U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________________________
FORM 10-QSB
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31,2000
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 0-25518
SOBIESKI BANCORP, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 35-1942803_________
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
2930 W. Cleveland Road, South Bend, Indiana 46628
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (219) 271-8300
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 [ ]
As of May 10, 2000, there were 709,662 shares of the registrant's common
stock issued and outstanding.
SOBIESKI BANCORP, INC.
AND SUBSIDIARY
INDEX
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Financial Condition 1
Condensed Consolidated Statements of Income 2
Condensed Consolidated Statements of Comprehensive Income 3
Condensed Consolidated Statements of Cash Flows 4
Notes to Condensed Consolidated Financial Statements 5-7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8-12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
i
PART I. Financial Information
Item 1. Financial Statements
Sobieski Bancorp, Inc. And Subsidiary
Condensed Consolidated Statements Of Financial Condition
March 31, 2000 and June 30,1999
<TABLE>
<CAPTION>
March 31, June 30,
ASSETS 2000 1999
(Unaudited)
<S> <C> <C>
Cash, including interest-bearing
deposits in other financial
institutions of $2,422 and
$ 165,940, respectively $ 1,963,718 $ 939,604
Investment securities,
available-for-sale (amortized
cost of $2,009,883 and
$2,593,252, respectively) 1,958,643 2,558,128
Investment securities,
held-to-maturity (market value
of approximately $1,118,500
and $190,700, respectively) 1,155,450 200,000
Mortgage-backed securities,
available-for-sale (amortized
cost of $4,896,815 and $473,166,
respectively) 4,833,452 462,199
Mortgage-backed securities,
held-to-maturity (market value
of approximately $1,811,700 and
$7,397,500, respectively) 1,911,470 7,484,493
Loans, net 94,476,476 87,899,960
Federal Home Loan Bank stock, at cost 1,499,800 1,325,800
Property and equipment, net 1,875,776 1,887,169
Other assets 1,063,351 940,588
Total assets $110,738,136 $103,697,941
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $ 74,994,114 $ 64,231,053
Federal funds purchased and other
short-term borrowings 219,287 1,000,000
Federal Home Loan Bank advances 21,500,000 25,250,000
Advances from borrowers for taxes
and insurance 696,609 292,291
Accrued income taxes 16,206 7,141
Accrued interest and other expenses 441,710 345,173
Total liabilities 97,867,926 91,125,658
Stockholders' equity:
Preferred stock, $.01 par value:
500,000 shares authorized; none issued - -
Common stock, $.01 par value:
3,500,000 shares authorized;
966,000 shares issued 9,660 9,660
Additional paid-in capital 9,251,590 9,250,990
Retained earnings, substantially
restricted 7,703,479 7,318,955
Net unrealized depreciation of
available-for-sale securities ( 96,210) ( 30,420)
16,868,519 16,549,185
Less: Treasury stock, at cost,
256,479 and 251,198 shares,
respectively 3,600,881 3,545,139
Unallocated Employee Stock
Ownership Plan shares; 39,743
and 43,176 shares, respectively 397,428 431,763
Total stockholders' equity 12,870,210 12,572,283
Total liabilities and
stockholders' equity $ 110,738,136 $103,697,941
</TABLE>
See accompanying notes to condensed
consolidated financial statements.
