<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1997 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to ________________
Commission File Number: 000-21628
HAVEN BANCORP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
11-3153802
(I.R.S. Employer Identification No.)
93-22 JAMAICA AVENUE, WOODHAVEN, NEW YORK 11421
(Address of principal executive offices) (Zip Code)
(718) 850-2500
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
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
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
There were 8,783,506 shares of the Registrant's common stock
outstanding as of November 13, 1997.
<PAGE>
HAVEN BANCORP, INC.
FORM 10-Q
INDEX
PART I - FINANCIAL INFORMATION PAGE
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Financial Condition
as of September 30, 1997 and December 31, 1996 3
Consolidated Statements of Income for the
Three Months and Nine Months ended
September 30, 1997 and 1996 4
Consolidated Statement of Changes in
Stockholders' Equity for the Nine Months
ended September 30, 1997 and 1996 5
Consolidated Statements of Cash Flows for the
Nine months ended September 30, 1997 and 1996 6
Notes to Consolidated Financial Statements 7-13
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 14-33
Item 3. Quantitative and Qualitative Disclosure About
Market Risk 33
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 33
Item 2. Changes in Securities and Use of Proceeds 33
Item 3. Defaults Upon Senior Securities 33
Item 4. Submission of Matters to a Vote of Security
Holders 33
Item 5. Other Information 34
Item 6. Exhibits and Reports on Form 8-K 34
Signature Page
2
<PAGE>
HAVEN BANCORP, INC.
Consolidated Statements of Financial Condition
(Dollars in thousands, except for share data)
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------- ------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 34,993 $ 28,848
Money market investments 5,215 6,869
Securities available for sale (note 2) 419,124 370,105
Debt securities held to maturity (estimated fair value of $87,989
and $96,324 in 1997 and 1996, respectively) (note 2) 88,360 97,307
Federal Home Loan Bank of NY stock, at cost 11,240 9,890
Mortgage-backed securities held to maturity (estimated fair value of
$172,434 and $195,682 in 1997 and 1996, respectively) (note 2) 172,736 197,940
Loans:
First mortgage loans 1,014,579 793,556
Cooperative apartment loans 19,844 19,936
Other loans 31,852 34,094
--------- ---------
Total loans 1,066,275 847,586
Less allowance for loan losses (11,954) (10,704)
--------- ---------
Loans, net 1,054,321 836,882
Premises and equipment, net 17,134 8,820
Accrued interest receivable 11,761 12,172
Other assets 18,400 14,712
--------- ---------
Total assets $1,833,284 $1,583,545
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits (note 3) $1,310,471 $1,137,788
Borrowed funds 390,665 326,433
Mortgagors' escrow balances 5,042 4,621
Due to broker - 1,000
Other liabilities 17,161 14,319
--------- ---------
Total liabilities 1,723,339 1,484,161
--------- ---------
Stockholders' Equity:
Preferred stock, $.01 par value, 2,000,000
shares authorized, none issued - -
Common stock, $.01 par value, 10,500,000 shares authorized,
9,918,750 shares issued; 8,772,104 and 8,650,814 shares
outstanding at September 30, 1997 and December 31, 1996 100 100
Additional paid-in capital 49,525 48,794
Retained earnings, substantially restricted 71,266 65,092
Unrealized gain (loss) on securities available for sale, net
of tax effect 1,669 (840)
Treasury stock, at cost (1,146,646 and 1,267,936 shares at September
30, 1997 and December 31, 1996) (10,322) (11,049)
Unallocated common stock held by Bank's ESOP (1,609) (1,854)
Unearned common stock held by Bank's Recognition Plans and Trusts (182) (267)
Unearned compensation (502) (592)
--------- ---------
Total stockholders' equity 109,945 99,384
--------- ---------
Total liabilities and stockholders' equity $1,833,284 $1,583,545
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
Note - Share information has been restated to fully reflect the
2-for-1 stock split effective November 1997.
3
<PAGE>
HAVEN BANCORP, INC.
Consolidated Statements of Income
(Dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest income:
Mortgage loans $19,811 $13,715 $54,878 $37,670
Other loans 808 884 2,424 2,781
Mortgage-backed securities 8,541 9,575 23,773 29,617
Money market investments 83 40 273 139
Debt and equity securities 3,332 3,749 11,640 10,674
------ ------ ------ ------
Total interest income 32,575 27,963 92,988 80,881
------ ------ ------ ------
Interest expense:
Deposits:
Passbook accounts 2,387 2,342 6,938 7,027
NOW accounts 277 247 772 704
Money market accounts 470 482 1,329 1,417
Certificate accounts 10,394 8,274 28,085 23,987
Borrowings 5,817 4,627 16,827 12,404
------ ------ ------ ------
Total interest expense 19,345 15,972 53,951 45,539
------ ------ ------ ------
Net interest income 13,230 11,991 39,037 35,342
Provision for loan losses 700 700 2,150 2,475
------ ------ ------ ------
Net interest income after provision for loan losses 12,530 11,291 36,887 32,867
------ ------ ------ ------
Non-interest income:
Loan fees and servicing income 271 293 775 1,517
Savings/checking fees 1,452 867 3,775 2,440
Net (loss) gain on sales of interest-earning assets (7) (11) (23) 88
Insurance annuity and mutual fund fees 1,024 837 2,827 2,329
Other 471 265 1,011 814
------ ------ ------ ------
Total non-interest income 3,211 2,251 8,365 7,188
------ ------ ------ ------
Non-interest expense:
Compensation and benefits 6,488 3,423 17,380 11,097
Occupancy and equipment 1,760 840 4,398 2,598
Real estate owned operations, net 99 8 283 312
SAIF Recapitalization - 6,800 - 6,800
Federal deposit insurance premiums 165 629 529 1,865
Other 3,502 2,324 10,031 6,812
------ ------ ------ ------
Total non-interest expense 12,014 14,024 32,621 29,484
------ ------ ------ ------
Income (loss) before income tax expense (benefit) 3,727 (482) 12,631 10,571
Income tax expense (benefit) 1,276 (559) 4,575 4,610
------ ------ ------ ------
Net income $2,451 $ 77 $8,056 $5,961
====== ====== ====== ======
Net income per common share: Primary $ 0.27 $ 0.01 $ 0.89 $ 0.68
====== ====== ====== ======
Fully diluted $ 0.27 $ 0.01 $ 0.88 $ 0.68
====== ====== ====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
Note - Per share amounts have been restated to fully reflect the
2-for-1 stock split effective November 1997.
4
<PAGE>
HAVEN BANCORP, INC.
Consolidated Statements of Changes in Stockholders' Equity
Nine months ended September 30, 1997 and 1996 (Unaudited)
<TABLE>
<CAPTION> Unrealized
Gain (Loss) Unallocated Unearned
Additional on Securities Common Common
Common Paid-In Retained Available Treasury Stock Held Stock Held Unearned
Stock Capital Earnings for Sale Stock by ESOP by RRP Compensation Total
------ ---------- -------- ------------- -------- ----------- ---------- ------------ -----
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 $100 48,794 65,092 (840) (11,049) (1,854) (267) (592) 99,384
Net income for the nine months ended
September 30, 1997 - - 8,056 - - - - - 8,056
Dividends declared (note 5) - - (1,956) - - - - - (1,956)
Treasury stock issued for deferred
compensation plan (8,988 shares) - 89 - - 54 - - (143) -
Stock options exercised, net of tax
effect (112,302 shares) (note 4) - - 74 - 673 - - - 747
Change in unrealized loss on
securities available for sale, net
of tax effect - - - 2,509 - - - - 2,509
Allocation of ESOP stock and
amortization of award of RRP stock
and related tax benefits - 642 - - - 245 85 - 972
Amortization of deferred compensation
plan - - - - - - - 233 233
--- ------ ------ ------ ------ ------ ----- ----- -------
Balance at September 30, 1997 $100 49,525 71,266 1,669 (10,322) (1,609) (182) (502) 109,945
=== ====== ====== ====== ====== ====== ===== ===== =======
Balance at December 31, 1995 $ 100 47,281 57,919 2,083 (6,023) (2,197) (644) - 98,519
Net income for the nine months ended
September 30, 1996 - - 5,961 - - - - - 5,961
Dividends declared - - (1,646) - - - - - (1,646)
Purchase of treasury stock
(451,074 shares) - - - - (5,516) - - - (5,516)
Stock options exercised, net of
tax effect (14,038 shares) - 412 (18) - 88 - - - 482
Treasury stock issued for deferred
compensation plans
(59,930 shares) - 411 - - 371 - - (782) -
Change in unrealized gain (loss) on
securities available for sale, net
of tax effect - - - (5,067) - - - - (5,067)
Allocation of ESOP stock and
amortization of award of RRP
stock and related tax benefits - 460 - - - 259 350 - 1,069
Amortization of deferred compensation
plan - - - - - - - 121 121
---- ------ ------ ------ ------ ------ ----- ----- ------
Balance at September 30, 1996 $ 100 48,564 62,216 (2,984) (11,080) (1,938) (294) (661) 93,923
==== ====== ====== ====== ====== ====== ===== ===== ======
</TABLE>
See accompanying notes to consolidated financial statements.
