UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the quarterly period ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number 0-24040
PENNFED FINANCIAL SERVICES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 22-3297339
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
622 Eagle Rock Avenue, West Orange, New Jersey 07052-2989
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (973) 669-7366
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(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
requirements for the past 90 days.
YES [X] NO[ ]
As of May 4, 1998, there were 9,616,589 shares of the Registrant's
Common Stock, par value $.01, outstanding.
<PAGE>
PART I - Financial Information
Item 1. Financial Statements
<TABLE>
<CAPTION>
PennFed Financial Services, Inc. and Subsidiaries
Consolidated Statements of Financial Condition
March 31, June 30,
1998 1997
------------ ------------
(Dollars in thousands)
<S> <C> <C>
Assets
Cash and cash equivalents .................................................... $ 11,931 $ 10,729
Investment securities held to maturity, at amortized cost, market
value of $161,401 and $35,432 at March 31, 1998 and
June 30, 1997 ............................................................. 161,305 35,290
Mortgage-backed securities held to maturity, at amortized cost,
market value of $233,242 and $291,125 at
March 31, 1998 and June 30, 1997 .......................................... 229,249 288,539
Loans receivable, net of allowance for loan losses of $2,649 and
$2,622 at March 31, 1998 and June 30, 1997 ................................. 1,003,373 931,451
Premises and equipment, net .................................................. 17,170 16,435
Real estate owned, net ....................................................... 1,897 884
Federal Home Loan Bank of New York stock, at cost ............................ 15,065 12,413
Accrued interest receivable, net ............................................. 10,016 7,196
Goodwill and other intangible assets ......................................... 14,083 15,918
Other assets ................................................................. 4,975 2,896
------------ ------------
$ 1,469,064 $ 1,321,751
============ ============
Liabilities and Stockholders' Equity
Liabilities:
Deposits ................................................................... $ 1,021,082 $ 918,160
Federal Home Loan Bank of New York advances ................................ 230,465 205,465
Other borrowings ........................................................... 52,625 82,750
Mortgage escrow funds ...................................................... 9,626 8,855
Due to banks ............................................................... 13,917 7,237
Accounts payable and other liabilities ..................................... 2,995 2,014
------------ ------------
Total liabilities ........................................................ 1,330,710 1,224,481
------------ ------------
Guaranteed Preferred Beneficial Interests in the Company's Junior
Subordinated Debentures .................................................... 34,500 --
Unamortized issuance expenses ................................................ (1,839) --
------------ ------------
Net Trust Preferred securities ........................................... 32,661 --
------------ ------------
<PAGE>
<CAPTION>
PennFed Financial Services, Inc. and Subsidiaries
Consolidated Statements of Financial Condition
March 31, June 30,
1998 1997
------------ ------------
(Dollars in thousands)
<S> <C> <C>
Stockholders' Equity:
Serial preferred stock, $.01 par value, 7,000,000 shares
authorized, no shares issued ............................................. -- --
Common stock, $.01 par value, 15,000,000 shares authorized,
11,900,000 shares issued and 9,646,589 and 9,644,248 shares outstanding at
March 31, 1998 and June 30, 1997 (excluding shares held in treasury of
2,253,411 and 2,255,752 at March 31, 1998 and June 30, 1997) ............. 60 60
Additional paid-in capital ................................................. 58,052 57,441
Restricted stock - Management Recognition Plan ............................. (1,062) (1,062)
Employee Stock Ownership Plan Trust debt ................................... (3,358) (3,671)
Retained earnings, partially restricted .................................... 68,533 61,051
Treasury stock, at cost, 2,253,411 and 2,255,752 shares at
March 31, 1998 and June 30, 1997 ......................................... (16,532) (16,549)
------------ ------------
Total stockholders' equity ............................................... 105,693 97,270
------------ ------------
$ 1,469,064 $ 1,321,751
============ ============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
PennFed Financial Services, Inc. and Subsidiaries
Consolidated Statements of Income
Three months ended Nine months ended
March 31, March 31,
-------------------------- --------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
(dollars in 000's, except per share amounts)
<S> <C> <C> <C> <C>
Interest and Dividend Income:
Interest and fees on loans ........................ $ 18,713 $ 16,312 $ 54,909 $ 44,626
Interest on federal funds sold .................... 8 -- 18 --
Interest and dividends on investment securities ... 3,080 307 6,396 1,177
Interest on mortgage-backed securities ............ 4,124 5,382 13,463 16,893
----------- ----------- ----------- -----------
25,925 22,001 74,786 62,696
----------- ----------- ----------- -----------
Interest Expense:
Deposits .......................................... 11,943 10,095 35,798 29,538
Borrowed funds .................................... 4,784 3,602 12,929 8,960
Trust Preferred securities ........................ 784 -- 1,391 --
----------- ----------- ----------- -----------
17,511 13,697 50,118 38,498
----------- ----------- ----------- -----------
Net Interest and Dividend Income Before Provision
for Loan Losses ................................... 8,414 8,304 24,668 24,198
Provision for Loan Losses ........................... 150 154 450 481
----------- ----------- ----------- -----------
Net Interest and Dividend Income After
Provision for Loan Losses ......................... 8,264 8,150 24,218 23,717
----------- ----------- ----------- -----------
Non-Interest Income:
Service charges ................................... 510 406 1,421 1,252
Net loss from real estate operations .............. (49) (15) (138) (185)
Net gain on sales of loans ........................ 419 -- 527 --
Other ............................................. 69 78 228 216
----------- ----------- ----------- -----------
949 469 2,038 1,283
----------- ----------- ----------- -----------
<PAGE>
<CAPTION>
PennFed Financial Services, Inc. and Subsidiaries
Consolidated Statements of Income
Three months ended Nine months ended
March 31, March 31,
-------------------------- --------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
(dollars in 000's, except per share amounts)
<S> <C> <C> <C> <C>
Non-Interest Expenses:
Compensation and employee benefits ................ 2,047 2,114 6,191 5,943
Net occupancy expense ............................. 325 284 941 834
Equipment ......................................... 404 375 1,130 1,144
Advertising ....................................... 100 88 258 266
Amortization of intangibles ....................... 607 625 1,835 1,891
Federal deposit insurance premium ................. 153 137 438 970
SAIF recapitalization assessment .................. -- -- -- 4,813
