SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1933
For the Quarter Ended June 30, 1996 Commission File #0-26546
STATEWIDE FINANCIAL CORP.
(Exact name of registrant as specified in its charter)
New Jersey 22 3397900
(State of Incorporation) (I.R.S. Employer Identification
Number)
70 Sip Avenue, Jersey City, New Jersey 07306
(Address of registrant's principal executive offices,
including zip code)
(201) 795-4000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days:
Yes X No
The number of shares outstanding of each of the registrant's classes
of common stock, as of July 31, 1996: Common Stock, No Par Value:
5,222,533 shares outstanding.<PAGE>
STATEWIDE FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Three Months Ended Six Months
June 30, Ended
June 30,
------------- ------------
1996 1995 1996 1995
---- ---- ---- ----
INTEREST INCOME:
Interest and fees on loans $ 4,837 $ 3,676 $ 9,095 $ 7,288
Interest on mortgage-backed
securities 5,438 3,523 10,631 7,164
Interest and dividends on debt
and equity securities 1,068 1,296 2,357 2,374
Dividends on FHLBNY stock 109 71 199 147
------ ------ ------ ------
Total interest and dividend
income 11,452 8,566 22,282 16,973
------ ------ ------ ------
INTEREST EXPENSE:
Deposits 4,156 3,698 8,406 7,091
Borrowed funds 1,883 764 3,262 1,510
------ ------ ------ ------
Total interest expense 6,039 4,462 11,668 8,601
------ ------ ------ ------
NET INTEREST INCOME 5,413 4,104 10,614 8,372
Provision for loan losses 125 65 250 139
------ ------ ------ ------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 5,288 4,039 10,364 8,233
------ ------ ------ ------
NON-INTEREST INCOME:
Service charges 311 238 550 491
Other income 203 80 630 364
------ ------ ------ ------
Total non-interest income 514 318 1,180 855
------ ------ ------ ------
NON-INTEREST EXPENSE:
Salaries and employee benefits 2,077 1,855 4,167 3,352
Occupancy, net 517 422 1,038 820
Federal deposit insurance premiums 281 293 558 585
Professional fees 174 92 316 199
Insurance premiums 109 70 197 135
Data processing fees 88 85 150 170
Foreclosed real estate expense, net (5) (25) 57 126
Other 758 615 1,376 1,268
------ ------ ------ ------
Total non-interest expense 3,999 3,407 7,859 6,655
------ ------ ------ ------
Income before income taxes 1,803 950 3,685 2,433
Income taxes 649 355 1,326 915
------ ------ ------ ------
Net income $ 1,154 $ 595 $ 2,359 $ 1,518
======= ====== ======= =======
Net income per share of common stock $0.24 n/a $0.49 n/a
======= ====== ======= =======
Weighted average number of common
stock outstanding 4,853,965 n/a 4,859,075 n/a
========= === ========= ===
See accompanying notes to consolidated financial statements.
STATEWIDE FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(DOLLARS IN THOUSANDS)
June 30, December 31,
1996 1995
---- ----
(UNAUDITED)
ASSETS
Cash and amounts due from depository
institutions $ 4,667 $ 6,553
Federal funds sold 100 1,650
------- -------
Total cash and cash equivalents 4,767 8,203
Mortgage-backed securities available
for sale 315,624 260,107
Debt and equity securities available
for sale 65,572 80,126
Loans receivable, net 268,800 195,773
Accrued interest receivable, net 4,790 4,410
Real estate owned, net 560 652
Premises and equipment, net 5,236 4,819
Federal Home Loan Bank stock, at cost 7,921 3,627
Excess of cost over fair value of net
assets acquired 189 214
Other assets 4,947 1,118
------- -------
Total assets $678,406 $559,049
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits $446,404 $438,021
Borrowed funds 159,578 44,703
Advance payments by borrowers for
taxes and insurance 1,729 1,033
Accounts payable and other
liabilities 3,527 2,977
------- -------
Total liabilities 611,238 486,734
------- -------
Shareholders' Equity 67,168 72,315
------- -------
Commitments and Contingencies
Total liabilities and
shareholders' equity $678,406 $559,049
======== ========
See accompanying notes to consolidated financial statements
STATEWIDE FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(DOLLARS IN THOUSANDS)
Six Months Ended
June 30,
---------
1996 1995
---- ----
Cash flows from operating activities:
Net income $ 2,359 $ 1,518
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 250 139
Provision for losses on real estate owned 18 2
Depreciation and amortization 325 234
Net amortization of deferred premiums and
unearned discounts 1,032 16
Net loss (gain) on sale of real estate owned 7 (98)
Changes in assets and liabilities:
(Increase) in accrued interest
and dividends receivable (380) (122)
Increase (decrease) in accrued interest
payable 205 (10)
(Increase) in other assets (392) (905)
Increase in accounts payable and other
liabilities 345 334
------- -------
Net cash provided by operating
activities 3,769 1,108
------- -------
Cash flows from investing activities:
Principal collections and repayments of loans 18,230 12,029
Purchase of loans (63,342) (2,425)
Origination of loans (28,322) (7,441)
Principal repayments from mortgage-backed
securities 0 9,926
Principal repayments from mortgage backed
securities available for sale 34,604 361
Purchase of mortgage-backed securities (97,900) 0
Purchase of debt and equity securities 0 (16,000)
Proceeds from maturities of debt securities 13,000 2,000
(Purchase) redemption of FHLBNY stock (4,294) 167
Proceeds from sale of real estate owned 225 941
Purchases of premises and equipment (742) (872)
------- -------
Net cash (used in) investing
activities (128,541) (1,314)
------- -------
Cash flows from financing activities:
Net increase in deposits 8,383 13,158
Repayment of borrowings (100,514) (63,400)
Borrowings and advances 215,389 52,350
Increase in advance payments by
borrowers for taxes and insurance 696 20
Purchase of treasury stock (2,618) 0
------- -------
Net cash provided by financing
activities 121,336 2,128
------- -------
Net (decrease) increase in cash
and cash equivalents (3,436) 1,922
Cash and cash equivalents at beginning of
period 8,203 8,059
------- -------
Cash and cash equivalents at end of period $ 4,767 $ 9,981
======= =======
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Income taxes $ 1,076 $ 1,349
======= =======
Interest $11,277 $ 8,645
======= =======
Non-cash investing and financing activities:
Unrealized (loss) gain ,net of income tax,
on securities available for sale $(5,301) $ 84
======= =======
Transfer from loans receivable to real
estate owned, net $ 158 $ 511
======= =======
See accompanying notes to consolidated financial statements
STATEWIDE FINANCIAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The consolidated financial statements include the accounts of
Statewide Financial Corp. (the "Company") and its wholly owned
subsidiary, Statewide Savings Bank, S.L.A. (the "Bank"), and the
Bank's wholly owned subsidiaries, Seventy Sip Corporation, Statewide
Atlantic Corporation and Statewide Financial Services Inc. All
significant intercompany balances and transactions have been
eliminated in consolidation. The Bank and Statewide Financial
Services Inc. are the only active subsidiaries at June 30, 1996. The
Bank operates sixteen banking offices in Hudson, Union, Bergen and
Passaic counties; and through its wholly owned subsidiary, Statewide
Financial Services, Inc., the Bank also engages in the sale of annuity
products. Both the Company and the Bank are subject to supervision
and regulation by various agencies including the New Jersey Department
of Banking, the Office of Thrift Supervision ("OTS") and the Federal
Deposit Insurance Corporation.
The consolidated financial statements contained herein have been
prepared without audit in accordance with the rules and regulations of
the Securities and Exchange Commission and reflect all adjustments
which, in the opinion of management, are necessary for a fair
statement of the results for interim periods. All adjustments made
were of a normal recurring nature. These consolidated financial
statements should be read in conjunction with the consolidated
financial statements and the notes thereto that are included in the
Company's transition report on Form 10-K for the fiscal period ended
December 31, 1995.
2. Shareholders' Equity
The components of shareholders' equity were as follows:
June 30, December 31,
1996 1995
---- ----
(Dollars in thousands)
Preferred stock, no par value, 2,000,000
shares authorized; no shares issued or
outstanding $ - $ -
Common Stock, no par value, 12,000,000
shares authorized; 5,058,152 shares issued
at June 30, 1996 and 5,269,752 shares at
December 31, 1995 - -
Additional paid in capital 50,865 50,770
Unallocated ESOP shares (3,914) (4,232)
Retained earnings - substantially restricted 25,896 23,537
Treasury stock, held for re-issue under
Management Recognition and Retention Plans (2,618) -
Net unrealized (loss) gain on securities
available for sale, net of income tax (3,061) 2,240
------- -------
Total shareholders' equity $67,168 $72,315
======= =======
3. Director and Employee Benefit Plans
On May 15, 1996 the Company's shareholders approved the 1996 Incentive
Stock Option Plan; the 1996 Stock Option Plan for Outside Directors;
the Recognition and Retention Plan for Executive Officers and
Employees; and the Recognition and Retention Plan for Outside
Directors (the "Stock Option" and the "RRP" plans). These plans were
approved on June 12, 1996 by the OTS. The RRP plans allow grants of up
to 211,600 shares of the Company's Common Stock; and the Stock Option
plans allow grants of options to purchase up to 529,000 shares of the
Company's Common Stock.
Prior to June 30, 1996, the Company purchased, on the open market,
211,600 shares of its Common Stock, of which 199,881 shares were re-
issued in July 1996 to employees and outside directors under the terms
of the RRP plans.
During June 1996, 389,980 options were granted to employees and
outside directors under the terms of the Stock Option plans. The
options permit the holders to purchase shares of the Company's Common
Stock at an exercise price of $12.1875 per share. There were no
options subject to exercise as of June 30, 1996.
4. Stock Repurchase Program
On July 16, 1996 the Company received approval from the OTS to
repurchase up to 263,488 shares of its Common Stock in the open
market. The Company completed such purchases by the end of July 1996,
at prices ranging from $11.75 to $11.9375 per share. The Company
intends to retire these shares upon receipt.
5. Net Income Per Share
On September 29, 1995 the Company completed an initial public offering
of its common stock. Accordingly, net income per share calculations
for any period prior to September 30, 1995 did not exist.
6. Non-Performing Loans and the Allowance for Loan Losses
Non-performing loans were as follows:
June 30, December 31,
1996 1995
---- ----
(Dollars in thousands)
Loans delinquent 90 days or more:
Non-accrual $6,322 $4,974
Accruing 755 647
------ ------
Total net loans delinquent 90 days or more $7,077 $5,621
====== ======
Loans delinquent 90 days or more as a
percentage of total net loans outstanding 2.63% 2.87%
==== ====
An analysis of the allowance for loan losses for the periods ended
June 30, 1996 and 1995 were as follows:
THREE MONTHS SIX MONTHS
ENDED ENDED
------------ ----------
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
---- ---- ---- -----
(Dollars in thousands)
Balance at beginning of period $3,331 $3,048 $3,241 $3,062
Provision charged to operations 125 65 250 139
Charge offs, net (45) (70) (80) (158)
------ ------ ------ ------
Balance at end of period $3,411 $3,043 $3,411 $3,043
====== ====== ====== ======
STATEWIDE FINANCIAL CORP. AND SUBSIDIARY
SELECTED FINANCIAL AND REGULATORY RATIOS AND OTHER DATA
At or for the At or for the
Three Months Six Months
Ended Ended
June 30, June 30,
--------- ---------
1996 1995 1996 1995
---- ---- ---- ----
SELECTED FINANCIAL RATIOS (1):
Return on Average Assets .70% .50% .74% .64%
Return on Average Equity 6.79% 10.62% 6.74% 13.82%
Shareholders' Equity to Assets 9.90% 4.74% 9.90% 4.74%
Net Interest Rate Spread (2) 2.92% 3.50% 2.93% 3.56%
Net Interest Margin (3) 3.37% 3.57% 3.40% 3.67%
Non-Interest Income to Average Assets .31% .27% .37% .36%
Non-Interest Expense to Average Assets 2.43% 2.86% 2.46% 2.81%
Efficiency Ratio (4) 70.99% 78.20% 71.32% 73.23%
Average Interest Earning Assets to
Average Interest Bearing Liabilities 112.07% 102.52% 112.69% 103.57%
June 30, December 31,
1996 1995
---- ------
REGULATORY CAPITAL RATIOS:
Tangible Capital Ratio 10.42% 10.28%
Core Capital Ratio 10.42% 10.28%
Risk-Based Capital Ratio 31.00% 32.88%
ASSET QUALITY RATIOS:
Non-Performing Loans to Total Net
Loans 2.63% 2.87%
Non-Performing Loans to Total Assets 1.04% 1.01%
Non-Performing Assets to Total Assets 1.13% 1.12%
Allowance for Loan Losses to Non-
performing Loans 48.20% 57.66%
Allowance for Loan Losses to Total
Net Loans 1.27% 1.66%
OTHER DATA:
Number of Deposit Accounts 51,419 50,062
Number of Offices 16 15
Notes to Selected Financial Ratios
(1) Ratios are annualized where appropriate.
