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: January 31, 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
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(Address of principal executive offices, zip code)
(201) 742-3060
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(Registrant's telephone number, including area code)
NOT APPLICABLE
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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 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: March 10, 1998
--------------
Class Outstanding
- ---------------------------- ----------------
$2.00 par value common stock 4,285,685 shares
<PAGE>
LAKEVIEW FINANCIAL CORP. and SUBSIDIARIES
CONTENTS
PART I - FINANCIAL INFORMATION Page
Item 1: Financial Statements
Unaudited Consolidated Statements of Financial Condition
as of January 31, 1998 and July 31, 1997 3
Unaudited Consolidated Statements of Income for the Three
Months Ended January 31, 1998 and 1997 4
Unaudited Consolidated Statements of Income for the Six
Months Ended January 31, 1998 and 1997 5
Unaudited Consolidated Statements of Cash Flows for the Six
Months Ended January 31, 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
2
<PAGE>
LAKEVIEW FINANCIAL CORP. AND SUBSIDIARIES
- -----------------------------------------
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CONDITION
AS OF JANUARY 31, 1998 AND JULY 31, 1997
- --------------------------------------------------------------------------------------------
(Unaudited) (Unaudited)
January 1998 July 1997
- ------------------------------------------------------------------------------ -------------
<S> <C> <C>
Assets
- ------
Cash on hand and in banks $7,847,566 $5,399,466
Investment securities held to maturity, net 33,092,180 42,681,799
Investment securities available for sale, net 74,975,484 105,592,249
Mortgage-backed securities held to maturity, net 93,432,349 102,248,545
Loans receivable, net 238,831,765 224,563,595
Real estate owned, net 1,774,000 1,929,447
Federal Home Loan Bank of New York stock, at cost 4,050,000 3,550,000
Accrued interest receivable, net 3,001,582 3,475,581
Office properties and equipment, net 3,965,123 4,027,940
Excess of cost over fair value of assets acquired 8,195,992 8,856,136
Other assets 3,525,131 3,557,442
- ------------------------------------------------------------------------------ -------------
Total assets $472,691,172 $505,882,200
============================================================================== =============
Liabilities and Shareholders' Equity
- ------------------------------------
Deposits $360,659,272 $370,787,103
Borrowings 60,626,595 61,250,000
Borrowings - (ESOP) obligation 0 2,353,825
Advance payments by borrowers for taxes and insurance 2,591,279 2,259,134
Net deferred tax liability 622,850 6,094,000
Other liabilities 2,566,122 1,329,003
- ------------------------------------------------------------------------------ -------------
Total liabilities 427,066,118 444,073,065
Shareholders' Equity
- --------------------
Common stock: $2.00 par value; authorized 10,000,000
shares, issued 6,441,504 shares and outstanding
3,882,063 shares at January 31, 1998 12,883,008 12,883,008
Additional paid-in capital 26,835,608 26,746,523
Retained income substantially restricted 31,657,720 28,617,200
Unrealized gain on securities available for sale, net of taxes 4,890,911 14,457,898
Treasury stock at cost (26,924,270) (17,357,996)
Common stock acquired by ESOP (2,732,875) (2,407,250)
Common stock acquired by MSBP (985,048) (1,130,248)
- ------------------------------------------------------------------------------ -------------
Total shareholders' equity 45,625,054 61,809,135
- ------------------------------------------------------------------------------ -------------
Total liabilities and shareholders' equity $472,691,172 $505,882,200
============================================================================== =============
Stated book value per share $11.75 $13.71
Tangible book value per share $9.64 $11.74
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
LAKEVIEW FINANCIAL CORP. AND SUBSIDIARIES
- -----------------------------------------
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTH ENDED JANUARY 31, 1998 AND 1997
- ---------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited)
1998 1997
- --------------------------------------------------------------------------------------- -----------
<S> <C> <C>
Interest income:
Loans receivable $5,149,819 $3,909,668
Mortgage-backed securities held to maturity 1,556,013 1,877,210
Investment securities held to maturity 947,342 908,651
Investment securities available for sale 1,029,841 1,287,429