Note - Share amounts have been restated to fully reflect the 2-for-1 stock split
effective November 1997.
5
<PAGE>
HAVEN BANCORP, INC.
Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended
September 30,
------------------
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 8,056 $ 5,961
Adjustments to reconcile net income to net cash provided by
operating activities:
Amortization of cost of stock benefit plans 1,205 1,190
Amortization of net deferred loan origination fees (401) 235
Amortization of premiums and discounts on loans, mortgage-backed
and debt securities 273 (963)
Provision for loan losses 2,150 2,475
Provision for losses on real estate owned 100 875
Deferred income taxes (1,252) (5,519)
SAIF Recapitalization - 6,800
Net loss (gain) on sales of interest-earning assets 23 (88)
Depreciation and amortization 1,010 661
Decrease in accrued interest receivable 411 128
Decrease in due to broker (1,000) (5,000)
Increase (decrease) in other liabilities 2,842 (2,022)
(Increase) decrease in other assets (2,437) 2,190
------- ------
Net cash provided by operating activities 10,980 6,923
------- ------
Cash flows from investing activities:
Net increase in loans (217,407) (169,072)
Proceeds from disposition of assets (including REO) 1,643 2,562
Purchases of securities available for sale (352,407) (254,969)
Principal repayments and maturities on securities available for sale 26,766 63,887
Proceeds from sales of securities available for sale 275,513 237,763
Purchases of debt securities held to maturity - (7,741)
Principal repayments, maturities and calls on debt securities
held to maturity 8,954 36,511
Purchases of mortgage-backed securities held to maturity - (38,451)
Principal repayments on mortgage-backed securities held to maturity 24,996 26,138
Purchases of FHLB stock, net (1,350) -
Net (increase) decrease in premises and equipment (9,324) 1,254
------- -------
Net cash used in investing activities (242,616) (102,118)
------- -------
Cash flows from financing activities:
Net increase in deposits 172,683 43,811
Net increase in borrowed funds 64,232 48,429
Increase in mortgagors' escrow balances 421 4,459
Purchase of treasury stock - (5,516)
Payment of common stock dividends (1,956) (1,646)
Stock options exercised 747 70
------- -------
Net cash provided by financing activities 236,127 89,607
------- -------
Net increase (decrease) in cash and cash equivalents 4,491 (5,588)
Cash and cash equivalents at beginning of period 35,717 38,854
------ -------
Cash and cash equivalents at end of period $40,208 $33,266
====== =======
Supplemental information:
Cash paid during the period for:
Interest $52,814 $44,208
Income taxes 3,946 7,624
Additions to real estate owned 1,539 3,237
====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
HAVEN BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997 and 1996
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION. The accompanying unaudited
consolidated financial statements include the accounts of Haven
Bancorp, Inc. ("Haven Bancorp" or the "Company") and its wholly-
owned subsidiary, CFS Bank, formerly known as Columbia Federal
Savings Bank, ("CFS" or the "Bank") and subsidiaries, as of
September 30, 1997 and December 31, 1996 and for the three-month
and nine-month periods ended September 30, 1997 and 1996,
respectively. Material intercompany accounts and transactions have
been eliminated in consolidation.
The accompanying unaudited consolidated 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 Article 10 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. In the opinion of management, all
necessary adjustments, consisting only of normal recurring accruals
necessary for a fair presentation, have been included. The results
of operations for the three-month and nine-month periods ended
September 30, 1997 are not necessarily indicative of the results
that may be expected for the entire fiscal year.
These consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and
notes thereto included in the Company's Annual Report to
Stockholders for the fiscal year ended December 31, 1996.
NOTE 2 - DEBT, EQUITY AND MORTGAGE-BACKED SECURITIES ("MBSs").
Debt and equity securities and MBSs which the Company has the
ability and the intent to hold until maturity are carried at cost
adjusted for amortization of premiums and accretion of discounts.
Debt and equity securities and MBSs to be held for indefinite
periods of time and not intended to be held to maturity or on a
long-term basis are classified as available for sale securities
which are recorded at fair value, with unrealized gains (losses)
reported as a separate component of stockholders' equity, net of
taxes.
7
<PAGE>
SECURITIES AVAILABLE FOR SALE
The amortized cost and estimated fair values of securities
available for sale at September 30, 1997 are summarized as follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- ---------
(In thousands)
<S> <C> <C> <C> <C>
Debt and equity securities available for sale:
U.S. Government and Agency obligations $ 78,213 56 (935) 77,334
Preferred Stock 4,133 35 (23) 4,145
------- ----- ------ -------
82,346 91 (958) 81,479
------- ----- ------ -------
MBSs available for sale:
GNMA Certificates 946 42 - 988
FNMA Certificates 48,934 738 - 49,672
FHLMC Certificates 67,971 1,608 (5) 69,574
CMOs and REMICS 216,359 2,145 (1,093) 217,411
------- ----- ------ -------
334,210 4,533 (1,098) 337,645
------- ----- ------ -------
Total $416,556 4,624 (2,056) 419,124
======= ===== ====== =======
</TABLE>
The net unrealized gain on securities available for sale at
September 30, 1997, was reported as a separate component of
stockholders' equity in the amount of $1.7 million, which is net of
a tax effect of $915,000.
DEBT SECURITIES HELD TO MATURITY
The amortized cost, gross unrealized gains and losses and estimated
fair values of debt securities held to maturity at September 30,
1997 are summarized as follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- ---------
(In thousands)
<S> <C> <C> <C> <C>
U.S. Government and Agency obligations $ 42,980 62 (290) 42,752
Corporate debt securities 45,380 33 (176) 45,237
------- -- ------ -------
Total $ 88,360 95 (466) 87,989
======= == ====== =======
</TABLE>
It is the Company's intent to hold these securities until maturity
and therefore the Company does not expect to realize the current
unrealized losses brought about by the current market environment.
8
<PAGE>
MORTGAGE-BACKED SECURITIES HELD TO MATURITY
The amortized cost, gross unrealized gains and losses and estimated
fair values of MBSs held to maturity at September 30, 1997 are
summarized as follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- ---------
(In thousands)
<S> <C> <C> <C> <C>
FHLMC Certificates $ 29,614 347 (251) 29,710
FNMA Certificates 64,041 227 (1,024) 63,244
CMOs and REMICs 79,081 806 (407) 79,480
------- ----- ------ -------
Total $172,736 1,380 (1,682) 172,434
======= ===== ====== =======
</TABLE>
It is the Company's intent to hold these securities until maturity
and therefore the Company does not expect to realize the current
unrealized losses brought about by the current market environment.
NOTE 3 - SUPERMARKET BANKING AGREEMENT WITH SHOPRITE STORES IN NEW
JERSEY AND CONNECTICUT. On September 2, 1997, Haven Bancorp
announced that CFS and ShopRite Stores had entered into licensing
agreements under which CFS may open as many as twelve in-store
supermarket branches in New Jersey and Connecticut. CFS opened its
first in-store branch in Hackensack, New Jersey on November 1, 1997
and will have the right of first refusal to open eight additional
in-store branches throughout Bergen County, New Jersey. CFS's
first in-store branch in Connecticut will be located in Brookfield
and is expected to open during January 1998, and CFS has the right
of first refusal to open two additional ShopRite locations in
Fairfield County, Connecticut. As of September 30, 1997, the Bank
had twenty-four in-store bank branches with deposits totaling
$115.9 million located in Queens, Brooklyn, Manhattan, Nassau,
Suffolk and Rockland Counties. Due to the Bank's expanding in-
store branch network, management believed it was critical to have
a unique identity throughout the tri-state region. Consequently,
in October, 1997 the Board of Directors changed the name of
Columbia Federal Savings Bank to CFS Bank.
9
<PAGE>
NOTE 4 - STOCK PLANS. Changes in outstanding options (restated for
the 2-for-1 stock split effective November 1997) for the benefit of
directors, officers and other key employees of the Bank for the
nine months ended September 30, 1997 are as follows:
<TABLE>
<CAPTION>
Weighted Average
Options Exercise Price
------- ----------------
<S> <C> <C>
Balance at December 31, 1996 1,324,558 $ 7.59
Granted 34,100 17.09
Forfeited (12,000) 12.14
Exercised (112,302) 6.65
--------- -----
Balance at September 30, 1997 1,234,356 $ 7.89
========= =====
Shares exercisable at September 30, 1997 898,110 $ 6.19
========= =====
</TABLE>
NOTE 5 - DIVIDENDS PAYABLE. On September 17, 1997, the Company's
Board of Directors approved a quarterly cash dividend of $0.15 per
share, payable on October 17, 1997, to shareholders of record as of
September 29, 1997. On October 23, 1997 Haven Bancorp announced
that its Board of Directors had declared a stock split in the form
of a 100% stock dividend. Shareholders of record on the close of
business October 31, 1997, received one additional share of Haven
Bancorp common stock for each share they owned as of that date.
