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 September 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 October 31, 1996: Common Stock, No Par Value:
4,994,545 shares outstanding.
STATEWIDE FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Three Months Nine Months
Ended Ended
September 30, September 30,
------------- -------------
1996 1995 1996 1995
---- ---- ---- ----
INTEREST INCOME:
Interest and fees on loans $ 5,844 $ 3,661 $14,939 $10,949
Interest on mortgage-backed
securities 4,803 3,289 15,434 10,453
Interest and dividends on
investment securities 1,067 1,547 3,424 3,921
Dividends on FHLBNY stock 139 72 338 219
------ ------ ------ ------
Total interest and dividend income 11,853 8,569 34,135 25,542
------ ------ ------ ------
INTEREST EXPENSE:
Deposits 4,160 4,076 12,566 11,167
Borrowed funds 2,205 621 5,467 2,131
------ ------ ------ ------
Total interest expense 6,365 4,697 18,033 13,298
------ ------ ------ ------
NET INTEREST INCOME 5,488 3,872 16,102 12,244
Provision for loan losses 125 125 375 264
------ ------ ------ ------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 5,363 3,747 15,727 11,980
------ ------ ------ ------
NON-INTEREST INCOME:
Service charges 319 263 869 754
Net loss on securities (1,095) - (1,095) -
Other income 113 436 743 800
------ ------ ------ ------
Total non-interest (loss)income (663) 699 517 1,554
------ ------ ------ ------
NON-INTEREST EXPENSE:
Salaries and employee benefits 2,043 1,896 6,210 5,248
Occupancy, net 505 471 1,543 1,291
Federal deposit insurance premiums 253 293 811 878
SAIF Assessment 2,651 - 2,651 -
Professional fees 190 199 506 398
Insurance premiums 79 78 276 213
Data processing fees 92 80 242 250
Foreclosed real estate expense, net 17 (2) 74 124
Other 793 633 2,169 1,901
------ ------ ------ ------
Total non-interest expense 6,623 3,648 14,482 10,303
------ ------ ------ ------
(Loss) Income before income taxes (1,923) 798 1,762 3,231
Income tax (benefit) expense (1,431) 298 (105) 1,213
------ ------ ------ ------
Net (loss) income $ (492) $ 500 $ 1,867 $ 2,018
====== ====== ======= =======
Net (loss) income per share of
common stock $(0.11) n/a $ 0.39 n/a
======= ====== ======= =======
Weighted average number of common
stock outstanding 4,648,450 n/a 4,788,980 n/a
========= === ========= ===
See accompanying notes to consolidated financial statements.
STATEWIDE FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(DOLLARS IN THOUSANDS)
September 30, December 31,
1996 1995
---- ----
(UNAUDITED)
ASSETS
Cash and amounts due from depository
institutions $ 5,719 $ 6,553
Federal funds sold - 1,650
------- -------
Total cash and cash equivalents 5,719 8,203
Mortgage-backed securities available
for sale 251,593 260,107
Debt and equity securities available
for sale 64,893 80,126
Loans receivable, net 315,478 195,773
Accrued interest receivable, net 4,438 4,410
Real estate owned, net 755 652
Premises and equipment, net 5,865 4,819
Federal Home Loan Bank stock, at cost 7,768 3,627
Excess of cost over fair value of net
assets acquired 158 214
Other assets 5,400 1,118
------- -------
Total assets $662,067 $559,049
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits 442,353 $438,021
Borrowed funds 146,798 44,703
Advance payments by borrowers for
taxes and insurance 2,079 1,033
Accounts payable and other liabilities 5,480 2,977
------- -------
Total liabilities 596,710 486,734
------- -------
Shareholders' Equity 65,357 72,315
------- -------
Total liabilities and shareholders'
equity $662,067 $559,049
======== ========
See accompanying notes to consolidated financial statements
STATEWIDE FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(DOLLARS IN THOUSANDS)
Nine Months Ended
September 30,
---------
1996 1995
---- ----
Cash flows from operating activities:
Net income $ 1,867 $ 2,018
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 375 259
Provision for losses on real estate owned 19 0
Depreciation and amortization of premises
and equipment 440 401
Net amortization of deferred premiums and
unearned discounts 1,545 166
Securities losses 1,095 0
ESOP and RRP plans expense 650 0
Net loss (gain) on sale of real estate owned 9 (60)
Changes in assets and liabilities:
Increase in accrued interest
and dividends receivable (28) (427)
Increase in accrued interest payable 245 67
Increase in other assets (2,391) (681)
Increase in accounts payable and other
liabilities 2,258 1,461
------- -------
Net cash provided by operating
activities 6,084 3,204
------- -------
Cash flows from investing activities:
Principal collections and repayments of loans 29,141 21,195
Purchase of loans (106,333) (14,539)
Origination of loans (43,297) (14,789)
Principal repayments from mortgage-backed
securities - held to maturity 0 18,232
Principal repayments from mortgage backed
securities available for sale 45,745 398
Purchase of mortgage-backed securities (97,900) 0
Purchase of debt and equity securities 0 (40,987)
Proceeds from maturities of debt securities 14,000 7,996