- --------------------------------------------------------------------------------------- -----------
Total interest income 8,683,015 7,982,958
Interest expense:
Interest on deposits 3,526,121 3,514,209
Interest on borrowings 1,137,083 843,270
- --------------------------------------------------------------------------------------- -----------
Total interest expense 4,663,204 4,357,479
Net interest income before provision for loan losses 4,019,811 3,625,479
Provision for loan losses 300,298 256,217
- --------------------------------------------------------------------------------------- -----------
Net interest income after provision for loan losses 3,719,513 3,369,262
Other Income:
Loan fees and service charges 343,627 301,872
Net realized gains on sale of investments 2,425,072 2,415,030
Other operating income 602,748 448,650
- --------------------------------------------------------------------------------------- -----------
Total other income 3,371,447 3,165,552
Other expense:
Compensation and employee benefits 1,543,246 1,385,437
Office occupancy and equipment expense 225,586 234,941
Net loss from real estate owned activities 112,023 81,341
Other operating expense 816,485 616,579
Amortization of the excess of cost over fair value of net assets acquired 330,072 330,072
- --------------------------------------------------------------------------------------- -----------
Total other expense 3,027,412 2,648,370
Net income before taxes 4,063,548 3,886,444
Total federal and state income tax 1,515,468 1,417,000
- --------------------------------------------------------------------------------------- -----------
Net Income $2,548,080 $2,469,444
======================================================================================= ===========
Net income per share:
Basic $0.75 $0.60
Diluted $0.63 $0.52
Weighted average number of shares outstanding:
Basic 3,413,557 4,131,222
Diluted 4,072,682 4,708,668
</TABLE>
4
<PAGE>
LAKEVIEW FINANCIAL CORP. AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JANUARY 31, 1998 AND 1997
- ---------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited)
1998 1997
- ------------------------------------------------------------------------------------- -----------
<S> <C> <C>
Interest income:
Loans receivable $10,333,415 $7,673,496
Mortgage-backed securities held to maturity 3,191,502 3,844,368
Investment securities held to maturity 1,884,674 1,750,018
Investment securities available for sale 2,243,940 2,773,146
- --------------------------------------------------------------------------------------- ----------
Total interest income 17,653,531 16,041,028
Interest expense:
Interest on deposits 7,094,392 6,940,279
Interest on borrowings 2,205,223 1,625,731
- --------------------------------------------------------------------------------------- ----------
Total interest expense 9,299,615 8,566,010
Net interest income before provision for loan losses 8,353,916 7,475,018
Provision for loan losses 600,816 361,217
- --------------------------------------------------------------------------------------- ----------
Net interest income after provision for loan losses 7,753,100 7,113,801
Other Income:
Loan fees and service charges 667,231 574,340
Net realized gains on sale of investments 2,412,016 3,179,080
Other operating income 1,037,465 1,026,089
- --------------------------------------------------------------------------------------- ----------
Total other income 4,116,712 4,779,509
Other expense:
Compensation and employee benefits 3,050,472 2,638,429
Office occupancy and equipment expense 456,090 463,740
Net loss from real estate owned activities 153,510 100,902
Other operating expense 1,530,133 1,367,827
SAIF recapitalization assessment 0 2,218,674
Amortization of the excess of cost over fair value of net assets acquired 660,144 660,144
- --------------------------------------------------------------------------------------- ----------
Total other expense 5,850,349 7,449,716
Net income before taxes 6,019,463 4,443,594
Total federal and state income tax 2,205,068 1,628,000
- --------------------------------------------------------------------------------------- ----------
Net Income $3,814,395 $2,815,594
======================================================================================= ==========
Net income per share:
Basic $1.06 $0.67
Diluted $0.90 $0.60
Weighted average number of shares outstanding:
Basic 3,589,622 4,167,418
Diluted 4,234,288 4,720,440
</TABLE>
5
<PAGE>
LAKEVIEW FINANCIAL CORP. AND SUBSIDIARIES
- -----------------------------------------
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JANUARY 31, 1998 AND 1997
- ------------------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited)
