SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
-----------------------------------------
FORM 10-QSB
(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, 1998
OR
[ ] TRANSITION report pursuant to section 13 or 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to ______________________
SEC File Number 0-23194
First Savings Bancorp of Little Falls, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
New Jersey 22-3360945
- --------------------------------------------------------------------------------
(State or other jurisdiction) (I.R.S. Employer Identification No.)
Registrant's telephone number, including area code (973) 256-2100
---------------
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last report
Indicate by check (X) whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for 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
------- -------
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: 440,100.
<PAGE>
FIRST SAVINGS BANCORP OF LITTLE FALLS, INC.
-------------------------------------------
INDEX
-----
Page Number
-----------
PART I - CONSOLIDATED FINANCIAL INFORMATION
Consolidated Statements of Financial
Condition at September 30, 1998
and December 31, 1997 (unaudited) 1
Consolidated Statements of Income
and Comprehensive Income
for the Three and Nine Months Ended
September 30, 1998 and 1997 (unaudited) 2
Consolidated Statements of Cash Flows
of the Nine Months Ended
September 30, 1998 and 1997 (unaudited) 3-4
Notes to Consolidated Financial Statements ^5-6
Management's Discussion and Analysis of
Financial Condition and Results of Operations ^7-12
PART II - OTHER INFORMATION ^13
SIGNATURES ^14
<PAGE>
FIRST SAVINGS BANCORP OF LITTLE FALLS, INC
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, 1998 December 31, 1997
------------------------------------------------------
<S> <C> <C>
Assets
- ------
Cash and amounts due from
depository institutions $1,613,468 $2,142,413
Interest-bearing demand
deposits in other banks 5,849,245 1,540,810
-------------------------- ----------------------
Total cash and cash equivalents 7,462,713 3,683,223
Securities available for sale, net 25,575,637 31,226,440
Investment securities held to maturity, net:
estimated fair value of $24,231,000(1998) and $19,647,000 (1997) 24,146,561 19,643,589
Mortgage-backed securities held to maturity, net:
estimated fair value of $9,032,000(1998) and $10,438,000 (1997) 8,943,261 10,414,679
Loans receivable, net of allowance for loan
losses of $611,170 (1998) $596,230 (1997) 109,933,403 105,467,485
Premises and equipment, net 2,760,705 2,775,060
Real estate owned, net 1,485,738 1,640,004
Federal Home Loan Bank of New York stock, at cost 1,154,400 1,106,600
Interest and dividends receivable, net 1,396,287 1,379,628
Other assets 1,653,628 807,631
-------------------------- ----------------------
Total assets $184,512,333 $178,144,339
========================= =====================
Liabilities and stockholder's equity
Liabilities
Deposits $172,399,887 $166,758,857
Borrowed Money 519,561 551,132
Advance payments by borrowers for
taxes and insurance 805,037 769,354
Other liabilities 501,087 200,537
-------------------------- ----------------------
Total liabilities 174,225,572 168,279,880
-------------------------- ----------------------
Stockholders' Equity
Common Stock (par value $1.00 per share)
authorized 5,000,000 shares: issued and
outstanding 440,100 shares 440,100 440,100
Additional paid-in capital 4,212,303 3,670,377
Retained earnings-substantially restricted 5,413,540 5,458,904
Accumulated other comprehensive income 220,818 295,078
-------------------------- ----------------------
Total stockholders' equity 10,286,761 9,864,459