Other ............................................. 867 780 2,196 2,158
----------- ----------- ----------- -----------
4,503 4,403 12,989 18,019
----------- ----------- ----------- -----------
Income Before Income Taxes .......................... 4,710 4,216 13,267 6,981
Income Tax Expense .................................. 1,662 1,590 4,791 2,726
----------- ----------- ----------- -----------
Net Income .......................................... $ 3,048 $ 2,626 $ 8,476 $ 4,255
=========== =========== =========== ===========
Weighted average number of common shares outstanding:
Basic ............................................. 8,974,642 8,888,080 8,952,790 8,900,530
=========== =========== =========== ===========
Diluted ........................................... 9,767,821 9,485,680 9,689,702 9,406,734
=========== =========== =========== ===========
Net income per common share:
Basic ............................................. $ 0.34 $ 0.30 $ 0.95 $ 0.48
=========== =========== =========== ===========
Diluted ........................................... $ 0.31 $ 0.28 $ 0.87 $ 0.45
=========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
PennFed Financial Services, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Nine months ended March 31,
---------------------------
1998 1997
--------- ---------
(In thousands)
<S> <C> <C>
Cash Flows From Operating Activities:
Net income ............................................... $ 8,476 $ 4,255
Adjustments to reconcile net income to net cash provided
by operating activities:
Net gain on sales of loans ............................... (527) --
Proceeds from sales of loans held for sale ............... 1,616 585
Originations of loans held for sale ...................... (1,616) (497)
(Gain) loss on sales of real estate owned ................ (72) 8
Amortization of investment and mortgage-backed
securities premiums, net ............................... 228 202
Depreciation and amortization ............................ 965 943
Provision for losses on loans and real estate owned ...... 589 580
Amortization of cost of stock plans ...................... 1,323 1,075
Amortization of intangibles .............................. 1,835 1,891
Amortization of premiums on loans and loan fees .......... 1,024 280
Amortization of Trust Preferred securities issuance costs 21 --
Increase in accrued interest receivable, net of
accrued interest payable ............................... (3,328) (536)
(Increase) decrease in other assets ...................... (2,079) 660
Increase in accounts payable and other liabilities ....... 580 1,233
Increase in mortgage escrow funds ........................ 771 1,982
Increase (decrease) in due to banks ...................... 6,680 (1,517)
Other, net ............................................... -- 4
--------- ---------
Net cash provided by operating activities ................ 16,486 11,148
--------- ---------
Cash Flows From Investing Activities:
Proceeds from maturities of investment securities ........ 15,150 16,000
Purchases of investment securities held to maturity ...... (141,168) --
Net outflow from loan originations net of principal
repayments of loans .................................... (72,284) (73,344)
Purchases of loans ....................................... (77,606) (158,842)
Proceeds from principal repayments of
mortgage-backed securities ............................. 59,065 44,416
Proceeds from sales of loans ............................. 74,915 --
Purchases of premises and equipment ...................... (1,700) (1,365)
Proceeds from sales of real estate owned ................. 1,026 1,133
Purchases of Federal Home Loan Bank of New York stock .... (2,652) (3,376)
--------- ---------
Net cash used in investing activities .................... (145,254) (175,378)
--------- ---------
<PAGE>
<CAPTION>
PennFed Financial Services, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Nine months ended March 31,
---------------------------
1998 1997
--------- ---------
(In thousands)
<S> <C> <C>
Cash Flows From Financing Activities:
Net increase in deposits ................................. 103,430 51,626
Increase (decrease) in advances from the Federal Home Loan
Bank of New York and other borrowings .................. (5,125) 109,157
Net proceeds from issuance of Trust Preferred securities . 32,640 --
Cash dividends paid ...................................... (975) (664)
Purchases of treasury stock .............................. -- (651)
--------- ---------
Net cash provided by financing activities ................ 129,970 159,468
--------- ---------
Net Increase (Decrease) in Cash and Cash Equivalents ....... 1,202 (4,762)
Cash and Cash Equivalents, Beginning of Period ............. 10,729 11,629
--------- ---------
Cash and Cash Equivalents, End of Period ................... $ 11,931 $ 6,867
========= =========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest.................................................. $ 49,847 $ 38,571
========= =========
Income taxes.............................................. $ 5,213 $ 2,075
========= =========
Supplemental Schedule of Non-Cash Activities:
Transfer of loans receivable to real estate owned, net.... $ 2,106 $ 872
========= =========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
PENNFED FINANCIAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The interim consolidated financial statements of PennFed Financial Services,
Inc. ("PennFed") and subsidiaries (with its subsidiaries, the "Company") include
the accounts of PennFed and its subsidiaries Penn Federal Savings Bank (the
"Bank") and PennFed Capital Trust I. These interim consolidated financial
statements included herein should be read in conjunction with the Company's
Annual Report on Form 10-K for the year ended June 30, 1997. The interim
consolidated financial statements reflect all normal and recurring adjustments
which are, in the opinion of management, considered necessary for a fair
presentation of the financial condition and results of operations for the
periods presented. There were no adjustments of a non-recurring nature recorded
during the nine months ended March 31, 1998 and 1997. The interim results of
operations presented are not necessarily indicative of the results for the full
year.
When necessary, reclassifications have been made to conform to current period
presentation.
2. Adoption of Recently Issued Accounting Standards
Effective July 1, 1997, the Company adopted Statement of Financial Accounting
Standards No. 128, "Earnings Per Share" ("SFAS 128"). SFAS 128 establishes
standards for computing and presenting earnings per share ("EPS"), simplifying
the standards previously found in APB Opinion No. 15, "Earnings Per Share." The
previous presentation of primary EPS has been replaced with a presentation of
basic EPS. Dual presentation of basic and diluted EPS is required on the face of
the income statement as well as a reconciliation of the numerator and
denominator of the basic EPS computation to the numerator and denominator of the
diluted EPS computation. 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 period. Diluted EPS is computed similarly to fully
diluted EPS pursuant to APB Opinion No. 15. The adoption of SFAS 128 did not
have a material effect on the Company's financial condition or results of
operations. EPS data presented for the three and nine months ended March 31,
1997 has been restated to conform with the provisions of SFAS 128.