1998 1997
- -------------------------------------------------------------------------------------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net Income $3,814,395 $2,815,594
Adjustment to reconcile net income to net cash provided
by operating activities :
Amortization of excess of cost over fair value of assets acquired 660,144 660,144
Amortization of discounts and premiums, net (655,407) (230,494)
Provision for losses on loans 600,816 361,217
Provision for losses on real estate owned 32,857 43,783
(Gain) loss on sale of real estate owned 3,653 (40,159)
Net realized gain on sale of investments available for sale (2,256,348) (2,799,965)
Net realized gain on sale of trading securities (155,668) (379,115)
Decrease in accrued interest receivable 473,999 110,132
Decrease in deferred loan fees (9,670) (27,867)
(Increase) decrease in other assets 32,311 (260,095)
Decrease in net deferred tax liability (156,099) 0
Increase (decrease) in other liabilities 1,237,121 (386,019)
Amortization of ESOP shares 231,172 339,838
Amortization of MSBP shares 145,200 212,438
Depreciation of office properties and equipment, net 156,712 152,070
- -------------------------------------------------------------------------------------------- --------------
Net cash provided by operating activities: 4,155,188 571,502
Cash flows from investing activities:
Loan origination net of principal payments (15,056,288) (33,670,010)
Increase in Federal Home Loan Bank stock (500,000) (962,600)
Purchase of investment securities available for sale (23,453,482) (19,881,290)
Proceeds from sale of investment securities available for sale 17,411,300 37,583,654
Proceeds from maturity of investment securities available for sale 22,967,780 0
Principal payments on investment securities available for sale 1,098,310 981,738
Purchase of trading securities (10,548,433) (17,891,376)
Proceeds from sale of trading securities 10,704,101 12,402,891
Purchase of investment securities held to maturity (5,830,198) (2,000,000)
Proceeds from maturity of investment securities held to maturity 15,945,000 2,000,000
Principal payments on mortgage-backed securities held to maturity 8,890,557 9,778,254
Proceeds from sale of real estate owned 338,937 457,692
Increase in office properties and equipment (93,895) (53,887)
- -------------------------------------------------------------------------------------------- --------------
Net cash provided by (used in) investing activities 21,873,689 (11,254,934)
</TABLE>
<PAGE>
LAKEVIEW FINANCIAL CORP. AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE SIX MONTHS ENDED JANUARY 31, 1998 AND 1997
- -------------------------------------------------------------------------------------------- ------------
(Unaudited) (Unaudited)
1998 1997
- -------------------------------------------------------------------------------------------- ------------
<S> <C> <C>
Cash flows from financing activities:
Increase (decrease) in deposits, net (10,127,831) 7,056,686
Increase (decrease) in borrowings, net (2,977,230) 4,821,571
Increase (decrease) in advance payments by borrowers for taxes, net 332,145 (34,215)
Purchase of treasury stock (10,214,112) (1,734,625)
Issuance of common stock 143,875 0
Common stock acquired by ESOP (2,793,422) 0
Common stock retired by ESOP 2,325,710 0
Dividend paid (269,912) (299,111)
- -------------------------------------------------------------------------------------------- ------------
Net cash provided by (used in) financing activities (23,580,777) 9,810,306
- -------------------------------------------------------------------------------------------- ------------
Net change in cash and cash equivalents 2,448,100 (873,126)
Cash and cash equivalents at beginning of period 5,399,466 6,902,040
- -------------------------------------------------------------------------------------------- ------------
Cash and cash equivalents at end of period $7,847,566 $6,028,914
============================================================================================ ============
Cash paid during period for:
Interest $6,877,447 $6,940,279
Income Taxes $1,623,000 $1,500,000
Supplemental disclosures of non-cash investing activities:
$220,000 $182,500
</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 six months ended
January 31, 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 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.
(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 income statement for all entities with complex capital structures.
Under Statement 128, basic EPS is to be computed 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 also requires the restatement of all prior-period EPS data
presented.