-------------------------- ----------------------
Total liabilities and stockholders' equity $184,512,333 $178,144,339
========================== ======================
</TABLE>
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
PAGE 1
<PAGE>
FIRST SAVINGS BANCORP OF LITTLE FALLS, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
---------------------------- --------------------------
SEPTEMBER 30 SEPTEMBER 30
1 9 9 8 1 9 9 7 1 9 9 8 1 9 9 7
------- ------- ------- -------
<S> <C> <C> <C> <C>
Interest income
Loans $ 2,244,232 $ 2,322,787 $ 6,667,710 $ 6,407,461
Mortgage-backed securities 359,877 708,525 1,151,883 2,244,161
Investments 557,446 138,349 1,623,997 459,012
Other interest-earning assets 110,602 101,174 362,138 300,443
----------- ----------- ----------- -----------
Total interest income 3,272,157 3,270,835 9,805,728 9,411,077
----------- ----------- ----------- -----------
Interest expense
Deposits 2,147,587 2,052,902 6,382,076 6,015,987
Borrowed Money 9,088 9,458 27,145 11,044
----------- ----------- ----------- -----------
Total Interest expense 2,156,675 2,062,360 6,409,221 6,027,031
----------- ----------- ----------- -----------
Net interest income 1,115,482 1,208,475 3,396,507 3,384,046
Provision for loan losses 25,000 25,000 75,000 75,000
Net interest income after
----------- ----------- ----------- -----------
provision of loan losses 1,090,482 1,183,475 3,321,507 3,309,046
----------- ----------- ----------- -----------
Non-interest income
Service charges 22,922 20,137 75,235 66,726
Miscellaneous 19,774 20,723 47,233 49,230
Gain on sale of loans 217 -- 217 --
Gain on sale of securities available -- -- -- 7,836
for sale
----------- ----------- ----------- -----------
Total non-interest income 42,913 40,860 122,685 123,792
----------- ----------- ----------- -----------
Non-interest expense
Salaries and employee benefits 340,733 366,059 1,071,209 1,092,206
Net occupancy expense 65,146 58,746 185,437 183,738
Equipment 102,804 93,438 287,904 274,631
Loss on foreclosed real estate 8,809 86,941 66,319 159,928
Federal insurance premium 25,717 24,975 77,287 72,678
Advertising and promotion 7,665 17,938 31,834 70,116
Legal fees 60,513 32,440 161,628 127,620
Miscellaneous 149,630 169,090 561,476 518,209
----------- ----------- ----------- -----------
Total non-interest expenses 761,017 849,627 2,443,094 2,499,126
----------- ----------- ----------- -----------
Income before income taxes 372,378 374,708 1,001,098 933,712
Income taxes 137,170 134,178 ^386,312 333,663
----------- ----------- ----------- -----------
Net income 235,208 240,530 ^614,786 600,049
----------- ----------- ----------- -----------
Other comprehensive income:
Unrealized holding (losses)gains on securities available
for sale, net of income taxes of $23,678, $38,322,
$20,521 and $56,151, respectively (81,579) 71,171 (74,260) 104,062
Reclassification adjustments for realized gains on
securities available for sale, net of income taxes of
$2,819 -- -- -- (5,017)
----------- ----------- ----------- -----------
Other comprehensive income: (81,579) 71,171 (74,260) 99,045
----------- ----------- ----------- -----------
Comprehensive income $ 153,629 $ 311,701 $ ^540,526 $ 699,094
=========== =========== =========== ===========
Net income per common share- basic and $ 0.53 $ 0.55 $ ^1.40 $ 1.36
diluted
=========== =========== =========== ===========
Weighted average number of common
shares outstanding- basic and diluted 440,100 440,100 440,100 440,100
=========== =========== =========== ===========
</TABLE>
Page 2
See notes to unaudited consolidated financial statements
<PAGE>
FIRST SAVINGS BANCORP OF LITTLE FALLS INC.