The new shares will be distributed on November 28, 1997. The total
number of shares outstanding increased to 8,772,104 shares as of
September 30, 1997. The annual cash dividend per common share will
be adjusted to $0.30 per share, or $0.075 per share quarterly,
which is unchanged from the present level.
NOTE 6 - RECENT ACCOUNTING/REGULATORY PRONOUNCEMENTS. In February,
1997, the Financial Accounting Standard Board ("FASB") issued SFAS
No. 128, "Accounting for Earnings Per Share." SFAS No. 128
establishes standards for the computation, presentation and
disclosure requirements for earnings per share ("EPS") and applies
to entities with publicly held common stock or potential common
stock. SFAS No. 128 simplifies the standards for computing EPS and
makes them more compatible with the EPS standards of other
countries and with that of the International Accounting Standards
Committee ("IASC"). It replaces the presentation of primary EPS
with a presentation of basic EPS. It also requires dual
presentation of basic and diluted EPS on the face of the income
statement for all entities with complex capital structures and
requires a reconciliation of the numerator and denominator of the
diluted EPS computation.
10
<PAGE>
Basic EPS excludes dilution and is computed by dividing income
available to common stockholders by the weighted-average number of
common shares outstanding for the relevant period. Diluted EPS
reflects the potential dilution that could occur if securities or
other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that
then shared in the earnings of the entity. Diluted EPS is computed
similarly to fully diluted EPS pursuant to APB Opinion No. 15,
"Earnings per Share" ("Opinion No. 15").
SFAS No. 128 is effective for financial statements issued for
periods ending after December 15, 1997, including interim periods;
earlier application is not permitted. SFAS No. 128 requires
restatement of all prior-period EPS data presented. SFAS No. 128,
when adopted, is expected to result in basic EPS being somewhat
greater than current primary EPS and diluted EPS not being
materially different than current fully diluted EPS.
In February 1997, the FASB issued SFAS No. 129, "Disclosure of
Information about Capital Structure." SFAS No. 129 establishes
standards for disclosing information about an entity's capital
structure. It applies to all entities. It supersedes specific
disclosure requirements of Opinions 10 and 15 and SFAS No. 47 and
consolidates them in SFAS No. 129 for ease of retrieval and for
greater visibility to nonpublic entities.
SFAS No. 129 is effective for financial statements for periods
ending after December 15, 1997. It contains no change in
disclosure requirements for entities that were previously subject
to the requirements of Opinions 10 and 15 and SFAS No. 47.
Accordingly, when adopted, SFAS No. 129 is not expected to have a
material effect on the Company's financial statements.
In June 1997, the FASB issued SFAS No. 130, "Reporting
Comprehensive Income". SFAS No. 130 establishes standards for
reporting and display of comprehensive income and its components
(revenues, expenses, gains and losses) in a full set of general-
purpose financial statements. This statement does not require a
specific format for that financial statement but requires that an
enterprise display an amount representing total comprehensive
income for the period in that financial statement.
SFAS No. 130 requires that all items that are required to be
recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements.
This Statement requires that an enterprise: (1) classify items of
other comprehensive income by their nature in a financial statement
and (2) display the accumulated balance of other comprehensive
income separately from retained earnings and additional paid-in
capital in the equity section of a statement of financial position.
11
<PAGE>
SFAS No. 130 is effective for fiscal years beginning after December
15, 1997. Reclassification of financial statements for earlier
periods provided for comparative purposes is required. The Company
is still assessing the impact of SFAS No. 130 and has not yet
concluded how the adoption of SFAS No. 130 will affect its
financial statements.
On June 30, 1997, the FASB issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information". The standard
establishes guidance for the way that public companies report
information about operating segments in annual financial statements
and requires that those enterprises report selected information
about operating segments in interim financial reports issued to
shareholders. It also establishes standards for related
disclosures about products and services, geographic areas, and
major customers.
SFAS No. 131 supersedes SFAS No. 14, "Financial Reporting for
Segments of a Business Enterprise", but retains the requirement to
report information about major customers. It amends SFAS No. 94,
"Consolidation of All Majority-Owned Subsidiaries", to remove the
special disclosure requirements for previously unconsolidated
subsidiaries.
The newly adopted standard requires that a public company report
financial and descriptive information about its reportable
operating segments. Operating segments are components of a
business about which separate financial information is available
that is evaluated regularly by the chief operating decision-maker
in deciding how to allocate resources and in assessing performance.
Generally, financial information is required to be reported on the
basis that it is used internally for evaluating segment performance
and deciding how to allocate resources to segments.
This Statement requires that a public business enterprise report a
measure of segment profit or loss, certain specific revenue and
expense items, and segment assets. It requires reconciliations of
total segment revenues, total segment profit or loss, total segment
assets, and other amounts disclosed for segments to corresponding
amounts in the enterprise's general-purpose financial statements.
It requires that all public business enterprises report information
about the revenues derived from the enterprise's products or
services (or groups of similar products and services), about the
countries in which the enterprise earns revenues and holds assets,
and about major customers regardless of whether that information is
used in making operating decisions. However, this Statement does
not require an enterprise to report information that is not
prepared for internal use if reporting it would be impracticable.
This Statement also requires that a public business enterprise
report descriptive information about the way that the operating
12
<PAGE>
segments were determined, the products and services provided by the
operating segments, differences between the measurements used in
reporting segment information and those used in the enterprise's
general-purpose financial statements, and changes in the
measurement of segment amounts from period to period.
SFAS No. 131 is effective for financial statements for periods
beginning after December 15, 1997. In the initial year of
application, comparative information for earlier years is to be
restated. The Company is still assessing the impact of SFAS No.
131 and has not yet concluded how the adoption of SFAS No. 131 will
affect its financial statements.
NOTE 7 - NET INCOME PER SHARE OF COMMON STOCK. Primary and fully
diluted net income per share were determined by dividing net income
by the weighted average number of shares outstanding, restated for
the 2-for-1 stock split, effective November, 1997. There were
9,171,246 primary shares outstanding and 9,224,852 fully diluted
shares outstanding for the three months ended September 30, 1997.
There were 9,086,884 primary shares outstanding and 9,199,856 fully
diluted shares outstanding for the nine months ended September 30,
1997. The weighted average number of shares outstanding does not
include 321,798 shares which are unallocated by the Employee Stock
Ownership Plan ("ESOP") as of September 30, 1997 in accordance with
American Institute of CPAs ("AICPA") Statement of Position ("SOP")
93-6, "Employers' Accounting for ESOPs". Stock options are
regarded as common stock equivalents and are considered in both
primary earnings per share and fully diluted earnings per share
using the treasury stock method.
NOTE 8 - SUBSEQUENT EVENT. On November 7, 1997, the Bank entered
into an agreement to purchase an office building in Westbury, Long
Island, New York for $7.3 million. The building will be the
Company and the Bank's corporate headquarters. The closing is
expected to be in late November 1997.
13
<PAGE>
Statements made herein that are forward-looking in nature within
the meaning of the Private Securities Litigation Reform Act of 1995
are subject to risks and uncertainties that could cause actual
results to differ materially. Such risks and uncertainties
include, but are not limited to, those related to overall business
conditions in the markets in which Haven operates, fiscal and
monetary policy, competitive products and pricing, credit risk
management, changes in regulations affecting financial institutions
and other risks and uncertainties discussed from time to time in
the Company's SEC filings, including its 1996 Form 10-K. The
Company disclaims any obligation to publicly announce future events
or developments, which affect the forward-looking statements
herein.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
Haven Bancorp, Inc. ("Haven Bancorp" or the "Company") is the
holding company for CFS Bank, formerly known as Columbia Federal
Savings Bank ("CFS" or the "Bank"), a federally chartered stock
savings bank. CFS converted from a mutual to a stock savings bank
on September 23, 1993 in conjunction with the issuance of the
Bank's capital stock to Haven Bancorp.
Haven Bancorp's business currently consists of the business of the
Bank. The Bank's principal business has been and continues to be
attracting retail deposits from the general public and investing
those deposits, together with funds generated from operations
primarily in one-to four-family, owner occupied residential
mortgage loans. In addition, in times of low loan demand, the Bank
will invest in debt, equity and mortgage-backed securities ("MBSs")
to supplement its lending portfolio. The Bank also invests, to a
lesser extent, in multi-family residential mortgage loans,
commercial real estate loans, equity lines of credit and other
marketable securities. The Bank's results of operations are
dependent primarily on its net interest income, which is the
difference between the interest income earned on its loan and
securities portfolios and its cost of funds, which primarily
consist of the interest paid on its deposits and borrowed funds.
The Bank's net income also is affected by its provision for loan
losses as well as non-interest income and operating expenses
consisting primarily of compensation and benefits, occupancy and
equipment, real estate owned operations, net, federal deposit
insurance premiums and other general and administrative expenses.
