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: October 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.
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(Exact name of registrant as specified in its charter)
New Jersey 22-3334052
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(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: December 1, 1998
Class Outstanding
- ---------------------------- ----------------
$2.00 par value common stock 4,818,478 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 October 31, 1998 and July 31, 1998 3
Unaudited Consolidated Statements of Income for the Three
Months Ended October 31, 1998 and 1997 4
Unaudited Consolidated Statements of Cash Flows for the Three
Months Ended October 31, 1998 and 1997 5
Notes to Unaudited Consolidated Financial Statements 7
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
Item 3: Quantitative and Qualitative Disclosure About Market Risk 15
PART II - OTHER INFORMATION
Item 1: Legal Proceedings 16
Item 2: Changes in Securities 16
Item 3: Defaults Upon Senior Securities 16
Item 4: Submission of Matters to a Vote of Security Holders 16
Item 5: Other Information 16
Item 6: Exhibits and Reports on Form 8-K 16
Signatures 17
2
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LAKEVIEW FINANCIAL CORP. AND SUBSIDIARIES
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<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
AS OF OCTOBER 31 AND JULY 31, 1998
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(dollars in thousands except share data) (unaudited) (unaudited)
October 1998 July 1998
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<S> <C> <C>
Assets
- ------
Cash on hand and in banks $15,113 $8,773
Federal funds sold 27,000 39,900
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Total cash and cash equivalents 42,113 48,673
Investment securities held to maturity 84,666 83,831
Securities available for sale 22,479 37,867
Mortgage-backed securities held to maturity 99,158 101,771
Loans receivable, net 286,653 286,869
Real estate owned, net 480 505
Federal Home Loan Bank of New York stock, at cost 4,626 4,626
Accrued interest receivable 3,249 3,068
Office properties and equipment, net 4,815 4,623
Excess of cost over fair value of assets acquired, net 18,116 18,643
Other assets 6,517 3,380
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Total assets $572,872 $593,856
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Liabilities and Shareholders' Equity
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Deposits $453,769 $456,880
Borrowings 55,752 64,928
Borrowings - Employee Stock Option Plan (ESOP) 8,499 8,783
Advance payments by borrowers for taxes and insurance 2,960 2,934
Other liabilities 3,400 3,724
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Total liabilities 524,380 537,249
Shareholders' Equity
- --------------------
Common stock: $2.00 par value; authorized 10,000,000 shares,
issued 6,441,504 shares and outstanding 4,818,478 shares at
October 31, 1998 and 4,880,268 shares at July 31, 1998 12,883 12,883
Additional paid-in capital 30,924 30,905
Retained income 31,888 30,500
Accumulated other comprehensive (loss) income (3,323) 5,306
Treasury stock at cost, 1,623,026 at October 31, 1998 and (14,377) (13,343)
1,561,236 at July 31, 1998
Unallocated ESOP shares (8,781) (8,893)
Unallocated Management Stock Bonus Plan (MSBP) shares (722) (751)
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Total shareholders' equity 48,492 56,607
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Total liabilities and shareholders' equity $572,872 $593,856
================================================================================ ==========
Stated book value per share $10.06 $11.60
Tangible book value per share $6.30 $7.78
</TABLE>
3
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LAKEVIEW FINANCIAL CORP. AND SUBSIDIARIES
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<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED OCTOBER 31, 1998 AND 1997
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(dollars in thousands except share data) (unaudited) (unaudited)
1998 1997
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<S> <C> <C>
Interest income:
Loans receivable $6,191 $5,184
Mortgage-backed securities held to maturity 1,644 1,636
Investment securities held to maturity and federal funds 1,808 937
Securities available for sale 370 1,214
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Total interest income 10,013 8,971
Interest expense:
Deposits 4,280 3,568
Borrowings 1,060 1,068
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Total interest expense 5,340 4,636
Net interest income 4,673 4,335
Provision for loan losses 225 301
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Net interest income after provision for loan losses 4,448 4,034
Other Income:
Loan fees and service charges 405 324
Net realized gains (losses) on sale of securities 3,301 (13)
Gains on sale of loans originated for sale 235 291
Other operating income 147 143
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Total other income 4,088 745
Other expense:
Compensation and employee benefits 1,679 1,507
Office occupancy and equipment expense 323 231
Net loss on real estate owned 35 41
Other operating expense 866 714
Amortization of the excess of cost over fair value of net assets acquired 527 330