(2) Interest rate spread represents the difference between the
weighted average yield on average interest-earning assets
and the weighted average costs of average interest-bearing
liabilities.
(3) Net interest margin represents net interest income as a
percent of average interest-earning assets.
(4) Efficiency ratio represents total non-interest expense divided by
the sum of net interest income after provision for loan losses,
and recurring non-interest income.
STATEWIDE FINANCIAL CORP. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
The following discussion and analysis refers to Statewide Financial
Corp. (the "Company") and its wholly-owned subsidiary, Statewide
Savings Bank, S.L.A. (the "Bank"). The Company was organized on May
31, 1995 for the purpose of acquiring all of the capital stock of the
Bank.
For the quarter ended June 30, 1996, the Company had net income of
$1,154,000, or $0.24 per share, as compared to net income of $595,000
for the same period last year. For the six months ended June 30,
1996, the Company had net income of $2,359,000, or $0.49 per share, as
compared to $1,518,000 for the prior year's period. These increases
primarily reflect the continued growth in the Company's balance sheet,
made possible through the infusion of new capital into the Company
from the September 1995 initial public offering, partially offset by
the continuing efforts of the Company to position itself for the
growth it has experienced.
The Company completed its initial public offering of its common stock
on September 29, 1995. Accordingly, per share data did not exist for
the prior period.
Net income for the quarter ended June 30, 1996 was $51,000 less than
the $1,205,000 of net income realized during the quarter ended March
31, 1996. This difference was primarily the result of non-recurring
net income of $228,000 during the first quarter versus $108,000 during
the second quarter of 1996. Net interest income increased $212,000, or
4.1%, between quarters, primarily as a result of growth in the loan
portfolio which was principally financed by short term borrowings.
Additionally, non-interest expense increased $139,000, or 3.6%,
chiefly because of marketing expenses.
FINANCIAL CONDITION
At June 30, 1996 shareholders' equity amounted to $67.2 million
compared to $72.3 million at December 31, 1995. The ratio of
shareholders' equity to total assets was 9.9% at June 30, 1996
compared to 12.94% at December 31, 1995. The $5.1 million decrease in
shareholders' equity at June 30, 1996 from December 31, 1995 resulted
principally from four factors. During June 1996, the Company purchased
211,600 shares of its stock on the open market for $2.6 million, of
which 199,881 shares were re-issued in July 1996 under management
recognition and retention plans. The Company also incurred a $5.3
million (net of tax) decrease in the market value of its investment
portfolio, all of which it classifies as available for sale.
Partially offsetting these decreases were income of $2.4 million and
allocation of the Company's Employee Stock Ownership Plan ("ESOP")
shares of $0.4 million.
Total assets at June 30, 1996 were $678.4 million, an increase of
$119.4 million from December 31, 1995. Investment activities and
lending activities were the principal reasons for this growth. The
growth was primarily funded through additional short term borrowing
over amounts outstanding at December 31, 1995.
Loans receivable, net, increased $73.0 million to $268.8 million at
June 30, 1996 from $195.8 million at December 31, 1995. The primary
increase was in one to four family first mortgage loans which
increased by $62.5 million, net of amortization, from December 31,
1995. During the six month period, the Company purchased $63.3
million of loans and originated $28.3 million. These loans have
anticipated yields of 7.18% based upon estimated prepayment speeds at
June 30, 1996. Investments at June 30, 1996 were $381.2 million, a
$41.0 million increase from the December 31, 1995 balance of $340.2
million. This growth resulted from continuation of the Company's
strategy of leveraging its excess capital. During the six months
ended June 30, 1996, the Company purchased $97.9 million of mortgage-
backed securities which had average lives, considering expected
prepayments, consistent with five and ten year Treasury instruments.
Asset growth during the periods since December 31, 1995 has been
primarily funded with short term borrowing, as supplemented by deposit
growth. Short term borrowing increased $114.9 million during the six
month period to $159.6 million at June 30, 1996. The borrowing is
primarily comprised of overnight borrowing with the Federal Home Loan
Bank of New York (the "FHLB"), and securities sold under agreements to
repurchase. Costs for these borrowings approximated 5.43% at June 30,
1996. All of these borrowings mature before September 30, 1996 and it
is the intention of the Company to keep its borrowing maturities short
term, subject to prevailing market interest rates, at least into the
fourth calendar quarter of 1996.
Other assets increased $3.8 million, from $1.1 million at December 31,
1995 to $4.9 million at June 30, 1996, primarily because of the
Federal income tax benefit associated with unrealized loss on
investments recorded as of June 30, 1996.
Deposits grew $8.4 million from $438.0 million at December 31, 1995 to
$446.4 million at June 30, 1996. Within this growth, core deposits
increased 7.5%, or $16.2 million. The change in core deposits was the
result of 1)marketing efforts by the Company as it has opened three
branches since May 1995, and established deposit agreements with
several affinity groups, and 2)transfers of balances from depositors
who preferred the liquidity of lower cost savings accounts to the
lower certificates of deposit ("CD") market interest rates which were
being offered during much of the period.
RESULTS OF OPERATIONS
THREE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1995
Net Income. For the three months ended June 30, 1996, net income
increased by $559 thousand, or 93.9%, to $1,154,000 from $595 thousand
for the same period last year. The increase in net income was
primarily a result of an increase in net interest income partially
offset by an increase in non-interest expense.
Interest Income. Total interest and dividend income increased $2.9
million, or 33.7%, to $11.5 million for the three months ended June
30, 1996 from $8.6 million for the three months ended June 30, 1995.
This growth in interest income is the result of a $179.4 million, or
38.7%, increase in the average balance of total interest-earning
assets over the comparable period last year, partially offset by a
decrease in the average yield on total interest-earning assets to
7.13% during the current quarter, compared to 7.40% during the quarter
ended June 30, 1995. The change in the average balances of interest-
earning assets between the prior year quarter and this quarter was
principally affected by: 1)investment of the proceeds from the
Company's initial public offering at the end of September 1995, and 2)
investment of funds borrowed from the FHLB during the period since the
Company's initial public offering, partially offset by 3)mortgage loan
and mortgage-backed securities principal amortization and prepayments.
Interest-earning assets most affected by this net increase in average
balances were mortgage-backed securities and first mortgage loans.
The decline in average yield reflects reinvestment of mortgage
principal repayments and amortization, as well as securities'
maturities, at lower rates than were previously earned.
Interest Expense. Interest expense increased $1.6 million, or 35.3%,
during the current quarter compared to the same quarter a year ago.
Interest expense on deposits increased $457 thousand, or 12.4%, and
interest expense on borrowed funds increased $1.1 million, or 146.5%.
The average balance of interest-bearing deposits increased $32.4
million, or 8.1%, for the quarter ended June 30, 1996 over the same
quarter in the prior year. In addition, the average cost of the
interest-bearing deposits grew to 3.83% for the quarter ended June 30,
1996 as compared to 3.68% for the same period in the previous year.
This cost increase primarily reflects a change in the Company's
savings accounts interest rates, which resulted as the Company opened
its three new branches. The Company paid bonuses to statement savings
rates, on a limited basis, to customers of those new branches. Also,
during 1995 the Company started to market its products, including
deposits, to affinity groups. Under this program, the Company offers
a higher statement savings rate which is tied to the three month U.S.
Treasury rate. The Company believes that the higher interest rate is
economically feasible since service under this program is principally
electronic, and has limited operational and incremental costs. This
program also has the advantage of soliciting new customers with
profiles to match loan products the Company is marketing.
The average balance of borrowed funds increased $98.1 million, or 239%
from the same quarter a year ago, while the weighted average borrowing
cost decreased 203 basis points from 7.44% to 5.41%. The increase in
borrowing reflects implementation of the Company's strategy to
leverage its excess capital, and this growth, along with the capital
provided through the Company's initial public offering, funded the
increase in assets which has occurred since June 30, 1995. The
decrease in the weighted average cost of borrowing reflects lower
short term rates during the period since June 30, 1995, and the effect
of prepayment of higher cost debt in December 1995. The borrowings
outstanding at June 30, 1996 have a weighted average cost of 5.43% at
that date, and all mature before September 30, 1996. It is the
Company's intention to keep its borrowing maturities short term,
subject to prevailing market interest rates, at least into the fourth
calendar quarter of 1996.
Net Interest Income. For the quarter ended June 30, 1996 net interest
income increased $1,309,000, or 31.9%, over the comparable period last
year. The increase is the result of an increase in interest income
larger than the increase in interest expense. During the current
quarter, net interest margin, which is interest income as a percentage
of average interest-earning assets, decreased to 3.37% from 3.57%
during the quarter ended June 30, 1995. This decrease is the result
of lower yield realized during the current quarter and increased
borrowings to leverage the Company's capital during this quarter than
the same quarter a year ago. The Company invested approximately $75
million during this quarter, including reinvestment of mortgage
principal and amortization, and maturities of securities, compared to
approximately $12 million during the quarter ended June 30, 1995. The
interest rate environment during the current quarter was lower than
that reflected in the investments and loans which matured and paid
down during the current quarter. In addition, net interest income
includes higher borrowing costs for this quarter over that incurred in
the same period last year.
Table 1 following presents a summary of the Company's interest-earning
assets and their average yields, and interest-bearing liabilities and
their average costs and shareholders' equity for the three months
ended June 30, 1996 and 1995. The average balance of loans includes
non-accrual loans, and the yields include loan fees which are
considered adjustments to yields.
Table 1
<TABLE>
Three Months Ended June 30,
--------------------------------------
1996 1995
---------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Average Interest Average Average Interest Average
Balance Yield/ Balance Yield/
Cost Cost
------- -------- ---- ------- -------- ----
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest-earning:
First Mortgage Loans $208,257 $3,995 7.67% $143,692 $3,014 8.39%
Consumer and Other Loans 35,864 842 9.39% 25,805 662 10.26%
Mortgage-backed
Securities 324,367 5,438 6.71% 201,696 3,523 6.99%
Debt Securities 66,575 1,064 6.39% 85,209 1,252 5.88%
Money Market Investments 317 4 5.05% 2,958 44 5.95%
FHLBNY Stock 7,007 109 6.22% 3,628 71 7.83%
------- ------ ------- ------
Total Interest-earning
Assets 642,382 $11,452 7.13% 462,988 $8,566 7.40%
======= ======
Non-interest-earning
Assets 16,364 14,114
------- -------
Total Assets $658,746 $477,102
======== ========
Liabilities and
Shareholders' Equity:
Interest-bearing
Liabilities:
Savings Accounts $129,654 $ 920 2.84% $110,330 $ 678 2.46%
NOW 44,983 316 2.81% 45,215 317 2.80%
Money Market 45,103 340 3.02% 41,489 280 2.70%
Certificates 214,268 2,580 4.82% 204,605 2,423 4.74%
Borrowed Funds 139,164 1,883 5.41% 41,082 764 7.44%
-------- ------ -------- ------
Total Interest-bearing
Liabilities 573,172 $ 6,039 4.21% 442,721 $4,462 4.03%
-------- ======= -------- ======
Non-interest-bearing
Deposits 12,774 8,973
Other Non-interest-bearing
Liabilities 4,813 3,540
-------- --------
Total Non-interest-earning
Liabilities 17,587 12,513
-------- --------
Total Liabilities 590,759 455,234
Shareholders' Equity 67,987 21,868
-------- --------
Total Liabilities and
Shareholders' Equity $658,746 $477,102
======== ========
</TABLE>
Provision for Loan Losses. The provision for loan losses increased by
$60 thousand to $125 thousand for the three months ended June 30, 1996
from $65 thousand for the same period last year. The provision for
the three months ended June 30, 1996 was determined by management
after review of, among other things, the Company's loan portfolio, the
risks inherent in the Company's lending activities and the economy in
the Company's market areas. Although management believes that both
the provision incurred during the quarter ended June 30, 1996 and the
balance of the allowance for loan losses are adequate, future
additions to the allowance may be necessary based upon changes in
economic condition, or the credit worthiness of borrowers and the
value of collateral underlying loans. As of June 30, 1996, non-
performing loans increased $.7 million, or 10.9%, to $7.1 million from
$6.4 million at March 31, 1996. These non-performing loans represent
2.63% of total net loans outstanding at June 30, 1996 compared to a
2.86% ratio of non-performing loans to total net loans at March 31,
1996. At June 30, 1996, the allowance for loan losses was $3.4
million, or 48.2%, of total non-performing loans, compared to $3.3
million, or 52.2%, of total non-performing loans at March 31, 1996.