The earnings of the Bank are significantly affected by general
economic and competitive conditions, particularly changes in market
interest rates, and to a lesser extent, by government policies and
actions of regulatory authorities.
14
<PAGE>
ANALYSIS OF CHANGES IN FINANCIAL CONDITION FROM DECEMBER 31, 1996
TO SEPTEMBER 30, 1997
ASSETS
Total assets increased by $249.7 million, or 15.8% to $1.83 billion
at September 30, 1997. Securities available for sale ("AFS")
increased by $49.0 million, or 13.2% to $419.1 million at September
30, 1997 from $370.1 million at December 31, 1996. During the nine
months ended September 30, 1997, the Bank purchased $307.6 million
of MBSs, $31.3 million of government agency securities and $5.9
million of FHLMC Preferred Stock for its AFS portfolio and the
Company purchased $7.6 million of other preferred stock issues for
its AFS portfolio. These purchases were partially offset by sales
from and principal repayments to the AFS portfolio of $275.5
million and $26.8 million, respectively. The purchases for the AFS
portfolio during the nine month period ended September 30, 1997
included $41.5 million related to the $85.0 million leverage
program which was implemented in February 1997. Debt securities
held to maturity declined by $8.9 million, or 9.2% to $88.4 million
at September 30, 1997 from $97.3 million at December 31, 1996
mainly due to principal repayments, maturities and calls totalling
$9.0 million. MBSs held to maturity declined by $25.2 million, or
12.7% to $172.7 million at September 30, 1997 from $197.9 million
at December 31, 1996 also due to principal repayments on the
portfolio. There were no purchases of debt securities or MBSs held
to maturity during the nine months ended September 30, 1997.
Net loans increased by $217.4 million, or 26.0% to $1.05 billion at
September 30, 1997 from $836.9 million at December 31, 1996. Loan
originations and purchases during the nine month period ended
September 30, 1997 totaled $325.3 million (comprised of $234.3
million of residential one-to four-family mortgage loans, $78.6
million of commercial real estate and multi-family loans, $8.6
million of equity loans and lines of credit and $3.8 million of
construction advances). Originations of residential one-to four-
family mortgage loans included purchases of $128.1 million of
residential loans in the secondary market to enhance the Bank's
internal loan origination volume. During the nine month period of
1997, principal payments totaled $106.8 million, $1.5 million was
transferred to real estate owned ("REO") and $838,000 of loans were
sold in the secondary market.
LIABILITIES
Deposits increased by $172.7 million, or 15.2% to $1.31 billion at
September 30, 1997 from $1.14 billion at December 31, 1996
primarily due to deposit inflows in the Bank's in-store bank
branches which had deposits totaling $115.9 million at September
30, 1997 compared to $12.1 million at December 31, 1996. The Bank
15
<PAGE>
had twenty-four in-store bank branches as of September 30, 1997
compared to four in-store branches at December 31, 1996. The Bank
expects to open nine additional in-store bank branches during the
fourth quarter of 1997 and twenty-four in 1998; twelve in Pathmark
Stores in New York and twelve in ShopRite stores in New Jersey and
Connecticut, although there can be no assurance that such schedule
will be met. Core deposits (comprised of checking, savings and
money market accounts) were equal to 29.6% of total in-store branch
deposits at September 30, 1997 compared to 45.9% in the Bank's
eight traditional branches. Overall, core deposits represented
44.5% of total deposits at September 30, 1997 compared to 47.2% at
December 31, 1996. Borrowed funds increased by $64.2 million, or
19.7% to $390.7 million at September 30, 1997 from $326.4 million
at December 31, 1996 primarily due to the addition of $25.0 million
of Capital Securities issued by Haven Capital Trust I in February
1997 which are included in borrowed funds in the consolidated
statements of financial condition and the addition of an $85.0
million leverage program which was implemented during the first
quarter to offset the additional interest expense resulting from
the issuance of the Capital Securities. A portion of the increase
was offset by the pay-down of short-term borrowings as a result of
deposit growth during 1997.
STOCKHOLDERS' EQUITY
Haven Bancorp's stockholders' equity increased to $109.9 million at
September 30, 1997 from $99.4 million at December 31, 1996. The
increase in stockholders' equity was due to net income of $8.1
million for the nine months ended September 30, 1997, a reduction
of $2.5 million in the unrealized loss on securities AFS and
$747,000 related to the exercise of stock options. In addition,
the allocation of ESOP stock due to the reduction of the Bank's
ESOP debt and the amortization of awards of shares of stock by the
Bank's RRPs and amortization of deferred compensation plan
increased stockholders' equity by $1.2 million. These increases
were partially offset by dividends declared of $2.0 million.
16
<PAGE>
NON-PERFORMING ASSETS
The following table sets forth information regarding all non-
accrual loans (which consist of loans 90 days or more past due and
restructured loans that have not yet performed in accordance with
their modified terms for the required six-month seasoning period),
restructured loans and REO.
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
(Dollars in Thousands) -------- ------------
<S> <C> <C>
Non-accrual loans
One-to four-family $ 3,455 4,083
Cooperative 533 431
Multi-family 2,336 1,463
Non-residential and other 4,042 4,756
------ ------
Total non-accrual loans 10,366 10,733
------ ------
Restructured loans
One-to four-family 682 887
Cooperative 358 486
Multi-family 1,173 1,427
Non-residential and other - 360
------ ------
Total restructured loans 2,213 3,160
------ ------
Total non-performing loans 12,579 13,893
------ ------
REO, net
One-to four-family 628 266
Cooperative 345 292
Non-residential and other 451 561
------ ------
Total REO 1,424 1,119
Less allowance for REO 78 81
------ ------
REO, net 1,346 1,038
------ ------
Total non-performing assets $13,925 14,931
====== ======
Non-performing loans to total loans 1.18% 1.64%
Non-performing assets to total assets 0.76 0.94
Non-performing loans to total assets 0.69 0.88
</TABLE>
17
<PAGE>
The $1.0 million decrease in non-performing assets is due to a
decrease of $947,000 in restructured loans and a decrease of
$367,000 in non-accrual loans partially offset by a $308,000 net
increase in REO. The decrease in non-performing assets was
primarily due to the reclassification of six performing
restructured real estate loans totaling $947,000 to performing
status during the first nine months of 1997. The ratio of non-
performing loans to total loans decreased primarily due to total
loans which increased by $218.7 million during the nine months.
The decreases in the ratios of non-performing assets to total
assets and non-performing loans to total assets were due to the
aforementioned reduction in restructured loans and an increase of
$249.7 million in total assets during the nine-month period ended
September 30, 1997.
REO, net increased by $308,000, or 29.7% to $1.3 million (net of a
$78,000 reserve) at September 30, 1997 from $1.0 million (net of a
$81,000 reserve) at December 31, 1996. During the third quarter of
1997, the Bank acquired $213,000 of REO properties, sold $220,000
of REO, and recorded write-downs to fair value of $32,000 on
various properties. During the first nine months of 1997, the Bank
acquired $1.5 million of REO, sold $677,000 of REO and recorded
write-downs to fair value of $558,000 on various properties.
The Bank maintains an allowance for loan losses and an allowance
for REO, which it believes are adequate for potential losses at
each period end. Management's judgment as to potential losses is
based on its review of the loan and REO portfolios and its judgment
regarding prevailing and anticipated economic conditions and a
variety of other factors which have an impact on those portfolios.
Although management believes that the allowances are adequate as of
the period end, additional provisions may be required in the
future.
18
<PAGE>
ALLOWANCE FOR LOAN LOSSES
The following table sets forth the changes in the allowance for
loan losses for the nine months ended September 30, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
(Dollars in Thousands) ------- -------
<S> <C> <C>
Balance at beginning of period $10,704 8,573
Charge-offs:
Residential (369) (703)
Cooperative (840) (448)
Multi-family - (30)
Non-residential and other (257) (360)
------ ------
Total charge-offs (1,466) (1,541)
------ ------
Recoveries 566 807
------ ------
Net charge-offs (900) (734)
Provision for loan losses 2,150 2,475
------ ------
Balance at end of period $11,954 10,314
====== ======
Ratio of net charge-offs during the period to
average loans outstanding during the period 0.13% 0.15%
Ratio of allowance for loan losses to
total loans at the end of the period 1.12 1.40
Ratio of allowance for loan losses to non-
performing loans at the end of the period 95.03 75.44
</TABLE>
The ratio of net charge-offs during the first nine months of 1997
to average loans outstanding decreased primarily due to average
loans outstanding which increased $307.8 million, or 47.5% due to
originations during the period. The ratio of allowance for loan
losses to total loans decreased primarily due to the increase in
loans outstanding during 1997. The ratio of allowance for loan
losses to non-performing loans increased between the periods due to
the decrease in non-performing loans and an increase in the
allowance for loan losses. The Bank's allowance for loan losses
was $12.0 million and $10.3 million at September 30, 1997 and 1996,
respectively, while non-performing loans totalled $12.6 million and
$13.7 million, respectively, at those dates.