<PAGE>
3. Computation of EPS
The computation of EPS is presented in the following table.
<TABLE>
<CAPTION>
Three months ended Nine months ended
March 31, March 31,
----------------------------- -----------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Net income ................................................. $ 3,048 $ 2,626 $ 8,476 $ 4,255
=========== =========== =========== ===========
Number of shares outstanding
Weighted average shares issued ........................... 11,900,000 11,900,000 11,900,000 11,900,000
Less: Weighted average shares held in treasury .......... 2,253,828 2,258,180 2,254,613 2,226,126
Less: Average shares held by the ESOP ................... 952,000 952,000 952,000 952,000
Plus: ESOP shares released or committed to be
released during the fiscal year ............... 280,470 198,260 259,403 178,656
----------- ----------- ----------- -----------
Average basic shares .............................. 8,974,642 8,888,080 8,952,790 8,900,530
Plus: Average common stock equivalents .................. 793,179 597,600 736,912 506,204
----------- ----------- ----------- -----------
Average diluted shares ............................ 9,767,821 9,485,680 9,689,702 9,406,734
=========== =========== =========== ===========
Earnings per common share
Basic ............................................. $ 0.34 $ 0.30 $ 0.95 $ 0.48
=========== =========== =========== ===========
Diluted ........................................... $ 0.31 $ 0.28 $ 0.87 $ 0.45
=========== =========== =========== ===========
</TABLE>
<PAGE>
4. Stockholders' Equity and Regulatory Capital
The Bank's capital amounts and ratios are presented in the following table.
<TABLE>
<CAPTION>
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
-------------------- ------------------- --------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
As of March 31, 1998
Tangible capital........................... $104,747 7.24% $21,711 1.50% N/A N/A
Core capital............................... $105,033 7.26% $57,909 4.00% $72,386 5.00%
Risk-based capital......................... $107,338 15.75% $54,534 8.00% $68,168 10.00%
As of June 30, 1997
Tangible capital........................... $73,470 5.61% $19,658 1.50% N/A N/A
Core capital............................... $73,907 5.64% $52,440 4.00% $65,550 5.00%
Risk-based capital......................... $75,929 12.22% $49,702 8.00% $62,127 10.00%
</TABLE>
The previous table reflects information for the Bank. Savings and loan holding
companies, such as PennFed, are not subject to capital requirements for capital
adequacy purposes or for prompt corrective action requirements. Bank holding
companies, however, are subject to capital requirements established by the Board
of Governors of the Federal Reserve System (the "FRB"). The following summarizes
the Company's capital position under the FRB's capital requirements for bank
holding companies.
<PAGE>
<TABLE>
<CAPTION>
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
-------------------- ------------------- --------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Stockholders' equity....................... $ 105,693
Add: Qualifying preferred
securities............................. 30,626
Less: Goodwill............................. (1,098)
Disallowed servicing assets........ (17)
Deposit premium intangible......... (12,985)
------------
Tangible capital, and ratio to
adjusted total assets.................. $ 122,219 8.40% $ 21,829 1.50%
=========== ===========
Add: Qualifying intangible assets.......... 286
------------
Tier 1 (core) capital, and ratio to
adjusted total assets.................. $ 122,505 8.42% $ 43,659 3.00% $ 72,764 5.00%
=========== =========== ===========
Tier 1 (core) capital, and ratio to
risk-weighted assets................... $ 122,505 18.07% $ 27,111 4.00% $ 40,667 6.00%
=========== =========== ===========
Less: Equity investments and
investments in real estate............. (50)
Add: Allowance for loan losses............. 2,356
-----------
Total risk-based capital, and ratio
to risk-weighted assets................ $ 124,811 18.41% $ 54,222 8.00% $ 67,778 10.00%
=========== =========== ===========
Total assets............................... $1,469,064
==========
Adjusted total assets...................... $1,455,287
==========
Risk-weighted assets....................... $ 677,775
===========
</TABLE>
<PAGE>
5. Guaranteed Preferred Beneficial Interests in the Company's
Junior Subordinated Debentures
The Company formed a wholly-owned trust subsidiary, PennFed Capital Trust I (the
"Trust"). Effective October 21, 1997, the Trust sold $34.5 million of 8.90%
cumulative trust preferred securities to the public which are reflected on the
Statement of Financial Condition as Guaranteed Preferred Beneficial Interests in
the Company's Junior Subordinated Debentures (the "Trust Preferred securities").
The Trust used the proceeds from the sale of the Trust Preferred securities to
purchase 8.90% junior subordinated deferrable interest debentures issued by
PennFed. The sole assets of the Trust are the junior subordinated debentures
which mature on October 31, 2027 and are redeemable at any time after five
years. The obligations of the Company related to the Trust constitute a full and
unconditional guarantee by the Company of the Trust Issuer's obligations under
the Trust Preferred securities. The Company has used the proceeds from the
junior subordinated debentures for general corporate purposes, including a $20
million capital contribution to the Bank to support future growth.
6. Stock Split
On January 13, 1998, the Company's Board of Directors declared a two-for-one
stock split in the form of a 100% stock dividend, payable on February 10, 1998
to common stockholders of record as of January 27, 1998.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward looking statements within the meaning of the Federal
Securities Laws. Actual results or performance could differ materially then
those contemplated, expressed or implied by the forward- looking statements
contained herein.
General
The Company's results of operations are dependent primarily on net interest
income, which is the difference between the income earned on its loan,
securities and investment portfolios and its cost of funds, consisting of the
interest paid on deposits and borrowings. Results of operations are also
affected by the Company's provision for loan losses and operating expenses.
General economic and competitive conditions, particularly changes in interest
rates, government policies and actions of regulatory authorities also
significantly affect the Company's results of operations. Future changes in
applicable law, regulations or government policies may also have a material
impact on the Company.
Financial Condition
Total assets increased $147.3 million, or 11.1%, to $1.469 billion at March 31,
1998 from total assets of $1.322 billion at June 30, 1997. The increase was
primarily attributable to a $126.0 million increase in investment securities and
a $71.9 million increase in net loans receivable, particularly in the Company's
one- to four-family first mortgage loan portfolio. At March 31, 1998, net loans
receivable were $1.003 billion compared to $931.5 million at June 30, 1997. The
asset growth was funded by the proceeds from the issuance of the Trust Preferred
securities, an increase in retail deposits and additional medium-term FHLB of
New York advances as well as principal payments on mortgage-backed securities.