Proceeds from the sale of mortgage-backed
securities available for sale 54,150 0
Purchase of FHLBNY stock (4,141) 0
Proceeds from sale of real estate owned 292 949
Purchases of premises and equipment (1,486) (1,079)
------- -------
Net cash used in investing
activities (109,829) (22,624)
------- -------
Cash flows from financing activities:
Net increase in deposits 4,332 25,960
Repayment of borrowings (541,694) (72,375)
Borrowings and advances 643,789 55,350
Increase (decrease) in advance payments by
borrowers for taxes and insurance 1,046 (38)
Common stock issued 0 46,538
Repurchase of common stock (5,755) 0
Cash dividends paid (457) 0
------- -------
Net cash provided by financing
activities 101,261 55,435
------- ------
Net (decrease) increase in cash
and cash equivalents (2,484) 36,015
Cash and cash equivalents at beginning of
period 8,203 8,059
------ ------
Cash and cash equivalents at end of period $ 5,719 $ 44,074
======== ========
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Income taxes $ 1,766 $ 800
======== ========
Interest $ 17,788 $ 11,859
======== ========
Non-cash investing and financing activities:
Unrealized (loss) gain ,net of income tax,
on securities available for sale $ (3,262) $ 98
======== ========
Transfer from loans receivable to real
estate owned, net $ 422 $ 854
======== ========
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 September 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:
September 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; 4,994,545 shares outstanding at
September 30, 1996 and 5,269,752 shares
outstanding at December 31, 1995 - -
Additional paid in capital 47,611 50,770
Unallocated Employee Stock Ownership Plan
shares (3,808) (4,232)
Unearned Recognition and Retention Plan
shares (2,226) -
Retained earnings - substantially restricted 24,946 23,537
Treasury stock, held for reissue under
Management Recognition and Retention Plans (144) -
Net unrealized (loss) gain on securities
available for sale, net of income tax (1,022) 2,240
------- -------
Total shareholders' equity $65,357 $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.
During June 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.
Also, 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 September 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 retired these
shares upon receipt.
5. Net (Loss) Income Per Share
Per share calculations are based upon the weighted average shares
outstanding for the periods presented. Common stock equivalents were
not given consideration as they were anti-dilutive or immaterial. On
September 29, 1995 the Company completed an initial public offering of
its common stock. Accordingly, 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:
September 30, December 31,
1996 1995
---- ----
(Dollars in thousands)
Loans delinquent 90 days or more:
Non-accrual $5,167 $4,974
Accruing 510 647
------ ------
Total net loans delinquent 90 days or more $5,677 $5,621
====== ======
Loans delinquent 90 days or more as a
percentage of total net loans outstanding 1.80% 2.87%
==== ====
An analysis of the allowance for loan losses for the periods ended
September 30, 1996 and 1995 follows:
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------- -------------
1996 1995 1996 1995
---- ---- ---- -----
(Dollars in thousands)
Balance at beginning of period $3,411 $3,043 $3,241 $3,062
Provision charged to operations 125 125 375 264
Charge offs, net (49) (9) (129) (167)
------ ------ ------ ------
Balance at end of period $3,487 $3,159 $3,487 $3,159
====== ====== ====== ======
STATEWIDE FINANCIAL CORP. AND SUBSIDIARY
SELECTED FINANCIAL AND REGULATORY RATIOS AND OTHER DATA
At or for the At or for the
Three Months Nine Months
Ended Ended
September 30, September 30,
------------- -------------
1996 1995 1996 1995
---- ---- ---- ----
SELECTED FINANCIAL RATIOS (1):
Return on Average Assets (.29)% .41% .38% .56%
Return on Average Equity (3.07)% 8.64% 3.66% 12.13%
Shareholders' Equity to Assets 9.87% 13.08% 9.87% 13.08%
Net Interest Rate Spread (2) 2.93% 3.06% 2.93% 3.33%
Net Interest Margin (3) 3.35% 3.29% 3.39% 3.52%
Non-Interest Income to Average Assets .26% .57% .33% .43%
Non-Interest Expense to Average
Assets, Exclusive of SAIF
Assessment 2.36% 2.99% 2.42% 2.87%
Efficiency Ratio, Exclusive of SAIF
Assessment (4) 69.02% 89.00% 70.53% 78.13%
Average Interest Earning Assets to
Average Interest Bearing Liabilities 110.98% 105.64%112.09% 104.94%
September 30, December 31,
1996 1995
---- ------
REGULATORY CAPITAL RATIOS:
Tangible Capital Ratio 9.87% 10.28%
Core Capital Ratio 9.87% 10.28%
Risk-Based Capital Ratio 26.88% 32.88%
ASSET QUALITY RATIOS:
Non-Performing Loans to Total Net
Loans 1.80% 2.87%
Non-Performing Loans to Total Assets .86% 1.01%
Non-Performing Assets to Total Assets .97% 1.12%
Allowance for Loan Losses to Non-
performing Loans 61.42% 57.66%
Allowance for Loan Losses to Total
Net Loans 1.11% 1.66%
OTHER DATA:
Number of Deposit Accounts 51,448 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.