ASSET/LIABILITY MANAGEMENT
The Company has attempted to reduce its exposure to interest rate
risk through the origination and purchase of ARM loans and the
19
<PAGE>
purchase of adjustable-rate securities which are expected to help
protect net interest margins during periods of rising interest
rates. During the first nine months of 1997, the Bank originated
or purchased $129.0 million of residential adjustable-rate
mortgages and $67.9 million of adjustable-rate multi-family,
commercial real estate and construction loans. During the same
period, the Bank purchased $231.1 million of fixed rate debt
securities and MBSs to take advantage of higher yields compared to
rates offered on adjustable-rate securities. At September 30,
1997, $258.7 million, or 50.7% of the Company's MBS portfolio were
adjustable-rate MBSs. In addition, $50.4 million, or 30.4% of the
Company's debt securities portfolio were floating rate securities.
The adjustable-rate portion of the MBS portfolio is allocated as
follows: $249.6 million is in the AFS portfolio and $9.0 million is
in the held to maturity portfolio. The Company's adjustable-rate
debt securities which total $50.4 million are all AFS securities.
Historically, the Company has been able to maintain a substantial
level of core deposits (comprised of passbook, money market, NOW
and demand accounts) which the Company believes helps to limit
interest rate risk by providing a relatively stable, low cost,
long-term funding base. At September 30, 1997 core deposits
represented 44.5% of deposits compared to 47.2% of deposits at
December 31, 1996. Core deposits for the Bank's eight traditional
branches was 45.9% compared to 29.6% for the Bank's twenty four in-
store bank branches. During the first nine months of 1997,
passbook accounts increased by $10.0 million, net of interest and
certificates of deposit increased by $124.3 million, net of
interest. The number of checking accounts increased by 23,649, or
36.8% to 87,998 at September 30, 1997 from 64,349 at December 31,
1996. Most of the increase, or 19,932 accounts is attributable to
the Bank's in-store bank branches. The balance of certificate
accounts outstanding at September 30, 1997 was $742.2 million
compared to $601.1 million at December 31, 1996. A major portion
of the increase, $73.9 million, is attributable to the Bank's in-
store branches. The Company expects to attract a higher percentage
of core deposits from its in-store bank branch locations as these
locations continue to grow and mature.
LIQUIDITY AND CAPITAL
The Bank is required to maintain minimum levels of liquid assets as
defined by regulations of the Office of Thrift Supervision ("OTS").
This requirement, which may be varied by the OTS depending upon
economic conditions and deposit flows, is based upon a percentage
of withdrawable deposits and short-term borrowings. The required
ratio is currently 5%. The Bank's ratio was 8.76% at September 30,
1997 compared to 14.99% at December 31, 1996. The decrease in the
liquidity ratio during the nine-month period is due to a decline of
$41.4 million in U.S. government securities in the Bank's AFS
portfolio due to the Bank's management of the AFS portfolio.
20
<PAGE>
The Company's primary sources of funds are deposits, principal and
interest payments on loans and MBSs, retained earnings and advances
from the Federal Home Loan Bank of NY ("FHLB-NY"). Proceeds from
the sale of AFS securities are also a source of funding, as are, to
a lesser extent, the sales of annuities and securities brokerage
activities conducted by the Bank's subsidiary, CFS Investment
Services, Inc., formerly known as Columbia Investment Services,
Inc. ("CIS"). While maturities and scheduled amortization of loans
and MBSs are somewhat predictable sources of funds, deposit flows
and mortgage prepayments are greatly influenced by general interest
rates, economic conditions, competition and regulatory changes.
The Company's most liquid assets are cash and short term
investments. The levels of these assets are dependent on the
Company's operating, financing, lending and investing activities
during any given period. At September 30, 1997 and December 31,
1996, cash and short and intermediate-term investments totaled
$40.2 million and $35.7 million, respectively.
The Company and the Bank have other sources of liquidity which
include debt securities maturing within one year, mortgage loans
and MBSs AFS. Other sources of funds include FHLB advances, which
at September 30, 1997, totaled $201.1 million. If needed, the Bank
may borrow an additional $15.9 million from the FHLB. An
additional source of funds are repurchase agreements which the Bank
utilized during the first quarter to complete an $85.0 million
leverage program.
As of September 30, 1997, the Bank exceeded all regulatory capital
requirements as detailed in the following table:
<TABLE>
<CAPTION>
Tangible Capital Core Capital Risk-Based Capital
-------------------- -------------------- -----------------------
Amount Percentage(1) Amount Percentage(1) Amount Percentage(1)(3)
------ ---------- ------ ---------- ------ ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Capital for regulatory purposes $121,612 6.67% $121,612 6.67% $132,139 14.46%
Minimum regulatory requirement 27,347 1.50 54,693 3.00(3) 73,098 8.00
------- ---- ------- ---- ------- ----
Excess $ 94,265 5.17% $ 66,919 3.67% $ 59,041 6.46%
======= ==== ====== ==== ======= ====
</TABLE>
(1) Tangible and core capital are shown as a percentage of total
adjusted assets. Risk-based capital levels are shown as a
percentage of risk-weighted assets.
(2) The OTS has incorporated an interest rate risk component into
its regulatory capital rule. Under the rule, saving associations
with "above normal" interest rate risk exposure would be subject to
a deduction from total capital for purposes of calculating their
risk-based capital requirements. The OTS has postponed the date
21
<PAGE>
that the component will first be deducted from an institution's
total capital until an appeals process is developed for the
measurement of an institution's interest rate risk. The Bank does
not anticipate that the new rule, when implemented, will have a
material effect on the Bank's risk-based capital.
(3) Although the minimum capital ratio is 3.0%, the OTS
regulations provide that generally an institution with less than
4.0% core capital is undercapitalized. Failure to meet the capital
requirements or to be deemed undercapitalized exposes an
institution to regulatory sanctions, including limitations on asset
growth. The OTS noted in the preamble to the final rulemaking for
interest rate risk that its intention was to issue a proposal to
lower this ratio requirement from 4.0% to 3.0%.
ANALYSIS OF CORE EARNINGS
The Company's profitability is primarily dependent upon net
interest income, which represents the difference between interest
and fees earned on loans, MBSs and debt and equity securities, and
the cost of deposits and borrowings. Net interest income is
dependent on the difference between the average balances and rates
earned on interest-earning assets and the average balances and
rates paid on interest-bearing liabilities. Net income is further
affected by non-interest income, non-interest expense and income
taxes.
22
<PAGE>
The following table sets forth certain information relating to the
Company's average consolidated statements of financial condition
and reflects 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 annualized by the average
balance of assets or liabilities, respectively, for the periods
shown. Average balances were derived from average daily balances.
The average balance of loans includes loans on which the Company
has discontinued accruing interest. The yields and costs include
fees which are considered adjustments to yields.