Non-Interest Income. Total non-interest income increased $196
thousand to $514 thousand for the three months ended June 30, 1996
from $318 thousand for the same period last year. The principal
reason for this increase was recognition of income from the collection
of unaccrued interest. During 1995, in connection with the workout of
a non-performing loan, the Company received full payment of the
outstanding principal in accord with the terms of a bankruptcy
settlement. Subsequent payments, representing unaccrued interest
totalled $169 thousand during the current quarter. There were no like
amounts received during the same quarter a year ago. All unaccrued
interest has now been paid to the Company under this plan.
Non-Interest Expense. Total non-interest expense increased 17.4%, or
$.6 million, to $4.0 million for the current quarter ended June 30,
1996 from $3.4 million for the same period last year.
Salaries and employee benefits expenses for the three months ended
June 30, 1996, increased $222 thousand, or 12.0%, compared to the same
period a year ago. Of this amount, approximately $141 thousand was
related to increased staffing requirements necessary to position the
Company to achieve its marketing and operational objectives, including
increased executive and loan administrative staff, and staffing and
training for the Company's new branches. Other salary and benefits
expenses, incurred for the same reason, include provisions for
additional incentive programs for employees at all levels of the
Company, including $201 thousand associated with the Company's ESOP
established September 29, 1995. Finally, salary and benefit expenses
also reflect normal salary increases from salary in place in the prior
year period.
Occupancy costs increased $95 thousand, or 22.5%, for the current
quarter over the same period last year. The increase was principally
a result of new lease costs for the three new branches the Company has
opened since the quarter ended June 30, 1995 and the related
amortization of leasehold improvements to these branches.
Professional fees increased $82 thousand, or 89.1%, for the three
months ended June 30, 1996 over the three months ended June 30, 1995,
principally as the result of marketing and computer system studies
performed. In addition, legal fees have increased because of the
ongoing requirements of a public company whereas in the same quarter a
year ago, the Company was not publicly owned.
Other non-interest expense increased $143 thousand, or 23.3%, for the
current quarter versus the same quarter a year ago, principally
because of advertising and promotional expenses in conjunction with
the build up of core deposits and the promotion of loan growth.
Income Taxes. The increase in income taxes of $294 thousand, or
82.8%, from the three month period a year ago was a result of the
increase in taxable income from that period.
SIX-MONTH PERIODS ENDED JUNE 30, 1996 AND 1995
Net Income. For the six months ended June 30, 1996, net income
increased by $841 thousand, or 55.4%, to $2,359,000 from $1,518,000
for the same period last year. The increase in net income was
primarily a result of an increase in net interest income partially
offset by an increase in non-interest expense.
Interest Income. Total interest and dividend income increased $5.3
million, or 31.3%, to $22.3 million for the six months ended June 30,
1996 from $17.0 million for the six months ended June 30, 1995. This
growth in interest income is the result of a $163.1 million, or 35.4%,
increase in the average balance of total interest-earning assets over
the comparable period last year, partially offset by a decrease in the
average yield on total interest-earning assets to 7.15% during the
current period, compared to 7.37% during the six months ended June 30,
1995. The change in the average balances of interest-earning assets
between the prior year period and this period was principally affected
by: 1)investment of the proceeds from the Company's initial public
offering at the end of September 1995, and 2) investment of funds
borrowed from the FHLB during the period since the Company's initial
public offering, partially offset by 3)mortgage loan and mortgage-
backed securities principal amortization and prepayments. Interest-
earning assets most affected by this net increase in average balances
were mortgage-backed securities and first mortgage loans. The decline
in average yield reflects reinvestment of mortgage principal
repayments and amortization, as well as securities' maturities, at
lower rates than were previously earned.
Interest Expense. Interest expense increased $3.1 million, or 35.7%,
during the current six month period compared to the same period a year
ago. Interest expense on deposits increased $1.3 million, or 18.5%,
and interest expense on borrowed funds increased $1.8 million, or
116.0%. The average balance of interest-bearing deposits increased
$33.3 million, or 8.3%, for the six months ended June 30, 1996 over
the same six months in the prior year. In addition, the average cost
of the interest-bearing deposits grew to 3.88% for the six months
ended June 30, 1996 as compared to 3.55% for the same period in the
previous year. This cost increase reflects a change in the mix of
deposits, which began during 1994 when interest rates rose. The
Company started offering market competitive CD rates, generally for
terms of less than 18 months, in conjunction with advertising
campaigns geared toward reemphasizing the Company's presence in its
markets. Although these rates were not the highest in the Company's
market territory, they were higher than those it traditionally
offered. Subsequently, as the Company opened its three new branches,
it continued with these rate offerings as well as paying bonuses to
statement savings rates, on a limited basis, to customers of those new
branches. Also, during 1995 the Company started to market its
products, including deposits, to affinity groups. Under this program,
the Company offers a higher statement savings rate which is tied to
the three month U.S. Treasury rate.
The average balance of borrowed funds increased $79.7 million, or 196%
from the same six month period a year ago, while the weighted average
borrowing cost decreased 200 basis points from 7.41% to 5.41%. The
increase in borrowing reflects implementation of the Company's
strategy to leverage its excess capital, and this growth, along with
the capital provided through the Company's initial public offering,
funded the increase in assets which has occurred since March, 1995.
The decrease in the weighted average cost of borrowing reflects lower
short term rates during the period since March, 1995, and the effect
of prepayment of higher cost borrowings in December 1995.
Net Interest Income. For the six months ended June 30, 1996 net
interest income increased $2,242,000, or 26.8% over the comparable
period last year. The increase is the result of an increase in
interest income larger than the increase in interest expense. During
the current six month period, net interest margin decreased to 3.40%
from 3.67% during the six months ended June 30, 1995. This decrease
is the result of lower yield realized during the current period and
more borrowings to leverage the Company's capital during this period
than the same period a year ago. The Company invested approximately
$194 million during the six months ended June 30, 1996, including
reinvestment of mortgage principal and amortization, and maturities of
securities, compared to approximately $26 million during the six
months ended June 30,1995. The interest rate environment during the
current six month period was lower than that reflected in the
investments and loans which matured and paid down during that period.
In addition, net interest income includes higher borrowing costs for
this six months over that incurred in the same period last year.
Table 2 following presents a summary of the Company's interest-earning
assets and their average yields, and interest-bearing liabilities and
their average costs and shareholders' equity for the six months ended
June 30, 1996 and 1995. The average balance of loans includes non-
accrual loans, and the yields include loan fees which are considered
adjustments to yields.
Table 2
<TABLE>
Six Months Ended June 30,
--------------------------------------
1996 1995
---------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Average Interest Average Average Interest Average
Balance Yield/ Balance Yield/
Cost Cost
------- ------- ---- ------- -------- ----
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest-earning:
First Mortgage Loans $192,183 $ 7,498 7.80% $144,519 $6,006 8.31%
Consumer and Other Loans 33,696 1,597 9.48% 25,360 1,282 10.11%
Mortgage-backed Securities 318,638 10,631 6.67% 204,092 7,164 7.02%
Debt Securities 71,683 2,330 6.50% 79,704 2,285 5.73%
Money Market Investments 981 27 5.50% 3,046 89 5.84%
FHLBNY Stock 6,301 199 6.32% 3,672 147 8.01%
------- ------ ------- ------
Total Interest-earning
Assets 623,482 $22,282 7.15% 460,393$16,973 7.37%
======= =======
Non-interest-earning Assets 16,172 13,990
------- -------
Total Assets $639,654 $474,383
======== ========
Liabilities and
Shareholders' Equity:
Interest-bearing
Liabilities:
Savings Accounts $126,509 $1,743 2.76% $110,583 $1,376 2.49%
NOW 44,745 625 2.79% 48,448 679 2.80%
Money Market 44,639 668 2.99% 41,394 534 2.58%
Certificates 216,900 5,370 4.95% 199,045 4,502 4.52%
Borrowed Funds 120,486 3,262 5.41% 40,747 1,510 7.41%
------- ------ ------- -----
Total Interest-bearing
Liabilities 553,279 $11,668 4.22% 440,217 $8,601 3.91%
------- ======= ------- ======
Non-interest-bearing
Deposits 11,653 8,835
Other Non-interest-bearing
Liabilities 4,759 3,634
------- -------
Total Non-interest-earning
Liabilities 16,412 12,469
------- -------
Total Liabilities 569,691 452,686
Shareholders' Equity 69,963 21,697
------- -------
Total Liabilities and
Shareholders' Equity $639,654 $474,383
======== ========
</TABLE>
Provision for Loan Losses. The provision for loan losses increased by
$111 thousand to $250 thousand for the six months ended June 30, 1996
from $139 thousand for the same period last year. The provision for
the six month periods was determined by management after review of,
among other things, the Company's loan portfolio, the risks inherent
in the Company's lending activities and the economy in the Company's
market areas. As of June 30, 1996, non-performing loans increased
$1.5 million, or 25.9%, to $7.1 million from $5.6 million at December
31, 1995. These non-performing loans represent 2.63% of total net
loans outstanding at June 30, 1996 compared to a 2.87% ratio of non-
performing loans to total net loans at December 31, 1995. At June 30,
1996, the allowance for loan losses was $3.4 million, or 48.2%, of
total non-performing loans, compared to $3.2 million, or 57.7%, of
total non-performing loans at December 31, 1995.
Non-Interest Income. Total non-interest income increased $325
thousand to $1,180,000 for the six months ended June 30, 1996 from
$855 thousand for the same period last year. The principal reasons
for this increase were recognition of income from the collection of
unaccrued interest, partially offset by a decrease in commissions from
annuity sales. During 1995, in connection with the workout of a non-
performing loan, the Company received full payment of the outstanding
principal in accord with the terms of a bankruptcy settlement.
Subsequent payments, representing unaccrued interest, totalled $525
thousand during the current six month period. There were no like
amounts received during the same period a year ago. All unaccrued
interest has now been paid to the Company under this plan. In
addition, commissions from sales of annuities declined $108 thousand
during the six months ended June 30, 1996 as compared to the same six
months a year ago because the Company redirected its resources toward
developing its new branches and marketing its core products rather
than selling annuities.
Non-Interest Expense. Total non-interest expense increased 18.1%, or
$1.2 million, to $7.9 million for the six months ended June 30, 1996
from $6.7 million for the same period last year.
Salaries and employee benefits expenses for the six months ended June
30, 1996, increased $815 thousand, or 24.3%, compared to the same
period a year ago. Of this amount, approximately $424 thousand was
related to increased staffing requirements necessary to position the
Company to achieve its marketing and operational objectives, including
increased executive and loan administrative staff, and staffing and
training for the Company's new branches. Other salary and benefits
expenses, incurred for the same reason, include provisions for
additional incentive programs for employees at all levels of the
Company, including $307 thousand associated with the Company's ESOP
established September 29, 1995. Finally, salary and benefit expenses
also reflect normal salary increases from salary in place in the prior
year period.
Occupancy costs increased $218 thousand, or 26.6%, for the six months
ended June 30, 1996 over the same period last year. The increase was
principally a result of new lease costs for the three new branches the
Company has opened since the quarter ended March 31, 1995 and the
related amortization of leasehold improvements to these branches, as
well as from branch maintenance required because of frequent snow
storms during the first quarter of 1996.
The remaining components of non-interest expense increased $171
thousand, or 6.8%, from $2,483,000 for the six months ended June 30,
1995 to $2,654,000 for the current six month period, primarily as a
result of marketing and advertising studies and promotional expense
incurred during the current period.
Income Taxes. The increase in income taxes of $411 thousand, or
44.9%, from the six month period a year ago was a result of the
increase in taxable income from that period.
THREE-MONTH PERIODS ENDED JUNE 30, 1996 AND MARCH 31, 1996
Net Income. For the three months ended June 30, 1996, net income
decreased by $51 thousand, or 4.2%, to $1,154,000 from $1,205,000 for
the preceding quarter, the three months ended March 31, 1996. The
decrease in net income was primarily a result of a decrease in non-
recurring non-interest income and an increase in non-interest expense,
partially offset by an increase in net interest income.