------------------------------------------
AND SUBSIDIARY
--------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
- -------------------------------------
Net income $ ^614,786 $ 600,049
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 197,396 211,844
Amortization of premiums, discounts and fees, net 162,076 178,753
Provision for losses on loans and real estate owned 113,000 113,511
Net (gain)loss on sales of real estate owned (17,600) 8,806
Net gain on sales of loans (217) --
Net gain on sales of securities available for sale -- (7,836)
Increase in interest and dividends receivable, net (16,659) (119,544)
Increase in other assets ^(288,301) (257,715)
(Decrease)increase in accrued interest payable (19,468) 37,959
Increase in other liabilities 80,500 136,739
Amortization of branch premium 25,000 24,999
- -------------------------------------------------------------------------- ------------ ------------
Net cash provided by operating activities ^235,727 927,565
- -------------------------------------------------------------------------- ------------ ------------
Cash flows from investing activities:
Purchase of securities available for sale (2,120,003) (3,177,687)
Proceeds from Investment securities held to maturity matured or called 15,815,891 8,000,000
Proceeds from sale of securities available for sale -- 3,340,763
Purchase of investment securities held to maturity (20,318,702) (14,607,815)
Purchase of Mortgage-backed securities held to maturity (1,021,875) --
Securities available for sale repayments 7,411,659 3,493,462
Mortgage-backed securities held to maturity repayments 2,494,994 2,567,325
Net increase in loans receivable (4,785,501) (13,012,217)
Additions to premises and equipment (183,041) (83,586)
Additions to real estate owned -- (51,355)
Payments received on real estate owned -- 6,000
Proceeds from sales of loans 98,717 --
Proceeds from sales of real estate owned 360,128 323,073
Purchase of Federal Home Loan Bank of NY stock (47,800) (181,000)
- -------------------------------------------------------------------------- ------------ ------------
Net cash used in investment activities (2,295,533) (13,383,037)
- -------------------------------------------------------------------------- ------------ ------------
Cash flows from financing activities:
Net increase in deposits 5,660,498 8,644,594
Increase in Federal Home Loan Bank Advances -- 568,000
Repayment of Federal Home Loan Bank Advances (31,571) (10,064)
Increase in advance payments by
borrowers for taxes and insurance 35,683 189,635
Preferred stock dividends paid -- (42,500)
Common stock dividends paid (440,100) (177,550)
- -------------------------------------------------------------------------- ------------ ------------
Net cash provided by financing activities 5,224,510 9,172,115
- -------------------------------------------------------------------------- ------------ ------------
Net increase(decrease) in cash and cash equivalents 3,779,490 (3,283,357)
Cash and cash equivalents -- beginning 3,683,223 10,673,339
------------ ------------
Cash and cash equivalents -- end $ 7,462,713 $ 7,389,982
============ ============
</TABLE>
See notes to unaudited consolidated financial statements
Page 3
<PAGE>
FIRST SAVINGS BANCORP OF LITTLE FALLS INC.
------------------------------------------
AND SUBSIDIARY
--------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
--------------------------------------
1998 1997
---- ----
<S> <C> <C>
Supplemental disclosures of cash flows information:
- ---------------------------------------------------
Cash paid during the period for:
--------- ----------------------
Interest $6,428,689 $5,989,072
================ ===============
Income taxes $239,515 $231,669
================ ===============
Supplemental disclosure of noncash activities:
- ----------------------------------------------
(Decrease)increase in unrealized gain on securities,
net of deferred income taxes ($74,260) $99,045
================ ===============
Loans transferred to real estate owned $226,262 $ --
================ ===============
Loans originated to facilitate the sale of
real estate owned $ -- $663,000
================ ===============
Common stock dividend declared but not yet paid $220,050 $42,500
================ ===============
^Refundable federal income taxes not affecting ^ $541,926 $ ^--
======== =========
net income recorded as an increase to additional
paid-in capital
</TABLE>
See notes to unaudited consolidated financial statements
Page 4
<PAGE>
First Savings Bancorp of Little Falls, Inc.
-------------------------------------------
Notes To Consolidated Financial Statements
------------------------------------------
The consolidated financial statements include the accounts of First
Savings Bancorp of Little Falls, Inc. (the "Company") and its wholly owned
subsidiary, First Savings Bank of Little Falls, FSB (the "Savings Bank") and the
Savings Bank's wholly owned subsidiaries, The First Service Corporation of
Little Falls and Redeem, Inc. All significant intercompany balances and
transactions have been eliminated in consolidation.