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Total other expense 3,430 2,823
Income before taxes 5,106 1,956
Income tax 1,910 690
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Net Income $3,196 $1,266
====================================================================================== ===========
Net income per share:
Basic $0.77 $0.34
Diluted $0.72 $0.29
Weighted average number of shares outstanding:
Basic 4,131,280 3,745,519
Diluted 4,429,596 4,382,525
</TABLE>
4
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LAKEVIEW FINANCIAL CORP. AND SUBSIDIARIES
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<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED OCTOBER 31, 1998 AND 1997
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(dollars in thousands) (unaudited) (unaudited)
1998 1997
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<S> <C> <C>
Cash flows from operating activities:
Net Income $3,196 $1,266
Adjustment to reconcile net income to net cash provided
by operating activities :
Amortization of excess of cost over fair value of assets acquired 527 330
Amortization of discounts and premiums, net (1,082) (182)
Provision for loan losses 225 301
Provision for losses on real estate owned 15 0
Net realized (gain) loss on sale of securities available for sale (3,283) 136
Net realized gain on sale of trading securities (18) (123)
Gains on sale of loans originated for sale (235) (291)
Purchase of trading securities (5,124) (6,400)
Proceeds from sale of trading securities 5,142 6,523
Loans originated for sale (6,145) (3,791)
Proceeds from sales of loans originated for sale 6,380 4,082
Increase in accrued interest receivable (181) (484)
(Decrease) increase in deferred loan fees (1) 4
Decrease in other assets 177 494
Amortization of ESOP shares 131 170
Amortization of MSBP shares 29 73
Increase in other liabilities 517 208
Depreciation expense, net 117 79
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Net cash provided by operating activities: 387 2,395
Cash flows from investing activities:
Loan origination net of principal payments (1) (9,245)
Purchase of Federal Home Loan Bank stock 0 (250)
Purchase of securities available for sale (48,965) (6,387)
Proceeds from sale of securities available for sale 54,401 1,886
Principal payments on securities available for sale 452 569
Purchase of investment securities held to maturity (16,341) (5,691)
Proceeds from maturity of investment securities held to maturity 16,461 2,750
Purchase of mortgage-backed securities held to maturity (5,024) 0
Principal payments on mortgage-backed securities held to maturity 7,692 4,250
Proceeds from sale of real estate owned 10 168
Increase in office properties and equipment (309) (27)
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Net cash provided by (used in) investing activities 8,376 (11,977)
</TABLE>
5
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LAKEVIEW FINANCIAL CORP. AND SUBSIDIARIES
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<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE THREE MONTHS ENDED OCTOBER 31, 1998 AND 1997
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(dollars in thousands) (unaudited) (unaudited)
1998 1997
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<S> <C> <C>
Cash flows from financing activities:
Decrease in deposits (3,047) (1,731)
(Decrease) increase in borrowings (9,460) 22,179
Increase (decrease) in advance payments by borrowers for taxes, net 26 (1,991)
Purchase of treasury stock (2,809) (7,652)
Exercise of stock options 254 0
Cash dividends paid (287) (140)
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Net cash (used in) provided by financing activities (15,323) 10,665
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Net change in cash and cash equivalents (6,560) 1,083
Cash and cash equivalents at beginning of period 48,673 5,399
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Cash and cash equivalents at end of period $42,113 $6,482
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Cash paid during period for:
Interest on deposits $4,326 $3,462
Income taxes $1,250 $103
</TABLE>
6
<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 active 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 months ended October
31, 1998 are not necessarily indicative of the results that may be expected for
the fiscal year July 31, 1999 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, 1998.
(2) Net Income per Share
In accordance with Statement of Financial Accounting Standards No. 128
("Statement 128"), Earnings Per Share, the following table reconciles the
weighted average number of common shares outstanding used to calculate basic and
diluted net income per share.
For the three months ended
October 31
--------------------------
1998 1997
Weighted Average Number
of Common Shares
Outstanding - Basic 4,131,280 3,745,519
Effective of Dilutive Securities
Qualified Stock Options 464 356,862
Non-Qualified Stock Options 203,625 233,157
MSBP Shares 94,227 46,987
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7
<PAGE>
Weighted Average Number
of Common Shares
Outstanding - Diluted 4,429,596 4,382,525
========= =========
(3) Comprehensive Income
Effective August 1, 1998, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive Income ("SFAS
130"). SFAS 130 establishes standards for reporting and display of comprehensive
income and its components in a full set of general purpose financial statements.
