SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
----
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: April 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
------------------ ------------------
Commission file number: 0-25106
Lakeview Financial Corp.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
New Jersey 22-3334052
- ------------------------------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1117 Main Street Paterson, New Jersey 07503
-------------------------------------------
(Address of principal executive offices, zip code)
(201) 742-3060
--------------------------------------------------
Registrant's telephone number, including area code)
NOT APPLICABLE
--------------------------------------------------
(Former name, former address, and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 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: June 12, 1998
-------------
Class Outstanding
- ---------------------------- -----------
$2.00 par value common stock 4,977,768 shares
<PAGE>
LAKEVIEW FINANCIAL CORP. and SUBSIDIARIES
CONTENTS
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION Page
<S> <C> <C>
Item 1: Financial Statements
Unaudited Consolidated Statements of Financial Condition
as of April 30, 1998 and July 31, 1997 3
Unaudited Consolidated Statements of Income for the Three
Months Ended April 30, 1998 and 1997 4
Unaudited Consolidated Statements of Income for the Nine
Months Ended April 30, 1998 and 1997 5
Unaudited Consolidated Statements of Cash Flows for the Nine
Months Ended April 30, 1998 and 1997 6
Notes to Unaudited Consolidated Financial Statements 8
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
PART II - OTHER INFORMATION
Item 1: Legal Proceedings 17
Item 2: Changes in Securities 17
Item 3: Defaults Upon Senior Securities 17
Item 4: Submission of Matters to a Vote of Security Holders 17
Item 5: Other Information 17
Item 6: Exhibits and Reports on Form 8-K 17
Signatures 18
</TABLE>
2
<PAGE>
LAKEVIEW FINANCIAL CORP. AND SUBSIDIARIES
- -----------------------------------------
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CONDITION
AS OF APRIL 30, 1998, AND JULY 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited)
April 1998 July 1997
- ------------------------------------------------------------------------------------------------------ ---------------------
<S> <C> <C>
Assets
- ------
Cash on hand and in banks $8,983,447 $5,399,466
Investment securities held to maturity, net 92,935,945 42,681,799
Investment securities available for sale, net 90,760,577 105,592,249
Mortgage-backed securities held to maturity, net 103,895,891 102,248,545
Loans receivable, net 278,319,511 224,563,595
Real estate owned, net 1,655,000 1,929,447
Federal Home Loan Bank of New York stock, at cost 4,626,200 3,550,000
Accrued interest receivable, net 4,013,685 3,475,581
Office properties and equipment, net 4,551,543 4,027,940
Excess of cost over fair value of assets acquired 19,164,285 8,856,136
Other assets 10,732,228 3,557,442
- ------------------------------------------------------------------------------------------------------ ---------------------
Total assets $619,638,312 $505,882,200
====================================================================================================== =====================
Liabilities and Shareholders' Equity
- ------------------------------------
Deposits $452,483,165 $370,787,103
Borrowings 90,729,596 61,250,000
Borrowings - ESOP 0 2,353,825
Advance payments by borrowers for taxes and insurance 2,726,738 2,259,134
Net deferred tax liability 3,887,897 6,094,000
Other liabilities 9,516,515 1,329,003
- ------------------------------------------------------------------------------------------------------ ---------------------
Total liabilities 559,343,911 444,073,065
Shareholders' Equity
- --------------------
Common stock: $2.00 par value; authorized 10,000,000
shares, issued 6,441,504 shares and outstanding 4,977,768
and 4,509,054 shares at April 30, 1998 and July 31, 1997 12,883,008 6,441,504
Additional paid-in capital 23,632,752 33,188,027
Retained income substantially restricted 34,941,015 28,617,200
Unrealized gain on securities available for sale, net of taxes 11,647,050 14,457,898
Treasury stock at cost (10,735,393) (17,357,996)
Common stock acquired by ESOP (11,161,583) (2,407,250)
Common stock acquired by MSBP (912,448) (1,130,248)
- ------------------------------------------------------------------------------------------------------ ---------------------
Total shareholders' equity 60,294,401 61,809,135
- ------------------------------------------------------------------------------------------------------ ---------------------
Total liabilities and shareholders' equity $619,638,312 $505,882,200
====================================================================================================== =====================