Interest Income. Total interest and dividend income increased $622
thousand, or 5.7%, to $11.5 million for the three months ended June
30, 1996 from $10.8 million for the three months ended March 31, 1996.
This growth in interest income is the result of a $37.8 million, or
6.3%, increase in the average balance of total interest-earning assets
over the preceding quarter, partially offset by a decrease in the
average yield on total interest-earning assets to 7.13% during the
current quarter, compared to 7.17% during the three months ended March
31, 1996. The change in the average balances of interest-earning
assets between the prior period and this period was principally
affected by: 1)the purchase and origination of $53.9 million of loans
during the current quarter, and 2)the purchase of $19.7 million of
mortgage-backed securities, offset by principal amortization and
prepayments on mortgage-backed securities and debt securities. The
decline in average yield reflects reinvestment of mortgage principal
repayments and amortization, as well as securities' maturities, at
lower rates than were previously earned.
Interest Expense. Interest expense increased $410 thousand, or 7.3%,
during the current three month period compared to the preceding
quarter. Interest expense on deposits decreased $94 thousand, or 2.2%,
and interest expense on borrowed funds increased $504 thousand, or
36.5%. The average balance of deposits increased $2.4 million, or
0.6%, for the three months ended June 30, 1996 over the preceding
three month period. In addition, the average cost of the deposits
decreased to 3.83% for the three months ended June 30, 1996 as
compared to 3.94% for the three months ended March 31, 1996. This
cost decrease primarily reflects management's decision to reduce rates
being paid on certificates of deposit, rather than renewing them at
higher promotional rates which were being offered during late 1994 and
through 1995. During 1994 and 1995, the Company had started offering
market competitive CD rates, generally for terms of less than 18
months, in conjunction with advertising campaigns geared toward
reemphasizing the Company's presence in its markets. The effect of
the interest rate reduction on certificates of deposit was partially
offset by increases in the average interest rates paid on the
Company's savings accounts, as the Company continued its marketing and
promotional efforts to increase its core accounts. During the current
quarter, interest expense reflects the full effect of the promotional
rates it offered to new customers of its Hoboken, New Jersey branch,
opened March 9, 1996. In addition, rates offered to its customers
under the affinity group program are tied to the three month Treasury
rates, which are higher this quarter than last quarter.
The average balance of borrowed funds increased $37.4 million, or
36.7%, from the three months ended March 31, 1996, while the weighted
average borrowing cost decreased from 5.42% to 5.41%. The increase in
borrowing reflects the continued implementation of the Company's
strategy to leverage its excess capital, and this growth, funded the
increase in interest earning assets which has occurred since March 31,
1996.
Net Interest Income. For the three months ended June 30, 1996, net
interest income increased $212 thousand, or 4.1%, over the preceding
three month period. The increase is the result of an increase in
interest income larger than the increase in interest expense. During
the current three month period, net interest margin decreased to 3.37%
from 3.44% during the three months ended March 31, 1996. This
decrease is the result of lower yield realized during the current
period and more borrowings to leverage the Company's capital during
this period than the preceding quarter. The Company invested
approximately $73.5 million during the three months ended June 30,
1996, including reinvestment of mortgage principal and amortization,
and maturities of securities, compared to approximately $119 million
during the three months ended March 31, 1996. While the interest rate
environment during the current three month period was generally higher
than the preceding quarter, it was still lower than that reflected in
the investments and loans which matured and paid down during this
quarter. In addition, net interest income includes higher borrowing
costs for this quarter over that incurred in the preceding quarter.
Table 3 following presents a summary of the Company's interest-earning
assets and their average yields, and interest-bearing liabilities and
their average costs and shareholders' equity for the three months
ended June 30, 1996 and the three months ended March 31, 1996. The
average balance of loans includes non-accrual loans, and the yields
include loan fees which are considered adjustments to yields.
Table 3
<TABLE>
Three Months Ended
--------------------------------------
June 30, 1996 March 31,1996
---------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
AverageInterest Average Average InterestAverage
Balance Yield/ Balance Yield/
Cost Cost
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest-earning:
First Mortgage Loans $208,257 $3,995 7.67% $176,106 $3,503 7.96%
Consumer and Other Loans 35,864 842 9.39% 31,527 755 9.58%
Mortgage-backed Securities 324,367 5,438 6.71% 312,907 5,193 6.64%
Debt Securities 66,575 1,064 6.39% 76,795 1,266 5.59%
Money Market Investments 317 4 5.05% 1,644 23 5.60%
FHLBNY Stock 7,007 109 6.22% 5,595 90 6.43%
------- ------ ------- ------
Total Interest-earning
Assets 642,382 $11,452 7.13% 604,574 $10,830 7.17%
======= =======
Non-interest-earning Assets 16,364 15,989
------- -------
Total Assets $658,746 $620,563
======== ========
Liabilities and
Shareholders' Equity:
Interest-bearing
Liabilities:
Savings Accounts $129,654 $ 920 2.84% $123,364 $ 823 2.67%
NOW 44,983 316 2.81% 44,506 309 2.78%
Money Market 45,103 340 3.02% 44,174 328 2.97%
Certificates 214,268 2,580 4.82% 219,535 2,790 5.08%
Borrowed Funds 139,164 1,883 5.41% 101,810 1,379 5.42%
------- ------ ------- ------
Total Interest-bearing
Liabilities 573,172 $ 6,039 4.21% 533,389 $5,629 4.22%
------- ======= ------- ======
Non-interest-bearing
Deposits 12,774 10,531
Other Non-interest-bearing
Liabilities 4,813 4,704
------- -------
Total Non-interest-earning
Liabilities 17,587 15,235
------- -------
Total Liabilities 590,759 548,624
Shareholders' Equity 67,987 71,939
------- -------
Total Liabilities and
Shareholders' Equity $658,746 $620,563
======== ========
</TABLE>
Provision for Loan Losses. There was no change in the provision for
loan losses between the three months ended June 30, 1996 and the three
months ended March 31, 1996. During both quarters the provision was
$125 thousand. The provision for each of the three month periods was
determined by management after review of, among other things, the
Company's loan portfolio, the risks inherent in the Company's lending
activities and the economy in the Company's market areas.
Non-Interest Income. Total non-interest income decreased $152
thousand to $514 thousand for the three months ended June 30, 1996
from $666 thousand for the preceding quarter. The principal reason
for this decrease was that less income was recognized from the
collection of unaccrued interest during the current quarter than had
been recognized in the preceding quarter. During 1995, in connection
with the workout of a non-performing loan, the Company received full
payment of the outstanding principal in accord with the terms of a
bankruptcy settlement. Subsequent payments, representing unaccrued
interest totalled $169 thousand during the current three month period
and $356 thousand during the preceding three months ended March 31,
1996. All unaccrued interest has now been paid to the Company under
this plan.
Non-Interest Expense. Total non-interest expense increased 3.6%, or
$139 thousand, to $3,999,000 for the three months ended June 30, 1996
from $3,860,000 for the preceding three months. The principal reasons
for the increase were increased marketing, advertising and promotion
expenses incurred as part of Company's ongoing programs to increase
its core deposits and loan portfolio.
Income Taxes. The decrease in income taxes of $28 thousand, or 4.1%,
from the three months ended March 31, 1996 was a result of the
decrease in taxable income from that period.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity is a measure of its ability to fund loans and
withdrawals of deposits in a cost effective manner. The Company's
primary financing sources are deposits obtained in its own market
area, advances from the FHLB and recently, securities sold under
repurchase agreements. Other sources of funds include scheduled
amortization and prepayments of loan principal and mortgage-backed
securities, maturities of debt securities, and funds provided by
operations. At June 30, 1996, the Company had total liquid assets
equal to 26.5% of total assets and 33.6% of total deposits. In
addition, at June 30, 1996, the Company also had available to it $2.3
million under a line of credit with the FHLB, expiring October 30,
1996, and approximately $12.7 million of excess collateral pledged
with the FHLB. The Company also has approximately $208.8 million in
unpledged debt, equity and mortgage-backed securities which could be
used to collateralize additional borrowings. Finally, all of the
Company's securities are available for sale.
At June 30, 1996, capital resources were sufficient to meet
outstanding loan commitments of $77.3 million and commitments on
unused lines of credit of $2.8 million. Certificates of deposit which
are scheduled to mature in one year or less from June 30, 1996
totalled $179.3 million. Management is unable to predict the amount
of such deposits that will renew with the Company. As a result of the
Company's liquidity position, management does not believe the
Company's operations will be materially affected by a failure to renew
these deposits. However, experience indicates that a significant
portion of such deposits should remain with the Company.
During the six months ended June 30, 1996, investment and lending
activities were the principal requirements for funding. Purchases of
mortgage-backed securities exceeded principal repayments and
maturities of debt and equity securities by $50.3 million. Purchase
and originations of loans exceeded principal collections by $73.4
million. The principal sources of funding for these investments were
increases in borrowings, net of repayments, from the FHLB of $113.5
million and an increase in deposits of $8.4 million.
During the six months ended June 30, 1995, investment activities
represented the primary funding need. Purchases of debt and equity
securities exceeded maturities and principal repayments of mortgage-
backed securities by $5.7 million. The principal sources of funding
for these purchases were the excess of loan repayments over loan
originations and cash provided by operations.
At June 30, 1996, the Bank exceeded each of the regulatory capital
requirements applicable to it. The table below presents the Bank's
capital ratios at June 30, 1996 as compared to the minimum OTS
requirements:
Required Capital Actual Capital
---------------- --------------
Excess of
Actual Over
% of % of Regulatory
(dollars in thousands) Amount Assets Amount Assets Requirement
Tangible Capital $ 10,258 1.50% $71,274 10.42% $61,016
Core Capital 27,354 4.0% 71,274 10.42% 43,920
Risk Based Capital 18,835 8.0% 72,993 31.00% 54,158
PART II OTHER INFORMATION
Item 1. Legal Proceedings
There are various claims and lawsuits in which the Bank is
periodically involved incidental to the Bank's business. In
the opinion of management, no material loss is expected from
any such pending claims or lawsuits.
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.
During the quarter ended June 30, 1996, the Company held its
annual meeting of shareholders. The following is the
information required by this item:
(a) The annual meeting of shareholders was held on May 15,
1996.
(b) Directors Victor M. Richel and Walter G. Scott were
elected to new terms on the Board of Directors expiring
in 1999. The term of office of each of the following
directors continues beyond the annual meeting: Maria
Ramirez, Stephen R. Tilton and Thomas V. Whelan.
(c) The following matters were voted upon at the annual
meeting:
Proposal I - The election of Victor M. Richel and
Walter G. Scott to new terms on the Board of Directors:
Name Votes In Favor Votes Against
---- -------------- -------------
Victor M. Richel 4,723,469 46,516
Walter G. Scott 4,723,769 46,216
Proposal II - Approval of the Statewide Financial Corp.
1996 Incentive Plan:
Votes In Favor Votes Against Abstentions Broker Non-Votes
-------------- ------------- ----------- ----------------
3,225,295 277,567 14,562 1,252,661
Proposal III - Approval of the Statewide Financial
Corp. 1996 Stock Option Plan for Outside Directors:
Votes In Favor Votes Against Abstentions Broker Non-Votes
-------------- ------------- ----------- ----------------
2,963,632 528,214 25,578 1,254,264
Proposal IV - Approval of the Statewide Financial Corp.
Recognition and Retention Plan for Executive Officers
and Employees:
Votes In Favor Votes Against Abstentions Broker Non-Votes
-------------- ------------- ----------- ----------------
2,913,405 572,719 31,300 1,252,661
Proposal V - Approval of the Statewide Financial Corp.
Recognition and Retention Plan for Outside Directors:
Votes In Favor Votes Against Abstentions Broker Non-Votes
-------------- ------------- ----------- ----------------
3,074,689 406,326 26,183 1,262,787
Item 5. Other Information.
Not applicable.
Item 6. Exhibits and Report of Form 8-K.
(a) Exhibits.
Number Description
------ -----------
27 Financial Data Schedule
(b) Reports on Form 8-K.
1.) The Registrant filed a Current Report on Form 8-K
dated April 22, 1996 announcing the Registrant's
earnings for the first quarter ended March 31,
1996.
2.) The Registrant filed a Current Report on Form 8-K
dated June 13, 1996 announcing Office of Thrift
Supervision approval for the Registrant's
Management Recognition and Retention Plans for
employees and outside directors.
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.
STATEWIDE FINANCIAL CORP.