These consolidated financial statements were prepared in accordance
with instructions for Form 10-QSB and therefore, do not include all disclosures
necessary for a complete presentation of the statements of financial condition,
statements of income, and statements of cash flows in conformity with generally
accepted accounting principles. However, all adjustments which are, in the
opinion of management, necessary for the fair presentation of the interim
financial statements have been included and all such adjustments are of a normal
recurring nature. The results of operations for the nine months ended September
30, 1998 are not necessarily indicative of the results that may be expected for
the fiscal year ending December 31, 1998 or any other interim period.
These statements should be read in conjunction with the consolidated
statements and related notes which are incorporated by reference in the
Company's Annual Report on Form 10-KSB for the year ended December 31, 1997.
Effective January 1, 1998, the Company adopted Financial Accounting Standards
Board Statement of Financial Accounting Standards ("Statement") No. 130,
"Reporting Comprehensive Income". Statement No. 130 requires the reporting of
comprehensive income in addition to net income from operations. Comprehensive
income is a more inclusive financial reporting methodology that includes
disclosure of certain financial information that historically has not been
recognized in the calculation of net income. As required, the provisions of
Statement No. 130 have been retroactively applied to previously reported
periods. The application of Statement No. 130 had no effect on the Company's
consolidated financial condition or operations.
On September 8, 1998 the Company signed a definitive merger agreement (the
"Agreement") with Greater Community Bancorp ("Greater Community") dated
September 4, 1998, for the purchase by Greater Community of all of the
outstanding common stock of the registrant. Each share of the registrant's
common stock will converted into the right to receive $52.26 in cash, subject to
adjustment as provided in the Agreement.
Page 5
<PAGE>
In February 1998, the President of the Company recognized taxable income based
upon the removal of a restriction on transfer of previously awarded common
stock. Such shares were previously awarded to the President by an investor
group. As a result, the Bank recognized a tax deductible expense of $542,000.
Such deduction was reported incorrectly as a permanent timing difference in the
calculation of income tax expense for the three months ended March 31, 1998.
This tax benefit should have been recorded as a direct addition to paid-in
capital as required by FASB 109. Such tax benefit recorded in the quarter ended
March 31, 1998 has been reversed, revising previously reported data as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, 1998 September 30, 1998
-------------------------------------------------------
As Previously As Previously
reported As revised reported As revised
-------------------------------------------------------
<S> <C> <C> <C> <C>
Income before income tax $ 391,112 $ 391,112 $ 1,001,098 $ 1,001,098
Income (benefit)tax (377,403) 164,523 (155,614) 386,312
----------- ----------- ----------- -----------
Net Income $ 768,515 $ 226,589 $ 1,156,712 $ 614,786
=========== =========== =========== ===========
Net Income per common
share-basic and diluted $ 1.75 $ .51 $ 2.63 $ 1.40
=========== =========== =========== ===========
</TABLE>
Page 6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
On September 8, 1998 the Company signed a definitive merger agreement (the
"Agreement") with Greater Community Bancorp ("Greater Community") dated
September 4, 1998, for the purchase by Greater Community of all of the
outstanding common stock of the registrant. Each share of the registrant's
common stock will converted into the right to receive $52.26 in cash, subject to
adjustment as provided in the Agreement
FINANCIAL CONDITION AT SEPTEMBER 30, 1998
- -----------------------------------------
Total assets of the Company increased $6.4 million or 3.6% from $178.1
million at December 31, 1997 to $184.5 million as September 30, 1998. The
increase in assets primarily reflects the Company's deployment of proceeds into
the loan portfolio and net investments held to maturity, from principal
repayments of mortgage-backed securities held to maturity and redemption's of
securities available for sale. The Bank as of September 30, 1998 had $2.2
million of outstanding loan commitments that will be funded in the fourth
quarter of 1998 with outstanding balances of interest bearing demand deposits in
other banks.