Deposits increased $102.9 million to $1.021 billion at March 31, 1998 from
$918.2 million at June 30, 1997. FHLB of New York advances were $230.5 million
at March 31, 1998, a $25.0 million increase from $205.5 million at June 30,
1997. In addition, the Company had $52.6 million of other borrowings at March
31, 1998, a $30.1 million decrease from $82.7 million at June 30, 1997.
Non-performing assets at March 31, 1998 totaled $5.9 million, representing 0.40%
of total assets, compared to $6.4 million, or 0.48% of total assets, at June 30,
1997. Non-performing loans were $4.0 million with a ratio of non-performing
loans to total loans of 0.40% at March 31, 1998 as compared to $5.5 million, or
0.59% of total loans, at June 30, 1997. Real estate owned increased slightly to
$1.9 million at March 31, 1998 from $884,000 at June 30, 1997.
Stockholders' equity at March 31, 1998 totaled $105.7 million compared to $97.3
million at June 30, 1997. The increase primarily reflects the net income
recorded for the nine months ended March 31, 1998.
<PAGE>
Results of Operations
General. For the three months ended March 31, 1998 net income was $3.0 million,
or $0.31 per diluted share, as compared to net income of $2.6 million, or $0.28
per diluted share for the comparable prior year period. For the nine months
ended March 31, 1998 net income was $8.5 million, or $0.87 per diluted share.
These results compare to net income of $4.3 million, or $0.45 per diluted share
for the nine months ended March 31, 1997. The nine months ended March 31, 1997
included the effects of the one-time Savings Association Insurance Fund ("SAIF")
recapitalization assessment which totaled $4.8 million ($3.1 million after-tax),
or $0.33 per share on a diluted basis.
Interest and Dividend Income. Interest and dividend income for the three and
nine months ended March 31, 1998 increased to $25.9 million and $74.8 million,
respectively, from $22.0 million and $62.7 million for the three and nine months
ended March 31, 1997, respectively. The increase in the current year periods
were due to an increase in average interest-earning assets, primarily
residential loans, partially offset by a decrease in the average yield earned on
interest-earning assets. Average interest-earning assets were $1.418 billion and
$1.353 billion for the three and nine months ended March 31, 1998, respectively,
compared to $1.180 billion and $1.117 billion for the comparable prior year
periods. The average yield earned on interest-earning assets decreased to 7.31%
and 7.37% for the three and nine months ended March 31, 1998, respectively, from
7.46% and 7.48% for the three and nine months ended March 31, 1997,
respectively.
Interest income on residential one- to four-family mortgage loans for the three
and nine months ended March 31, 1998 increased $2.2 million, or 15.2%, and $9.8
million, or 25.5%, respectively, when compared to the prior year period. The
increase in interest income on residential one- to four-family mortgage loans
was due to $142.7 million and $192.7 million increases in the average balance
outstanding to $904.6 million and $875.0 million for the three and nine months
ended March 31, 1998, respectively, compared to $761.9 million and $682.3
million, respectively, for the prior year periods. The increase in the average
balance on residential one- to four-family mortgage loans was partially offset
by a decrease of 0.22% and 0.16% in the average yield earned on this loan
portfolio to 7.27% and 7.36% for the three and nine months ended March 31, 1998,
respectively, from the comparable prior year periods.
Interest on investment securities and other interest-earning assets increased
$2.8 million and $5.2 million for the three and nine months ended March 31,
1998, respectively, from the comparable prior year periods. The increase was
primarily due to a $150.8 million and $94.9 million increase in the average
balance outstanding and a 0.38% and a 0.18% increase in the average yield earned
on these assets for the three and nine months ended March 31, 1998,
respectively.
Interest income on the mortgage-backed securities portfolio decreased $1.3
million and $3.4 million, or 23.4% and 20.3%, for the three and nine months
ended March 31, 1998, respectively, as compared to the prior year periods. The
decrease in interest income on mortgage-backed securities primarily reflects a
$71.2 million and $65.0 million decrease in the average balance outstanding to
$239.1 million and $259.6 million for the three and nine months ended March 31,
1998, respectively, compared to $310.3 million and $324.6 million for the prior
year periods.
<PAGE>
Interest Expense. Interest expense increased $3.8 million and $11.6 million for
the three and nine months ended March 31, 1998, respectively, from $13.7 million
and $38.5 million for the comparable 1997 periods. The increase was primarily
attributable to an increase in total average deposits, primarily certificates of
deposit, and FHLB of New York advances coupled with an increase in the Company's
cost of funds. Interest expense also increased due to the issuance of the Trust
Preferred securities. Average deposits and borrowings increased $196.0 million
and $204.4 million for the three and nine months ended March 31, 1998,
respectively, compared to the 1997 periods. The average rate paid on deposits,
borrowings and Trust Preferred securities increased to 5.25% and 5.19% for the
three and nine months ended March 31, 1998, respectively, from 4.94% and 4.83%
for the comparable prior year periods.
Net Interest and Dividend Income. Net interest and dividend income for the three
and nine months ended March 31, 1998 was $8.4 million and $24.7 million,
respectively, reflecting an increase from $8.3 million and $24.2 million,
respectively, recorded in the comparable prior year periods. The increase
reflects the Company's growth in assets, primarily in investment securities and
residential one- to four-family mortgage loans. The increase in net interest and
dividend income was partially offset by the timing differences between the
receipt of the proceeds from the Trust Preferred securities offering and full
implementation of the Company's investment strategy. The net interest rate
spread and net interest margin for the three months ended March 31, 1998 were
2.06% and 2.37%, respectively, a decline from 2.52% and 2.81%, respectively,
during the comparable prior year period. Net interest rate spread and net
interest margin were 2.18% and 2.43%, respectively, for the nine months ended
March 31, 1998, compared to 2.65% and 2.89% for the comparable prior year
period. For the three and nine months ended March 31, 1998, the decline in net
interest rate spread and net interest margin was partially due to the addition
of the Trust Preferred securities. The declines in the net interest rate spread
and net interest margin were also attributable to the flat yield curve
environment recently experienced in which higher yielding loans pre-paid at
accelerated rates and were replaced by lower yielding loans. Since the Company's
liabilities generally reprice more quickly than its assets, net interest rate
spread and net interest margins will likely decrease if interest rates rise. In
addition, the interest rate environment during the current year periods
reflecting a flattening of the yield curve has contributed to compressed net
interest margins for many financial institutions.