Under SFAS 130, comprehensive income is divided into net income and other
comprehensive income. Other comprehensive income includes items previously
recorded directly in equity, such as unrealized gains or losses on securities
available for sale. Comparative financial statements for earlier periods are
reclassified to reflect application of the provisions of SFAS 130.
SFAS 130 requires total comprehensive income and its components to be displayed
on the face of a financial statement for annual financial statements. For
interim financial statements, SFAS 130 requires only total comprehensive income
to be reported and allows such disclosure to be presented in the notes to the
interim financial statements. Total comprehensive income for the applicable
periods is shown below.
(in thousands) Total Comprehensive
(Loss) Income
-------------
For the quarter ended:
October 31, 1998 $(5,433)
October 31, 1997 1,099
(4) Non Performing Loans and the Allowance for Loan Losses
Non performing assets at October 31, 1998, and July 31, 1998, are as follows, in
thousands:
October 31, 1998 July 31,1998
---------------- ------------
Non accrual loans $3,427 $2,794
Real estate owned, net 480 505
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Total non-performing assets $3,907 $3,299
====== ======
8
<PAGE>
Non-accrual loans as a percentage
of total loans 1.20% .97%
Non-performing assets as a percentage
of total assets .68% .56%
An analysis of the allowance for loan losses for the three month period ended
October 31, 1998 and 1997 is as follows, in thousands:
For the three For the three
months ended months ended
October 31, 1998 October 31, 1997
---------------- ----------------
Balance at beginning of period $4,478 $3,411
Provision charged to operations 225 301
Charge-offs (113) (183)
Recoveries 35 11
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Balance at end of period $4,625 $3,540
====== ======
(5) Recent Events
The Company, including its subsidiary Branchview, Inc., has an equity investment
with a cost basis of $7.1 million in Industry Mortgage Company, L.P. (IMC). In
addition, the Company has an unsecured line of credit to IMC for $6.8 million as
of October 31, 1998.
IMC reached an agreement on October 15, 1998 for a $33 million standby revolving
credit facility with a lender and certain affiliates of the lender. The facility
is available to provide working capital for a period of up to 90 days, during
which time IMC intends to explore financial and strategic alternatives including
the possible sale of IMC. The terms of the new facility result in a substantial
dilution of existing common stockholders' equity equating to a minimum of 40%,
up to a maximum of 90%, on a fully diluted basis, depending on when, or whether,
a change of control transaction occurs, as described below. Lakeview's equity
investment in IMC represents approximately 5.5% of IMC's outstanding common
shares.
IMC has also entered into intercreditor arrangements with its three largest
warehouse and residual certificate lenders which have agreed to a "standstill"
keeping their facilities in place for up to 90 days in order for IMC to explore
its financial alternatives. In addition, IMC has entered into a forbearance and
intercreditor agreement with respect to its $95 million revolving bank credit
facility, which has matured by its terms. That agreement provides that the
lender will take no collection action for 45 days, extending for an additional
45 days (to a total of 90 days) if a letter of intent to effectuate a change of
control has been entered into by IMC during the initial 45-day period.
9
<PAGE>
In view of, among other things, reductions in available cash and credit
resources, IMC has retained an investment banker to advise it as to financial
and strategic alternatives. IMC is actively working with the investment banker
to seek a long-term investor in IMC or a sale or similar transaction resulting
in a change of control of IMC.
On November 30, 1998, IMC announced that on November 27, 1998, it had entered
into a non-binding letter of intent with Greenwich Street Capital Partners II,
L.P. or its designated affiliate ("Greenwich"). Under the proposed transaction,
Greenwich would invest sufficient additional equity in IMC and arrange for
credit facilities to permit IMC to repay in full its existing bank loans and
credit facilities, and Greenwich would obtain newly issued stock equal to 95% of
the total outstanding equity interests of IMC on a diluted basis leaving the
existing common shareholders with 5% of the outstanding equity. No payment would
be made to IMC's common shareholders in the proposed transaction; except that
the letter of intent provides for warrants to be issued to IMC's common
shareholders on terms not yet negotiated. Under the letter of intent, IMC may
continue to seek other buyers.
The proposed transaction is subject to a number of conditions including the
negotiation and signing of a mutually agreeable definitive agreement, and that
IMC continue to operate in the ordinary course of business. There is no
assurance that a definitive agreement will be executed or that the proposed
transactions will be consummated, and the letter of intent may be terminated by
either Greenwich or IMC at any time.