The Company had a net loss of $492,000, or $0.11 per share, for the
quarter ended September 30, 1996, as a result of a pre-tax charge of
$2,651,000, representing the Company's portion of a one time industry-
wide assessment on thrift institutions to recapitalize the Savings
Association Insurance Fund ("SAIF"). The assessment reduced net income
by $1,697,000, or $0.37 per share. Exclusive of the SAIF assessment,
the net income of the Company for the three months ended September 30,
1996 was $1,205,000, or $0.26 per share, as compared to $500,000 for
the same quarter last year.
Nine-month earnings to date totalled $1,867,000, or $0.39 per share.
Exclusive of the SAIF assessment, the net income of the Company for the
nine months ended September 30, 1996 was $3,564,000, or $0.74 per
share, compared to $2,018,000 for the nine months ended September 30,
1995.
These increases in net income, exclusive of the SAIF assessment, over
similar periods in the prior year 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 29, 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 September 30, 1996, exclusive of the
SAIF assessment was $51,000 more than the $1,154,000 of net income
realized during the quarter ended June 30, 1996. This difference was
primarily in net interest income as a result of growth in the loan
portfolio which was principally financed by short term borrowings and
through sales of mortgage-backed securities.
FINANCIAL CONDITION
At September 30, 1996 shareholders' equity was $65.4 million compared
to $72.3 million at December 31, 1995, and $67.2 million at June 30,
1996. The ratios of shareholders' equity to total assets were 9.9% at
September 30, 1996 and June 30, 1996; and 12.9% at December 31, 1995.
The $6.9 million decrease in shareholders' equity at September 30, 1996
from December 31, 1995 resulted principally from: 1) purchase on the
open market, and retirement, of 263,488 shares of stock for $3.1
million, at an average price of $11.91 per share; 2) purchase of
a)211,600 shares on the open market, of which 199,881 shares, valued at
$2.3 million, were awarded under management recognition and retention
plans and b)11,719 shares, valued at $144,000, that were retained as
treasury stock held for reissuance under RRP plans; 3) a $3.3 million
(net of tax) decrease in the market value of the investment portfolio,
all of which is classified as available for sale; and 4) the third
quarter dividend of $457,000. Partially offsetting these decreases were
income of $1.9 million for the nine months ended September 30, 1996 and
the reduction of $521,000 in the unallocated and unearned Employee
Stock Ownership Plan ("ESOP") and RRP shares.
At September 30, 1996, the Company's total assets were $662.1 million,
compared to $559.0 million at December 31, 1995, and $678.4 million at
June 30, 1996. The reduction in total assets during the quarter was
the result of sales of mortgage-backed securities, with proceeds used
to repay borrowings and to fund growth in the Company's net loan
portfolio. The net loan portfolio increased $46.7 million, or 17%, to
$315.5 million at September 30, 1996, compared to $268.8 million at
June 30, 1996. Of this growth, one to four family residential
mortgages increased 19% over June 30, 1996, or $41.1 million, primarily
in adjustable rate mortgages that have five to seven year initial reset
periods. In addition, commercial loans increased $5.6 million, or 63%,
to $14.4 million, and consumer loans increased $371,000 or 1% compared
to their June 30, 1996 balances.
Investment in Federal Home Loan Bank of New York (the "FHLB") stock
increased $4.1 million from December 31, 1995, and decreased $153,000
from June 30, 1996, to $7.8 million at September 30, 1996, as a result
of requirements associated with the Company's borrowing levels at the
FHLB. Other assets increased $4.3 million, from $1.1 million at
December 31, 1995 and $453,000 from June 30, 1996, to $5.4 million at
September 30, 1996, primarily due to the increase in the deferred tax
assets related to the change in the unrealized gain on securities
available for sale and excess estimated tax payments paid during the
period.
Asset growth during the nine-month period since December 31, 1995 has
been primarily funded with short term borrowing, as supplemented by
deposit growth. Short term borrowing increased $102.1 million from the
December 31, 1995 level, and decreased $12.8 million from the amount
outstanding at June 30, 1996, to $146.8 million at September 30, 1996.
During this past quarter the Company has maintained, on average, higher
levels of borrowings than were outstanding at quarter end. These
borrowings were reduced through sales of mortgage-backed securities.
Borrowed funds at September 30, 1996 is primarily comprised of
securities sold to the FHLB under agreements to repurchase, and the
remaining is overnight borrowing. Costs for these borrowings
approximated 5.42% at September 30, 1996, and all mature before
December 31, 1996. It is the intention of the Company to keep its
borrowing maturities short term, subject to prevailing market interest
rates, at least into the first calendar quarter of 1997.
Deposits totalled $442.4 million at September 30, 1996, representing an
increase of 1.0% from December 31, 1995, and a decrease of 0.9% from
June 30, 1996. However, core deposits grew $3.4 million, or 1.3%
during this quarter and $19.4 million, or 8.9% during the last nine
months. During both the quarter and the year to date, interest rates
paid to retail depositors have been rising within the Company's market
area. In response, the Company developed products which placed
emphasis on customer relationships rather than matching the most
aggressively priced certificate of deposit offerings by it competition.
As a result, there has been runoff in certificates of deposits
primarily from depositors who do not have other accounts with the
Company while core deposits have increased. In addition to product
development, core deposits have increased as a result of marketing
efforts by the Company as it has opened two branches since December
1995, and it has established deposit agreements with several affinity
groups.