Stated book value per share $12.11 $13.71
Tangible book value per share $8.26 $11.74
</TABLE>
3
<PAGE>
LAKEVIEW FINANCIAL CORP. AND SUBSIDIARIES
- -----------------------------------------
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED APRIL 30, 1998 AND 1997
- -----------------------------------------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited)
1998 1997
- ------------------------------------------------------------------------------------------------------------- ---------------------
<S> <C> <C>
Interest income:
Loans receivable $5,769,927 $4,495,467
Mortgage-backed securities held to maturity 1,649,461 1,764,675
Investment securities held to maturity 1,443,791 855,368
Investment securities available for sale 781,817 1,256,577
- ------------------------------------------------------------------------------------------------------------- ---------------------
Total interest income 9,644,996 8,372,087
Interest expense:
Interest on deposits 3,948,310 3,450,719
Interest on borrowings 1,135,650 860,813
- ------------------------------------------------------------------------------------------------------------- ---------------------
Total interest expense 5,083,960 4,311,532
Net interest income before provision for loan losses 4,561,036 4,060,555
Provision for loan losses 449,401 300,000
- ------------------------------------------------------------------------------------------------------------- ---------------------
Net interest income after provision for loan losses 4,111,635 3,760,555
Other Income:
Loan fees and service charges 390,547 308,063
Net realized gain (loss) on sale of securities 2,629,075 (21,923)
Other operating income 567,046 685,811
- ------------------------------------------------------------------------------------------------------------- ---------------------
Total other income 3,586,668 971,951
Other expense:
Compensation and employee benefits 1,572,641 1,486,622
Office occupancy and equipment expense 245,138 229,370
Net loss from real estate owned activities 5,647 34,561
Other operating expense 842,747 766,316
Amortization of the excess of cost over fair value of net assets acquired 466,192 330,071
- ------------------------------------------------------------------------------------------------------------- ---------------------
Total other expense 3,132,365 2,846,940
Net income before taxes 4,565,938 1,885,566
Total federal and state income tax 1,524,470 546,394
- ------------------------------------------------------------------------------------------------------------- ---------------------
Net Income $3,041,468 $1,339,172
============================================================================================================= =====================
Net income per share:
Basic $0.83 $0.33
Diluted $0.75 $0.29
Weighted average numbers of shares outstanding:
Basic 3,665,509 4,044,002
Diluted 4,076,544 4,660,769
</TABLE>
4
<PAGE>
LAKEVIEW FINANCIAL CORP. AND SUBSIDIARIES
- -----------------------------------------
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED APRIL 30, 1998 AND 1997
- -----------------------------------------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited)
1998 1997
- ------------------------------------------------------------------------------------------------------------- ---------------------
<S> <C> <C>
Interest income:
Loans receivable $16,103,342 $12,168,963
Mortgage-backed securities held to maturity 4,840,963 5,609,043
Investment securities held to maturity 3,328,465 2,605,386
Investment securities available for sale 3,025,757 4,029,723
- ------------------------------------------------------------------------------------------------------------- ---------------------
Total interest income 27,298,527 24,413,115
Interest expense:
Interest on deposits 11,042,702 10,390,998
Interest on borrowings 3,340,873 2,486,544
- ------------------------------------------------------------------------------------------------------------- ---------------------
Total interest expense 14,383,575 12,877,542
Net interest income before provision for loan losses 12,914,952 11,535,573
Provision for loan losses 1,050,217 661,217
- ------------------------------------------------------------------------------------------------------------- ---------------------
Net interest income after provision for loan losses 11,864,735 10,874,356
Other Income:
Loan fees and service charges 1,057,778 882,403
Net realized gain on sale of securities 5,041,091 3,157,157
Other operating income 1,604,511 1,711,900
- ------------------------------------------------------------------------------------------------------------- ---------------------
Total other income 7,703,380 5,751,460
Other expense:
Compensation and employee benefits 4,623,113 4,125,051
Office occupancy and equipment expense 701,228 693,110