Provision for Loan Losses. The provision for loan losses for the three and nine
months ended March 31, 1998 was $150,000 and $450,000, respectively, compared to
$154,000 and $481,000 for the prior year periods. The allowance for loan losses
at March 31, 1998 of $2.6 million was unchanged from the June 30, 1997 level.
The allowance for loan losses as a percentage of non-performing loans was 66.84%
at March 31, 1998, compared to 47.80% at June 30, 1997.
<PAGE>
Non-Interest Income. For the three and nine months ended March 31, 1998
non-interest income was $949,000 and $2.0 million, respectively, compared to
$469,000 and $1.3 million for the prior year periods. A gain of approximately
$403,000 on the sale of $50 million of jumbo one- to four-family mortgage loans
was reflected in the three month period ended March 31, 1998. For the nine
months ended March 31, 1998 net gain on sales of loans also included a $91,000
gain recorded on an approximately $20 million loan sale. These loan sales have
been undertaken to manage prepayment risk as part of the Company's
asset/liability management strategy. In addition to these gains, growth in
non-interest income was primarily attained through the introduction of charging
non-customers for ATM transactions, fees recorded for the origination of loans
provided to other investors and an increase in regular service charges.
Furthermore, for the nine months ended March 31, 1998, the increase was
partially attributable to a decrease in the net loss from real estate
operations. The net loss from real estate operations was $138,000 for the nine
months ended March 31, 1998 compared to a net loss from real estate operations
of $185,000 for the prior year period.
Non-Interest Expenses. The Company's non-interest expenses of $4.5 million for
the three months ended March 31, 1998 were slightly above the $4.4 million of
non-interest expenses recorded for the three months ended March 31, 1997.
Non-interest expenses were $13.0 million for the nine months ended March 31,
1998 compared to $18.0 million for the prior year period. The nine months ended
March 31, 1997 included $4.8 million for the one-time SAIF recapitalization
assessment. Excluding the effects of the SAIF assessment, non-interest expenses
for the nine months ended March 31, 1998 are slightly lower than the comparable
1997 period. The Company's non-interest expenses as a percent of average assets
declined to 1.22% and 1.23% for the three and nine months ended March 31, 1998,
respectively, from 1.43% and 1.51% for the comparable prior year periods,
excluding the SAIF assessment.
Income Tax Expense. Income tax expense for the three and nine months ended March
31, 1998 was $1.7 million and $4.8 million, respectively, compared to $1.6
million and $2.7 million for the three and nine months ended March 31, 1997.
Excluding the effects of the one-time SAIF recapitalization assessment, income
tax expense of $4.5 million was recorded for the prior year nine month period.
The effective tax rate for the three and nine months ended March 31, 1998 was
35.3% and 36.1%, respectively. Excluding the effect of the one-time SAIF
recapitalization assessment, the effective tax rate was 37.7% and 38.0% for the
three and nine months ended March 31, 1997, respectively.
Analysis of Net Interest Income
The following table sets forth certain information relating to the Company's
consolidated statements of financial condition and the consolidated statements
of income for the three and nine months ended March 31, 1998 and 1997, and
reflects the average yield on assets and average cost of liabilities for the
periods indicated. Such yields and costs are derived from average daily
balances. The average balance of loans receivable includes non-accruing loans.
The yields and costs include fees which are considered adjustments to yields.
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended March 31,
------------------------------------------------------------------------------
1998 1997
--------------------------------------- ----------------------------------
Average Interest Average Interest
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Balance Paid Rate(1) Balance Paid Rate(1)
------- ---- ------- ------- ---- -------
(Dollars in thousands)
Interest-earning assets:
<S> <C> <C> <C> <C> <C> <C>
One- to four-family mortgage loans................. $ 904,571 $16,448 7.27% $761,867 $14,272 7.49%
Commercial and multi-family real
estate loans..................................... 58,882 1,320 8.97 54,342 1,232 9.07
Consumer loans..................................... 47,487 945 8.07 35,823 808 9.15
---------- ------- ---------- -------
Total loans receivable........................... 1,010,940 18,713 7.40 852,032 16,312 7.66
Mortgage-backed securities......................... 239,053 4,124 6.90 310,283 5,382 6.94
Investment securities and other.................... 168,474 3,088 7.33 17,683 307 6.95
---------- ------- ---------- -------
Total interest-earning assets.................... 1,418,467 $25,925 7.31 1,179,998 $22,001 7.46
======= =======
Non-interest earning assets........................ 56,464 54,834
---------- ----------
Total assets..................................... $1,474,931 $1,234,832
========== ==========
Deposits and borrowings:
Money market and demand deposits.................... $ 84,801 $ 254 1.22% $ 79,908 $ 245 1.25%
Savings deposits.................................... 165,103 892 2.19 172,560 950 2.23
Certificates of deposit............................. 747,403 10,797 5.86 627,389 8,900 5.75
----------- -------- ----------- ---------
Total deposits.................................... 997,307 11,943 4.86 879,857 10,095 4.65
FHLB of New York advances........................... 233,568 3,520 6.11 169,305 2,565 6.15
Other borrowings.................................... 88,832 1,264 5.69 74,523 1,037 5.56
----------- -------- ----------- ---------
Total deposits and borrowings..................... 1,319,707 16,727 5.14 1,123,685 13,697 4.94
Trust Preferred securities.......................... 32,656 784 9.59 --- --- ---
----------- --------- ----------- ---------
Total deposits, borrowings and Trust
Preferred securities......................... 1,352,363 $17,511 5.25 1,123,685 $13,697 4.94
======= =======
Other liabilities................................... 18,674 18,194
----------- -----------
Total liabilities................................. 1,371,037 1,141,879
Stockholders' equity................................ 103,894 92,953
----------- ----------
Total liabilities and stockholders' equity........ $1,474,931 $1,234,832
========== ==========
<PAGE>
<CAPTION>
Three Months Ended March 31,
------------------------------------------------------------------------------
1998 1997
--------------------------------------- ----------------------------------
Average Interest Average Interest
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Balance Paid Rate(1) Balance Paid Rate(1)
------- ---- ------- ------- ---- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Net interest income and net interest rate
spread........................................... $ 8,414 2.06% $ 8,304 2.52%
======= ==== ======== ====
Net interest-earning assets and net interest
margin........................................... $ 66,104 2.37% $ 56,313 2.81%
=========== ==== =========== ====
Ratio of interest-earning assets to
deposits, borrowings and Trust Preferred
securities................................... 104.89% 105.01%
============ ============
</TABLE>
(1) Annualized.