RESULTS OF OPERATIONS
THREE-MONTH PERIODS ENDED SEPTEMBER 30, 1996 AND 1995
Net Results. The net result for the three months ended September 30,
1996, was a net loss of $492,000, or $0.11 per share, as compared to
net income of $500 thousand for the same period last year. The net
loss was a result of the Deposit Insurance Funds Act of 1996 (the
"BIF/SAIF Act"),enacted on September 30, 1996. The BIF/SAIF Act
mitigated the disparity between insurance premiums for deposits insured
by SAIF and deposits insured by the Bank Insurance Fund (BIF) by
assessing all institutions with SAIF insured deposits a one time charge
equal to 0.657% of the institution's March 31, 1995 deposits.
Immediately preceding the enactment, the Company was incurring deposit
insurance expense at the rate of 23 cents per $100 of deposits.
Effective January 1, 1997 the rate will be reduced to approximately 6.4
cents per $100 of deposits. Due to the one time assessment, the
Company recognized $2,651,000 additional FDIC insurance expense (the
"SAIF Assessment"). The effect to net income for the third quarter was
a reduction of $1,697,000, or $0.37 per share. Exclusive of the SAIF
Assessment, the Company had net income of $1,205,000, or $0.26 per
share for the three months ended September 30, 1996 as compared to
$500,000, for the same quarter last year. This increase was primarily a
result of an increase in net interest income partially offset by an
increase in non-interest expense. In addition, the Company recognized
a charge from the reduction in the value of securities identified for
sale during the quarter, and recognized income from the reversal of a
tax liability which expired during the quarter.
Interest Income. Total interest and dividend income increased $3.3
million, or 38.3%, to $11.9 million for the three months ended
September 30, 1996 from $8.6 million for the three months ended
September 30, 1995. This growth in interest income is the result of a
$184.4 million, or 39.2%, 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 7.24% during the current quarter, compared to 7.28% during
the quarter ended September 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
for the full quarter, from the Company's initial public offering 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 first mortgage loans and mortgage-backed 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, partially offset by a shift to
higher yielding investments from money market accounts within which the
common stock subscription deposits were held prior to the completion of
the Company's initial public offering.
Interest Expense. Interest expense increased $1.7 million, or 35.5%,
during the current quarter compared to the same quarter a year ago.
Interest expense on deposits increased $84 thousand, or 2.1%, and
interest expense on borrowed funds increased $1.6 million, or 255.1%.
The average balance of interest-bearing deposits increased $15.8
million, or 3.8%, for the quarter ended September 30, 1996 over the
same quarter in the prior year. This growth is primarily the result of
two branch openings and the marketing of products, including deposits,
to affinity groups. Partially offsetting the interest expense increase
from deposit growth was a reduction in the average cost of the
interest-bearing deposits, which decreased to 3.85% for the quarter
ended September 30, 1996, from 3.92% for the same period in the
previous year, primarily because higher cost promotional certificate of
deposits expired and new certificates were issued at lower rates.
The average balance of borrowed funds increased $128.9 million, or
438%, from the same quarter a year ago, while the weighted average
borrowing cost decreased 288 basis points from 8.45% to 5.57%. 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 September 30, 1995. The
decrease in the weighted average cost of borrowing reflects lower short
term rates during the period since September 30, 1995, and the effect
of prepayment of higher cost debt in December 1995. The borrowings
outstanding at September 30, 1996 have a weighted average cost of 5.42%
at that date, and all mature before December 31, 1996. It is the
Company's intention to keep its borrowing maturities short term,
subject to prevailing market interest rates, at least into the first
calendar quarter of 1997.
Net Interest Income. For the quarter ended September 30, 1996, net
interest income increased $1,616,000, or 41.7%, 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 net interest income
as a percentage of average interest-earning assets, increased to 3.35%
from 3.29% during the quarter ended September 30, 1995. The increase
was a result of interest earning assets growing faster than interest
bearing liabilities, because of the deployment of the proceeds from the
Company's initial public offering at the end of September 1995,
partially offset by lower yields realized during the current quarter
and increased borrowings to leverage the Company's capital.
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
September 30, 1996 and 1995. The average balance of loans includes
non-accrual loans, and associated yields include loan fees which are
considered adjustments to yields.