1
Sobieski Bancorp, Inc. And Subsidiary
Condensed Consolidated Statements Of Income
for the three and nine months ended March 31,2000 and 1999
<TABLE>
<CAPTION>
Three Months Nine Months
Ended March 31, Ended March 31,
2000 1999 2000 1999
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Interest Income:
Loans $1,904,482 $1,644,468 $5,460,862 $4,862,268
Mortgage-backed
securities 99,766 123,049 308,194 396,520
Investment securities 77,888 11,749 207,150 25,875
Interest-bearing deposits 14,698 49,002 46,044 165,396
Total interest income 2,096,834 1,828,268 6,022,250 5,450,059
Interest expense:
Interest on deposits 847,579 749,737 2,445,842 2,280,004
Interest on borrowings 393,820 303,838 1,088,551 907,557
Total interest expense 1,241,399 1,053,575 3,534,393 3,187,561
Net interest income 855,435 774,693 2,487,857 2,262,498
Provision for loan losses 55,000 15,000 105,000 55,000
Net interest income after
provision for loan losses 800,435 759,693 2,382,857 2,207,498
Non-interest income:
Fees and service charges 64,803 36,796 173,313 112,266
Gain on sales of loans 11,702 - 11,702 -
Other incom e 14,277 5,654 14,392 11,022
Total non-interest income 90,782 42,450 199,407 123,288
Non-interest expenses:
Compensation and benefits 305,071 280,597 908,425 839,160
Occupancy and equipment 84,551 85,440 267,751 236,876
Federal deposit insurance
premiums 3,681 9,943 22,440 27,945
Advertising and promotion 9,994 9,340 31,007 31,533
Service bureau expense 64,418 53,952 166,179 131,495
Other operating expenses 117,486 91,164 321,128 267,106
Total non-interest
expenses 585,201 530,436 1,716,930 1,534,115
Income before income
taxes 306,016 271,707 865,334 796,671
Provision for income
taxes 126,800 115,600 357,500 340,000
Net income 179,216 156,107 507,834 456,671
Basic earnings per
common share $ 0.27 $ 0.23 $ 0.76 $ 0.65
Diluted earnings per
common share $ 0.27 $ 0.23 $ 0.76 $ 0.65
Dividends per common
share $ 0.08 $ 0.08 $ 0.24 $ 0.24
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
Sobieski Bancorp, Inc. And Subsidiary
Condensed Consolidated Statements Of Comprehensive Income
for the three and nine months ended March 31,2000 and 1999
<TABLE>
<CAPTION>
Three Months Nine Months
Ended March 31, Ended March 31,
2000 1999 2000 1999
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net Income $ 179,216 $ 156,107 $ 507,834 $ 456,671
Other comprehensive income,
net of tax:
Unrealized depreciation
of other available-for-sale
securities (14,196) (368) (53,773) (3,185)
Unrealized depreciation on
$5.3 million of securities
transferred from
held-to-maturity to
available-for- sale upon
the adoption of SFAS # 133 - - (12,017) -
Total comprehensive income $ 165,020 $ 155,739 $ 442,044 $ 453,486
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
Sobieski Bancorp, Inc. And Subsidiary
Condensed Consolidated Statements Of Cash Flows
for the nine months ended March 31, 2000 and 1999
<TABLE>
<CAPTION>
Nine Months
Ended March 31,
2000 1999
(Unaudited)
<S> <C> <C>
Cash flows provided by (used in)
operating activities:
Net income $ 507,834 $ 456,671
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation of property and equipment 85,868 83,298
Loss on fixed asset disposals 1,951 -
Provision for loan losses 105,000 55,000
Gain on sale of loans (11,702) -
Contribution to Employee Stock
Ownership Plan 42,030 55,268
Contribution to Recognition and
Retention Plan 55,020 68,823
Amortization of premiums and accretion
of discounts, net 95,197 75,196
Deferral (amortization of) loan fees (72,677) 18,736
Increase in other assets (275) (133,397)
Increase (decrease)in accrued income taxes 5,719 (77,871)
Increase in accrued interest and
other expenses 381,443 195,646
Net cash provided by operating activities 1,195,408 797,370
Cash flows provided by (used in)
investing activities:
Purchase of investment securities (410,859) (782,201)
Purchase of certificates of deposit - (100,000)
Proceeds from maturities of
certificates of deposit - 100,000
Proceeds from maturities of
investment securities - 500,000
Principal reductions of
mortgage-backed securities 1,110,304 1,847,572
Net increase in loans made to
customers and principal collections
on loans (12,060,773) (9,626,243)
Purchase of Federal Home Loan
Bank stock (174,000) (278,000)
Proceeds from sale of loans 5,326,521 -
Purchase of property and equipment (76,426) (78,009)
Net cash used in investing activities ( 6,285,233) (8,416,881)
Cash flows provided by (used in)
financing activities:
Net increase in deposits 10,763,061 5,811,600
Increase in advances from borrowers
for taxes and insurance 404,318 280,496
Federal Home Loan Bank advances 9,000,000 10,800,000
Repayment of Federal Home Loan
Bank advances (12,750,000) (6,000,000)
Decrease in federal funds purchased (1,000,000) -
Purchase of treasury stock (129,344) (798,890)
Cash dividends (174,096) (182,632)
Net cash provided by financing activities 6,113,939 9,910,574
Increase in cash and cash equivalents 1,024,114 2,291,063
Cash and cash equivalents, beginning
of period 939,604 1,291,426
Cash and cash equivalents, end of period $ 1,963,718 $ 3,582,489
Non cash transactions:
Transfer to real estate owned from
loans 52,159 -
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
Sobieski Bancorp, Inc. And Subsidiary
Notes To Condensed Consolidated Financial Statements
A. GENERAL.
The accompanying condensed consolidated financial statements include
the accounts of Sobieski Bancorp, Inc. (the "Company") and its wholly
owned subsidiary, Sobieski Federal Savings and Loan Association of
South Bend (the "Association").
The condensed consolidated financial statements included herein have
been prepared by the registrant pursuant to the rules and regulations
of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although
the registrant believes that the disclosures are adequate to make the
information presented not misleading. In the opinion of management,
the accompanying unaudited condensed consolidated financial statements
contain all adjustments, consisting only of normal recurring accruals,
necessary for a fair presentation of the Company's consolidated
financial position, results of operations and cash flows for the
interim periods presented. The consolidated results of operations
for the interim periods presented are not necessarily indicative of
the results that may be expected for the full year. The accompanying
unaudited condensed consolidated financial statements should be read
in conjunction with the Company's consolidated financial statements
included in the Company's Annual Report on Form 10-KSB for the year
ended June 30, 1999.
The Company cautions that any forward looking statements contained in
this report, in a report incorporated by reference to this report or
made by management of the Company involve risks and uncertainties and
are subject to change based on various factors. Actual results could
differ materially from those expressed or implied.
B. CONVERSION TO STOCK SAVINGS LOAN ASSOCIATION
On October 4, 1994, the Board of Directors of the Association adopted
a plan of conversion to convert the Association from a federally
chartered mutual savings and loan association to a federally chartered
stock savings and loan association (the "Conversion"). The Association
obtained the required regulatory approval for the Conversion in
February 1995 and on March 22, 1995 the plan of conversion was approved
by a majority of the votes eligible to be cast by the members of the
Association.
The Company was organized as a Delaware corporation in December 1994
for the purpose of acquiring all of the issued and outstanding capital
stock of the Association issued in the Conversion.
At the time of Conversion, the Association established a liquidation
account in an amount equal to the Association's retained earnings as
of September 30, 1994. The liquidation account will be maintained for
the benefit of depositors, as of the eligibility record date and
supplemental eligibility record date, who continue to maintain their
deposits with the Association after the Conversion. In the event of
a complete liquidation (and only in such event), each eligible depositor
will be entitled to receive a liquidation distribution from the
liquidation account, in the proportionate amount of the then current
adjusted balance for deposits then held, before any liquidation
distribution may be made with respect to the stockholders.
5
Sobieski Bancorp, Inc. And Subsidiary
Notes To Condensed Consolidated Financial Statements, Continued
Current regulations allow the Company to pay cash dividends on its
stock if its regulatory capital would not thereby be reduced below
the amount then required for the aforementioned liquidation account.
Also, capital distribution regulations limit the Company's ability
to make capital distributions which include dividends, stock redemptions,
repurchases and other transactions charged to the capital account based
on its capital level and supervisory condition.