Net loss from real estate owned activities 159,157 135,463
Other operating expense 2,372,880 2,134,143
SAIF recapitalization assessment 0 2,218,674
Amortization of the excess of cost over fair value of net assets acquired 1,126,336 990,215
- ------------------------------------------------------------------------------------------------------------- ---------------------
Total other expense 8,982,714 10,296,656
Net income before taxes 10,585,401 6,329,160
Total federal and state income tax 3,729,538 2,174,394
- ------------------------------------------------------------------------------------------------------------- ---------------------
Net Income $6,855,863 $4,154,766
============================================================================================================= =====================
Net income per share:
Basic $1.87 $1.01
Diluted $1.68 $0.89
Weighted average numbers of shares outstanding:
Basic 3,665,254 4,122,462
Diluted 4,091,565 4,690,478
</TABLE>
5
<PAGE>
LAKEVIEW FINANCIAL CORP. AND SUBSIDIARIES
- -----------------------------------------
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED APRIL 30, 1998 AND 1997
- ----------------------------------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited)
1998 1997
- --------------------------------------------------------------------------------------------------------- -----------------
<S> <C> <C>
Cash flows from operating activities:
Net Income $6,855,863 $4,154,766
Adjustment to reconcile net income to net cash provided
by operating activities :
Amortization of excess of cost over fair value of assets acquired 1,126,336 990,215
Amortization of discounts and premiums, net (1,422,791) (289,971)
Provision for losses on loans 1,050,217 661,217
Provision for losses on real estate owned 32,857 43,783
Loss (gain) on sale of real estate owned 4,780 (37,624)
Net realized gain on sale of investments available for sale (4,838,948) (2,799,964)
Net realized gain on sale of trading securities (202,143) (357,193)
Decrease (increase) in accrued interest receivable 474,875 (319,304)
Decrease in deferred loan fees (25,218) (28,012)
Increase in other assets (6,999,037) (1,909,797)
Decrease in net deferred tax liability (156,098) 0
Increase (decrease) in other liabilities 7,615,434 (498,194)
Amortization of ESOP shares 336,180 562,238
Amortization of MSBP shares 217,800 285,038
Depreciation of office properties and equipment, net 239,683 200,190
- --------------------------------------------------------------------------------------------------------- -----------------
Net cash provided by operating activities: 4,309,790 657,388
Cash flows from investing activities:
Loan origination net of principal payments (14,616,810) (45,147,870)
Increase in Federal Home Loan Bank stock (500,000) (962,600)
Purchase of investment securities available for sale (53,323,545) (23,201,502)
Proceeds from sale of investment securities available for sale 39,033,842 37,820,741
Proceeds from maturity of investment securities available for sale 27,967,780 3,000,000
Principal payments on investment securities available for sale 1,674,544 1,331,532
Purchase of trading securities (21,901,487) (20,391,277)
Proceeds from sale of trading securities 22,103,630 13,351,537
Purchase of investment securities held to maturity (39,627,306) (2,500,000)
Proceeds from maturity of investment securities held to maturity 24,946,725 2,000,000
Principal payments on mortgage-backed securities held to maturity 15,166,208 15,212,970
Proceeds from sale of real estate owned 531,810 684,074
Increase in office properties and equipment (117,634) (91,919)
Payment for purchase of Westwood Financial Corporation, net
of cash acquired 5,724,409 0
- --------------------------------------------------------------------------------------------------------- -----------------
Net cash provided by (used in) investing activities 7,062,166 (18,894,314)
</TABLE>
6
<PAGE>
LAKEVIEW FINANCIAL CORP. AND SUBSIDIARIES
- -----------------------------------------
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE NINE MONTHS ENDED APRIL 30, 1998 AND 1997
- --------------------------------------------------------------------------------------------------------- -----------------
(Unaudited) (Unaudited)
1998 1997
- --------------------------------------------------------------------------------------------------------- -----------------
<S> <C> <C>
Cash flows from financing activities:
(Decrease) increase in deposits, net (9,187,188) 19,267,534
Increase in borrowings, net 17,125,771 4,058,071
Increase in advance payments by borrowers for taxes, net 467,263 419,272
Purchase of treasury stock (8,781,841) (5,300,876)
Issuance of common stock 2,121,497 0
Common stock acquired by ESOP (9,001,429) 0
Dividend paid (532,048) (445,272)
- --------------------------------------------------------------------------------------------------------- -----------------