Deposits, after interest credited increased $5.6 million or 3.4% from
$166.8 million at December 31, 1997 to $172.4 million at September 30, 1998. The
increase resulted primarily from the growth of certificates of deposit, Now
accounts and the Company's response to the rates offered by other bank's in the
market area. The Company did not offer promotional rates on deposits during this
quarter.
Stockholder's equity increased $422,000 to $10.3 million at September 30, 1998
from $9.9 million at December 31, 1997. The primary cause of the increase was
the recording of a $542,000 federal income tax benefit not affecting net income
directly to additional paid-in capital. This benefit related to the release of
certain restrictions on the common stock owned by a member of the control group.
Other changes in stockholders equity resulted from net income of $615,000,
dividends declared of $660,000 and a $74,000 reduction in net unrealized gains
on securities available for sale.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED
- ------------------------------------------------
SEPTEMBER 30, 1998
- -------------------
Net income for the three months ended September 30, 1998 decreased
$6,000 or 2% from $241,000 for the three month period ended September 30, 1997
to $235,000 for three month period ended September 30, 1998. This decrease was
primarily due to a $93,000 decrease in net interest income, offset by a $89,000
decrease in non-interest expenses.
For the three months ended September 30, 1998, net interest income
decreased $93,000 from $1.21 million for the same period in 1997 to $1.12
million in 1998. The primary reason for the decrease was during the three months
ended September 30, 1998, the Company's interest rate spread and net interest
margin decreased to 2.55% and 2.54%, respectively, compared to 2.82% and 2.81%,
respectively for the same period of 1997.
Page 7
<PAGE>
The lower spread and margin are primarily due to a lower yield on earning
assets and the higher cost of funds in the third quarter of 1998. Average
balances of the securities and loan portfolio increased $6.7 million due to
asset growth from the origination of whole loans and the purchase of securities
Non-interest income increased $2,000 or 5% from $41,000 for the three
month period ended September 30, 1997 to $43,000 for the three month period
ended September 30, 1998. The increase was for increases in the collection of
mortgage late charges and DDA fees.
Non-interest expense decreased to $761,000 for the three month period ended
September 30, 1998 from $850,000 for the three month period ended September 30,
1997. Salaries and employee benefits decreased $25,000 due mainly to the
retirement of two employees at June 30, 1998 whose positions remained unfilled
as of September 30, 1998. Loss on foreclosed real estate decreased $78,000 due
to the lower holding costs and improved results related to the disposition of
properties during the three month period ended September 30, 1998. See " Asset
Quality". Legal fees increased $28,000 during the three month period September
30, 1998 because of increased costs associated with resolving cases of real
estate owned properties.
Income taxes were $137,000 and $134,000 for the three months ended
September 30, 1998 and 1997, respectively. The effective tax rate for the three
month periods ended September 30, 1998 and 1997, was 37% and 36% respectively.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
- ------------------------------------------------------------------
Net income for the nine months ended September 30, 1998 increased $15,000 or
2% from $600,000 for the nine month period ended September 30, 1997 to $615,000
for the nine month period ended September 30, 1998. The increase was primarily
due to a $12,000 increase in net interest income and a $56,000 decrease in
non-interest expense, partially offset by a $53,000 increase in income tax
expense.
For the nine months ended September 30, 1998, net interest income increased
$12,000 from $3.38 million for the same period in 1997 to $3.40 million in 1998.
The main reason for the increase was that the average balances of the securities
and loan portfolio increased $4.3 million, due to asset growth from the
origination of whole loans and the purchase of investment securities held to
maturity, during the nine month period ended September 30, 1998 compared to the
same period last year. Declining interest rates partially offset the increase in
average balances. The interest rate spread and net interest margin declined to
2.59% and 2.58%, respectively, during the nine months ended September 30, 1998
compared to 2.74% and 2.73%, respectively for the same period of 1997. The lower
spread and margin are primarily due to a lower yield on earning assets and
higher cost of funds in the first nine months of 1998.