8
<PAGE>
The following reconciles the weighted average number of common shares
outstanding used to calculate basic and diluted net income per share.
For the three For the six
months ended months ended
January 31 January 31
---------- ----------
1998 1997 1998 1997
Weighted Average Number
of Common Shares
Outstanding - Basic 3,413,557 4,131,222 3,589,622 4,167,418
Effective of Dilutive Securities
Qualified Stock Options 371,266 314,396 364,776 300,499
Non-Qualified Stock Options 249,351 195,137 242,093 184,610
MSBP Shares 38,508 67,913 37,797 67,913
--------- --------- --------- ---------
Weighted Average Number
of Common Shares
Outstanding - Diluted 4,072,682 4,708,668 4,234,288 4,720,440
========= ========= ========= =========
(3) Par Value of Common Stock
As previously disclosed in the Company's Annual Report on Form 10K for the year
ended July 31, 997, on September 4, 1997, the Company declared a two for one
stock split 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 par value at $2.00,
and therefore the Balance Sheet at January 31, 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.
(4) Non Performing Loans and the Allowance for Loan Losses
Non-performing assets (loans 90 days or more delinquent, non-accrual loans, real
estate owned and other non-performing assets) totaled $6.0 million or 1.27% of
total assets at January 31, 1998, as compared to $5.7 million or 1.13% of total
assets at July 31, 1997.
9
<PAGE>
Non performing loans at January 31, 1998, and July 31, 1997, are as follows:
January 31, 1998 July 31,1997
---------------- ------------
Loans delinquent 90 days or more $4,207,659 $3,810,868
As a percentage of total loans 1.8% 1.7%
An analysis of the allowance for loan losses for the six month period ended
January 31, 1998 and 1997 is as follows:
For the six For the six
months ended months ended
January 31, 1998 January 31, 1997
---------------- --------------
Balance at beginning of period $ 3,411,461 $ 3,073,158
Provision charged to operations 600,816 361,217
Charge-offs, (587,320) (342,811)
Recoveries 17,813 18,277
----------- -----------
Balance at end of period $ 3,442,770 $ 3,109,841
=========== ===========
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 eight 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 approved the merger of Westwood
Savings Bank ("WFC") with and into the Corporation on February 24, 1998, and the
transaction closed on February 27, 1998. In connection with the merger, the
Company issued 403,622 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 January 31, 1998 and July 31, 1997
- -----------------------------------------------------------------------
Total assets decreased $33.2 million, or 6.6%, to $472.7 million at January 31,
1998, from $505.9 million at July 31, 1997. The decrease was primarily due to a
decreases in investment securities held to maturity of $9.6 million, $30.6
million in investment securities available for sale, $8.8 million in mortgage
backed securities held to maturity, and $660 thousand in excess of cost over
fair value of assets acquired, offsetting increases of $14.3 million in loans
receivable, net, and $500 thousand in Federal Home Loan Bank of New York Stock.
Funds from investment securities (held to maturity and available for sale) and
mortgage backed securities held to maturity were used to fund the growth in
loans receivable and to re-pay the ESOP obligation.
The investment securities held to maturity decreased $9.6 million, or 22.5%, to
$33.1 million at January 31, 1998, from $42.7 million at July 31, 1997. The
decrease was mainly attributed to the proceeds of maturities of $15.9 million,
offset by the purchase of $5.8 million and amortization of discounts of $525
thousand.
Investment securities available for sale ("investment securities") decreased
$30.6 million to $75.0 million at January 31, 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 $23.0 million, $15.2 million in
proceeds from sale, $1.1 million of principal repayments, and a $14.8 million
decrease in market, offset by purchases of $23.5 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
11
<PAGE>
("IMC"), which consists of 1,661,856 shares of common stock. For the six months
ended January 31, 1998, the market value decreased $15.4 million or 51.5% to
$14.5 million from $29.9 million at July 31, 1997. Branchview's cost basis of
the investment in IMC is $7.8 million at January 31, 1998. The decrease in
market value was the result of unfavorable market conditions in the
non-conforming mortgage loan industry. Investment securities available for sale
are reported at fair value, with unrealized gains and losses excluded from
earnings and reported net of income tax, as a separate component of equity.