IMC believes that the letter of intent with Greenwich satisfies the extended
condition in the standstill agreement described above and that the standstill
period with its warehouse and revolving credit lenders will now extend to
mid-January, 1999. If the proposed transaction with Greenwich (or an alternative
transaction with a third party) is not consummated by that date, those lenders
would no longer be subject to their standstill agreements and would be free to
take action under their loan agreements.
As of November 30, 1998, the market value of the IMC stock held by the Company,
based on the quoted market price per share, was $945 thousand, resulting in an
unrealized loss, net of tax, of $4.0 million. This loss, if realized, would
represent a $.90 loss per share.
Management of the Company cannot presently predict what effect the actions of
IMC, as described above, will have on the collectibility of the outstanding line
of credit and recoverability of their equity investment.
(6) Recent Account Pronouncements
In October 1998, the FASB issued SFAS 134, "Accounting for Mortgage-Backed
Securities Retained after the Securitization of Mortgage Loans Held for Sale by
a Mortgage Banking Enterprise, an amendment of FASB Statement No. 65". Statement
No. 65, Accounting for
10
<PAGE>
Certain Mortgage Banking Activities, establishes accounting and reporting
standards for certain activities of mortgage banking enterprises and other
enterprises that conduct operations that are substantially similar to the
primary operations of a mortgage banking enterprise. This Statement further
amends Statement 65 to require that after the securitization of mortgage loans
held for sale, an entity engaged in mortgage banking activities classify the
resulting mortgage-backed securities or other retained interests based on its
ability and intent to sell or hold those investments. This Statement shall be
effective for the first fiscal quarter beginning after December 15, 1998. Early
application is encouraged and is permitted as of the issuance of this Statement.
The Company expects the adoption of this statement to have no material impact on
their financial position or results of operations.
In February 1998, the FASB issued Statement of Financial Accounting Standards
No. 132 "Employers' Disclosures about Pensions and Other Postretirement
Benefits" ("Statement No. 132"). Statement No. 132 revises employers'
disclosures about pension and other postretirement benefits plans. It does not
change the measurement or recognition of those plans. It standardizes the
disclosure requirements for pensions and other postretirement benefits to the
extent practicable, requires additional information in changes in the benefit
obligations and fair value of plan assets that will facilitate financial
analysis, and eliminates certain required disclosures of previous accounting
pronouncements.
Statement No. 132 is effective for fiscal years beginning after December 15,
1997. Earlier application is encouraged. Restatement of disclosures for earlier
periods provided for comparative purposes is required unless the information is
not readily available. As Statement No. 132 affects disclosure requirements, it
is not expected to have an impact on the financial statements of the Company.
On June 1998, the FASB issued Statement of Financial Accounting Standards No.
133, "Accounting for Derivative Instruments and Hedging Activities" ("Statement
No. 133"). This statement establishes accounting and reporting standards for
derivative instruments and for hedging activities. Statement No. 133 supersedes
the disclosure requirements in Statements No. 80, 105 and 119. This statement is
effective for periods beginning after June 15, 1999. The adoption of Statement
No. 133 is not expected to have a material impact on the financial position or
results of the Company.
(7) Management Stock Bonus Plans ("MSBP")
During the first quarter ended October 31, 1998, the Company issued an aggregate
of 194,000 restricted shares under the MSBP to its officers and directors. The
newly issued MSBPs began vesting at the rate of 20% per year on August 28, 1998.
The restricted shares under the MSBP become immediately vested in the event of
death, disability, or a "change of control" of the Company or the Savings Bank.
11
<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 eleven office locations located in Bergen and Passaic Counties,
New Jersey. The Company also has investments in three service corporations,
Branchview, Inc., LVS, Inc. and Lakeview Mortgage Depot, Inc.
Comparison of Financial Condition at October 31, 1998 and July 31, 1998
- -----------------------------------------------------------------------
Total assets decreased $21.0 million, or 3.5%, to $572.9 million at October 31,
1998, from $593.9 million at July 31, 1998. The decrease was primarily due to a
decrease in securities available for sale of $15.4 million, $2.6 million in
mortgage-backed securities held to maturity, and $6.6 million in cash and cash
equivalents offsetting the increase of $3.1 million in other assets. Funds from
cash and cash equivalents and mortgage-backed securities were used to pay down
borrowings.
Securities available for sale decreased $15.4 million to $22.5 million at
October 31, 1998 from $37.9 million at July 31, 1998. The decrease was mainly
attributable to $51.1 million in sales, $452 thousand of principal repayments,
and a $12.8 million decrease in market, offset by purchases of $49.0 million.