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended March 31,
-----------------------------------------------------------------------------
1998 1997
--------------------------------------- ---------------------------------
Average Interest Average Interest
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Balance Paid Rate(1) Balance Paid Rate(1)
------- ---- ------- ------- ---- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
One- to four-family mortgage loans................. $ 874,981 $48,301 7.36% $682,337 $38,475 7.52%
Commercial and multi-family real
estate loans..................................... 57,024 3,854 9.01 53,405 3,679 9.19
Consumer loans..................................... 44,018 2,754 8.33 35,088 2,472 9.38
---------- -------- --------- -------
Total loans receivable........................... 976,023 54,909 7.50 770,830 44,626 7.72
Mortgage-backed securities......................... 259,604 13,463 6.91 324,573 16,893 6.94
Investment securities and other.................... 116,955 6,414 7.31 22,021 1,177 7.13
---------- -------- ---------- -------
Total interest-earning assets.................... 1,352,582 $74,786 7.37 1,117,424 $62,696 7.48
======= =======
Non-interest earning assets........................ 53,556 54,172
---------- ----------
Total assets..................................... $1,406,138 $1,171,596
========== ==========
Deposits and borrowings:
Money market and demand deposits.................... $ 82,767 $ 751 1.21% $ 79,763 $ 732 1.22%
Savings deposits.................................... 166,597 2,741 2.19 175,424 2,947 2.24
Certificates of deposit............................. 732,465 32,306 5.88 604,761 25,859 5.70
---------- -------- --------- -------
Total deposits.................................... 981,829 35,798 4.86 859,948 29,538 4.58
FHLB of New York advances........................... 214,815 9,901 6.14 133,697 6,136 6.11
Other borrowings.................................... 69,148 3,028 5.75 67,797 2,824 5.47
---------- -------- --------- -------
Total deposits and borrowings..................... 1,265,792 48,727 5.13 1,061,442 38,498 4.83
Trust Preferred securities.......................... 19,439 1,391 9.54 --- --- ---
---------- -------- --------- -------
Total deposits, borrowings and Trust
Preferred securities......................... 1,285,231 $50,118 5.19 1,061,442 $38,498 4.83
======= =======
Other liabilities................................... 20,029 18,376
---------- -----------
Total liabilities................................. 1,305,260 1,079,818
Stockholders' equity................................ 100,878 91,778
---------- -----------
Total liabilities and stockholders' equity........ $1,406,138 $1,171,596
========== ==========
<PAGE>
<CAPTION>
Nine Months Ended March 31,
-----------------------------------------------------------------------------
1998 1997
--------------------------------------- ---------------------------------
Average Interest Average Interest
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Balance Paid Rate(1) Balance Paid Rate(1)
------- ---- ------- ------- ---- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Net interest income and net interest rate
spread........................................... $24,668 2.18% $24,198 2.65%
======= ==== ======= ====
Net interest-earning assets and net interest
margin........................................... $ 67,351 2.43% $ 55,982 2.89%
=========== ==== =========== ====
Ratio of interest-earning assets to
deposits, borrowings and Trust Preferred
securities................................... 105.24% 105.27%
============ ============
</TABLE>
(1) Annualized.
<PAGE>
Non-Performing Assets
The table below sets forth the Company's amounts and categories of
non-performing assets and restructured loans. Loans are generally placed on
non-accrual status when the collection of principal or interest becomes
delinquent more than 90 days. Real estate owned represents assets acquired in
settlement of loans and is shown net of valuation allowances. Restructured loans
are performing in accordance with modified terms and are, therefore, considered
performing.
<TABLE>
<CAPTION>
March 31, June 30,
1998 1997
------ ------
(Dollars in thousands)
<S> <C> <C>
Non-performing loans:
One- to four-family .................................... $2,790 $3,567
Commercial and multi-family ............................ 414 1,053
Consumer ............................................... 759 865
------ ------
Total non-performing loans ........................... 3,963 5,485
------ ------
Real estate owned, net ................................... 1,897 884
------ ------
Total non-performing assets .......................... 5,860 6,369
Restructured loans ....................................... 1,424 1,451
------ ------
Total risk elements .................................. $7,284 $7,820
====== ======
Non-performing loans as a percentage of total loans ...... 0.40% 0.59%
====== ======
Non-performing assets as a percentage of total assets .... 0.40% 0.48%
====== ======
Total risk elements as a percentage of total assets ...... 0.50% 0.59%
====== ======
</TABLE>
Allowance for Loan Losses. The allowance for loan losses is established through
a provision for loan losses based upon management's evaluation of the risk
inherent in its loan portfolio and changes in the nature and volume of its loan
activity. Such evaluation, which includes a review of loans for which full
collectibility may not be reasonably assured, considers among other matters,
loan classifications, the estimated fair value of the underlying collateral,
economic conditions, historical loan loss experience, and other factors that
warrant recognition in providing for an adequate loan loss allowance.
Real estate properties acquired through foreclosure are recorded at the lower of
cost or estimated fair value less costs to dispose of such properties. If fair
value at the date of foreclosure is lower than the balance of the related loan,
the difference will be charged-off to the allowance for loan losses at the time
of transfer. Valuations are periodically updated by management and if the value
declines, a specific provision for losses on real estate owned is established by
a charge to operations.