Date: August 12, 1996 By: Bernard F. Lenihan
BERNARD F. LENIHAN
Senior Vice President and Chief
Financial Officer<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1933
For the Quarter Ended June 30, 1996 Commission File #0-26546
STATEWIDE FINANCIAL CORP.
(Exact name of registrant as specified in its charter)
New Jersey 22 3397900
(State of Incorporation) (I.R.S. Employer Identification
Number)
70 Sip Avenue, Jersey City, New Jersey 07306
(Address of registrant's principal executive offices,
including zip code)
(201) 795-4000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days:
Yes X No
The number of shares outstanding of each of the registrant's classes
of common stock, as of July 31, 1996: Common Stock, No Par Value:
5,222,533 shares outstanding.<PAGE>
STATEWIDE FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Three Months Ended Six Months
June 30, Ended
June 30,
------------- ------------
1996 1995 1996 1995
---- ---- ---- ----
INTEREST INCOME:
Interest and fees on loans $ 4,837 $ 3,676 $ 9,095 $ 7,288
Interest on mortgage-backed
securities 5,438 3,523 10,631 7,164
Interest and dividends on debt
and equity securities 1,068 1,296 2,357 2,374
Dividends on FHLBNY stock 109 71 199 147
------ ------ ------ ------
Total interest and dividend
income 11,452 8,566 22,282 16,973
------ ------ ------ ------
INTEREST EXPENSE:
Deposits 4,156 3,698 8,406 7,091
Borrowed funds 1,883 764 3,262 1,510
------ ------ ------ ------
Total interest expense 6,039 4,462 11,668 8,601
------ ------ ------ ------
NET INTEREST INCOME 5,413 4,104 10,614 8,372
Provision for loan losses 125 65 250 139
------ ------ ------ ------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 5,288 4,039 10,364 8,233
------ ------ ------ ------
NON-INTEREST INCOME:
Service charges 311 238 550 491
Other income 203 80 630 364
------ ------ ------ ------
Total non-interest income 514 318 1,180 855
------ ------ ------ ------
NON-INTEREST EXPENSE:
Salaries and employee benefits 2,077 1,855 4,167 3,352
Occupancy, net 517 422 1,038 820
Federal deposit insurance premiums 281 293 558 585
Professional fees 174 92 316 199
Insurance premiums 109 70 197 135
Data processing fees 88 85 150 170
Foreclosed real estate expense, net (5) (25) 57 126
Other 758 615 1,376 1,268
------ ------ ------ ------
Total non-interest expense 3,999 3,407 7,859 6,655
------ ------ ------ ------
Income before income taxes 1,803 950 3,685 2,433
Income taxes 649 355 1,326 915
------ ------ ------ ------
Net income $ 1,154 $ 595 $ 2,359 $ 1,518
======= ====== ======= =======
Net income per share of common stock $0.24 n/a $0.49 n/a
======= ====== ======= =======
Weighted average number of common
stock outstanding 4,853,965 n/a 4,859,075 n/a
========= === ========= ===
See accompanying notes to consolidated financial statements.
STATEWIDE FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(DOLLARS IN THOUSANDS)
June 30, December 31,
1996 1995
---- ----
(UNAUDITED)
ASSETS
Cash and amounts due from depository
institutions $ 4,667 $ 6,553
Federal funds sold 100 1,650
------- -------
Total cash and cash equivalents 4,767 8,203
Mortgage-backed securities available
for sale 315,624 260,107
Debt and equity securities available
for sale 65,572 80,126
Loans receivable, net 268,800 195,773
Accrued interest receivable, net 4,790 4,410
Real estate owned, net 560 652
Premises and equipment, net 5,236 4,819
Federal Home Loan Bank stock, at cost 7,921 3,627
Excess of cost over fair value of net
assets acquired 189 214
Other assets 4,947 1,118
------- -------
Total assets $678,406 $559,049
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits $446,404 $438,021
Borrowed funds 159,578 44,703
Advance payments by borrowers for
taxes and insurance 1,729 1,033
Accounts payable and other
liabilities 3,527 2,977
------- -------
Total liabilities 611,238 486,734
------- -------
Shareholders' Equity 67,168 72,315
------- -------
Commitments and Contingencies
Total liabilities and
shareholders' equity $678,406 $559,049
======== ========
See accompanying notes to consolidated financial statements
STATEWIDE FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(DOLLARS IN THOUSANDS)
Six Months Ended
June 30,
---------
1996 1995
---- ----
Cash flows from operating activities:
Net income $ 2,359 $ 1,518
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 250 139
Provision for losses on real estate owned 18 2
Depreciation and amortization 325 234
Net amortization of deferred premiums and
unearned discounts 1,032 16
Net loss (gain) on sale of real estate owned 7 (98)
Changes in assets and liabilities:
(Increase) in accrued interest
and dividends receivable (380) (122)
Increase (decrease) in accrued interest
payable 205 (10)
(Increase) in other assets (392) (905)
Increase in accounts payable and other
liabilities 345 334
------- -------
Net cash provided by operating
activities 3,769 1,108
------- -------
Cash flows from investing activities:
Principal collections and repayments of loans 18,230 12,029
Purchase of loans (63,342) (2,425)
Origination of loans (28,322) (7,441)
Principal repayments from mortgage-backed
securities 0 9,926
Principal repayments from mortgage backed
securities available for sale 34,604 361
Purchase of mortgage-backed securities (97,900) 0
Purchase of debt and equity securities 0 (16,000)
Proceeds from maturities of debt securities 13,000 2,000
(Purchase) redemption of FHLBNY stock (4,294) 167
Proceeds from sale of real estate owned 225 941
Purchases of premises and equipment (742) (872)
------- -------
Net cash (used in) investing
activities (128,541) (1,314)
------- -------
Cash flows from financing activities:
Net increase in deposits 8,383 13,158
Repayment of borrowings (100,514) (63,400)
Borrowings and advances 215,389 52,350
Increase in advance payments by
borrowers for taxes and insurance 696 20
Purchase of treasury stock (2,618) 0
------- -------
Net cash provided by financing
activities 121,336 2,128
------- -------
Net (decrease) increase in cash
and cash equivalents (3,436) 1,922
Cash and cash equivalents at beginning of
period 8,203 8,059
------- -------
Cash and cash equivalents at end of period $ 4,767 $ 9,981
======= =======
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Income taxes $ 1,076 $ 1,349
======= =======
Interest $11,277 $ 8,645
======= =======
Non-cash investing and financing activities:
Unrealized (loss) gain ,net of income tax,
on securities available for sale $(5,301) $ 84
======= =======
Transfer from loans receivable to real
estate owned, net $ 158 $ 511
======= =======
See accompanying notes to consolidated financial statements
STATEWIDE FINANCIAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The consolidated financial statements include the accounts of
Statewide Financial Corp. (the "Company") and its wholly owned
subsidiary, Statewide Savings Bank, S.L.A. (the "Bank"), and the
Bank's wholly owned subsidiaries, Seventy Sip Corporation, Statewide
Atlantic Corporation and Statewide Financial Services Inc. All
significant intercompany balances and transactions have been
eliminated in consolidation. The Bank and Statewide Financial
Services Inc. are the only active subsidiaries at June 30, 1996. The
Bank operates sixteen banking offices in Hudson, Union, Bergen and
Passaic counties; and through its wholly owned subsidiary, Statewide
Financial Services, Inc., the Bank also engages in the sale of annuity
products. Both the Company and the Bank are subject to supervision
and regulation by various agencies including the New Jersey Department
of Banking, the Office of Thrift Supervision ("OTS") and the Federal
Deposit Insurance Corporation.
The consolidated financial statements contained herein have been
prepared without audit in accordance with the rules and regulations of
the Securities and Exchange Commission and reflect all adjustments
which, in the opinion of management, are necessary for a fair
statement of the results for interim periods. All adjustments made
were of a normal recurring nature. These consolidated financial
statements should be read in conjunction with the consolidated
financial statements and the notes thereto that are included in the
Company's transition report on Form 10-K for the fiscal period ended
December 31, 1995.
2. Shareholders' Equity
The components of shareholders' equity were as follows:
June 30, December 31,
1996 1995
---- ----
(Dollars in thousands)
Preferred stock, no par value, 2,000,000
shares authorized; no shares issued or
outstanding $ - $ -
Common Stock, no par value, 12,000,000
shares authorized; 5,058,152 shares issued
at June 30, 1996 and 5,269,752 shares at
December 31, 1995 - -
Additional paid in capital 50,865 50,770
Unallocated ESOP shares (3,914) (4,232)
Retained earnings - substantially restricted 25,896 23,537
Treasury stock, held for re-issue under
Management Recognition and Retention Plans (2,618) -
Net unrealized (loss) gain on securities
available for sale, net of income tax (3,061) 2,240
------- -------
Total shareholders' equity $67,168 $72,315
======= =======
3. Director and Employee Benefit Plans
On May 15, 1996 the Company's shareholders approved the 1996 Incentive
Stock Option Plan; the 1996 Stock Option Plan for Outside Directors;
the Recognition and Retention Plan for Executive Officers and
Employees; and the Recognition and Retention Plan for Outside
Directors (the "Stock Option" and the "RRP" plans). These plans were
approved on June 12, 1996 by the OTS. The RRP plans allow grants of up
to 211,600 shares of the Company's Common Stock; and the Stock Option
plans allow grants of options to purchase up to 529,000 shares of the
Company's Common Stock.
Prior to June 30, 1996, the Company purchased, on the open market,
211,600 shares of its Common Stock, of which 199,881 shares were re-
issued in July 1996 to employees and outside directors under the terms
of the RRP plans.
During June 1996, 389,980 options were granted to employees and
outside directors under the terms of the Stock Option plans. The
options permit the holders to purchase shares of the Company's Common
Stock at an exercise price of $12.1875 per share. There were no
options subject to exercise as of June 30, 1996.
4. Stock Repurchase Program
On July 16, 1996 the Company received approval from the OTS to
repurchase up to 263,488 shares of its Common Stock in the open
market. The Company completed such purchases by the end of July 1996,
at prices ranging from $11.75 to $11.9375 per share. The Company
intends to retire these shares upon receipt.
5. Net Income Per Share
On September 29, 1995 the Company completed an initial public offering
of its common stock. Accordingly, net income per share calculations
for any period prior to September 30, 1995 did not exist.
6. Non-Performing Loans and the Allowance for Loan Losses
Non-performing loans were as follows:
June 30, December 31,
1996 1995
---- ----
(Dollars in thousands)
Loans delinquent 90 days or more:
Non-accrual $6,322 $4,974
Accruing 755 647
------ ------
Total net loans delinquent 90 days or more $7,077 $5,621
====== ======
Loans delinquent 90 days or more as a
percentage of total net loans outstanding 2.63% 2.87%
==== ====
An analysis of the allowance for loan losses for the periods ended
June 30, 1996 and 1995 were as follows:
THREE MONTHS SIX MONTHS
ENDED ENDED
------------ ----------
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
---- ---- ---- -----
(Dollars in thousands)
Balance at beginning of period $3,331 $3,048 $3,241 $3,062
Provision charged to operations 125 65 250 139
Charge offs, net (45) (70) (80) (158)
------ ------ ------ ------
Balance at end of period $3,411 $3,043 $3,411 $3,043
====== ====== ====== ======
STATEWIDE FINANCIAL CORP. AND SUBSIDIARY
SELECTED FINANCIAL AND REGULATORY RATIOS AND OTHER DATA
At or for the At or for the
Three Months Six Months
Ended Ended
June 30, June 30,
--------- ---------
1996 1995 1996 1995
---- ---- ---- ----
SELECTED FINANCIAL RATIOS (1):
Return on Average Assets .70% .50% .74% .64%
Return on Average Equity 6.79% 10.62% 6.74% 13.82%
Shareholders' Equity to Assets 9.90% 4.74% 9.90% 4.74%
Net Interest Rate Spread (2) 2.92% 3.50% 2.93% 3.56%
Net Interest Margin (3) 3.37% 3.57% 3.40% 3.67%
Non-Interest Income to Average Assets .31% .27% .37% .36%
Non-Interest Expense to Average Assets 2.43% 2.86% 2.46% 2.81%
Efficiency Ratio (4) 70.99% 78.20% 71.32% 73.23%
Average Interest Earning Assets to
Average Interest Bearing Liabilities 112.07% 102.52% 112.69% 103.57%
June 30, December 31,
1996 1995
---- ------
REGULATORY CAPITAL RATIOS:
Tangible Capital Ratio 10.42% 10.28%
Core Capital Ratio 10.42% 10.28%
Risk-Based Capital Ratio 31.00% 32.88%
ASSET QUALITY RATIOS:
Non-Performing Loans to Total Net
Loans 2.63% 2.87%
Non-Performing Loans to Total Assets 1.04% 1.01%
Non-Performing Assets to Total Assets 1.13% 1.12%
Allowance for Loan Losses to Non-
performing Loans 48.20% 57.66%
Allowance for Loan Losses to Total
Net Loans 1.27% 1.66%
OTHER DATA:
Number of Deposit Accounts 51,419 50,062
Number of Offices 16 15
Notes to Selected Financial Ratios
(1) Ratios are annualized where appropriate.