Table 1
<TABLE>
Three Months Ended September 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 $255,292 $ 4,920 7.71% $140,328 $2,979 8.49%
Consumer and Other Loans 40,326 924 9.17% 27,274 682 10.00%
Mortgage-backed Securities 285,248 4,803 6.74% 194,881 3,289 6.75%
Debt Securities 65,467 1,064 6.50% 91,830 1,381 6.02%
Money Market Investments 203 3 5.91% 12,763 166 5.20%
FHLBNY Stock 8,526 139 6.52% 3,628 72 7.94%
------- ----- ------- ------
Total Interest-earning
Assets 655,062 $11,853 7.24% 470,704 $8,569 7.28%
======= ======
Non-interest-earning
Assets 17,430 16,673
------- -------
Total Assets $672,492 $487,377
======== ========
Liabilities and
Shareholders' Equity:
Interest-bearing
Liabilities:
Savings Accounts $135,306 $ 924 2.73% $110,908$ 725 2.61%
NOW 45,573 330 2.90% 43,826 311 2.84%
Money Market 44,063 342 3.10% 41,727 297 2.85%
Certificates 207,067 2,564 4.95% 219,704 2,743 4.99%
Borrowed Funds 158,259 2,205 5.57% 29,398 621 8.45%
-------- ------ -------- ------
Total Interest-bearing
Liabilities 590,268 $ 6,365 4.31% 445,563$ 4,697 4.22%
-------- ======= -------- ======
Non-interest-bearing
Deposits 13,715 9,165
Other Non-interest-bearing
Liabilities 4,366 9,514
-------- --------
Total Non-interest-earning
Liabilities 18,081 18,679
-------- --------
Total Liabilities 608,349 464,242
Shareholders' Equity 64,143 23,135
-------- --------
Total Liabilities and
Shareholders' Equity $672,492 $487,377
======== ========
</TABLE>
Provision for Loan Losses. The provision for loan losses for the three
months ended September 30, 1996 was $125 thousand, identical to that
provided for the same period last year. The provision for the three
months ended September 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 September 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 September 30, 1996, non-performing
loans decreased $1.4 million, or 19.8%, to $5.7 million from $7.1
million at June 30, 1996. These non-performing loans represent 1.80%
of total net loans outstanding at September 30, 1996 compared to a
2.63% ratio of non-performing loans to total net loans at June 30,
1996. At September 30, 1996, the allowance for loan losses was $3.5
million, or 61.4%, of total non-performing loans, compared to $3.4
million, or 48.2%, of total non-performing loans at June 30, 1996.
Non-Interest Income. Total non-interest income decreased $1,362,000,
to a loss of $663,000, for the three months ended September 30, 1996
from income of $699,000, for the same period last year. The principal
reason for this decrease was recognition of a charge of $1,074,000 for
the reduction in value of securities identified for sale during the
quarter, and sold subsequent to quarter end. These securities, with a
book value of $58.6 million, had yields which approximated the
Company's borrowing rates. Proceeds from this subsequent sale were
used to reduce borrowing levels. The Company expects to renew
borrowings for these amounts to invest into interest-earning assets
upon appropriate market conditions. In addition to the recognition of
this reduction in value, the Company also sold $53.3 million of
securities during the three months ended September 30, 1996, and
incurred a loss of $21 thousand. The effect of these losses was to
reduce earnings per share by $0.15 for the three months ended September
30, 1996.
Aside from the effect of the above described securities transactions,
non-interest income for the three months ended September 30, 1996
includes $40 thousand from the collection of unaccrued interest
associated with loans whose principal had been repaid, as compared with
$347 thousand in the prior year's three-month period. The effect of
this non-recurring income to earnings per share for the three months
ended September 30, 1996 was an increase of $.01 per share. Absent
these credits, non-interest income increased $40 thousand, or 11.4%, to
$392 thousand for the current quarter compared to $352 thousand for the
same quarter a year ago.
Non-Interest Expense. Total non-interest expense increased 81.6%, or
$3.0 million, to $6.6 million for the current quarter ended September
30, 1996 from $3.6 million for the same period last year. Exclusive of
the SAIF assessment, total non-interest expense increased 8.9%, or $324
thousand, to $4.0 million for the current quarter ended September 30,
1996 from $3.6 million for the same period last year.
Salaries and employee benefits expenses for the three months ended
September 30, 1996, increased $147 thousand, or 7.8%, compared to the
same period a year ago. Increased staffing requirements necessary to
position the Company to achieve its marketing and operational
objectives, including increased loan administrative staff, staffing and
training for the Company's new branches, provisions for additional
incentive and award programs for employees at all levels of the
Company, including the Company's ESOP established on September 29,
1995, along with normal salary increases accounted for the change from
the prior year.
Occupancy costs increased $34 thousand, or 7.2%, for the current
quarter over the same period last year. The increase was principally a
result of new lease costs for the two new branches the Company has
opened since the quarter ended September 30, 1995 and the related
amortization of leasehold improvements to these branches.
Other non-interest expense increased $160 thousand, or 25.3%, for the
current quarter versus the same quarter a year ago, principally because
of advertising and promotional expenses in conjunction with the
increase of core deposits and the promotion of loan growth.
Income Taxes. Income taxes for the three months ended September 30,
1996 reflects a tax benefit of $1.4 million, which is the result of the
tax effect of the loss incurred for the quarter then ended, and the
result of the reversal of a $702,000 tax liability, previously
established, which expired during the quarter. The effect of this
reversal was to increase earnings per share by $0.15 per share for the
three months ended September 30, 1996. Income tax expense for the three
months ended September 30, 1995 is solely the result of the tax effect
of the pre-tax income recognized in that quarter.
NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1996 AND 1995
Net Income. For the nine months ended September 30, 1996, net income
was $1,867,000, compared to $2,018,000 for the same period last year.
The decrease in net income was a result of the BIF/SAIF Act. The
effect to net income for the nine-month period was a reduction of
$1,697,000, or $0.36 per share. Exclusive of the SAIF Assessment, the
Company had net income of $3,564,000, or $0.74 per share for the nine
months ended September 30, 1996 as compared to $2,018,000, for the same
period last year. This increase was primarily a result of an increase
in net interest income partially offset by an increase in non-interest
expense. In addition during the current nine-month period, the Company
recognized a charge from the reduction in the value of securities
identified for sale, and recognized income from the reversal of a tax
liability which expired during the period.