Page 8
<PAGE>
Non-interest income decreased $1,000 or 1% from $124,000 for the nine
month period ended September 30, 1997 to $123,000 for the nine month period
ended September 30, 1998.
Non-interest expense decreased $56,000, or 2%, from $2.5 million for the nine
months ended September 30, 1997 to $2.44 million for the nine months ended
September 30, 1998. Such decrease was primarily attributable to a $94,000
decrease in loss on real estate owned, a $38,000 decrease in advertising and
promotion, offset by a $34,000 increase in legal fees. As discussed previously,
lower holding costs were incurred on real estate owned property and increased
legal costs were incurred on the resolution of real estate owned property. In
1997, the Company incurred advertising and promotion costs for the " Grand
Reopening" of the Little Ferry branch which were non-recurring in 1998.
An income tax expense of $386,000 was recorded for the nine month period ended
September 30, 1998 compared to a $334,000 expense for the same period last year.
The effective tax rate for the nine month periods ended September 30, 1998 and
1997, was 38% and 36% respectively
Asset Quality
- -------------
The following schedule sets forth certain information regarding the Bank's
non-performing as of September 30, 1998, and as of December 31, 1997.
Sept 30, December 31,
1998 1997
--------- ------------
Non-accrual loans $1,683 $2,601
Renegotiated loans 406 406
-------------------------
Total non-accural and
renegotiated loans 2,086 3,007
Other real estate owned 1,486 1,640
-------------------------
Total $3,572 $4,647
=========================
At September 30, 1998, non-accrual loans decreased $918,000 from December 31,
1997. Residential loans totaling $588,000 became nonaccrual, residential loans
formally non-accrual totaling $501,000 became current, a $300,000 payment was
made on a multi-family loan, four loans totaling $479,000 were paid-off and a
loan of $226,000 was transferred to other real estate owned and sold during the
second quarter of 1998. As of September 30, 1998 the Bank's other real estate
owned represents one non-residential property.
Page 9
<PAGE>
The following table represents an analysis of the allowance for loan losses:
<TABLE>
<CAPTION>
Nine months ended Sept. 30, Year ended December 31,
---------------------------------------------------------
1998 1997 1997
------------------------------------------------
<S> <C> <C> <C>
Balance - beginning $ 596,230 $ 523,715 $ 523,715
Provision charged 75,000 75,000 101,174
Loans charged off (61,555) (35,474) (37,374)
Recoveries 1,495 3,868 8,715
------------------------------------------------
Balance-ending $ 611,170 $ 567,109 $ 596,230
================================================
Net loans charged off as a
percent of average loans (1) .07% .04% .03%
Allowance as a percent of
Total loans .55% .52% .56%
Non performing loans 29.30% 34.64% 19.83%
</TABLE>
(1)Annualized
Analysis of the Allowance for Loan Losses
- -----------------------------------------
<TABLE>
<CAPTION>
At September 30, 1998 At December 31, 1997
---------------------------------------------------
(Dollars In Thousands) Percent of Percent of
Loans in each Loans in each
category to category to
$ total loans $ total loans
---------------------------------------------------
<S> <C> <C> <C> <C>
Real estate...................... $465 90.76% $408 88.96%
Commercial........................ 105 4.26% 107 4.38%
Consumer......................... 41 4.98% 81 6.66%
---------------------------------------------------
Total $611 100.00% 596 100.00%
===================================================
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Savings Bank is required to maintain minimum levels of liquid
assets, as defined by the Office Of Thrift Supervision regulations. This
requirement, which may be varied from time to time depending upon economic
conditions and deposit flows, is based upon a percentage of deposits and
short-term borrowings. The required minimum ratio is 4%. The Savings Bank's
liquidity ratio averaged 38.5% during nine months of 1998.