Mortgage backed securities held to maturity decreased $8.8 million, or 8.6%, to
$93.4 million at January 31, 1998, from $102.2 million at July 31, 1997. This
was attributed to principal repayments of $8.8 million. The funds were primarily
used to fund the growth in loans receivable.
Loans receivable increased $14.3 million, or 6.4%, to $238.8 million at January
31, 1998, from $224.6 million at July 31, 1997. The increase was the result of
the concerted efforts of a seasoned branch staff, specialized lending officers
and senior management.
Federal Home Loan Bank of New York stock, increased $500 thousand, or 14.1%, to
$4.1 million at January 31, 1998, from $3.6 million at July 31, 1997. The
increase was due to an additional purchase of FHLB of New York stock.
Deposits, after interest credited, decreased $10.1 million, or 2.7%, to $360.7
million at January 31, 1998, from $370.8 million at July 31, 1997. During the
six months ended January 31, 1998, now accounts and money market deposits
increased $780 thousand or 1.0%, saving deposits decreased $1.4 million or 1.8%
and certificates of deposit deceased $9.5 million or 4.4%. Growth occurred
primarily in now accounts and money market deposit accounts due to Management's
concerted efforts to increase these low cost and revenue generating funding base
accounts.
During the quarter ended January 31, 1998, borrowings on ESOP obligations of
$2.4 million were re-paid.
Shareholders' equity decreased $16.2 million during the six months ended January
31, 1998, to $45.6 million. This was primarily due to the repurchase of $10.2
million in common stock, decrease in the unrealized gains on securities
available for sale of $9.6 million, and cash dividends of $270,000, offsetting
the decrease was net income of $3.8 million and amortization of ESOP shares of
$231 thousand.
Comparison of Operating Results For The Three Months Ended January 31, 1998 and
- --------------------------------------------------------------------------------
1997
- ----
Interest Income: Total interest income increased $700 thousand to $8.7 million
for the quarter ended January 31, 1998, compared to $8.0 million for the quarter
ended January
12
<PAGE>
31, 1997. The increase was mainly due to growth in the level of interest earning
assets, primarily in loans receivable, net, and an increase in the average yield
on interest earning assets from 7.34% to 7.46%. The average balance in interest
earning assets for the three months ended January 31, 1998, increased $31.3
million, or 7.10% to $472.3 million from $441.0 million for the same period in
1997.
Interest Expense: Total interest expense increased $306 thousand to $4.7 million
for the quarter ended January 31, 1998, compared to $4.4 million for the quarter
ended January 31, 1997. The increase was due to growth in the level of interest
bearing liabilities, offset by a decrease in the average cost. Average interest
bearing liabilities increased $18.8 million or 4.6% to $423.2 million for the
quarter ended January 31, 1998, from $404.4 million for the quarter ended
January 31, 1997. The cost decreased five basis points to 4.26% for the three
months ended January 31, 1998 from 4.31% for the same period in 1997.
Net Interest Income: Net interest income before provision for loan losses
increased $394 thousand or 10.9%, to $4.0 million for the three months ended
January 31, 1998, from $3.6 million for the same period in 1997.
Provision For Loan Losses: For the comparison period, the provision for loan
losses increased $44 thousand, or 17.2%, to $300 thousand compared to $256
thousand for the same period ended January 31, 1997, due to loan growth and a
change in the mix of the loan portfolio. Management of the Savings Bank
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 the Savings Bank's 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 $206 thousand during the comparison period
to $3.4 million or 6.50%, from $3.2 million. Loan fees and service charges
increased $42 thousand, or 13.8%, to $344 thousand. The increase is primarily
due to an increase of $27 thousand in NOW account service fees. Other income
increased $154 thousand, or 34.4% to $603 thousand for the quarter ended January
31, 1998, compared to $449 thousand for the quarter ended January 31, 1997. The
increase was primarily attributed to an increase of $135 thousand in the
operations of the Company's subsidiary, Lakeview Mortgage Depot, Inc.