Interest Income. Total interest and dividend income increased $8.6
million, or 33.6%, to $34.1 million for the nine months ended September
30, 1996 from $25.5 million for the nine months ended September 30,
1995. This growth in interest income is the result of a $170.2
million, or 36.7%, 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
7.18% during the current period, compared to 7.34% during the nine
months ended September 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 for the full
quarter, 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 $4.7 million, or 35.6%,
during the current nine month period compared to the same period a year
ago. Interest expense on deposits increased $1.4 million, or 12.5%, and
interest expense on borrowed funds increased $3.3 million, or 156.5%.
The average balance of interest-bearing deposits increased $27.5
million, or 6.8%, for the nine months ended September 30, 1996 over the
same nine-month period in the prior year. Also, the average cost of
interest-bearing deposits grew to 3.87% for the nine months ended
September 30, 1996 as compared to 3.68% for the same period in the
previous year. This cost increase primarily reflects the full period's
effect of changes in the Company's cost of certificates of deposits,
made when the Company began, in late 1994, to market CD's with
competitive 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. It continued with these rate offerings when
the Company opened new branches in June and December of 1995 and March
1996. In addition, interest rates on savings accounts have increased,
as a result of paying bonuses on statement savings accounts, on a
limited basis, to customers of those new branches. Also, during mid
third quarter of 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 that the Company is marketing.
The average balance of borrowed funds increased $96.1 million, or
260.0%, from the same nine-month period a year ago, while the weighted
average borrowing cost decreased 221 basis points from 7.69% to 5.48%.
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 September 1995.
The decrease in the weighted average cost of borrowing reflects
refinancing in December 1995, of longer term borrowings which were
originated in higher interest rate environments with lower cost, short
term, 30 to 90 day instruments.
Net Interest Income. For the nine months ended September 30, 1996 net
interest income increased $3,858,000, or 31.5%, 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 nine month period, net interest margin decreased to 3.39%
from 3.52% during the nine months ended September 30, 1995. This
decrease is the result of a 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 $251.7 million during the nine months ended September 30,
1996, including reinvestment of mortgage principal and amortization,
and maturities of securities, compared to approximately $70.3 million
during the nine months ended September 30,1995. The interest rate
environment during the current nine 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 expense for the current nine-month period 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 nine months ended
September 30, 1996 and 1995. The average balance of loans includes
non-accrual loans, and associated yields include loan fees which are
considered adjustments to yields.
Table 2
<TABLE>
Nine Months Ended September 30,
--------------------------------------
1996 1995
---------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Average InterestAverage Average InterestAverage
Balance Yield/ Balance Yield/
Cost Cost
------- ------- ---- ------- -------- ----
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest-earning:
First Mortgage Loans $213,219 $12,425 7.77% $143,122$ 8,985 8.37%
Consumer and Other Loans 35,906 2,514 9.34% 25,998 1,964 10.07%
Mortgage-backed Securities 307,508 15,434 6.69% 201,022 10,453 6.93%
Debt Securities 69,611 3,394 6.50% 83,746 3,667 5.84%
Money Market Investments 722 30 5.54% 6,285 254 5.39%
FHLBNY Stock 7,043 338 6.40% 3,657 219 7.98%
------- ------ ------- ------
Total Interest-earning
Assets 634,009 $34,135 7.18% 463,830$25,542 7.34%
======= =======
Non-interest-earning Assets 16,591 14,884
------- -------
Total Assets $650,600 $478,714
======== ========
Liabilities and
Shareholders' Equity:
Interest-bearing
Liabilities:
Savings Accounts $129,441 $ 2,668 2.75% $110,691$ 2,102 2.53%
NOW 45,021 955 2.83% 46,907 990 2.81%
Money Market 44,447 1,010 3.03% 41,505 831 2.67%
Certificates 213,623 7,933 4.95% 205,932 7,244 4.69%
Borrowed Funds 133,077 5,467 5.48% 36,964 2,131 7.69%
------- ------ ------- -----
Total Interest-bearing
Liabilities 565,609 $18,033 4.25% 441,999$13,298 4.01%
------- ======= -------=======
Non-interest-bearing
Deposits 12,340 8,945
Other Non-interest-bearing
Liabilities 4,628 5,594
------- -------
Total Non-interest-earning
Liabilities 16,968 14,539
------- -------
Total Liabilities 582,577 456,538
Shareholders' Equity 68,023 22,176
------- -------
Total Liabilities and
Shareholders' Equity $650,600 $478,714
======== ========
</TABLE>
Provision for Loan Losses. The provision for loan losses increased by
$111 thousand to $375 thousand for the nine months ended September 30,
1996 from $264 thousand for the same period last year. The provision
for the nine months ending September 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. As of September 30, 1996,
non-performing loans increased $56,000, or 1.0%, to $5.7 million from
$5.6 million at December 31, 1995. These non-performing loans
represent 1.80% of total net loans outstanding at September 30, 1996
compared to a 2.87% ratio of non-performing loans to total net loans at
December 31, 1995. At September 30, 1996, the allowance for loan
losses was $3.5 million, or 61.4%, 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 decreased $1,037,000,
to $517,000, for the nine months ended September 30, 1996 from
$1,554,000, for the same period last year. The principal reason for
this decrease was recognition of a charge of $1,074,000 for the
reduction in value of securities identified for sale before September
30, 1996 and sold subsequent to that date. The securities, with a book
value of $58.6 million, had yields which approximated the Company's
borrowing rates. Proceeds from this subsequent sale were used to
reduce borrowing levels. The Company expects to renew borrowings for
these amounts to invest into interest-earning assets upon appropriate
market conditions. In addition to the recognition of this reduction in
value, the Company also sold $53.3 million of securities during the
nine months ended September 30, 1996, and incurred a loss of $21
thousand. The effect of these losses was to reduce earnings per share
by $0.15 for the nine months ended September 30, 1996.