The Savings Bank anticipates that it will have sufficient funds
available to meet its current loan commitments and normal savings withdrawals.
At September 30, 1998, the Savings Bank had outstanding loan commitments of $2.7
million. In addition, it had $97.7 million in certificates of deposits scheduled
to mature within one year of September 30, 1998. Based upon historical
experience, management believes that a substantial portion of such deposits will
remain with the Savings Bank.
As of September 30, 1998, the Company had regulatory capital that was
in excess of applicable limits. The Company is required under certain federal
regulations to maintain tangible capital equal to at least 1.5% of its tangible
assets, core capital equal to at least 3.00% of adjusted tangible assets and
risk-based capital equal to at least 8.00% of risk-weighted assets. At September
30, 1998, the Savings Bank had tangible capital equal to 5.11% of adjusted total
assets, core capital equal to 5.11% of adjusted total assets and total capital
equal to 12.43% of risk-weighted assets.
Page 10
<PAGE>
YEAR 2000
- ---------
A great deal of information has been disseminated about the global computer year
2000. Many computer programs that can only distinguish the final two digits of
the year entered (a common programming practice in earlier years) are expected
to read entries for the year 2000 as the year 1900 and compute payment, interest
or delinquency based on the wrong date or are expected to be unable to compute
payment, interest or delinquency. Rapid and accurate data processing is
essential to the operation of the Bank. Data processing is also essential to
most other financial institutions and many other companies. All of the material
data processing of the Bank that could be affected by this problem is provided
by third party hardware and software providers.
During March 1998 the Bank's Board of Directors adopted a Year 2000 Business
Plan("The Plan") and selected five key employees to serve on the Year 2000
committee and prepare the Bank for the new millennium. As recommended by the
Federal Financial Institutions Examination Council, the Plan encompasses the
following phases: Awareness, Assessment, Renovation, Validation and
Implementation. These phases will enable the Company to identify risks, develop
an action plan perform adequate testing and complete certification that its
processing systems will be Year 2000 ready. Execution of the Plan is currently
on target.
The Bank's committee has selected nine areas as deemed mission critical to the
continued operation of the Bank into the next millennium. The nine areas are as
follows: internal Data processing system, Novell wide area networks, personal
computer hardware/software, Fedline terminal, automated clearing house terminal,
ATM machines, optical disk storage, and third party service bureaus. The Bank's
main areas of concern is the in-house data processing system which is a Unisys
mainframe running Information Technology Inc. software. The system is the Bank's
main processor and currently runs the Bank's savings, DDA, loans, general
ledger, investments, accounts payable and fixed assets. This system is currently
Year 2000 and has been since it was compiled in 1987 and therefore no additional
costs or renovations will needed to be done in this area. The other eight areas
of concern have either been updated to be Year 2000 ready or will be updated by
the fourth quarter of 1998.
The Bank is currently in the validation phase of its plan and expects to have
completed all testing and have all systems verified by June 1999. Testing has
been delayed until June 1999 due to the pending merger. If the proposed merger
is completed, it is uncertain which system the Bank will retain.
Page 11
<PAGE>
The Bank has contacted all material vendors and suppliers regarding their Year
2000 state of readiness. Each of these third parties has delivered written
assurance to the Bank that they expect to be Year 2000 compliant prior to the
Year 2000. The Bank is in the process of contacting all its material loan
customers regarding their Year 2000 state of readiness.