C. ACCOUNTING POLICIES.
Securities
Securities that may be sold as part of the Association's asset/liability
or liquidity management or in response to or in anticipation of changes
in interest rates and resulting prepayment risk, or for other similar
factors, are classified as available-for-sale and carried at fair market
value. Unrealized holding gains and losses on securities classified as
available-for-sale are reported net of related deferred income taxes as
a separate component of stockholders' equity. Securities that the
Association has the ability and positive intent to hold to maturity are
classified as held-to-maturity and carried at amortized cost. Trading
securities are carried at fair market value with unrealized holding
gains and losses included in earnings. Gains and losses on all securities
transactions are recognized when sold as determined by the identified
certificate method. The Association had no trading securities at
March 31, 2000.
Allowance For Loan Losses
The allowance for loan losses is established through a provision for
loan losses based on management's evaluation of the risks inherent in
the Company's loan portfolio and changes in the nature and volume of
its loan activity, including those loans which are being specifically
monitored by management. Such evaluation, which includes a review of
loans for which full collectibility may not be reasonably assured,
considers among other matters, loan classification, the estimated fair
value of the underlying collateral, economic conditions, historical loan
loss experience, the amount of loans outstanding and other factors that
warrant recognition in providing for an adequate allowance for loan
losses. A significant factor considered in the Company's allowance is
its historically low level of loans other than one-to-four family real
estate loans. The Company's allowance for loan losses and nonaccrual
loans at March 31, 2000 aggregated $380,000 and $228,000, respectively.
Earnings Per Common Share
Basic earnings per share are computed by dividing net income by the
weighted average number of shares of common stock outstanding. For the
three and nine-month periods ended March 31, 2000, the weighted average
number of common shares used in the computation of basic earnings per
share were 670,475 and 671,522, respectively. The weighted average
number of common shares for the same periods in 1999 were 682,940 and
699,350.
6
Sobieski Bancorp, Inc. and Subsidiary
Notes to Condensed Consolidated Financial Statements, Concluded
Diluted earnings per share are computed by dividing net income by
the weighted average number of shares of common stock outstanding plus
the dilutive effect of outstanding stock options and nonvested shares
awarded under the RRP. For the three and nine-month periods ended
March 31, 2000, the weighted average number of common shares used in
the computation of diluted earnings per share were 670,475 and 671,534,
respectively. The weighted average number of common shares for the same
periods in 1999 were 686,678 and 705,207, respectively.
The Company accounts for the shares of common stock acquired by its
Employee Stock Ownership Plan ("ESOP") and the restricted shares awarded
under its Recognition and Retention Plan ("RRP") in accordance with the
American Institute of Certified Public Accountants Statement of Position
93-6, "Employers' Accounting For Employee Stock Ownership Plans", which
prescribes that shares held by the ESOP and the restricted shares awarded
under the RRP are not considered in the weighted average number of shares
outstanding until such shares are released for allocation to an ESOP
participant's individual account or vested, in the case of the RRP.
Comprehensive Income
The Company adopted Statement of Financial Accounting Standards (SFAS)
No. 130, "Reporting Comprehensive Income," effective July 1, 1998.
SFAS No. 130 establishes standards for the reporting and disclosure
of comprehensive income and its components in a full year set and
interim set of general purpose financial statements. Presently, the
only component of comprehensive income not already included in net
income is unrealized appreciation or depreciation on available-for-sale
investment securities.
Non-Qualified Supplemental Benefit Plans
Effective July 1, 1998, the Company established non-qualified
supplemental benefit plans for certain of its officers and directors.
These plans generally provide for the payment of supplemental retirement
benefits over a period of ten (10) years, beginning with the later of
(a) the officer's or director's attainment of a specified retirement
age; or (b) upon termination of the officer's employment with the
Company or the director's termination as a member of the Company's
Board of Directors. The estimated aggregate present value of these
future benefits are being accrued over the average remaining service
life of the officer and director group commencing July 1, 1998. The
Company also maintains life insurance contracts on the officers and
directors to provide funding for the retirement obligations.
Compensation expense associated with these agreements aggregated
$32,000 and $41,200 for the nine-month periods ended March 31, 2000
and 1999, respectively.