<TABLE>
<CAPTION>
Three months ended September 30,
1997 1996
------------------------ ------------------------
Average Average
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
------- -------- ------- ------- -------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Assets:
Interest-earning assets:
Mortgage loans $1,005,225 $19,811 7.88% $ 679,279 $13,715 8.08%
Other loans 32,027 808 10.09 35,023 884 10.10
Mortgage-backed securities 503,448 8,541 6.79 552,471 9,575 6.93
Money market investments 5,137 83 6.46 2,693 40 5.94
Debt and equity securities 183,095 3,332 7.28 224,835 3,749 6.67
--------- ------ --------- ------
Total interest-earning assets 1,728,932 32,575 7.54 1,494,301 27,963 7.49
Non-interest earning assets 88,256 ------ 63,885 ------
--------- ---------
Total assets 1,817,188 1,558,186
========= =========
Liabilities and stockholders' equity:
Interest-bearing liabilities:
Passbook accounts 376,276 2,387 2.54 373,418 2,342 2.51
Certificate accounts 705,785 10,394 5.89 583,711 8,274 5.67
NOW accounts 137,362 277 0.81 111,174 247 0.89
Money market accounts 55,136 470 3.41 56,989 482 3.38
Borrowed funds 406,126 5,817 5.73 316,095 4,627 5.86
--------- ------ --------- ------
Total interest-bearing liabilities 1,680,685 19,345 4.60 1,441,387 15,972 4.43
Other liabilities 27,636 ------ 20,423 ------
--------- ---------
Total liabilities 1,708,321 1,461,810
Stockholders' equity 108,867 96,376
--------- ---------
Total liabilities and stockholders' equity $1,817,188 $1,558,186
========= =========
Net interest income/net interest rate spread $13,230 2.94% $11,991 3.06%
====== ==== ====== ====
Net interest earning assets/net interest margin $48,247 3.06% $52,914 3.21%
====== ==== ====== ====
Ratio of interest-earning assets to
interest-bearing liabilities 102.87% 103.67%
====== ======
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
Nine months ended September 30,
1997 1996
------------------------ ------------------------
Average Average
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
------- -------- ------- ------- -------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Assets:
Interest-earning assets:
Mortgage loans $ 922,207 $54,878 7.93% $ 610,837 $37,670 8.22%
Other loans 32,900 2,424 9.82 36,498 2,781 10.16
Mortgage-backed securities 467,804 23,773 6.78 574,702 29,617 6.87
Money market investments 6,140 273 5.93 2,947 139 6.29
Debt and equity securities 216,971 11,640 7.15 220,136 10,674 6.47
--------- ------ --------- ------
Total interest-earning assets 1,646,022 92,988 7.53 1,445,120 80,881 7.46
Non-interest earning assets 94,300 ------ 63,520 ------
--------- ---------
Total assets 1,740,322 1,508,640
========= =========
Liabilities and stockholders' equity:
Interest-bearing liabilities:
Passbook accounts 370,311 6,938 2.50 376,315 7,027 2.49
Certificate accounts 651,189 28,085 5.75 565,507 23,987 5.66
NOW accounts 129,358 772 0.80 109,980 704 0.85
Money market accounts 54,617 1,329 3.24 59,178 1,417 3.19
Borrowed funds 385,190 16,827 5.82 282,141 12,404 5.86
--------- ------ --------- ------
Total interest-bearing liabilities 1,590,665 53,951 4.52 1,393,121 45,539 4.36
Other liabilities 45,013 ------ 23,339 ------
--------- ---------
Total liabilities 1,635,678 1,416,460
Stockholders' equity 104,644 92,180
--------- ---------
Total liabilities and stockholders' equity $1,740,322 $1,508,640
========= =========
Net interest income/net interest rate spread $39,037 3.01% $35,342 3.10%
====== ==== ====== ====
Net interest earning assets/net interest margin $55,357 3.16% $51,999 3.26%
====== ==== ====== ====
Ratio of interest-earning assets to
interest-bearing liabilities 103.48% 103.73%
====== ======
</TABLE>
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1997 AND 1996
GENERAL. The Company reported net income of $2.5 million for the
three months ended September 30, 1997 compared to net income of
$77,000 for the three months ended September 30, 1996. The
significant increase in earnings was primarily attributable to the
fact that non-interest expenses for the third quarter of 1996
included a one-time special assessment of $6.8 million to
recapitalize the SAIF insurance fund. Net interest income
increased $1.2 million to $13.2 million for the three months ended
September 30, 1997 primarily due to an increase in interest income
of $4.6 million due to the growth in the mortgage loan portfolio.
Non-interest income increased $960,000 when compared to the same
period last year mainly due to an increase in savings and checking
fees associated with the Bank's in-store branch expansion program.
Non-interest expenses, excluding the SAIF recapitalization,
24
<PAGE>
increased $4.8 million compared to the same period last year
primarily due to costs associated with the Bank's in-store program
which included twenty-four locations as of September 30, 1997.
Finally, the provision for tax expense increased $1.8 million for
the third quarter of 1997 due to pre-tax income which increased
$4.2 million.
INTEREST INCOME. Interest income increased by $4.6 million, or
16.5% to $32.6 million for the three months ended September 30,
1997 from $28.0 million for the three months ended September 30,
1996. The increase was primarily the result of a $6.1 million
increase in interest income on mortgage loans, and an increase of
$43,000 in interest income on money market investments. These
increases were partially offset by decreases in interest income on
MBSs, debt and equity securities and other loans of $1.0 million,
$417,000 and $76,000, respectively.
Interest income on mortgage loans increased by $6.1 million, or
44.4% to $19.8 million for the three months ended September 30,
1997, from $13.7 million for the comparable three-month period in
1996, primarily as a result of an increase in average balances of
mortgage loans of $325.9 million partially offset by a decrease in
the average yield on mortgage loans of 20 basis points. The
increase in average balance of mortgage loans between the periods
was primarily due to mortgage originations, including purchases,
for the fourth quarter of 1996 and the first nine months of 1997
which totalled $117.9 million and $316.7 million, respectively.
The originations for both periods were partially offset by
principal repayments of $18.4 million and $95.9 million,
respectively. The decline in the average yield from the prior year
was primarily due to the increasing percentage of residential
mortgages to total mortgages which increased from 69.4% at
September 30, 1996 to 73.2% at September 30, 1997. Interest income
on other loans decreased by $76,000, or 8.6% primarily due to a
decrease of $3.0 million in average balances outstanding.
Interest income on MBSs decreased by $1.0 million, or 10.8% to $8.5
million for the three months ended September 30, 1997 from $9.6
million for the comparable three-month period in 1996, primarily
due to a decrease in average balances of MBSs of $49.0 million and
a decrease in average yield of 14 basis points. During the first
nine months of 1997, the Bank sold $170.1 million of MBSs from its
AFS portfolio to fund mortgage loan originations, purchases of
loans in the secondary market and also to manage the AFS portfolio
to improve yield and shorten duration of various securities.
Interest income on debt and equity securities decreased by
$417,000, or 11.1% to $3.3 million for the three months ended
September 30, 1997 from $3.7 million for the comparable three-month
period in 1996, primarily as a result of a decrease in the average
balance of $41.7 million, partially offset by the yield which
25
<PAGE>
increased 61 basis points. The decline in average balance was due
to the sale of callable agency securities which were replaced by
adjustable rate CMOs with shorter duration.
INTEREST EXPENSE. Interest expense increased by $3.4 million, or
21.1% to $19.3 million for the three months ended September 30,
1997 from $16.0 million for the three months ended September 30,
1996. The increase was the result of a $2.2 million increase in
interest expense on deposits and an increase of $1.2 million in
interest expense on borrowings.
Interest on deposits increased by $2.2 million, or 19.2% to $13.5
million for the three months ended September 30, 1997 from $11.3
million for the comparable three-month period in 1996. The
increase in interest on deposits was primarily due to the average
balance which increased $149.3 million, or 13.3% to $1.27 billion
for the three months ended September 30, 1997 from $1.13 billion
for the comparable three-month period in 1996. The increase in
deposits is partly attributable to the Bank's in-store banking
expansion which was implemented during the second quarter of 1996.
At September 30, 1997, the Bank had twenty-four in-store bank
branches operating with combined deposits totalling $115.9 million
compared to two in-store branches with deposits of $6.2 million as
of September 30, 1996. Interest expense on certificate accounts
increased by $2.1 million, or 25.6% to $10.4 million for the three
months ended September 30, 1997 from $8.3 million in the same
period in 1996 and accounted for the major portion of the increase
in interest expense for the period. Certificate account average
balances increased by $122.1 million, or 20.9% to $705.8 million
(which included $81.6 million, or 70% of in-store bank branch
balances at September 30, 1997) for the three months ended
September 30, 1997 from $583.7 million for the comparable three-
month period in 1996. The average cost of certificate accounts was
5.89% for the third quarter of 1997 compared to 5.67% for the
comparable 1996 period due to the increase in market interest
rates.
Interest on borrowed funds increased by $1.2 million, or 25.7% to
$5.8 million for the three months ended September 30, 1997 from
$4.6 million for the comparable three-month period in 1996.
Borrowed funds on an average basis increased by $90.0 million
between the periods due to the addition of short-term FHLB advances
and securities sold under agreements to repurchase during 1997 as
part of a $85.0 million leverage program that was completed during
the first quarter of 1997 to offset the additional interest expense
resulting from the issuance of $25 million of 10.46% Capital
Securities by Haven Capital Trust I in February 1997. The average
rate paid on borrowings decreased to 5.73% for the three months
ended September 30, 1997 from 5.86% for the comparable prior-year
period due to changes in market rates.
26
<PAGE>
NET INTEREST INCOME. Net interest income increased by $1.2 million
to $13.2 million for the three months ended September 30, 1997 from
$12.0 million for the three months ended September 30, 1996. The
increase is primarily due to total interest-earning assets which
increased by $234.6 million, or 15.7% to $1.73 billion for the
three months ended September 30, 1997 from $1.49 billion in the
same period last year primarily due to growth in the Bank's
mortgage loan portfolio. In addition, the average yield on
interest-earning assets increased to 7.54% for the three months
ended September 30, 1997 from 7.49% for the three months ended
September 30, 1996. This increase was offset by the average cost
on interest-bearing liabilities which increased to 4.60% from 4.43%
for the three months ended September 30, 1997 and 1996,
respectively. The average balance of interest-bearing liabilities
increased by $239.3 million, or 16.6% to $1.68 billion for the
three months ended September 30, 1997 from $1.44 billion for the
three months ended September 30, 1996. The net interest spread was
2.94% for the three months ended September 30, 1997 compared to
3.06% for the comparable period in 1996.
PROVISION FOR LOAN LOSSES. The Bank provided $700,000 for loan
losses for both the three months ended September 30, 1997 and 1996,
respectively.