Based on a preliminary study, the Bank expects to spend approximately $74,000
from 1998 through 1999 to modify its computer information systems enabling
proper processing of transactions relative to the year 2000 and beyond. As of
September 30, 1998 the Bank has incurred $20,000 of expenses toward the Year
2000 and does not expect to incur all the $74,000 allocated to the Year 2000 due
to the pending merger which will result in the consolidation of some operations
and therefore some expenses will not have to be incurred. The Bank has not
developed a formal contingency plan which would be implemented in the unlikely
event that it was not Year 2000 compliant. The Company will continue to closely
monitor the progress of its Year 2000 compliance plan and will determine by
March 31, 1999 if the need for a contingency plan exits. The Bank is considering
using its existing Disaster Recovery Plan as a contingency plan which would be
implemented in the unlikely event that it was not Year 2000 compliant. The
Bank's Disaster recovery plan in summary calls for a delivery of new computer
equipment with compliant software in a remote location if necessary.
The Bank continues to evaluate appropriate courses of corrective action,
including replacement of certain systems whose associated costs would be
recorded as assets and amortized. Accordingly, the Bank does not expect the
amounts required to be expensed over the next two years to have a material
effect on its financial position or results of operations.
Successful and timely completion of the Year 2000 project is based on
management's best estimates derived from various assumptions of future events,
which are inherently uncertain, including the progress and results of the Bank's
testing plans, and all vendors, supplies and customer readiness.
Page 12
<PAGE>
FIRST SAVINGS BANCORP OF LITTLE FALLS, INC.
-------------------------------------------
PART II
-------
Item 1. Legal Proceedings
The Company and the Savings Bank are not engaged in any legal
proceedings of a material nature at the present time. From time to
time, the Savings Bank is a party to legal proceedings wherein it
enforces its security interest in loans.
Item 2. Changes in Securities
Not applicable
Item 3. Defaults upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a)Exhibits
Exhibit 27 Financial Data Schedule(electronic filing only)
b)Reports on Form 8-K
On September 9, 1998, the Company filed a Form 8-K reporting the
announcement of the definitive merger agreement with Greater
Community Bancorp.
Page 13
<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.
FIRST SAVINGS BANCORP OF LITTLE FALLS INC.
------------------------------------------
(Registrant)
Date: ^December 7, 1998 /s/Haralambos S. Kostakopoulos
----------------------------
Haralambos S. Kostakopoulos
President
Chief Executive Officer
Date: ^December 7, 1998 /s/Brian McCourt
-----------------------------
Brian McCourt
Vice President
Treasurer
Page 14
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION DERIVED FROM THE
QUARTERLY REPORT ON FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL INFORMATION.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-30-1998
<PERIOD-END> SEP-30-1998
<CASH> 1,613
<INT-BEARING-DEPOSITS> 5,849
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 25,576
<INVESTMENTS-CARRYING> 33,090
<INVESTMENTS-MARKET> 33,263
<LOANS> 109,933
<ALLOWANCE> 611
<TOTAL-ASSETS> 184,512
<DEPOSITS> 172,400
<SHORT-TERM> 520
<LIABILITIES-OTHER> 1,306
<LONG-TERM> 0
0
0
<COMMON> 440
<OTHER-SE> 9,847
<TOTAL-LIABILITIES-AND-EQUITY> 184,512
<INTEREST-LOAN> 6,668
<INTEREST-INVEST> 2,776
<INTEREST-OTHER> 362
<INTEREST-TOTAL> 9,806
<INTEREST-DEPOSIT> 6,382
<INTEREST-EXPENSE> 27
<INTEREST-INCOME-NET> 3,397
<LOAN-LOSSES> 75
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,443
<INCOME-PRETAX> 1,001
<INCOME-PRE-EXTRAORDINARY> 1,001
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 615
<EPS-PRIMARY> 1.40
<EPS-DILUTED> 1.40
<YIELD-ACTUAL> 2.55
<LOANS-NON> 1,683
<LOANS-PAST> 11
<LOANS-TROUBLED> 406
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 596
<CHARGE-OFFS> 61
<RECOVERIES> 1
<ALLOWANCE-CLOSE> 611
<ALLOWANCE-DOMESTIC> 611
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 611
</TABLE>