7
Item 2. Management's Discussion And Analysis of Financial
Condition And Results of Operations
Forward-Looking Statements
When used in this Form 10-QSB and in future filings by the Company
with the Securities and Exchange Commission (the "SEC"), in the
Company's press releases or other public or shareholder communications,
and in oral statements made with the approval of an authorized executive
officer, the words or phrases "will likely result," "are expected
to," "will continue," "is anticipated," "estimate," "project",
"believe" or similar expressions are intended to identify
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such statements are subject
to certain risks and uncertainties, including, among other things,
changes in economic conditions in the Company's market area, changes
in policies by regulatory agencies, fluctuations in interest rates,
demand for loans in the Company's market area and competition, that
could cause actual results to differ materially from historical earnings
and those presently anticipated or projected. The Company wishes to
caution readers not to place undue reliance on any such forward-looking
statements, which speak only as of the date made. The Company wishes to
advise readers that the factors noted above could affect the Company's
financial performance and could cause the Company's actual results for
future periods to differ materially from those anticipated or projected.
The Company does not undertake and specifically disclaims any
obligation to publicly release the result of any revisions which
may be made to any forward-looking statements to reflect events or
circumstances after the date of such statements or to reflect the
occurrence of anticipated or unanticipated events.
Financial Condition
The Company's total assets increased $7.0 million during the nine
months ended March 31, 2000 to $110.7 million from $103.7 million at
June 30, 1999. This increase was mainly due to increases in net loans
of $6.6 million net of $5.3 million of loans sold and demand deposits
in other financial institutions of $1.0 million, offset by a decrease
of $0.8 million in the securities portfolio. The increase in loans was
a result of purchasing participation interests in commercial loans,
and originations for commercial, home equity and mortgage loans.
The Company's total liabilities increased $6.8 million from
$91.1 million at June 30, 1999 to $97.9 million at March 31, 2000.
The increase was primarily from $10.8 million in deposit growth offset
by reduced Federal Home Loan Bank ("FHLB") advances repaid from loan
sale proceeds, with the remaining funds primarily used to fund the new
originated loans and purchases of participation interests in commercial
loans. Deposits increased from $64.2 million at June 30, 1999 to
$75.0 million at March 31, 2000. The deposit increase was the result
of continued competitive market pricing of our deposits.
Stockholders' equity increased by $298,000 to $12.87 million at
March 31, 2000 from $12.57 million at June 30, 1999, principally
the result of $508,000 of net income, offset by $174,000 of cash
dividends paid and $129,000 of treasury stock purchases.
8
Item 2. Management's Discussion And Analysis of Financial
Condition And Results of Operations, Continued.
Results of Operations
General. The Company recorded net income for the three months ended
March 31, 2000 of $179,000 which is an increase of $23,000 over net
income of $156,000 for the same period in 1999. For the nine months
ended March 31, 2000, net income was $508,000 which is an increase of
$51,000 or 11.2% over the reported net income of $457,000 for the
comparable period in the prior year.
Net Interest Income. The Company's net income is primarily dependent
upon net interest income. Net interest income was $855,000 and
$2.49 million for the three and nine month periods ended March 31, 2000,
respectively, as compared to $775,000 and $2.26 million for the same
periods in the prior year. The increase of $80,000 and $230,000 for the
three and nine month periods, respectively, was primarily a result of
increased income earned on loans offset in part by decreased non-loan
interest, increases in interest paid on deposits, interest paid on
increased FHLB advances, and other borrowings. The increase in interest
income earned on loans was generated by increased loan volume offset by
slightly lower loan rates.
Interest expense for the three and nine month periods ended
March 31, 2000 was $1.24 million and $3.53 million, respectively, as
compared to $1.05 million and $3.19 million for the comparable periods
in the prior year. The increase in interest expense for the three and
nine month periods ended March 31, 2000 was attributable to increased
deposit, FHLB advance, and other borrowing levels along with higher
rates paid on FHLB advances.