Net cash (used in) provided by financing activities (7,787,975) 17,998,729
- --------------------------------------------------------------------------------------------------------- -----------------
Net change in cash and cash equivalents 3,583,981 (238,197)
Cash and cash equivalents at beginning of period 5,399,466 6,902,040
- --------------------------------------------------------------------------------------------------------- -----------------
Cash and cash equivalents at end of period $8,983,447 $6,663,843
========================================================================================================= =================
Cash paid during period for:
Interest on deposits $10,792,398 $10,390,998
Income taxes $2,104,000 $1,735,153
Supplemental disclosures of non-cash investing activities:
Transfer of loans receivable to real estate owned $295,000 $733,476
</TABLE>
7
<PAGE>
LAKEVIEW FINANCIAL CORP. and SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
(1) Basis of Presentation
The consolidated financial statements include the accounts of Lakeview Financial
Corp. (the "Company"), its wholly owned subsidiaries, Lakeview Savings Bank (the
"Savings Bank"), Branchview, Inc., and its 90% owned subsidiary, Lakeview
Mortgage Depot, 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-Q and therefore, do not include all disclosures
necessary for a complete presentation of the statement of financial condition,
statement of operations, and statement 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 three and nine months ended
April 30, 1998 are not necessarily indicative of the results that may be
expected for the fiscal year July 31, 1998 or any other interim period.
These statements should be read in conjunction with the consolidated financial
statements and related notes which are incorporated by reference in the
Company's Annual Report on Form 10-K for the year ended July 31, 1997.
Shareholders of Westwood Financial Corporation ("WFC"), the parent company of
Westwood Savings Bank, approved the merger of WFC with and into the Company on
February 24, 1998. The merger was consummated on February 27, 1998 and the
Company issued from treasury 401,343 shares of common stock and paid $10,136,939
in cash for the outstanding shares of common stock of WFC. The transaction was
accounted for under the purchase method of accounting.
(2) Net Income per Share
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 ("Statement 128"), "Earnings Per Share."
As required, the Corporation adopted Statement 128 during the quarter ended
January 31, 1998. This statement redefines the standards of computing earnings
per share (EPS) previously found in Accounting Principles Board Opinion No. 15,
Earnings Per Share. Statement 128 establishes new standards for computing and
presenting EPS and requires dual presentation of "basic" and "diluted" EPS on
the face of the income statement for all entities with complex capital
structures. Under Statement 128, basic EPS is computed
8
<PAGE>
based upon income available to common shareholders divided by the weighted
average number of common shares outstanding for the period. Diluted EPS is
calculated based on net income available to common stockholders divided by the
average weighted shares outstanding including common stock equivalents utilizing
the treasury stock method. Statement 128 requires the restatement of all
prior-period EPS data presented.
The following reconciles the weighted average number of common shares
outstanding used to calculate basic and diluted net income per share.
<TABLE>
<CAPTION>
For the three For the nine
months ended months ended
April 30 April 30
-------- --------
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Weighted Average Number
of Common Shares
Outstanding - Basic 3,665,509 4,044,002 3,665,254 4,122,462
Effective of Dilutive Securities
Qualified Stock Options 128,706 337,167 147,687 309,632
Non-Qualified Stock Options 254,427 217,885 250,993 196,669
MSBP Shares 27,902 61,715 27,631 61,715
------ ------ ------ ------
Weighted Average Number
of Common Shares
Outstanding - Diluted 4,076,544 4,660,769 4,091,565 4,690,478
========= ========= ========= =========
</TABLE>
(3) Par Value of Common Stock
As previously disclosed in the Company's Annual Report on Form 10K for the year
ended July 31, 1997, on September 4, 1997, the Company declared a two for one
stock split in the form of a stock dividend payable on October 15, 1997 to
stockholders of record on October 1, 1997. For the year ended July 31, 1997,
share data was adjusted to reflect the stock split. The Company is required to
maintain the stock value at $2.00 per share, and therefore the balance sheet at
April 30, 1998 reflects such par value. A change during the quarter ended
January 31, 1998 was made to restore the common stock par value to that level.