NON-INTEREST INCOME. Non-interest income increased by $960,000, or
42.6% for the three months ended September 30, 1997 to $3.2 million
from $2.3 million for the three month period in 1996. Savings and
checking fees increased by $585,000, or 67.5% to $1.5 million for
the third quarter of 1997 compared to $867,000 for the same period
last year. The significant increase in fees is due to the number
of checking accounts which increased by 26,719, or 43.6% to 87,998
at September 30, 1997 from 61,279 at September 30, 1996 due to the
Bank's strategy to continue to attract lower cost core deposit
balances. A significant portion of the growth in checking
accounts, approximately 20,357, is attributable to the Bank's in-
store bank branch program. The in-store bank branches generated
savings and checking fees of $507,000 for the third quarter of 1997
compared to $23,000 for the third quarter of 1996. Insurance,
annuity and mutual fund fees increased by $187,000, or 22.3%
between the period due to an increase in sales volume, including
$211,000 in revenue from in-store bank branches. Other non-
interest income increased $206,000, or 77.7% to $471,000 for the
three months ended September 30, 1997 from $265,000 for the prior
year period. The increase was due to fee income of $82,000 on the
sale of stamps via the ATM machines, a new service implemented
during 1997. In addition, referral fees and miscellaneous income
increased $20,000 and $85,000, respectively.
NON-INTEREST EXPENSE. Non-interest expense decreased by $2.0
million, or 14.3% for the three months ended September 30, 1997 to
$12.0 million from $14.0 million for the comparable three-month
27
<PAGE>
period in 1996. The decrease in non-interest expenses was due to
the fact that the third quarter of 1996 included a one-time special
assessment of $6.8 million for the recapitalization of the SAIF
insurance fund. However, a major portion of this savings was
offset by operating expenses totalling $3.3 million incurred for
the Bank's in-store branch expansion program. Compensation and
benefit costs increased by $3.1 million, or 89.5% to $6.5 million
for the three months ended September 30, 1997 from $3.4 million for
the same period last year. The in-store branch expansion accounts
for $1.8 million of the increase in compensation costs since the
Bank has hired approximately 250 new employees for the in-store
program as of September 30, 1997. Salary costs for the Bank's
subsidiary, CIS, Inc., increased $155,000 due to higher sales
volume. The remainder of the increase in salary costs was due to
normal merit increases. In addition, federal social security taxes
increased $136,000 from the prior period due to a higher salary
base. Pension expense increased $661,000 since the Bank's retire-
ment plan was frozen as of July 1, 1996 and the results for the
prior period included the reversal of pension accruals booked
previously during 1996. Occupancy and equipment costs increased
$920,000 primarily due to the Bank's in-store banking program which
accounted for $831,000 of the increase. REO operations, net
increased $91,000 from the comparable period last year due to a
decline in profits realized from the sale of properties. The
significant decrease in the federal deposit insurance premium costs
of $464,000 was due to a decrease in the assessment rate from 23
basis points in 1996 to 6.48 basis points in 1997. Finally,
miscellaneous operating costs increased $1.2 million, or 50.7% to
$3.5 million for the third quarter of 1997 compared to $2.3 million
for the third quarter of 1996. Operating expenses including
stationery, telephone, postage, insurance and miscellaneous costs
increased $562,000 primarily due to the Bank's in-store branch
expansion program. Consulting fees increased $127,000 from the
same period last year also due to the in-store expansion. The cost
of EDP services provided to the Bank increased $187,000 primarily
due to growth in deposit accounts. The costs incurred for
advertising increased $150,000 due to the growth in both the loan
portfolio and deposit base.
INCOME TAX EXPENSE. Income tax expense was $1.3 million for an
effective tax rate of 34.2% for the three months ended September
30, 1997 compared to an income tax credit of $559,000 for the prior
year period. The decrease in the effective tax rate was due, in
part, to the switch to the percentage of taxable income ("PTI")
method for calculating the bad debt deduction for New York City and
to the establishment of a REIT subsidiary, Columbia Preferred
Capital Corp. ("CPCC"), effective June 9, 1997, which resulted in
certain tax savings.
28
<PAGE>
COMPARISON OF OPERATING RESULTS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1997 AND 1996
GENERAL. The Company reported net income of $8.1 million for the
nine months ended September 30, 1997 compared to net income of $6.0
million for the nine months ended September 30, 1996. The $2.1
million increase was primarily attributable to net interest income
and non-interest income which increased $3.7 million and $1.2
million, respectively. In addition, the provision for loan losses
declined $325,000 from the previous period. These increases were
partially offset by non-interest expenses which increased by $3.1
million primarily due to the Bank's in-store branch expansion
program.
INTEREST INCOME. Interest income increased by $12.1 million, or
15.0% to $93.0 million for the nine months ended September 30, 1997
from $80.9 million for the nine months ended September 30, 1996.
The increase was primarily the result of a $17.2 million increase
in interest income on mortgage loans, an increase of $966,000 in
interest income on debt and equity securities, and an increase of
$134,000 in interest income on money market investments. These
increases were partially offset by a decrease in interest income on
MBSs and other loans of $5.8 million and $357,000, respectively.
Interest income on mortgage loans increased by $17.2 million, or
45.7% to $54.9 million for the nine months ended September 30, 1997
from $37.7 million for the comparable nine-month period in 1996,
primarily as a result of an increase in average balances of
mortgage loans of $311.4 million, partially offset by a decrease in
the average yield on mortgage loans of 29 basis points. The
increase in the average balance of mortgage loans between the
periods was due to mortgage originations, including purchases. The
average yield on mortgage loans decreased to 7.93% for the nine
months ended September 30, 1997 from 8.22% for the comparable nine-
month period in 1996 mainly due to the increasing percentage of
relatively lower yielding residential mortgages.
Interest income on other loans decreased by $357,000, or 12.8% to
$2.4 million for the nine months ended September 30, 1997 from $2.8
million for the comparable period in 1996 primarily due to a
decrease of $3.6 million in average balances outstanding and a
decrease of 34 basis points in average yield.
Interest income on MBSs decreased by $5.8 million, or 19.7% to
$23.8 million for the nine months ended September 30, 1997 from
$29.6 million for the comparable nine-month period in 1996
primarily due to a decrease in average balances of MBSs of $106.9
million. During 1996, sales of MBSs from the AFS portfolio
exceeded purchases due to funding needed for mortgage loan
originations and the purchase of loans in the secondary market.
For the first nine months of 1997, the Bank placed a greater
29
<PAGE>
emphasis on MBSs reflecting management's strategy to improve
duration and yield of the AFS portfolio with MBSs rather than debt
and equity securities.
Interest income on debt and equity securities increased by
$966,000, or 9.1% to $11.6 million for the nine months ended
September 30, 1997 from $10.7 million for the comparable nine-month
period in 1996 primarily as a result of an increase in average
yield of 68 basis points. The increase in the average yield was
due to the purchase of debt and equity securities yielding
approximately 7.3% which were designated as AFS, offsetting sales
yielding approximately 6.9%.
INTEREST EXPENSE. Interest expense increased by $8.4 million, or
18.5% to $54.0 million for the nine months ended September 30, 1997
from $45.5 million for the nine months ended September 30, 1996.
The increase was the result of a $4.0 million increase in interest
expense on deposits and an increase of $4.4 million in interest
expense on borrowings.
Interest on deposits increased by $4.0 million, or 12.0% to $37.1
million for the nine months ended September 30, 1997 from $33.1
million for the comparable nine-month period in 1996. The increase
in interest on deposits was primarily due to the average balance
which increased $94.5 million, or 8.51% to $1.21 billion for the
nine months ended September 30, 1997 from $1.11 billion for the
comparable nine-month period in 1996. The deposit growth is
primarily attributable to the Bank's in-store banking program which
was implemented during the second quarter of 1996. The increase in
average balance was primarily due to certificate account balances
which increased $85.7 million, or 15.2% to $651.2 million for the
nine months ended September 30, 1997 from $565.5 million for the
comparable nine-month period in 1996. Interest expense on
certificate accounts increased by $4.1 million, or 17.1% to $28.1
million for the nine months ended September 30, 1997 from $24.0
million in the same period in 1996 primarily due to the growth in
average balances primarily in the in-store branches. The average
cost of certificate accounts was 5.75% for the first nine months of
1997 compared to 5.66% for the comparable period in 1996. Interest
expense on passbook accounts decreased by $89,000, or 1.3% to $6.9
million for the nine months ended September 30, 1997 from $7.0
million in the same period in 1996 primarily due to a decrease in
average balances due to customers seeking higher yielding
investment opportunities including the Bank's certificate of
deposit accounts. The average cost of all deposits was 4.11% for
the period ended September 30, 1997 compared to 3.98% for the
period ended September 30, 1996.
Interest on borrowed funds increased by $4.4 million, or 35.7% to
$16.8 million for the nine months ended September 30, 1997 from
$12.4 million for the comparable nine-month period in 1996.
30
<PAGE>
Borrowed funds on an average basis increased by $103.0 million
between the periods due to the addition of $25.0 million of Capital
Securities issued by Haven Capital Trust I in February 1997 which
are included in borrowed funds and the addition of an $85.0 million
leverage program which was implemented during the first quarter to
offset the additional interest expense resulting from the issuance
of the Capital Securities.