Other Expense: For the comparison period, other expense increased $379 thousand,
or 14.3%, to $3.0 million for the three months ended January 31, 1998, from $2.6
million for the three months ended January 31, 1997. Compensation increased $158
thousand, or 11.4% to $1.5 million at January 31, 1998 as compared to $1.4
million at January 31, 1997. The increase was mainly attributed to higher
compensation and benefit cost for the
13
<PAGE>
Company of approximately $54 thousand and $104 thousand respectively, due to an
increase in staff for the Company's subsidiary Lakeview Mortgage Depot, Inc. Net
loss on real estate owned operations increased $31 thousand, or 37.8% to $112
thousand at January 31, 1998 as compared to $81 thousand at January 31, 1997.
Management will continue to liquidate real estate owned whenever possible. Other
operating expense increased $199 thousand, or 32.4% to $816 thousand for the
three months ended January 31, 1998, compared to $617 thousand for the three
months ended January 31, 1997. The increase is mainly attributed to an increase
of $59 thousand in operating cost of the Company's subsidiary Lakeview Mortgage
Depot, Inc., due to the expansion of operations. In addition legal expense
increased $38 thousand for the comparable periods due to cost associated with
the Westwood Financial Corporation merger.
Comparison of Operating Results For The Six Months Ended January 31, 1998 and
- --------------------------------------------------------------------------------
1997
- ----
Interest Income: Total interest income increased $1.7 million to $17.7 million
for the six months ended January 31, 1998, compared to $16.0 million for the six
months ended January 31, 1997. The increase was mainly due to growth in the
level of interest earning assets, primarily in loans receivable, net, and an
increase in the average yield on interest earning assets from 7.45% to 7.52%.
The average balance in interest earning assets for the six months ended January
31, 1998 increased $39.6 million, or 9.91% to $475.9 million from $436.3 million
for the same period in 1997.
Interest Expense: Total interest expense increased $734 thousand to $9.3 million
for the six months ended January 31, 1998, compared to $8.6 million for the six
months ended January 31, 1997. The increase was due to growth in the level of
interest bearing liabilities, and a decrease in the average cost. Average
interest bearing liabilities increased $19.7 million or 4.9% to $421.2 million
for the six months ended January 31, 1998, from $401.5 million for the six
months ended January 31, 1997. The cost increased 3 basis points to 4.30% for
the six months ended January 31, 1998, from 4.27% for the same period in 1997.
Net Interest Income: Net interest income before provision for loan losses
increased $879 thousand or 11.8%, to $8.4 million for the six months ended
January 31, 1998, from $7.5 million for the same period in 1997.
Provision For Loan Losses: For the comparison period, the provision for loan
losses increased $240 thousand or 66.3%, to $600 thousand compared to $361
thousand for the same period ended January 31, 1997, due to loan growth and a
change in the mix of the loan portfolio. Management of the Savings Bank
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 the Savings Bank's non-performing loans and assets. The assessment of
the adequacy of the allowance for loan losses involves subjective
14
<PAGE>
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 decreased $663 thousand during the comparison period
to $4.1 million or 13.9%, from $4.8 million. The decline was primarily due to
$3.2 million in gains from the sale of investments during the six months ended
January 31, 1997 compared to a $2.4 million gain from the investment securities
available for sale portfolio for the six months ended January 31, 1998. The gain
on the sale of investment securities available for sale for the six months ended
January 31, 1998 is not necessarily indicative of the results expected for the
fiscal year ending July 31, 1998. Other income increased $93 thousand , or
16.2%, to $667 thousand. The increases is primarily due to an increase of $79
thousand in NOW account service charges.