(2) Interest rate spread represents the difference between the
weighted average yield on average interest-earning assets
and the weighted average costs of average interest-bearing
liabilities.
(3) Net interest margin represents net interest income as a
percent of average interest-earning assets.
(4) Efficiency ratio represents total non-interest expense divided by
the sum of net interest income after provision for loan losses,
and recurring non-interest income.
STATEWIDE FINANCIAL CORP. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
The following discussion and analysis refers to Statewide Financial
Corp. (the "Company") and its wholly-owned subsidiary, Statewide
Savings Bank, S.L.A. (the "Bank"). The Company was organized on May
31, 1995 for the purpose of acquiring all of the capital stock of the
Bank.
For the quarter ended June 30, 1996, the Company had net income of
$1,154,000, or $0.24 per share, as compared to net income of $595,000
for the same period last year. For the six months ended June 30,
1996, the Company had net income of $2,359,000, or $0.49 per share, as
compared to $1,518,000 for the prior year's period. These increases
primarily reflect the continued growth in the Company's balance sheet,
made possible through the infusion of new capital into the Company
from the September 1995 initial public offering, partially offset by
the continuing efforts of the Company to position itself for the
growth it has experienced.
The Company completed its initial public offering of its common stock
on September 29, 1995. Accordingly, per share data did not exist for
the prior period.
Net income for the quarter ended June 30, 1996 was $51,000 less than
the $1,205,000 of net income realized during the quarter ended March
31, 1996. This difference was primarily the result of non-recurring
net income of $228,000 during the first quarter versus $108,000 during
the second quarter of 1996. Net interest income increased $212,000, or
4.1%, between quarters, primarily as a result of growth in the loan
portfolio which was principally financed by short term borrowings.
Additionally, non-interest expense increased $139,000, or 3.6%,
chiefly because of marketing expenses.
FINANCIAL CONDITION
At June 30, 1996 shareholders' equity amounted to $67.2 million
compared to $72.3 million at December 31, 1995. The ratio of
shareholders' equity to total assets was 9.9% at June 30, 1996
compared to 12.94% at December 31, 1995. The $5.1 million decrease in
shareholders' equity at June 30, 1996 from December 31, 1995 resulted
principally from four factors. During June 1996, the Company purchased
211,600 shares of its stock on the open market for $2.6 million, of
which 199,881 shares were re-issued in July 1996 under management
recognition and retention plans. The Company also incurred a $5.3
million (net of tax) decrease in the market value of its investment
portfolio, all of which it classifies as available for sale.
Partially offsetting these decreases were income of $2.4 million and
allocation of the Company's Employee Stock Ownership Plan ("ESOP")
shares of $0.4 million.
Total assets at June 30, 1996 were $678.4 million, an increase of
$119.4 million from December 31, 1995. Investment activities and
lending activities were the principal reasons for this growth. The
growth was primarily funded through additional short term borrowing
over amounts outstanding at December 31, 1995.
Loans receivable, net, increased $73.0 million to $268.8 million at
June 30, 1996 from $195.8 million at December 31, 1995. The primary
increase was in one to four family first mortgage loans which
increased by $62.5 million, net of amortization, from December 31,
1995. During the six month period, the Company purchased $63.3
million of loans and originated $28.3 million. These loans have
anticipated yields of 7.18% based upon estimated prepayment speeds at
June 30, 1996. Investments at June 30, 1996 were $381.2 million, a
$41.0 million increase from the December 31, 1995 balance of $340.2
million. This growth resulted from continuation of the Company's
strategy of leveraging its excess capital. During the six months
ended June 30, 1996, the Company purchased $97.9 million of mortgage-
backed securities which had average lives, considering expected
prepayments, consistent with five and ten year Treasury instruments.
Asset growth during the periods since December 31, 1995 has been
primarily funded with short term borrowing, as supplemented by deposit
growth. Short term borrowing increased $114.9 million during the six
month period to $159.6 million at June 30, 1996. The borrowing is
primarily comprised of overnight borrowing with the Federal Home Loan
Bank of New York (the "FHLB"), and securities sold under agreements to
repurchase. Costs for these borrowings approximated 5.43% at June 30,
1996. All of these borrowings mature before September 30, 1996 and it
is the intention of the Company to keep its borrowing maturities short
term, subject to prevailing market interest rates, at least into the
fourth calendar quarter of 1996.
Other assets increased $3.8 million, from $1.1 million at December 31,
1995 to $4.9 million at June 30, 1996, primarily because of the
Federal income tax benefit associated with unrealized loss on
investments recorded as of June 30, 1996.
Deposits grew $8.4 million from $438.0 million at December 31, 1995 to
$446.4 million at June 30, 1996. Within this growth, core deposits
increased 7.5%, or $16.2 million. The change in core deposits was the
result of 1)marketing efforts by the Company as it has opened three
branches since May 1995, and established deposit agreements with
several affinity groups, and 2)transfers of balances from depositors
who preferred the liquidity of lower cost savings accounts to the
lower certificates of deposit ("CD") market interest rates which were
being offered during much of the period.
RESULTS OF OPERATIONS
THREE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1995
Net Income. For the three months ended June 30, 1996, net income
increased by $559 thousand, or 93.9%, to $1,154,000 from $595 thousand
for the same period last year. The increase in net income was
primarily a result of an increase in net interest income partially
offset by an increase in non-interest expense.
Interest Income. Total interest and dividend income increased $2.9
million, or 33.7%, to $11.5 million for the three months ended June
30, 1996 from $8.6 million for the three months ended June 30, 1995.
This growth in interest income is the result of a $179.4 million, or
38.7%, increase in the average balance of total interest-earning
assets over the comparable period last year, partially offset by a
decrease in the average yield on total interest-earning assets to
7.13% during the current quarter, compared to 7.40% during the quarter
ended June 30, 1995. The change in the average balances of interest-
earning assets between the prior year quarter and this quarter was
principally affected by: 1)investment of the proceeds from the
Company's initial public offering at the end of September 1995, and 2)
investment of funds borrowed from the FHLB during the period since the
Company's initial public offering, partially offset by 3)mortgage loan
and mortgage-backed securities principal amortization and prepayments.
Interest-earning assets most affected by this net increase in average
balances were mortgage-backed securities and first mortgage loans.
The decline in average yield reflects reinvestment of mortgage
principal repayments and amortization, as well as securities'
maturities, at lower rates than were previously earned.
Interest Expense. Interest expense increased $1.6 million, or 35.3%,
during the current quarter compared to the same quarter a year ago.
Interest expense on deposits increased $457 thousand, or 12.4%, and
interest expense on borrowed funds increased $1.1 million, or 146.5%.
The average balance of interest-bearing deposits increased $32.4
million, or 8.1%, for the quarter ended June 30, 1996 over the same
quarter in the prior year. In addition, the average cost of the
interest-bearing deposits grew to 3.83% for the quarter ended June 30,
1996 as compared to 3.68% for the same period in the previous year.
This cost increase primarily reflects a change in the Company's
savings accounts interest rates, which resulted as the Company opened
its three new branches. The Company paid bonuses to statement savings
rates, on a limited basis, to customers of those new branches. Also,
during 1995 the Company started to market its products, including
deposits, to affinity groups. Under this program, the Company offers
a higher statement savings rate which is tied to the three month U.S.
Treasury rate. The Company believes that the higher interest rate is
economically feasible since service under this program is principally
electronic, and has limited operational and incremental costs. This
program also has the advantage of soliciting new customers with
profiles to match loan products the Company is marketing.
The average balance of borrowed funds increased $98.1 million, or 239%
from the same quarter a year ago, while the weighted average borrowing
cost decreased 203 basis points from 7.44% to 5.41%. The increase in
borrowing reflects implementation of the Company's strategy to
leverage its excess capital, and this growth, along with the capital
provided through the Company's initial public offering, funded the
increase in assets which has occurred since June 30, 1995. The
decrease in the weighted average cost of borrowing reflects lower
short term rates during the period since June 30, 1995, and the effect
of prepayment of higher cost debt in December 1995. The borrowings
outstanding at June 30, 1996 have a weighted average cost of 5.43% at
that date, and all mature before September 30, 1996. It is the
Company's intention to keep its borrowing maturities short term,
subject to prevailing market interest rates, at least into the fourth
calendar quarter of 1996.
Net Interest Income. For the quarter ended June 30, 1996 net interest
income increased $1,309,000, or 31.9%, over the comparable period last
year. The increase is the result of an increase in interest income
larger than the increase in interest expense. During the current
quarter, net interest margin, which is interest income as a percentage
of average interest-earning assets, decreased to 3.37% from 3.57%
during the quarter ended June 30, 1995. This decrease is the result
of lower yield realized during the current quarter and increased
borrowings to leverage the Company's capital during this quarter than
the same quarter a year ago. The Company invested approximately $75
million during this quarter, including reinvestment of mortgage
principal and amortization, and maturities of securities, compared to
approximately $12 million during the quarter ended June 30, 1995. The
interest rate environment during the current quarter was lower than
that reflected in the investments and loans which matured and paid
down during the current quarter. In addition, net interest income
includes higher borrowing costs for this quarter over that incurred in
the same period last year.
Table 1 following presents a summary of the Company's interest-earning
assets and their average yields, and interest-bearing liabilities and
their average costs and shareholders' equity for the three months
ended June 30, 1996 and 1995. The average balance of loans includes
non-accrual loans, and the yields include loan fees which are
considered adjustments to yields.
Table 1
Three Months Ended June 30,
--------------------------------------
1996 1995
---------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Average Interest Average Average Interest Average
Balance Yield/ Balance Yield/
Cost Cost
------- -------- ---- ------- -------- ----
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest-earning:
First Mortgage Loans $208,257 $3,995 7.67% $143,692 $3,014 8.39%
Consumer and Other Loans 35,864 842 9.39% 25,805 662 10.26%
Mortgage-backed
Securities 324,367 5,438 6.71% 201,696 3,523 6.99%
Debt Securities 66,575 1,064 6.39% 85,209 1,252 5.88%
Money Market Investments 317 4 5.05% 2,958 44 5.95%
FHLBNY Stock 7,007 109 6.22% 3,628 71 7.83%
------- ------ ------- ------
Total Interest-earning
Assets 642,382 $11,452 7.13% 462,988 $8,566 7.40%
======= ======
Non-interest-earning
Assets 16,364 14,114
------- -------
Total Assets $658,746 $477,102
======== ========
Liabilities and
Shareholders' Equity:
Interest-bearing
Liabilities:
Savings Accounts $129,654 $ 920 2.84% $110,330 $ 678 2.46%
NOW 44,983 316 2.81% 45,215 317 2.80%
Money Market 45,103 340 3.02% 41,489 280 2.70%
Certificates 214,268 2,580 4.82% 204,605 2,423 4.74%
Borrowed Funds 139,164 1,883 5.41% 41,082 764 7.44%
-------- ------ -------- ------
Total Interest-bearing
Liabilities 573,172 $ 6,039 4.21% 442,721 $4,462 4.03%
-------- ======= -------- ======
Non-interest-bearing
Deposits 12,774 8,973
Other Non-interest-bearing
Liabilities 4,813 3,540
-------- --------
Total Non-interest-earning
Liabilities 17,587 12,513
-------- --------
Total Liabilities 590,759 455,234
Shareholders' Equity 67,987 21,868
-------- --------
Total Liabilities and
Shareholders' Equity $658,746 $477,102
======== ========
Provision for Loan Losses. The provision for loan losses increased by
$60 thousand to $125 thousand for the three months ended June 30, 1996
from $65 thousand for the same period last year. The provision for
the three months ended June 30, 1996 was determined by management
after review of, among other things, the Company's loan portfolio, the
risks inherent in the Company's lending activities and the economy in
the Company's market areas. Although management believes that both
the provision incurred during the quarter ended June 30, 1996 and the
balance of the allowance for loan losses are adequate, future
additions to the allowance may be necessary based upon changes in
economic condition, or the credit worthiness of borrowers and the
value of collateral underlying loans. As of June 30, 1996, non-
performing loans increased $.7 million, or 10.9%, to $7.1 million from
$6.4 million at March 31, 1996. These non-performing loans represent
2.63% of total net loans outstanding at June 30, 1996 compared to a
2.86% ratio of non-performing loans to total net loans at March 31,
1996. At June 30, 1996, the allowance for loan losses was $3.4
million, or 48.2%, of total non-performing loans, compared to $3.3
million, or 52.2%, of total non-performing loans at March 31, 1996.