Provisions for Loan Losses. During the three and nine months ended
March 31, 2000, the Company had provisions of $55,000 and $105,000,
respectively, as compared to $15,000 and $55,000 for the same periods
in the prior year. Loan charge-offs during the three-month period
ended March 31, 2000 were $35,000 with no other charge-offs during
this or the prior year. At March 31, 2000, the Company's allowance
for loan losses totaled $380,000 or .40% of net loans and 167% of
total non-performing loans.
Although management believes that it uses the best information
available to determine the allowance, unforeseen market conditions
could result in adjustments and net income could be significantly
affected if circumstances differ substantially from the assumptions
used in making the final determination. Future additions to the
Company's allowance for loan losses will be the result of periodic
loan, property and collateral reviews and thus cannot be predicted
in advance. In addition, federal regulatory agencies, as an integral
part of their oversight process, periodically review the Company's
allowance for loan losses. Such agencies may require the Company to
recognize additions to the allowance based upon their judgment of the
information available to them at the time of their examination.
Non-Interest Income. Non-interest income consists primarily of fees
and service charges on deposit accounts and other income. Non-interest
income increased $49,000 to $91,000 for the three months ended
March 31, 2000 as compared to $42,000 for the same period last year
and increased $76,000 to $199,000 for the nine months ended
March 31, 2000 from $123,000 for the same period in 1999. These
increases were due primarily to increased fee income and service
charges on customer accounts along with added letter of credit fee
income and loan sales related gains.
9
Item 2. Management's Discussion And Analysis of Financial
Condition And Results of Operations, Continued
Non-Interest Expenses. Non-interest expenses were $585,000 and
$1.72 million for the three and nine month periods ended
March 31, 2000, respectively, compared to $530,000 and $1.53 million
for the same periods last year. The increase of $183,000 for the
nine month period ended March 31, 2000 compared to the same period
last year was due to higher compensation, occupancy, service bureau
Year 2000 costs, professional services and other administrative expense.
Other expenses remaining relatively the same were FDIC insurance and
advertising.
Income Taxes. Income taxes for the nine months ended March 31, 2000
were $357,500 on pre-tax income of $865,300, an effective tax rate
of 41.3%. For the nine months ended March 31, 1999, income taxes
were $340,000 on pre-tax income of $796,700, an effective tax rate
of 42.7%
Liquidity and Capital Resources
The Company's principal sources of funds are deposits and principal
and interest payments on loans and investments. While scheduled loan
repayments and maturing investments are relatively predictable,
deposit flows and early loan prepayments are more influenced by
interest rates, general economic conditions and competition.
Additionally, the Company may borrow funds from the Federal Home
Loan Bank of Indianapolis ("FHLB") or utilize other borrowings of
funds based on need, comparative costs and availability at the time.
Federal regulations require the Association to maintain minimum
levels of liquid assets. The required percentage has varied from
time to time based upon the economic conditions and savings flows
and is currently 4% of net withdrawable savings deposits and borrowings
payable on demand or in one year or less during the preceding calendar
month. Liquid assets for purposes of this ratio include cash, certain
time deposits, U.S. Government obligations, government agency and other
securities and obligations generally having remaining maturities of less
than five years. The Company has maintained its liquidity ratio at
levels in excess of those required. At March 31, 2000, the Association
liquidity ratio was 23.8%.
At March 31, 2000, the Company had $21.5 million in outstanding
advances from the FHLB used primarily to fund purchases of participation
interests in commercial loans, internally originated loans and other
investments.
The Company uses its liquidity resources principally to meet ongoing
commitments to fund maturing certificates of deposit and deposit
withdrawals and to meet operating expenses. At March 31, 2000, the
Company had outstanding commitments to extend credit, which amounted
to $7.2 million (including $3.3 million in available home equity lines
of credit). Management believes that loan repayments and other sources
of funds will be adequate to meet the Company's foreseeable liquidity
needs.
At March 31, 2000, the Association had tangible capital of $9.9 million
or 9.0% of adjusted total assets, which was $8.2 million above the
minimum capital requirement of $1.6 million or 1.5% of adjusted total
assets.