Aside from the effect of the above described securities transactions,
non-interest income for the nine months ended September 30, 1996
includes $565 thousand from the collection of unaccrued interest
associated with loans the principal of which had been repaid, as
compared with $347 thousand in collections in the prior year's nine-
month period. The interest on one of these loans has been completely
repaid. The effect of this non-recurring income to earnings per share
for the nine months ended September 30, 1996 was an increase of $.08
per share. Absent these credits, non-interest income decreased $160
thousand, or 13.3%, to $1,047,000, for the nine months ended September
30, 1996 compared to $1,207,000 for the same period a year ago. This
decrease occurred during the first quarter of 1996, primarily because
of decreases in commissions from annuity sales, as the Company
prioritized its resources toward developing its new branches and
marketing its core products rather than selling annuities.
Non-Interest Expense. Total non-interest expense increased 40.6%, or
$4.2 million, to $14.5 million for the nine months ended September 30,
1996 from $10.3 million for the same period last year. Exclusive of
the SAIF Assessment, total non-interest expense increased 14.8%, or
$1.5 million, to $11.8 million for the nine-month period ended
September 30, 1996 from $10.3 million for the same period last year.
Salaries and employee benefits expenses for the nine months ended
September 30, 1996 increased $962 thousand, or 18.3%, compared to the
same period a year ago. Of this amount, approximately $454 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 $328 thousand associated with the Company's ESOP
established September 29, 1995 and the Company's Employee RRP plan
adopted during the third quarter of 1996. Finally, salary and benefit
expenses also reflect normal salary increases from salary in place in
the prior year period.
Occupancy costs increased $252 thousand, or 19.5%, for the nine months
ended September 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 June 30, 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.
Professional fees increased $108 thousand, or 27.1%, for the nine
months ended September 30, 1996 over the comparable period last year,
principally as a 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 period a
year ago, the Company was not publicly owned.
The remaining components of non-interest expense increased $206
thousand, or 6.1%, from $3,366,000 for the nine months ended September
30, 1995 to $3,572,000 for the current nine month period, principally
because of advertising and promotional expenses in conjunction with the
growth of core deposits and the promotion of loan growth.
Income Taxes. Income taxes for the nine months ended September 30,
1996 reflect a tax benefit of $105 thousand, which is the result of the
reversal of a $702,000 tax liability, previously established, that
expired during the period, partially offset by the tax effect of the
pre-tax income recognized for the nine months ended September 30, 1996.
The effect of the reversal of the tax liability was to increase
earnings per share by $0.15 per share for the nine months ended
September 30, 1996. Income tax expense for the nine months ended
September 30, 1995 is solely the result of the tax effect of the pre-
tax income recognized in that period.
THREE-MONTH PERIODS ENDED SEPTEMBER 30, 1996 AND JUNE 30, 1996
Net Income. For the three months ended September 30, 1996, net income,
exclusive of the SAIF Assessment, increased by $51 thousand, or 4.4%,
to $1,205,000 from $1,154,000 for the preceding quarter, the three
months ended June 30, 1996. The increase in net income was primarily a
result of increases in net interest income, and non-interest income,
partially offset by a reduction in non-recurring non-interest income.
Interest Income. Total interest and dividend income increased $401
thousand, or 3.5%, to $11.9 million for the three months ended
September 30, 1996 from $11.5 million for the three months ended June
30, 1996. This growth in interest income is the result of a $12.7
million, or 2.0%, increase in the average balance of total interest-
earning assets over the preceding quarter, and an increase in the
average yield on total interest-earning assets to 7.24% during the
current quarter, compared to 7.13% during the three months ended June
30, 1996. The change in the average balances of interest-earning
assets between the prior period and this period was principally
affected by purchasing $43 million and originating $15.0 million of
loans during the current quarter, offset by the sale of $54.1 million
of mortgage-backed and debt securities, and further offset by principal
amortization and prepayments on mortgage-backed securities and debt
securities. The Company does not expect this level of loan purchases
to continue into the next quarter. The increase in average yield
reflects reinvestment of the proceeds from the sale of lower yielding
investment securities into higher yielding loan products, partially
offset by mortgage principal repayments and amortizations at higher
rates than can currently be earned.