Non-Interest Income. Total non-interest income increased $196
thousand to $514 thousand for the three months ended June 30, 1996
from $318 thousand for the same period last year. The principal
reason for this increase was recognition of income from the collection
of unaccrued interest. During 1995, in connection with the workout of
a non-performing loan, the Company received full payment of the
outstanding principal in accord with the terms of a bankruptcy
settlement. Subsequent payments, representing unaccrued interest
totalled $169 thousand during the current quarter. There were no like
amounts received during the same quarter a year ago. All unaccrued
interest has now been paid to the Company under this plan.
Non-Interest Expense. Total non-interest expense increased 17.4%, or
$.6 million, to $4.0 million for the current quarter ended June 30,
1996 from $3.4 million for the same period last year.
Salaries and employee benefits expenses for the three months ended
June 30, 1996, increased $222 thousand, or 12.0%, compared to the same
period a year ago. Of this amount, approximately $141 thousand was
related to increased staffing requirements necessary to position the
Company to achieve its marketing and operational objectives, including
increased executive and loan administrative staff, and staffing and
training for the Company's new branches. Other salary and benefits
expenses, incurred for the same reason, include provisions for
additional incentive programs for employees at all levels of the
Company, including $201 thousand associated with the Company's ESOP
established September 29, 1995. Finally, salary and benefit expenses
also reflect normal salary increases from salary in place in the prior
year period.
Occupancy costs increased $95 thousand, or 22.5%, for the current
quarter over the same period last year. The increase was principally
a result of new lease costs for the three new branches the Company has
opened since the quarter ended June 30, 1995 and the related
amortization of leasehold improvements to these branches.
Professional fees increased $82 thousand, or 89.1%, for the three
months ended June 30, 1996 over the three months ended June 30, 1995,
principally as the result of marketing and computer system studies
performed. In addition, legal fees have increased because of the
ongoing requirements of a public company whereas in the same quarter a
year ago, the Company was not publicly owned.
Other non-interest expense increased $143 thousand, or 23.3%, for the
current quarter versus the same quarter a year ago, principally
because of advertising and promotional expenses in conjunction with
the build up of core deposits and the promotion of loan growth.
Income Taxes. The increase in income taxes of $294 thousand, or
82.8%, from the three month period a year ago was a result of the
increase in taxable income from that period.
SIX-MONTH PERIODS ENDED JUNE 30, 1996 AND 1995
Net Income. For the six months ended June 30, 1996, net income
increased by $841 thousand, or 55.4%, to $2,359,000 from $1,518,000
for the same period last year. The increase in net income was
primarily a result of an increase in net interest income partially
offset by an increase in non-interest expense.
Interest Income. Total interest and dividend income increased $5.3
million, or 31.3%, to $22.3 million for the six months ended June 30,
1996 from $17.0 million for the six months ended June 30, 1995. This
growth in interest income is the result of a $163.1 million, or 35.4%,
increase in the average balance of total interest-earning assets over
the comparable period last year, partially offset by a decrease in the
average yield on total interest-earning assets to 7.15% during the
current period, compared to 7.37% during the six months ended June 30,
1995. The change in the average balances of interest-earning assets
between the prior year period and this period was principally affected
by: 1)investment of the proceeds from the Company's initial public
offering at the end of September 1995, and 2) investment of funds
borrowed from the FHLB during the period since the Company's initial
public offering, partially offset by 3)mortgage loan and mortgage-
backed securities principal amortization and prepayments. Interest-
earning assets most affected by this net increase in average balances
were mortgage-backed securities and first mortgage loans. The decline
in average yield reflects reinvestment of mortgage principal
repayments and amortization, as well as securities' maturities, at
lower rates than were previously earned.
Interest Expense. Interest expense increased $3.1 million, or 35.7%,
during the current six month period compared to the same period a year
ago. Interest expense on deposits increased $1.3 million, or 18.5%,
and interest expense on borrowed funds increased $1.8 million, or
116.0%. The average balance of interest-bearing deposits increased
$33.3 million, or 8.3%, for the six months ended June 30, 1996 over
the same six months in the prior year. In addition, the average cost
of the interest-bearing deposits grew to 3.88% for the six months
ended June 30, 1996 as compared to 3.55% for the same period in the
previous year. This cost increase reflects a change in the mix of
deposits, which began during 1994 when interest rates rose. The
Company started offering market competitive CD rates, generally for
terms of less than 18 months, in conjunction with advertising
campaigns geared toward reemphasizing the Company's presence in its
markets. Although these rates were not the highest in the Company's
market territory, they were higher than those it traditionally
offered. Subsequently, as the Company opened its three new branches,
it continued with these rate offerings as well as paying bonuses to
statement savings rates, on a limited basis, to customers of those new
branches. Also, during 1995 the Company started to market its
products, including deposits, to affinity groups. Under this program,
the Company offers a higher statement savings rate which is tied to
the three month U.S. Treasury rate.
The average balance of borrowed funds increased $79.7 million, or 196%
from the same six month period a year ago, while the weighted average
borrowing cost decreased 200 basis points from 7.41% to 5.41%. The
increase in borrowing reflects implementation of the Company's
strategy to leverage its excess capital, and this growth, along with
the capital provided through the Company's initial public offering,
funded the increase in assets which has occurred since March, 1995.
The decrease in the weighted average cost of borrowing reflects lower
short term rates during the period since March, 1995, and the effect
of prepayment of higher cost borrowings in December 1995.
Net Interest Income. For the six months ended June 30, 1996 net
interest income increased $2,242,000, or 26.8% over the comparable
period last year. The increase is the result of an increase in
interest income larger than the increase in interest expense. During
the current six month period, net interest margin decreased to 3.40%
from 3.67% during the six months ended June 30, 1995. This decrease
is the result of lower yield realized during the current period and
more borrowings to leverage the Company's capital during this period
than the same period a year ago. The Company invested approximately
$194 million during the six months ended June 30, 1996, including
reinvestment of mortgage principal and amortization, and maturities of
securities, compared to approximately $26 million during the six
months ended June 30,1995. The interest rate environment during the
current six month period was lower than that reflected in the
investments and loans which matured and paid down during that period.
In addition, net interest income includes higher borrowing costs for
this six months over that incurred in the same period last year.
Table 2 following presents a summary of the Company's interest-earning
assets and their average yields, and interest-bearing liabilities and
their average costs and shareholders' equity for the six months ended
June 30, 1996 and 1995. The average balance of loans includes non-
accrual loans, and the yields include loan fees which are considered
adjustments to yields.
Table 2
Six Months Ended June 30,
--------------------------------------
1996 1995
---------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Average Interest Average Average Interest Average
Balance Yield/ Balance Yield/
Cost Cost
------- ------- ---- ------- -------- ----
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest-earning:
First Mortgage Loans $192,183 $ 7,498 7.80% $144,519 $6,006 8.31%
Consumer and Other Loans 33,696 1,597 9.48% 25,360 1,282 10.11%
Mortgage-backed Securities 318,638 10,631 6.67% 204,092 7,164 7.02%
Debt Securities 71,683 2,330 6.50% 79,704 2,285 5.73%
Money Market Investments 981 27 5.50% 3,046 89 5.84%
FHLBNY Stock 6,301 199 6.32% 3,672 147 8.01%
------- ------ ------- ------
Total Interest-earning
Assets 623,482 $22,282 7.15% 460,393$16,973 7.37%
======= =======
Non-interest-earning Assets 16,172 13,990
------- -------
Total Assets $639,654 $474,383
======== ========
Liabilities and
Shareholders' Equity:
Interest-bearing
Liabilities:
Savings Accounts $126,509 $1,743 2.76% $110,583 $1,376 2.49%
NOW 44,745 625 2.79% 48,448 679 2.80%
Money Market 44,639 668 2.99% 41,394 534 2.58%
Certificates 216,900 5,370 4.95% 199,045 4,502 4.52%
Borrowed Funds 120,486 3,262 5.41% 40,747 1,510 7.41%
------- ------ ------- -----
Total Interest-bearing
Liabilities 553,279 $11,668 4.22% 440,217 $8,601 3.91%
------- ======= ------- ======
Non-interest-bearing
Deposits 11,653 8,835
Other Non-interest-bearing
Liabilities 4,759 3,634
------- -------
Total Non-interest-earning
Liabilities 16,412 12,469
------- -------
Total Liabilities 569,691 452,686
Shareholders' Equity 69,963 21,697
------- -------
Total Liabilities and
Shareholders' Equity $639,654 $474,383
======== ========
Provision for Loan Losses. The provision for loan losses increased by
$111 thousand to $250 thousand for the six months ended June 30, 1996
from $139 thousand for the same period last year. The provision for
the six month periods was determined by management after review of,
among other things, the Company's loan portfolio, the risks inherent
in the Company's lending activities and the economy in the Company's
market areas. As of June 30, 1996, non-performing loans increased
$1.5 million, or 25.9%, to $7.1 million from $5.6 million at December
31, 1995. These non-performing loans represent 2.63% of total net
loans outstanding at June 30, 1996 compared to a 2.87% ratio of non-
performing loans to total net loans at December 31, 1995. At June 30,
1996, the allowance for loan losses was $3.4 million, or 48.2%, of
total non-performing loans, compared to $3.2 million, or 57.7%, of
total non-performing loans at December 31, 1995.
Non-Interest Income. Total non-interest income increased $325
thousand to $1,180,000 for the six months ended June 30, 1996 from
$855 thousand for the same period last year. The principal reasons
for this increase were recognition of income from the collection of
unaccrued interest, partially offset by a decrease in commissions from
annuity sales. During 1995, in connection with the workout of a non-
performing loan, the Company received full payment of the outstanding
principal in accord with the terms of a bankruptcy settlement.
Subsequent payments, representing unaccrued interest, totalled $525
thousand during the current six month period. There were no like
amounts received during the same period a year ago. All unaccrued
interest has now been paid to the Company under this plan. In
addition, commissions from sales of annuities declined $108 thousand
during the six months ended June 30, 1996 as compared to the same six
months a year ago because the Company redirected its resources toward
developing its new branches and marketing its core products rather
than selling annuities.
Non-Interest Expense. Total non-interest expense increased 18.1%, or
$1.2 million, to $7.9 million for the six months ended June 30, 1996
from $6.7 million for the same period last year.
Salaries and employee benefits expenses for the six months ended June
30, 1996, increased $815 thousand, or 24.3%, compared to the same
period a year ago. Of this amount, approximately $424 thousand was
related to increased staffing requirements necessary to position the
Company to achieve its marketing and operational objectives, including
increased executive and loan administrative staff, and staffing and
training for the Company's new branches. Other salary and benefits
expenses, incurred for the same reason, include provisions for
additional incentive programs for employees at all levels of the
Company, including $307 thousand associated with the Company's ESOP
established September 29, 1995. Finally, salary and benefit expenses
also reflect normal salary increases from salary in place in the prior
year period.
Occupancy costs increased $218 thousand, or 26.6%, for the six months
ended June 30, 1996 over the same period last year. The increase was
principally a result of new lease costs for the three new branches the
Company has opened since the quarter ended March 31, 1995 and the
related amortization of leasehold improvements to these branches, as
well as from branch maintenance required because of frequent snow
storms during the first quarter of 1996.
The remaining components of non-interest expense increased $171
thousand, or 6.8%, from $2,483,000 for the six months ended June 30,
1995 to $2,654,000 for the current six month period, primarily as a
result of marketing and advertising studies and promotional expense
incurred during the current period.
Income Taxes. The increase in income taxes of $411 thousand, or
44.9%, from the six month period a year ago was a result of the
increase in taxable income from that period.
THREE-MONTH PERIODS ENDED JUNE 30, 1996 AND MARCH 31, 1996
Net Income. For the three months ended June 30, 1996, net income
decreased by $51 thousand, or 4.2%, to $1,154,000 from $1,205,000 for
the preceding quarter, the three months ended March 31, 1996. The
decrease in net income was primarily a result of a decrease in non-
recurring non-interest income and an increase in non-interest expense,
partially offset by an increase in net interest income.