At March 31,2000, the Association had core capital of $9.9 million or
9.0% of adjusted total assets which was $6.6 million above the minimum
capital requirement of $3.3 million or 3.0% of adjusted total assets.
10
Item 2. Management's Discussion And Analysis of Financial
Condition And Results of Operations, Continued
At March 31, 2000, the Association had total risk-based capital of
$10.2 million and risk-weighted assets of $60.0 million or total
risk-based capital of 17.0% of risk-weighted assets. This amount
was $5.4 million above the minimum regulatory risk-based capital
requirement of $4.8 million, or 8.0% of risk-weighted assets.
Financial Accounting Developments
In June 1998, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS")
No. 133, "Accounting for Derivatives Instruments and Hedging
Activities". SFAS No. 133, as modified by SFAS No. 137 in July 1999,
is effective for all fiscal quarters of all fiscal years beginning
after June 15, 2000. (July 1, 2001 for the Company.) SFAS No. 133
requires that all derivative instruments be recorded on the balance
sheet at their fair value. Changes in the fair value of derivatives
are recorded each period in current earnings or other comprehensive
income, depending on whether a derivative is designated as part of a
hedge transaction and, if it is, the type of hedge transaction.
The Company adopted SFAS No. 133 effective October 1, 1999.
Concurrent with the adoption of SFAS No. 133, the Company
reclassified $5.2 million of held-to-maturity mortgage backed
securities to the available-for-sale classification. The gross
unrealized depreciation on these securities at the time of transfer
was $18,200. This transfer was made to provide greater flexibility
in managing the Company's assets and to facilitate future derivative
transactions. The adoption of SFAS No. 133 did not have any significant
effect on the Company's results of operations or financial position.
11
Item 2. Management's Discussion And Analysis of Financial
Condition And Results of Operations, Concluded
Year 2000
No disruptions in systems, service to customers or operations of
the Company were experienced as a result of the date rollover from
December 31, 1999 to January 1, 2000, the so-called "Year 2000 issue."
The Year 2000 issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Any
of the computer programs used by the Company that have time-sensitive
software could have recognized a date using "00" as the year 1900 rather
than the year 2000. This could have resulted in system failure or
miscalculations, had management not made the Year 2000 preparations
disclosed previously in the Company's filings with the Securities and
Exchange Commission. The Company has accrued for all costs associated
with its preparations for the Year 2000. The total cost of the
Company's Year 2000 project since its commencement in 1998 was
approximately $60,000.
12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
On April 26, 2000, the Company filed a current report on
form 8-K, reporting a change in accountants.
13
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Sobieski Bancorp, Inc.
(Registrant)
Date: May 10, 2000 By: ______________________
Thomas F. Gruber
President and Chief Executive Officer
Date: May 10, 2000 By: ___________________
Arthur Skale
Chief Financial Officer
14
[ARTICLE] 5
<TABLE>
<S> <C>
[PERIOD-TYPE] 9-MO
[FISCAL-YEAR-END] 06-30-2000
[PERIOD-END] 03-30-2000
[CASH] 1,963,718
[SECURITIES] 11,358,815
[RECEIVABLES] 94,856,476
[ALLOWANCES] (380,000)
[PP&E] 2,590,041
[DEPRECIATION] (714,265)
[TOTAL-ASSETS] 110,738,136
[CURRENT-LIABILITIES] 74,994,114
[PREFERRED-MANDATORY] -0-
[PREFERRED] -0-
[COMMON] 9,660
[OTHER-SE] 12,860,550
[TOTAL-LIABILITY-AND-EQUITY] 110,738,136
[TOTAL-REVENUES] 6,221,657
[OTHER-EXPENSES] 1,716,930
[LOSS-PROVISION] 105,000
[INTEREST-EXPENSE] 3,534,393
[INCOME-PRETAX] 865,334
<INCOME-TEX> 357,500
[NET-INCOME] 507,834
[EPS-BASIC] .76
[EPS-DILUTED] .76
</TABLE>