<PAGE>
Although management believes that it uses the best information available to
determine the allowances, unforeseen market conditions could result in
adjustments and net earnings could be significantly affected if circumstances
differ substantially from the assumptions used in making the final
determination. Future additions to the Company's allowances will be the result
of periodic loan, property and collateral reviews and thus cannot be predicted
in advance. In addition, federal regulatory agencies, as an integral part of the
examination process, periodically review the Company's allowance for loan
losses. Such agencies may require the Company to record additions to the
allowance level based upon their assessment of the information available to them
at the time of their examination. At March 31, 1998, the Company had a total
allowance for loan losses of $2.6 million representing 66.84% of total
non-performing loans.
Interest Rate Sensitivity
Interest Rate Gap. The interest rate risk inherent in assets and liabilities may
be determined by analyzing the extent to which such assets and liabilities are
"interest rate sensitive" and by measuring an institution's interest rate
sensitivity "gap." An asset or liability is said to be interest rate sensitive
within a defined time period if it matures or reprices within that period. The
difference or mismatch between the amount of interest-earning assets maturing or
repricing within a defined period and the amount of interest-bearing liabilities
maturing or repricing within the same period is defined as the interest rate
sensitivity gap. An institution is considered to have a negative gap if the
amount of interest-bearing liabilities maturing or repricing within a specified
time period exceeds the amount of interest-earning assets maturing or repricing
within the same period. If more interest-earning assets than interest-bearing
liabilities mature or reprice within a specified period, then the institution is
considered to have a positive gap. Accordingly, in a rising interest rate
environment, in an institution with a negative gap, the cost of its rate
sensitive liabilities would theoretically rise at a faster pace than the yield
on its rate sensitive assets, thereby diminishing future net interest income. In
a falling interest rate environment, a negative gap would indicate that the cost
of rate sensitive liabilities would decline at a faster pace than the yield on
rate sensitive assets and improve net interest income. For an institution with a
positive gap, the reverse would be expected.
At March 31, 1998, the Company's total deposits and borrowings maturing or
repricing within one year exceeded its total interest-earning assets maturing or
repricing within one year by $72.0 million, representing a one year negative gap
of 4.96% of total assets. At June 30, 1997, the one year negative gap was 7.44%
of total assets.
In evaluating the Company's exposure to interest rate risk, certain limitations
inherent in the method of analysis must be considered. For example, although
certain assets and liabilities may have similar maturities or periods to
repricing, they may react in different degrees to changes in market interest
rates. Also, the interest rates on certain types of assets and liabilities may
fluctuate in advance of changes in market interest rates, while interest rates
on other types may lag behind changes in market rates. Additionally, certain
assets, such as adjustable rate mortgages, have features which restrict changes
in interest rates in the short-term and over the life of the asset. Further, in
the event of a change in interest rates, prepayment and early withdrawal levels
may deviate significantly from those assumed in calculating the gap position.
Finally, the ability of many borrowers to service their debt may decrease in the
event of an interest rate increase. The Company considers all of these factors
in monitoring its exposure to interest rate risk.
<PAGE>
Net Portfolio Value. The Company's interest rate sensitivity is regularly
monitored by management through selected interest rate risk ("IRR") measures set
forth by the Office of Thrift Supervision ("OTS"). The IRR measures used by the
OTS include an IRR "Exposure Measure" or "Post-Shock" NPV ratio and a
"Sensitivity Measure." A low Post-Shock NPV ratio indicates greater exposure to
IRR. Greater exposure can result from a low initial NPV ratio or high
sensitivity to changes in interest rates. The Sensitivity Measure is the decline
in the NPV ratio, in basis points, caused by a 2% increase or decrease in rates,
whichever produces a larger decline. At least quarterly, and generally monthly,
management models the change in net portfolio value ("NPV") over a variety of
interest rate scenarios. NPV is the present value of expected cash flows from
assets, liabilities and off-balance sheet contracts. An NPV ratio, in any
interest rate scenario, is defined as the NPV in that rate scenario divided by
the market value of assets in the same scenario.
At March 31, 1998, the Bank's internally generated initial NPV was 9.76%.
Following a 2% increase in interest rates, the Bank's "Post-Shock" NPV ratio was
7.26%. The change in the NPV ratio, or the Bank's Sensitivity Measure, was
2.50%. NPV is also measured internally on a consolidated basis. As of March 31,
1998, the Company's initial NPV ratio was 10.86%, the Post-Shock ratio was
8.38%, and the Sensitivity Measure was 2.48%. Variances between the Bank's and
the Company's NPV ratios are attributable to balance sheet items which are
adjusted during consolidation, such as intercompany borrowings and capital.
Internally generated NPV measurements are based on simulations which utilize
institution specific assumptions and, as such, generally result in lower levels
of presumed interest rate risk (i.e., higher Post-Shock NPV ratio and lower
Sensitivity Measure) than OTS measurements indicate.
The OTS measures the Bank's IRR on a quarterly basis using data from the
quarterly Thrift Financial Reports, coupled with non-institution specific
assumptions which are based on national averages. As of December 31, 1997 (the
latest date for which information is available), the Bank's initial NPV ratio,
as measured by the OTS, was 8.26%. The Bank's Post-Shock ratio was 5.79% and the
Sensitivity Measure was 2.47%.
In addition to monitoring NPV and gap, management also monitors the duration of
assets and liabilities and the effects on net interest income resulting from
parallel and non-parallel increases or decreases in rates.
At March 31, 1998, based on its internally generated simulation models, the
Company's consolidated net interest income projected for one year forward would
decrease 13.1% from the base case, or current market, as a result of an
immediate and sustained 2% increase in interest rates. At June 30, 1997, the
simulation models projected an 11.2% decrease in the Company's consolidated net
interest income projected for one year forward, as a result of a 2% increase in
interest rates.
Interest Rate Swaps. The Company had $100 million and $70 million in notional
amount interest rate swap agreements outstanding at March 31, 1998 and June 30,
1997, respectively, on which the Company pays a fixed interest rate. The fixed
interest rate paid ranged from 5.44% to 6.71% at March 31, 1998 compared to a
range from 6.25% to 6.71% at June 30, 1997. The Company receives a floating
interest rate based on three-month LIBOR, from the counter parties. At March 31,
1998 and June 30, 1997 three-month LIBOR was 5.71% and 5.78%, respectively.