NET INTEREST INCOME. Net interest income increased by $3.7 million
to $39.0 million for the nine months ended September 30, 1997 from
$35.3 million for the nine months ended September 30, 1996. The
increase is primarily due to total interest-earning assets which
increased $200.9 million, or 13.9% to $1.65 billion for the nine
months ended September 30, 1997 from $1.45 billion for the same
period last year primarily due to the growth in the Bank's mortgage
loan portfolio. In addition, the average yield on interest-earning
assets increased to 7.53% from 7.46% for the nine months ended
September 30, 1997 and 1996, respectively. This increase was
offset by the average cost on interest-bearing liabilities which
increased to 4.52% from 4.36% for the nine months ended September
30, 1997 and 1996, respectively. The net interest spread was 3.01%
for the nine months ended September 30, 1997 compared to 3.10% for
the comparable period in 1996.
PROVISION FOR LOAN LOSSES. The Bank recorded $2.2 million for loan
losses for the nine months ended September 30, 1997 compared to
$2.5 million for the comparable nine-month period in 1996.
NON-INTEREST INCOME. Non-interest income increased by $1.2
million, or 16.4% for the nine months ended September 30, 1997 to
$8.4 million from $7.2 million for the comparable nine-month period
in 1996. The results for 1996 included $597,000 in loan prepayment
fees. Savings and checking fees increased by $1.3 million, or
54.7% to $3.8 million for the first nine months of 1997 compared to
$2.4 million for the same period last year due to the increase in
the number of checking accounts. The in-store bank branches
generated savings and checking fees of $843,000 of the $1.3 million
increase for the nine months ended September 30, 1997. Insurance,
annuity and mutual fund fees increased by $498,000 due to an
increase in sales volume which included $357,000 in revenue from
sales originating from in-store bank branches. The Bank realized
a net loss of $23,000 on the sale of securities from its AFS
portfolio compared to a gain of $88,000 for the same period last
year.
NON-INTEREST EXPENSE. Non-interest expense increased by $3.1
million, or 10.6% for the nine months ended September 30, 1997 to
$32.6 million from $29.5 million for the comparable nine-month
period in 1996. The significant increase in operating expenses is
primarily due to the Bank's in-store branch expansion program which
accounted for $6.9 million of operating expenses in the first nine
31
<PAGE>
months of 1997. Compensation and benefit costs increased by $6.3
million, or 56.6% for the nine months ended September 30, 1997 to
$17.4 million from $11.1 million for the prior period. The in-
store branch expansion accounts for $3.9 million of the increase in
compensation costs. Salary costs for the Bank's subsidiary, CIS,
Inc., increased by $419,000 due to higher sales volume. The
remainder of the increase in salary costs was due to normal merit
increases. In addition, federal social security taxes increased
$391,000 from the prior period due to a higher salary base. ESOP
compensation increased $162,000 from the same period last year due
to the increase in the average price of Haven Bancorp common stock
for the period. The cost incurred for hospitalization and group
life insurance increased $180,000 from the comparable period last
year due to the increase in staff. Finally, pension expense
increased $250,000 since the results for 1996 reflect the reversal
of pension accruals since the plan was frozen as of July 1, 1996.
Occupancy and equipment costs increased $1.8 million primarily due
to the Bank's in-store banking program which accounted for $100% of
the increase. REO operations, net decreased $29,000 from the
comparable period last year due to a decline in loss provisions
booked for the REO portfolio. The results for the first nine
months of 1996 included a one-time special assessment of $6.8
million which was used to recapitalize the SAIF insurance fund.
The significant decrease in the federal deposit insurance premium
costs of $1.3 million was due to a decrease in the assessment rate
from 23 basis points in 1996 to 6.48 basis points in 1997 primarily
due to the SAIF recapitalization previously discussed. Finally,
miscellaneous operating costs increased $3.2 million, or 47.3% to
$10.0 million for the nine months ended September 30, 1997 compared
to $6.8 million for the same period last year. Operating expenses
including stationery, telephone, postage, insurance and
miscellaneous costs increased approximately $998,000 due to the
Bank's in-store branch program. Consulting fees increased $346,000
from 1996 primarily due to the implementation of the in-store
branch program. Professional fees increased $136,000 from 1996 due
to professional services related to the formation of CPCC. The
cost of EDP services provided to the Bank increased $328,000 due to
the growth in deposit accounts. The costs for advertising and NYCE
fees increased $289,000 and $108,000, respectively, due to the
growth in both the loan portfolio and deposit base. Operating
expenses for CIS, Inc., the Bank investment subsidiary increased
$170,000 due to higher sales volume. Miscellaneous operating
losses increased $457,000 from the same period last year due to the
1996 results which included the reversal of a $389,000 reserve
regarding claims which were subsequently paid by Nationar, an
entity that previously provided check collection services for the
Bank.
INCOME TAX EXPENSE. Income tax expense was $4.6 million for an
effective tax rate of 36.2% for the nine months ended September 30,
1997 compared to income tax expense of $4.6 million for an
32
<PAGE>
effective tax rate of 43.6% for the comparable period in 1996. The
decrease in the effective tax rate is due to several factors:
First, during the first quarter of 1997, a deferred tax liability
of $330,000 was reversed related to the potential recapture of the
New York City tax bad debt reserve which was no longer necessary
due to New York City tax legislation enacted earlier this year.
The New York City tax law was amended in the first quarter of 1997
to conform to the New York State tax treatment for bad debt
reserves. The legislation "decouples" New York State's and New
York City's thrift bad debt provisions from the federal tax law and
allows for the use of the percentage of taxable income method
("PTI") for computing the tax bad debt reserves. The second factor
which contributed to the tax savings when compared to the prior
period was the switch to the PTI method for calculating the bad
debt deduction for New York City. The final factor contributing to
the decline in the effective tax rate for 1997 was the
establishment of CPCC during the second quarter of 1997 which
resulted in certain tax savings.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not applicable.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In February, 1983, a burglary of the contents of safe deposit boxes
occurred at a branch office of the Bank. At September 30, 1997,
the Bank has a class action lawsuit related thereto pending,
whereby the plaintiffs are seeking recovery of approximately $12.9
million in actual damages and an additional $12.9 million of
unspecified damages. The Bank's ultimate liability, if any, which
might arise from the disposition of these claims cannot presently
be determined. Management believes it has meritorious defenses
against these actions and has and will continue to defend its
position. Accordingly, no provision for any liability that may
result upon adjudication has been recognized in the accompanying
consolidated financial statements.
The Company is involved in various other legal actions arising in
the ordinary course of business, which in the aggregate, are
believed by management to be immaterial to the financial position
of the Company.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
33
<PAGE>
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) 27.1 Financial Data Schedule.
(b) The Company filed Form 8-K on October 28, 1997
regarding the declaration on October 23, 1997 of a stock split in
the form of a 100% stock dividend.
34
<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.
HAVEN BANCORP INC.
(Registrant)
<TABLE>
<S> <C>
Date: November 14, 1997 By: /s/ Philip S. Messina
---------------------------
Philip S. Messina
President and Chief Executive
Officer
Date: November 14, 1997 By: /s/ Catherine Califano
---------------------------
Catherine Califano
Senior Vice President
and Chief Financial Officer
</TABLE>
35
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Statement of Financial Condition at September 30, 1997 and
the Consolidated Statement of Operations for the 9 months Ended September
30, 1997.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 34,993
<INT-BEARING-DEPOSITS> 1,229,298
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 419,124
<INVESTMENTS-CARRYING> 261,096
<INVESTMENTS-MARKET> 260,423
<LOANS> 1,066,275
<ALLOWANCE> 11,954
<TOTAL-ASSETS> 1,833,284
<DEPOSITS> 1,310,471
<SHORT-TERM> 303,821
<LIABILITIES-OTHER> 22,203
<LONG-TERM> 86,844
0
0
<COMMON> 100
<OTHER-SE> 109,845
<TOTAL-LIABILITIES-AND-EQUITY> 1,833,284
<INTEREST-LOAN> 57,302
<INTEREST-INVEST> 35,686
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 92,988
<INTEREST-DEPOSIT> 37,124
<INTEREST-EXPENSE> 53,951
<INTEREST-INCOME-NET> 39,037
<LOAN-LOSSES> 2,150
<SECURITIES-GAINS> (23)
<EXPENSE-OTHER> 32,621
<INCOME-PRETAX> 12,631
<INCOME-PRE-EXTRAORDINARY> 12,631
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,056
<EPS-PRIMARY> 0.89
<EPS-DILUTED> 0.88
<YIELD-ACTUAL> 3.16
<LOANS-NON> 10,366
<LOANS-PAST> 0
<LOANS-TROUBLED> 2,213
<LOANS-PROBLEM> 22,850
<ALLOWANCE-OPEN> 10,704
<CHARGE-OFFS> 1,466
<RECOVERIES> 566
<ALLOWANCE-CLOSE> 11,954
<ALLOWANCE-DOMESTIC> 11,954
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