Other Expense: For the comparison period, other expense decreased $1.6 million,
or 21.5%, to $5.9 million for the six months ended January 31, 1998, from $7.4
million for the six months ended January 31, 1997. Other expense primarily
decreased due to the recognition for the six months ended October 31, 1996 of a
$2.2 million special assessment required to recapitalize the SAIF. The decrease
was offset by an increase in compensation expense of $412 thousand, a $53
thousand increase in net loss from real estate owned activities as compared to
the same period in 1997 and an increase of $162 thousand in other operating
expense. Compensation increased $412 thousand, or 15.6% to $3.0 million at
January 31, 1998 as compared to $2.6 million at January 31, 1997. The increase
was mainly attributed to higher compensation and benefit cost for the Company of
approximately $240 thousand and $172 thousand respectively, due to increased
staff for the Company's subsidiary Lakeview Mortgage Depot, Inc. Net loss on
real estate owned operations increased $53 thousand, or 52.1% to $154 thousand
at January 31, 1998 as compared to $101 thousand at January 31, 1997. Management
will continue to liquidate real estate owned whenever possible. Other operating
expense increased $162 thousand, or 11.9%, to $1.5 million for the six months
ended January 31, 1998. The increase is mainly attributable to an increase of
$61 thousand in legal expense due to cost associated with the merger with
Westwood Financial Corporation, and a $81 thousand in increased cost of the
Company's subsidiary Lakeview Mortgage Depot, Inc due to the expansion of
operations.
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.
15
<PAGE>
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 January 31, 1998, cash and cash
equivalents totaled $7,847,566.
The Savings Bank anticipates that it will have sufficient funds available to
meet its current commitments. As of January 31, 1998, the Savings Bank had
commitments to fund loans of $4,236,000.
The Savings Bank had leverage, Tier 1 and risk-based capital ratios of 7.9%,
12.7%, and 14.0% at January 31, 1998, which exceeded the FDIC's respective
minimum requirements of 4.00%, 4.00% and 8.00%. The Savings Bank was classified
as a "well capitalized" institution by the FDIC as of January 31, 1998.
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 January 31, 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
The Company announced on February 27, 1998, that the
shareholders of Westwood Financial Corporation approved the
merger of Westwood Savings Bank with and into the Corporation
and Lakeview on February 24, 1998. The transaction closed at
the close of business on February 27, 1998. In connection with
the merger, the Company issued 403,622 shares of common stock
and paid $10,136,938.50 in cash for all of the outstanding
shares of common stock of WFC. The transaction was accounted
for as a "purchase."
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: March 10, 1998 /s/ Kevin J. Coogan
------------------------
Kevin J. Coogan
President and CEO
(Principal Executive Officer)
Date: March 10, 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> 3-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-END> JAN-31-1998
<CASH> 7,847,566
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 74,975,484
<INVESTMENTS-CARRYING> 130,574,529
<INVESTMENTS-MARKET> 130,578,721
<LOANS> 242,274,535
<ALLOWANCE> 3,442,770
<TOTAL-ASSETS> 472,691,172
<DEPOSITS> 360,659,272
<SHORT-TERM> 60,626,595
<LIABILITIES-OTHER> 5,780,251
<LONG-TERM> 0
0
0
<COMMON> 12,883,008
<OTHER-SE> 32,742,046
<TOTAL-LIABILITIES-AND-EQUITY> 472,691,172
<INTEREST-LOAN> 5,149,819
<INTEREST-INVEST> 3,533,196
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 8,683,015
<INTEREST-DEPOSIT> 3,526,121
<INTEREST-EXPENSE> 4,663,204
<INTEREST-INCOME-NET> 4,019,811
<LOAN-LOSSES> 300,298
<SECURITIES-GAINS> 2,425,072
<EXPENSE-OTHER> 3,027,412
<INCOME-PRETAX> 4,063,548
<INCOME-PRE-EXTRAORDINARY> 4,063,548
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,548,080
<EPS-PRIMARY> .75<F1>
<EPS-DILUTED> .63
<YIELD-ACTUAL> 3.22
<LOANS-NON> 4,207,659
<LOANS-PAST> 4,207,659
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,539,703
<CHARGE-OFFS> 404,289
<RECOVERIES> 7,058
<ALLOWANCE-CLOSE> 3,442,770
<ALLOWANCE-DOMESTIC> 3,442,770
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
<FN>
<F1> BASIC EARNINGS PER SHARE
</FN>
</TABLE>