<PAGE>
Liquidity and Capital Resources
The Company's primary sources of funds are deposits, principal and interest
payments on loans and mortgage-backed securities, and borrowings from the FHLB
of New York. While scheduled loan repayments and maturing investments are
relatively predictable, deposit flows and early loan repayments are more
influenced by interest rates, general economic conditions and competition. The
Company has competitively set rates on deposit products for selected terms and,
when necessary, has supplemented deposits with longer-term or less expensive
alternative sources of funds.
Federal regulations require the Bank to maintain minimum levels of liquid
assets. The required percentage has varied from time to time based upon economic
conditions and savings flows. The current required percentage is 4% of net
withdrawable deposits payable on demand or in one year or less and borrowings
payable on demand or in one year or less both as of the end of the preceding
calendar quarter. Liquid assets for purposes of this ratio includes cash,
accrued interest receivable, certain time deposits, U.S. Treasury and Government
agencies and other securities and obligations generally having remaining
maturities of less than five years. All mortgage-backed securities are
includable in liquid assets, as well. The Company's most liquid assets are cash
and cash equivalents, short-term investments and mortgage-backed securities. The
levels of these assets are dependent on the Bank's operating, financing, lending
and investing activities during any given period. At March 31, 1998 and June 30,
1997, the Bank's liquidity ratios were 22.91% and 10.36%, respectively.
The Company uses its liquid resources principally to fund maturing certificates
of deposit and deposit withdrawals, to purchase loans and securities, to fund
existing and future loan commitments, and to meet operating expenses. Management
believes that loan repayments and other sources of funds will be adequate to
meet the Company's foreseeable liquidity needs.
In addition to cash provided by operating activities, the Company's cash needs
for the nine months ended March 31, 1998 were provided by increased deposits.
Furthermore, proceeds from the Trust Preferred securities offering, principal
repayments of mortgage-backed securities and sales of loans contributed to
meeting the Company's cash needs. During this period, the cash provided was used
for investing activities, which included the origination and purchase of loans
and the purchase of investment securities. In addition to cash provided by
operating activities, during the nine months ended March 31, 1997 the cash needs
of the Company were principally provided by increased deposits and an increase
in advances from the FHLB of New York and other borrowings. The cash provided
was principally utilized for investing activities, which included the
origination and purchase of loans.
Current regulatory standards impose the following capital requirements: a
risk-based capital standard expressed as a percentage of risk adjusted assets; a
leverage ratio of core capital to total adjusted assets; and a tangible capital
ratio expressed as a percentage of total adjusted assets. As of March 31, 1998,
the Bank substantially exceeded all regulatory capital standards (see Note 4. -
Stockholders' Equity and Regulatory Capital, in the Notes to Consolidated
Financial Statements).
<PAGE>
PART II - Other Information
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 11: Statement Regarding Computation of Per Share Earnings.
Exhibit 27: Financial Data Schedule.
<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.
PENNFED FINANCIAL SERVICES, INC.
Date: May 14, 1998 By: /s/ Joseph L. LaMonica
----------------------
Joseph L. LaMonica
President and Chief
Executive Officer
Date: May 14, 1998 By: /s/ Lucy T. Tinker
------------------
Lucy T. Tinker
Executive Vice President and
Chief Operating Officer
(Principal Financial Officer)
Date: May 14, 1998 By: /s/ Jeffrey J. Carfora
----------------------
Jeffrey J. Carfora
Senior Vice President and
Chief Financial Officer
(Principal Accounting Officer)
<TABLE>
<CAPTION>
EXHIBIT 11
Statement Regarding Computation of Per Share Earnings
Three and Nine Months Ended March 31, 1998 and 1997
(Dollars in thousands, except per share amounts)
Three months ended Nine months ended
March 31, March 31,
--------------------------- -----------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Income ................................................. $ 3,048 $ 2,626 $ 8,476 $ 4,255
=========== =========== =========== ===========
Number of shares outstanding
Weighted average shares issued ........................... 11,900,000 11,900,000 11,900,000 11,900,000
Less: Weighted average shares held in
treasury ...................................... 2,253,828 2,258,180 2,254,613 2,226,126
Less: Average shares held by the ESOP .................... 952,000 952,000 952,000 952,000
Plus: ESOP shares released or committed
to be released during the fiscal year ......... 280,470 198,260 259,403 178,656
----------- ----------- ----------- -----------
Average basic shares ............................... 8,974,642 8,888,080 8,952,790 8,900,530
Plus: Average common stock equivalents ................... 793,179 597,600 736,912 506,204
----------- ----------- ----------- -----------
Average diluted shares ............................. 9,767,821 9,485,680 9,689,702 9,406,734
=========== =========== =========== ===========
Earnings per common share
Basic .............................................. $ 0.34 $ 0.30 $ 0.95 $ 0.48
=========== =========== =========== ===========
Diluted ............................................ $ 0.31 $ 0.28 $ 0.87 $ 0.45
=========== =========== =========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> MAR-31-1998
<CASH> 11,931
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 390,554
<INVESTMENTS-MARKET> 394,643
<LOANS> 1,006,022
<ALLOWANCE> 2,649
<TOTAL-ASSETS> 1,469,064
<DEPOSITS> 1,021,082
<SHORT-TERM> 12,750
<LIABILITIES-OTHER> 26,538
<LONG-TERM> 303,001
0
0
<COMMON> 60
<OTHER-SE> 105,633
<TOTAL-LIABILITIES-AND-EQUITY> 1,469,064
<INTEREST-LOAN> 54,909
<INTEREST-INVEST> 19,877
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 74,786
<INTEREST-DEPOSIT> 35,798
<INTEREST-EXPENSE> 50,118
<INTEREST-INCOME-NET> 24,668
<LOAN-LOSSES> 450
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 12,989
<INCOME-PRETAX> 13,267
<INCOME-PRE-EXTRAORDINARY> 8,476
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,476
<EPS-PRIMARY> .95
<EPS-DILUTED> .87
<YIELD-ACTUAL> 2.43
<LOANS-NON> 3,963
<LOANS-PAST> 0
<LOANS-TROUBLED> 1,424
<LOANS-PROBLEM> 2,919
<ALLOWANCE-OPEN> 2,622
<CHARGE-OFFS> 423
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 2,649
<ALLOWANCE-DOMESTIC> 2,649
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