The decrease in market value in securities available for sale is mainly
attributed to the carrying value of Branchview's investment in Industry Mortgage
Company ("IMC"), which consists of 1,511,856 shares of common stock. At October
31, 1998, the market value decreased $12.8 million to $3.0 million from $15.8
million at July 31, 1998. The cost basis of IMC was $7.1 million at October 31,
1998. During the three months ended October 31, 1998, 150,000 shares of IMC were
sold for a loss of $554,000. The decrease in market value was partially the
result of unfavorable market conditions in the non-conforming mortgage loan
industry and specific actions taken by IMC. Further, as of November 30, 1998,
the market value of the IMC stock was $945 thousand, resulting in an unrealized
loss, net of tax, of $4.0 million. This loss, if realized, would represent a
$.90 loss per share. See Note 5 to the Consolidated Financial Statements.
Other assets increased $3.1 million, or 92.8% to $6.5 million at October 31,
1998 from $3.4 million at July 31, 1998. The increase was mainly attributed to a
$4.0 million deferred tax asset which resulted from the decrease in market value
of securities available for sale during the three months ended October 31, 1998.
12
<PAGE>
Cash and cash equivalents decreased $6.6 million, or 13.5%, to $42.1 million at
October 31, 1998, from $48.7 million at July 31, 1998. The decrease was used to
pay down borrowings.
Borrowings decreased $9.1 million or 14.1%, to $55.8 million at October 31,
1998, from $64.9 million at July 31, 1998. The decrease in borrowings was
provided by decreases in cash and cash equivalents and principal repayments of
mortgage-backed securities held to maturity.
Comparison of Operating Results For The Three Months Ended October 31, 1998
- ---------------------------------------------------------------------------
and 1997
- --------
Interest Income: Total interest income increased $1.0 million or 11.6% to $10.0
million for the three months ended October 31, 1998, compared to $9.0 million
for the comparable 1997 period. Average interest earning assets increased $62.4
million to $542.0 million for the three month period in 1998 from $479.6 million
for the comparable 1997 period. The increase reflects an increase in average
loans of $61.2 million, average investments and mortgage-backed securities held
to maturity of $59.2 million offset by a decrease in investments and
mortgage-backed securities available for sale of $58.0 million.
Interest Expense: Total interest expense increased $704 thousand or 15.2% to
$5.3 million for the three months ended October 31, 1998 compared to $4.6
million for the comparable 1997 period. Average interest-bearing liabilities
increased $79.8 million to $499.0 million for the three month period in 1998
from $419.2 million for the comparable 1997 period. Of this increase, average
deposits increased $79.1 million and average borrowings increased $755 thousand.
Net Interest Income: Net interest income increased $338 thousand or 7.8% to $4.7
million for the three months ended October 31, 1998 compared to $4.3 million for
the comparable 1997 period. During the three months ended October 31, 1998, the
Company's interest rate spread increased to 3.11%, compared to 3.06% for the
same period in 1997. A 14 basis point decline in the cost of funds offset by a 9
basis point decrease in the yield on earning assets was the primary reason for
the increase.
Provision For Loan Losses: The provision for loan losses decreased $76 thousand,
or 25.3%, to $225,000 for the three months ended October 31, 1998, compared to
$301,000 for the same period ended October 30, 1997. 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.
13
<PAGE>
Other Income: Other income increased $3.3 million during the first quarter of
1998 to $4.1 million, from $745,000. The increase is primarily attributable to a
$3.3 million gain from securities available for sale for the three months ended
October 31, 1998. The gain on sale of securities for the three months ended
October 31, 1998 is not necessarily indicative of the results for the fiscal
year ended July 31, 1999.
Other Expense: Other expense increased $607 thousand, or 21.5%, to $3.4 million
for the three months ended October 31, 1998, from $2.8 million for the three
months ended October 31, 1997. Compensation increased $172 thousand, to $1.7
million at October 31, 1998 as compared to $1.5 million at October 31, 1997. The
increase was mainly attributable to the increased staff of the Company with the
merger of Westwood and the Bank's new branch office which opened in September
1998, in Fairview, New Jersey. Office occupancy and equipment expense increased
$92 thousand, or 39.8% to $323 thousand from $231 thousand in 1997. The increase
is mainly attributable to the two (2) branches associated with the acquisition
of Westwood and the opening of a new branch in August 1998. Amortization of the
excess of cost over fair value of net assets acquired increased $197 thousand or
59.7% to $527 thousand from $330 thousand in 1997. The increase was mainly
attributable to the goodwill associated with the acquisition of Westwood.