Interest Income. Total interest and dividend income increased $622
thousand, or 5.7%, to $11.5 million for the three months ended June
30, 1996 from $10.8 million for the three months ended March 31, 1996.
This growth in interest income is the result of a $37.8 million, or
6.3%, increase in the average balance of total interest-earning assets
over the preceding quarter, partially offset by a decrease in the
average yield on total interest-earning assets to 7.13% during the
current quarter, compared to 7.17% during the three months ended March
31, 1996. The change in the average balances of interest-earning
assets between the prior period and this period was principally
affected by: 1)the purchase and origination of $53.9 million of loans
during the current quarter, and 2)the purchase of $19.7 million of
mortgage-backed securities, offset by principal amortization and
prepayments on mortgage-backed securities and debt securities. The
decline in average yield reflects reinvestment of mortgage principal
repayments and amortization, as well as securities' maturities, at
lower rates than were previously earned.
Interest Expense. Interest expense increased $410 thousand, or 7.3%,
during the current three month period compared to the preceding
quarter. Interest expense on deposits decreased $94 thousand, or 2.2%,
and interest expense on borrowed funds increased $504 thousand, or
36.5%. The average balance of deposits increased $2.4 million, or
0.6%, for the three months ended June 30, 1996 over the preceding
three month period. In addition, the average cost of the deposits
decreased to 3.83% for the three months ended June 30, 1996 as
compared to 3.94% for the three months ended March 31, 1996. This
cost decrease primarily reflects management's decision to reduce rates
being paid on certificates of deposit, rather than renewing them at
higher promotional rates which were being offered during late 1994 and
through 1995. During 1994 and 1995, the Company had started offering
market competitive CD rates, generally for terms of less than 18
months, in conjunction with advertising campaigns geared toward
reemphasizing the Company's presence in its markets. The effect of
the interest rate reduction on certificates of deposit was partially
offset by increases in the average interest rates paid on the
Company's savings accounts, as the Company continued its marketing and
promotional efforts to increase its core accounts. During the current
quarter, interest expense reflects the full effect of the promotional
rates it offered to new customers of its Hoboken, New Jersey branch,
opened March 9, 1996. In addition, rates offered to its customers
under the affinity group program are tied to the three month Treasury
rates, which are higher this quarter than last quarter.
The average balance of borrowed funds increased $37.4 million, or
36.7%, from the three months ended March 31, 1996, while the weighted
average borrowing cost decreased from 5.42% to 5.41%. The increase in
borrowing reflects the continued implementation of the Company's
strategy to leverage its excess capital, and this growth, funded the
increase in interest earning assets which has occurred since March 31,
1996.
Net Interest Income. For the three months ended June 30, 1996, net
interest income increased $212 thousand, or 4.1%, over the preceding
three month period. The increase is the result of an increase in
interest income larger than the increase in interest expense. During
the current three month period, net interest margin decreased to 3.37%
from 3.44% during the three months ended March 31, 1996. This
decrease is the result of lower yield realized during the current
period and more borrowings to leverage the Company's capital during
this period than the preceding quarter. The Company invested
approximately $73.5 million during the three months ended June 30,
1996, including reinvestment of mortgage principal and amortization,
and maturities of securities, compared to approximately $119 million
during the three months ended March 31, 1996. While the interest rate
environment during the current three month period was generally higher
than the preceding quarter, it was still lower than that reflected in
the investments and loans which matured and paid down during this
quarter. In addition, net interest income includes higher borrowing
costs for this quarter over that incurred in the preceding quarter.
Table 3 following presents a summary of the Company's interest-earning
assets and their average yields, and interest-bearing liabilities and
their average costs and shareholders' equity for the three months
ended June 30, 1996 and the three months ended March 31, 1996. The
average balance of loans includes non-accrual loans, and the yields
include loan fees which are considered adjustments to yields.
Table 3
Three Months Ended
--------------------------------------
June 30, 1996 March 31,1996
---------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
AverageInterest Average Average InterestAverage
Balance Yield/ Balance Yield/
Cost Cost
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest-earning:
First Mortgage Loans $208,257 $3,995 7.67% $176,106 $3,503 7.96%
Consumer and Other Loans 35,864 842 9.39% 31,527 755 9.58%
Mortgage-backed Securities 324,367 5,438 6.71% 312,907 5,193 6.64%
Debt Securities 66,575 1,064 6.39% 76,795 1,266 5.59%
Money Market Investments 317 4 5.05% 1,644 23 5.60%
FHLBNY Stock 7,007 109 6.22% 5,595 90 6.43%
------- ------ ------- ------
Total Interest-earning
Assets 642,382 $11,452 7.13% 604,574 $10,830 7.17%
======= =======
Non-interest-earning Assets 16,364 15,989
------- -------
Total Assets $658,746 $620,563
======== ========
Liabilities and
Shareholders' Equity:
Interest-bearing
Liabilities:
Savings Accounts $129,654 $ 920 2.84% $123,364 $ 823 2.67%
NOW 44,983 316 2.81% 44,506 309 2.78%
Money Market 45,103 340 3.02% 44,174 328 2.97%
Certificates 214,268 2,580 4.82% 219,535 2,790 5.08%
Borrowed Funds 139,164 1,883 5.41% 101,810 1,379 5.42%
------- ------ ------- ------
Total Interest-bearing
Liabilities 573,172 $ 6,039 4.21% 533,389 $5,629 4.22%
------- ======= ------- ======
Non-interest-bearing
Deposits 12,774 10,531
Other Non-interest-bearing
Liabilities 4,813 4,704
------- -------
Total Non-interest-earning
Liabilities 17,587 15,235
------- -------
Total Liabilities 590,759 548,624
Shareholders' Equity 67,987 71,939
------- -------
Total Liabilities and
Shareholders' Equity $658,746 $620,563
======== ========
Provision for Loan Losses. There was no change in the provision for
loan losses between the three months ended June 30, 1996 and the three
months ended March 31, 1996. During both quarters the provision was
$125 thousand. The provision for each of the three month periods was
determined by management after review of, among other things, the
Company's loan portfolio, the risks inherent in the Company's lending
activities and the economy in the Company's market areas.
Non-Interest Income. Total non-interest income decreased $152
thousand to $514 thousand for the three months ended June 30, 1996
from $666 thousand for the preceding quarter. The principal reason
for this decrease was that less income was recognized from the
collection of unaccrued interest during the current quarter than had
been recognized in the preceding quarter. During 1995, in connection
with the workout of a non-performing loan, the Company received full
payment of the outstanding principal in accord with the terms of a
bankruptcy settlement. Subsequent payments, representing unaccrued
interest totalled $169 thousand during the current three month period
and $356 thousand during the preceding three months ended March 31,
1996. All unaccrued interest has now been paid to the Company under
this plan.
Non-Interest Expense. Total non-interest expense increased 3.6%, or
$139 thousand, to $3,999,000 for the three months ended June 30, 1996
from $3,860,000 for the preceding three months. The principal reasons
for the increase were increased marketing, advertising and promotion
expenses incurred as part of Company's ongoing programs to increase
its core deposits and loan portfolio.
Income Taxes. The decrease in income taxes of $28 thousand, or 4.1%,
from the three months ended March 31, 1996 was a result of the
decrease in taxable income from that period.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity is a measure of its ability to fund loans and
withdrawals of deposits in a cost effective manner. The Company's
primary financing sources are deposits obtained in its own market
area, advances from the FHLB and recently, securities sold under
repurchase agreements. Other sources of funds include scheduled
amortization and prepayments of loan principal and mortgage-backed
securities, maturities of debt securities, and funds provided by
operations. At June 30, 1996, the Company had total liquid assets
equal to 26.5% of total assets and 33.6% of total deposits. In
addition, at June 30, 1996, the Company also had available to it $2.3
million under a line of credit with the FHLB, expiring October 30,
1996, and approximately $12.7 million of excess collateral pledged
with the FHLB. The Company also has approximately $208.8 million in
unpledged debt, equity and mortgage-backed securities which could be
used to collateralize additional borrowings. Finally, all of the
Company's securities are available for sale.
At June 30, 1996, capital resources were sufficient to meet
outstanding loan commitments of $77.3 million and commitments on
unused lines of credit of $2.8 million. Certificates of deposit which
are scheduled to mature in one year or less from June 30, 1996
totalled $179.3 million. Management is unable to predict the amount
of such deposits that will renew with the Company. As a result of the
Company's liquidity position, management does not believe the
Company's operations will be materially affected by a failure to renew
these deposits. However, experience indicates that a significant
portion of such deposits should remain with the Company.
During the six months ended June 30, 1996, investment and lending
activities were the principal requirements for funding. Purchases of
mortgage-backed securities exceeded principal repayments and
maturities of debt and equity securities by $50.3 million. Purchase
and originations of loans exceeded principal collections by $73.4
million. The principal sources of funding for these investments were
increases in borrowings, net of repayments, from the FHLB of $113.5
million and an increase in deposits of $8.4 million.
During the six months ended June 30, 1995, investment activities
represented the primary funding need. Purchases of debt and equity
securities exceeded maturities and principal repayments of mortgage-
backed securities by $5.7 million. The principal sources of funding
for these purchases were the excess of loan repayments over loan
originations and cash provided by operations.
At June 30, 1996, the Bank exceeded each of the regulatory capital
requirements applicable to it. The table below presents the Bank's
capital ratios at June 30, 1996 as compared to the minimum OTS
requirements:
Required Capital Actual Capital
---------------- --------------
Excess of
Actual Over
% of % of Regulatory
(dollars in thousands) Amount Assets Amount Assets Requirement
Tangible Capital $ 10,258 1.50% $71,274 10.42% $61,016
Core Capital 27,354 4.0% 71,274 10.42% 43,920
Risk Based Capital 18,835 8.0% 72,993 31.00% 54,158
PART II OTHER INFORMATION
Item 1. Legal Proceedings
There are various claims and lawsuits in which the Bank is
periodically involved incidental to the Bank's business. In
the opinion of management, no material loss is expected from
any such pending claims or lawsuits.
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.
During the quarter ended June 30, 1996, the Company held its
annual meeting of shareholders. The following is the
information required by this item:
(a) The annual meeting of shareholders was held on May 15,
1996.
(b) Directors Victor M. Richel and Walter G. Scott were
elected to new terms on the Board of Directors expiring
in 1999. The term of office of each of the following
directors continues beyond the annual meeting: Maria
Ramirez, Stephen R. Tilton and Thomas V. Whelan.
(c) The following matters were voted upon at the annual
meeting:
Proposal I - The election of Victor M. Richel and
Walter G. Scott to new terms on the Board of Directors:
Name Votes In Favor Votes Against
---- -------------- -------------
Victor M. Richel 4,723,469 46,516
Walter G. Scott 4,723,769 46,216
Proposal II - Approval of the Statewide Financial Corp.
1996 Incentive Plan:
Votes In Favor Votes Against Abstentions Broker Non-Votes
-------------- ------------- ----------- ----------------
3,225,295 277,567 14,562 1,252,661
Proposal III - Approval of the Statewide Financial
Corp. 1996 Stock Option Plan for Outside Directors:
Votes In Favor Votes Against Abstentions Broker Non-Votes
-------------- ------------- ----------- ----------------
2,963,632 528,214 25,578 1,254,264
Proposal IV - Approval of the Statewide Financial Corp.
Recognition and Retention Plan for Executive Officers
and Employees:
Votes In Favor Votes Against Abstentions Broker Non-Votes
-------------- ------------- ----------- ----------------
2,913,405 572,719 31,300 1,252,661
Proposal V - Approval of the Statewide Financial Corp.
Recognition and Retention Plan for Outside Directors:
Votes In Favor Votes Against Abstentions Broker Non-Votes
-------------- ------------- ----------- ----------------
3,074,689 406,326 26,183 1,262,787
Item 5. Other Information.
Not applicable.
Item 6. Exhibits and Report of Form 8-K.
(a) Exhibits.
Number Description
------ -----------
27 Financial Data Schedule
(b) Reports on Form 8-K.
1.) The Registrant filed a Current Report on Form 8-K
dated April 22, 1996 announcing the Registrant's
earnings for the first quarter ended March 31,
1996.
2.) The Registrant filed a Current Report on Form 8-K
dated June 13, 1996 announcing Office of Thrift
Supervision approval for the Registrant's
Management Recognition and Retention Plans for
employees and outside directors.
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.
STATEWIDE FINANCIAL CORP.
Date: August 12, 1996 By: Bernard F. Lenihan
BERNARD F. LENIHAN
Senior Vice President and Chief
Financial Officer<PAGE>
</TABLE>