Such change had no effect on total stockholders' equity and stated/tangible book
value per share.
9
<PAGE>
(4) Non Performing Loans and the Allowance for Loan Losses
Non performing assets at April 30, 1998, and July 31, 1997, are as follows:
<TABLE>
<CAPTION>
April 30, 1998 July 31,1997
-------------- ------------
<S> <C> <C>
Accruing loans 90 + delinquent $ - $ -
Non accrual loans 4,265,090 3,810,868
Real estate owned, net 1,655,000 1,929,447
--------- ---------
Total non-performing assets $5,920,090 $5,740,315
========= ==========
Non-accrual loans as a percentage
of total loans 1.53% 1.70%
Non-performing assets as a percentage
of total assets .96% 1.13%
</TABLE>
An analysis of the allowance for loan losses for the nine month period ended
April 30, 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
For the nine For the nine
months ended months ended
April 30, 1998 April 30, 1997
-------------- --------------
<S> <C> <C>
Balance at beginning of period $3,411,461 $3,073,158
Allowance for loan losses acquired
from Westwood 426,500 -
Provision charged to operations 1,050,217 661,217
Charge-offs, (771,760) (602,543)
Recoveries 43,142 30,225
--------- ---------
Balance at end of period $4,159,560 $3,162,057
========== ==========
</TABLE>
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
- --------
Lakeview Financial Corp. (the "Company") is organized as a unitary savings and
loan holding company and owns all of the outstanding capital stock of Lakeview
Savings Bank (the "Savings Bank"). The business of the Savings Bank and
therefore, the Company, is the acceptance of deposits from the general public
and the origination and purchase of mortgage loans in Northern New Jersey. The
Savings Bank has ten office locations located in Bergen and Passaic Counties,
New Jersey. The Company also has investments in two service corporations,
Branchview, Inc. and Lakeview Mortgage Depot, Inc.
Shareholders of Westwood Financial Corporation ("WFC"), the parent company of
Westwood Savings Bank, approved the merger of WFC with and into the Company on
February 24, 1998. The merger was consummated on February 27, 1998 and the
Company issued from treasury 401,343 shares of common stock and paid $10,136,939
in cash for the outstanding shares of common stock of WFC. The transaction was
accounted for under the purchase method of accounting.
Comparison of Financial Condition at April 30, 1998 and July 31, 1997
- ---------------------------------------------------------------------
Total assets increased $113.7 million, or 22.5%, to $619.6 million at April 30,
1998, from $505.9 million at July 31, 1997. The acquisition of Westwood amounted
to $109.4 million or 96.2% of the increase.
The investment securities held to maturity increased $50.2 million, or 117.7%,
to $92.9 million at April 30, 1998, from $42.7 million at July 31, 1997. The
increase was mainly attributed to purchases of $39.6 million, $34.4 million from
the acquisition of Westwood, and amortization of discounts of $1.1 million,
offset by the proceeds of maturities of $24.9 million.
Investment securities available for sale ("investment securities") decreased
$14.8 million to $90.8 million at April 30, 1998 from $105.6 million at July 31,
1997. The decrease was mainly attributable to the proceeds from maturity of
investment securities available for sale of $27.9 million, $34.1 million in
sales, $1.7 million of principal repayments, and a $4.4 million decrease in
market, offset by purchases of $53.3 million.
The decrease in market value in investment securities available for sale is
mainly attributed to the carrying value of Branchview's investment in Industry
Mortgage Company ("IMC"), which consists of 1,661,856 shares of common stock. At
April 30, 1998, the market value decreased $3.4 million or 11.4% to $26.5
million from $29.9 million at July 31, 1997. The cost basis of IMC was $7.8
million at April 30, 1998. The decrease in market value was the result of
unfavorable market conditions in the non-conforming
11
<PAGE>
mortgage loan industry.
Mortgage backed securities held to maturity increased $1.7 million, or 1.6%, to
$103.9 million at April 30, 1998, from $102.2 million at July 31, 1997. This was
attributed to $16.7 million from the acquisition of Westwood, offset by
principal repayments of $15.2 million. The funds were primarily used to fund the
growth in loans receivable.