Year 2000 Compliance Issues
- ---------------------------
During fiscal 1998, the Company adopted a Year 2000 Compliance Plan (the "Plan")
and established a Year 2000 Compliance Committee (the "Committee"). The
objectives of the Plan and the Committee are to prepare the Company for the new
millennium. As recommended by the Federal Financial Institutions Examination
Council, the Plan encompasses the following phases: Awareness, Assessment,
Renovation, Validation and Implementation. These phases will enable the Company
to identify risks, develop an action plan, perform adequate testing and complete
certification that its processing systems will be Year 2000 ready. Execution of
the Plan is currently on target. The Company is currently in the process of
developing a Contingency Plan (the "Plan") specific to the Year 2000. The Plan
will address the actions that would be undertaken if critical business functions
cannot be carried out in the normal manner upon entering the next century due to
the computer system or supplier failure.
Costs will be incurred due to the replacement of non-compiant teller hardware
and software. The Company does not anticipate that hte related overall costs
will be material in any single year. No assurance can be given that the Year
2000 Compliance Plan will be completed successfully by the Year 2000, in which
event the Company could incur significant costs.
14
<PAGE>
Successful and timely completion of the Year 2000 project is based on
management's best estimates derived from various assumptions of future events,
which are inherently uncertain, including the progress and results of the
Company's third-party service provider, testing plans, and all vendors,
suppliers and customer readiness.
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 October 31, 1998, cash and cash
equivalents totaled $42.1 million.
The Savings Bank anticipates that it will have sufficient funds available to
meet its current commitments. As of October 31, 1998, the Savings Bank had
commitments to fund loans of $6.2 million.
The Savings Bank had leverage, Tier 1, and risk-based capital ratios of 5.0%,
8.7%, and 10.0% at October 31, 1998, which exceeded the FDIC's respective
minimum requirements of 4.00%, 4.00% and 8.00%.
Quantitative and Qualitative Disclosure About Market Risk
- ---------------------------------------------------------
There were no significant changes for the three months ended October 31, 1998
from the information presented in the annual report on Form 10-K for the year
ended July 31, 1998, concerning quantitative and qualitative disclosures about
market risk.
15
<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 October 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
Not Applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit 27. Financial Data Schedule (included in electronic
filing only).
16
<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: December 15, 1998 /s/ Kevin J. Coogan
------------------------
Kevin J. Coogan
President and CEO
(Principal Executive Officer)
Date: December 15, 1998 /s/ Anthony G. Gallo
------------------------
Anthony G. Gallo
Vice President and CFO
(Principal Financial Officer)
17
<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-31-1999
<PERIOD-END> OCT-31-1998
<CASH> 15,112,573
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 27,000,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 22,478,828
<INVESTMENTS-CARRYING> 188,449,961
<INVESTMENTS-MARKET> 190,237,881
<LOANS> 291,277,935
<ALLOWANCE> 4,624,856
<TOTAL-ASSETS> 572,871,865
<DEPOSITS> 453,769,251
<SHORT-TERM> 64,251,091
<LIABILITIES-OTHER> 6,359,697
<LONG-TERM> 0
0
0
<COMMON> 12,883,008
<OTHER-SE> 35,608,818
<TOTAL-LIABILITIES-AND-EQUITY> 572,871,865
<INTEREST-LOAN> 6,191,036
<INTEREST-INVEST> 3,821,898
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 10,012,934
<INTEREST-DEPOSIT> 4,279,952
<INTEREST-EXPENSE> 5,339,858
<INTEREST-INCOME-NET> 4,673,076
<LOAN-LOSSES> 225,000
<SECURITIES-GAINS> 3,300,850
<EXPENSE-OTHER> 3,429,833
<INCOME-PRETAX> 5,105,719
<INCOME-PRE-EXTRAORDINARY> 3,195,719
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,195,719
<EPS-PRIMARY> .77
<EPS-DILUTED> .72
<YIELD-ACTUAL> 3.11
<LOANS-NON> 3,426,646
<LOANS-PAST> 3,426,646
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 4,477,623
<CHARGE-OFFS> 112,574
<RECOVERIES> 34,809
<ALLOWANCE-CLOSE> 4,624,856
<ALLOWANCE-DOMESTIC> 4,624,856
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