Loans receivable increased $53.7 million, or 23.9%, to $278.3 million at April
30, 1998, from $224.6 million at July 31, 1997. The increase was mainly
attributed to $40.4 million from the acquisition of Westwood.
Federal Home Loan Bank of New York stock, increased $1.0 million, or 30.3%, to
$4.6 million at April 30, 1998, from $3.6 million at July 31, 1997. The increase
was due to an additional purchase of FHLB of New York stock and $576 thousand
attributed to the acquisition of Westwood.
Excess of cost over fair value of net assets acquired (i.e., goodwill) increased
$10.3 million, to $19.2 million at April 30, 1998, from $8.9 million at July 31,
1997. The increase is mainly attributed to the goodwill associated with the
acquisition of Westwood. The goodwill will be amortized over 180 months on a
straight-line basis.
Other assets increased $7.1 million, or 201.7% to $10.7 million at April 30,
1998 from $3.6 million at July 31, 1997. The increase was mainly attributed to a
$6.3 million settlement receivable from the sale of investment securities
available for sale which was received in May 1998.
Deposits, after interest credited, increased $81.7 million, or 22.0%, to $452.5
million at April 30, 1998, from $370.8 million at July 31, 1997. The increase is
mainly attributed to the acquisition of Westwood.
Borrowings increased $29.4 million or 48.1%, to $90.7 million at April 30, 1998,
from $61.3 million at July 31, 1997. The increase was attributed to $10.0
million from the acquisition of Westwood and a $17.1 million increase to fund
growth in loans receivable and investment securities held to maturity.
12
<PAGE>
Comparison of Operating Results For The Three Months Ended April 30, 1998 and
- -----------------------------------------------------------------------------
1997
- ----
Interest Income: Total interest income increased $1.2 million or 15.2% to $9.6
million for the three months ended April 30, 1998, compared to $8.4 million for
the comparable 1997 period. Average interest earning assets increased $76.2
million to $524.4 million for the three month period in 1998 from $448.2 million
for the comparable 1997 period. The increase reflects an increase in average
loans of $61.1 million, average investments and mortgage-backed securities held
to maturity of $25.1 million offset by a decrease in investments and
mortgage-backed securities available for sale of $10.0 million.
Interest Expense: Total interest expense increased $800 thousand or 17.9% to
$5.1 million for the three months ended April 30, 1998 compared to $4.3 million
for the comparable 1997 period. Average interest-bearing liabilities increased
$69.1 million to $479.4 million for the three month period in 1998 from $410.3
million for the comparable 1997 period. Of this increase, average deposits
increased $53.1 million and average borrowings increased $16.0 million.
Net Interest Income: Net interest income increased $500 thousand or 12.3% to
$4.6 million for the three months ended April 30, 1998 compared to $4.1 million
for the comparable 1997 period. During the three months ended April 30, 1998,
the Company's interest rate spread and net interest margin decreased to 3.48%
and 3.11%, respectively compared to 3.62% and 3.27% for the same period in 1997.
A 11 basis point decline in the yield on earnings assets combined with a 4 basis
point increase in the cost of funds were the primary reasons for the declines.
Provision For Loan Losses: The provision for loan losses increased $149
thousand, or 49.8%, to $449 thousand for the three months ended April 30, 1998,
compared to $300 thousand for the same period ended April 30, 1997, due to loan
growth and a change in the mix of the loan portfolio. Management regularly
accesses the credit risk of the loan portfolio based on information available at
such times, including trends in the local real estate market and levels of
non-performing loans and assets. The assessment of the adequacy of the allowance
for loan losses involves subjective judgement regarding future events and thus
there can be no assurance that additional provisions for loan losses will not be
required in future periods.
Other Income: Other income increased $2.6 million during the comparison period
to $3.6 million, from $972 thousand. The increase is primarily attributable to a
$2.6 million gain from securities available for sale and trading for the three
months ended April 30, 1998. The gain on sale of securities for the three months
ended April 30, 1998 is not necessarily indicative of the results for the fiscal
year ended July 31, 1998.
13
<PAGE>
Other Expense: Other expense was relatively stable during the period and
increased $300 thousand, or 10.0%, to $3.1 million for the three months ended
April 30, 1998, from $2.8 million for the three months ended April 30, 1997.
Compensation increased $86 thousand, to $1.6 million at April 30, 1998 as
compared to $1.5 million at April 30, 1997 due to an increase in staff for the
Company's subsidiary Lakeview Mortgage Depot, Inc. Other operating expense
increased $76 thousand, to $843 thousand for the three months ended April 30,
1998, compared to $766 thousand for the three months ended April 30, 1997. The
increase was mainly attributed to an increase of $18 thousand in operating cost
of Lakeview Mortgage Depot, Inc., due to the expansion of operations.
Comparison of Operating Results For The Nine Months Ended April 30, 1998 and
- ----------------------------------------------------------------------------
1997
- ----
Interest Income: Total interest income increased $2.9 million or 11.8% to $27.3
million for the nine months ended April 30, 1998 compared to $24.4 million for
the comparable 1997 period. Average interest-earning assets increased $51.8
million to $492.1 million for the nine month period in 1998 from $440.3 million
for the comparable 1997 period. This increase primarily reflects the growth in
average loans receivable of $56.2 million.
Interest Expense: Total interest expense increased $1.5 million or 11.7% to
$14.4 million for the nine months ended April 30, 1998, compared to $12.9
million for the comparable 1997 period. Average interest-bearing liabilities
increased $36.1 million to $440.6 million for the nine month period in 1998 from
$404.5 million for the comparable 1997 period. Of this increase, average
deposits increased $20.9 million and average borrowings increased $15.2 million.
Net Interest Income: Net interest income increased $1.4 million or 12.0% to
$12.9 million for the nine months ended April 30, 1998 compared to $11.5 million
for the comparable 1997 period. During the nine months ended April 30, 1998, the
Company's net interest margin decreased to 3.04%, compared to 3.15% for the same
period in 1997. A 40 basis point increase in the cost of funds for average
borrowings was the primary reason for the decline. Interest rate spread
increased to 3.50% for the nine months ended April 30, 1998 from 3.49% for the
comparable 1997 period.
Provision For Loan Losses: For the comparison period, the provision for loan
losses increased $389 thousand or 58.8%, to $1.1 million compared to $661
thousand for the same period ended April 30, 1997, due to loan growth and a
change in the mix of the loan portfolio. Management regularly accesses the
credit risk of the loan portfolio based on information available at such times,
including trends in the local real estate market and levels of non-performing
loans and assets. The assessment of the adequacy of the allowance for loan
losses involves subjective judgement regarding future events and thus there can
be no assurance that additional provisions for loan losses will not be required
in future periods.
14
<PAGE>
Other Income: Other income increased $1.9 million or 33.9% to $7.7 million for
the nine months ended April 30, 1998 compared to $5.8 million for the nine
months ended April 30, 1997. The increase was primarily due to $5.0 million in
gains from the sale of securities available for sale and trading during the nine
months ended April 30, 1998 compared to a $3.2 million gain from the securities
for the nine months ended April 30, 1997. The gain on the sale of securities for
the nine months ended April 30, 1998 is not necessarily indicative of the
results expected for the fiscal year ending July 31, 1998.
Other Expense: Other expense decreased $1.3 million, or 12.6% to $9.0 million
for the nine months ended April 30, 1998, from $10.3 million for the nine months
ended April 30, 1997. Other expense primarily decreased due to the recognition
for the nine months ended October 31, 1996 of a $2.2 million special assessment
required to recapitalize the SAIF. Offsetting the decrease, compensation
increased $498 thousand, to $4.6 million at April 30, 1998 as compared to $4.1
million at April 30, 1997 due to the increased staff of Lakeview Mortgage Depot,
Inc. Other operating expense increased $239 thousand to $2.4 million for the
nine months ended April 30, 1998 as compared to $2.1 million for the nine months
ended April 30, 1997. The increase is mainly attributable to a $142 thousand
increased cost of Lakeview Mortgage Depot, Inc., due to the expansion of
operations.
Year 2000
- ---------
Based on a preliminary study, Lakeview Financial Corp expects to spend
approximately $150 thousand from 1997 through 1999 to modify its computer
information systems enabling proper processing of transactions relating to the
year 2000 and beyond. The Company 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 Company does
not expect the amounts required to be expensed over the next three years to have
a material effect on its financial position or results of operations. The amount
expensed in 1998 was immaterial.
Liquidity and Capital Resources
- -------------------------------
The Savings Bank's primary sources of funds includes savings deposits, loan
repayments and prepayments, cash flow from operations and borrowings from the
Federal Home Loan Bank of New York ("FHLB"). The Savings Bank uses its capital
resources principally to fund loan origination and purchases, repay maturing
borrowings, purchase of securities, and for short and long-term liquidity needs.
The Savings Bank expects to be able to fund or refinance, on a timely basis, its
commitments and long-term liabilities.
The Savings Bank's liquid assets consist of cash and cash equivalents, which
include investments in highly liquid short-term investments. The level of these
assets are dependent on the Savings Bank's operating, financing and investment
activities during any given period. At April 30, 1998, cash and cash equivalents
totaled $8,983,447.
15
<PAGE>
The Savings Bank anticipates that it will have sufficient funds available to
meet its current commitments. As of April 30, 1998, the Savings Bank had
commitments to fund loans of $6,470,720.
The Savings Bank had leverage, Tier 1, and risk-based capital ratios of 4.4%,
7.7%, and 8.9% at April 30, 1998, which exceeded the FDIC's respective minimum
requirements of 4.00%, 4.00% and 8.00%.
16
<PAGE>
LAKEVIEW FINANCIAL CORP. AND SUBSIDIARIES
PART II
ITEM 1. LEGAL PROCEEDINGS
From time to time, the Savings Bank is a party to legal
proceedings in the ordinary course of business wherein it
enforces its security interest in loans. Neither the
Registrant nor the Savings Bank was engaged in any legal
proceeding of a material nature as of April 30, 1998.
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 MATERIALLY IMPORTANT EVENTS
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit 27. Financial Data Schedule (included in electronic
filing only).
17
<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.
Lakeview Financial Corp.
Date: June 12, 1998 /s/ Kevin J. Coogan
------------------------
Kevin J. Coogan
President and CEO
(Principal Executive Officer)
Date: June 12, 1998 /s/ Anthony G. Gallo
------------------------
Anthony G. Gallo
Vice President and CFO
(Principal Financial Officer)
18
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION DERIVED FROM THE
QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL INFORMATION.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-END> APR-30-1998
<CASH> 8,983,447
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 90,760,577
<INVESTMENTS-CARRYING> 201,458,036
<INVESTMENTS-MARKET> 202,206,746
<LOANS> 282,479,071
<ALLOWANCE> 4,159,560
<TOTAL-ASSETS> 619,638,312
<DEPOSITS> 452,483,165
<SHORT-TERM> 90,729,596
<LIABILITIES-OTHER> 16,131,151
<LONG-TERM> 0
0
0
<COMMON> 12,883,008
<OTHER-SE> 47,411,392
<TOTAL-LIABILITIES-AND-EQUITY> 619,638,312
<INTEREST-LOAN> 5,769,927
<INTEREST-INVEST> 3,875,069
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 9,644,996
<INTEREST-DEPOSIT> 3,948,310
<INTEREST-EXPENSE> 5,083,960
<INTEREST-INCOME-NET> 4,561,036
<LOAN-LOSSES> 449,401
<SECURITIES-GAINS> 2,629,075
<EXPENSE-OTHER> 3,132,365
<INCOME-PRETAX> 4,565,938
<INCOME-PRE-EXTRAORDINARY> 4,565,938
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,041,468
<EPS-PRIMARY> .83
<EPS-DILUTED> .75
<YIELD-ACTUAL> 3.04
<LOANS-NON> 4,265,090
<LOANS-PAST> 4,265,090
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,442,770
<CHARGE-OFFS> 25,330
<RECOVERIES> 184,441
<ALLOWANCE-CLOSE> 4,159,560
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