Interest Expense. Interest expense increased $326 thousand, or 5.4%,
during the current three month period compared to the preceding
quarter. Interest expense on deposits increased $4 thousand, or 0.1%,
and interest expense on borrowed funds increased $322 thousand, or
17.1%. The average balance of deposits decreased $2.0 million, or 0.5%,
for the three months ended September 30, 1996 over the preceding three
month period. In addition, the average cost of the deposits increased
to 3.85% for the three months ended September 30, 1996 as compared to
3.83% for the three months ended June 30, 1996. This cost increase
primarily reflects the higher retail interest rate environment which
existed in the third quarter of this year versus the second quarter.
As certificates of deposits matured during this quarter, the Company
matched the competition's rates for those customers who had other
account relationships with the Company. It did not otherwise
aggressively seek to renew these certificates. As a result, although
rates increased, the average balance of certificates of deposit
decreased by $7.2 million, or 3.4%. However, the average balance of
deposits other than certificates increased $5.2 million during the
third quarter to $224.9 million compared to $219.7 million during the
second quarter, and the average interest rate of these deposits has
decreased to 2.84% from 2.87% during the third quarter.
The average balance of borrowed funds during the three months ended
September 30, 1996 increased $19.1 million, or 13.7%, from the three
months ended June 30, 1996, while the weighted average borrowing cost
increased from 5.41% to 5.57%. 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 average interest
earning assets and the reductions of capital which have occurred since
June 30, 1996.
Net Interest Income. For the three months ended September 30, 1996,
net interest income increased $75 thousand, or 1.4%, 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 3.35%
from 3.37% during the three months ended June 30, 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 $58.0
million during the three months ended September 30, 1996, including
reinvestment of mortgage principal and amortization, and maturities of
securities, compared to approximately $73.5 million during the three
months ended June 30, 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
September 30, 1996 and the three months ended June 30, 1996. The
average balance of loans includes non-accrual loans, and associated
yields include loan fees which are considered adjustments to yields.
Table 3
<TABLE>
Three Months Ended
--------------------------------------
September 30, 1996 June 30,1996
---------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Average Interest Average AverageInterest Average
Balance Yield/ Balance Yield/
Cost Cost
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest-earning:
First Mortgage Loans $255,292 $ 4,920 7.71% $208,257 $3,995 7.67%
Consumer and Other Loans 40,326 924 9.17% 35,864 842 9.39%
Mortgage-backed Securities 285,248 4,803 6.74% 324,367 5,438 6.71%
Debt Securities 65,467 1,064 6.50% 66,570 1,064 6.39%
Money Market Investments 203 3 5.91% 317 4 5.05%
FHLBNY Stock 8,526 139 6.52% 7,007 109 6.22%
------- ----- ------- ------
Total Interest-earning
Assets 655,062 $11,853 7.24% 642,382 $11,452 7.13%
======= =======
Non-interest-earning Assets 16,364
17,430
------- -------
Total Assets $672,492 $658,746
======== ========
Liabilities and
Shareholders' Equity:
Interest-bearing
Liabilities:
Savings Accounts $135,306 $ 924 2.73% $129,654 $ 920 2.84%
NOW 45,573 330 2.90% 44,983 316 2.81%
Money Market 44,063 342 3.10% 45,103 340 3.02%
Certificates 207,067 2,564 4.95% 214,268 2,580 4.82%
Borrowed Funds 158,259 2,205 5.57% 139,164 1,883 5.41%
-------- ------ ------- ------
Total Interest-bearing
Liabilities 590,268 $ 6,365 4.31% 573,172 $ 6,039 4.21%
-------- ======= ------- =======
Non-interest-bearing
Deposits 13,715 12,774
Other Non-interest-bearing
Liabilities 4,366 4,813
-------- -------
Total Non-interest-earning
Liabilities 18,081 17,587
-------- -------
Total Liabilities 608,349 590,759
Shareholders' Equity 64,143 67,987
-------- -------
Total Liabilities and
Shareholders' Equity $672,492 $658,746
======== ========
</TABLE>
Provision for Loan Losses. There was no change in the provision for
loan losses between the three months ended September 30, 1996 and the
three months ended June 30, 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, exclusive of losses
recognized in the third quarter for securities, decreased $82 thousand
to $432 thousand for the three months ended September 30, 1996 from
$514 thousand for the preceding quarter. The principal reason for this
decrease was that $129 thousand less income was recognized from the
collection of unaccrued interest during the current quarter than had
been recognized in the preceding quarter. During the second quarter, in
connection with the workout of a non-performing loan, the Company
received a final payment of $169 thousand, representing unaccrued
interest, on a loan whose principal was repaid in accordance with the
terms of a bankruptcy settlement. During the third quarter, the
Company began to receive unaccrued interest payments from another loan
whose principal had been repaid, amounting to $40 thousand. The Company
expects to receive approximately $250 thousand of unaccrued interest on
this loan, before year end.
Non-Interest Expense. Total non-interest expense, exclusive of the
SAIF Assessment, decreased 0.7%, or $27 thousand, to $3,972,000 for the
three months ended September 30, 1996 from $3,999,000 for the preceding
three months. The principal reasons for the decrease were reductions in
FDIC insurance premiums and insurance expense, partially offset by
increased marketing, advertising and promotion expenses incurred as
part of Company's ongoing programs to increase its core deposits and
loan portfolio.
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
September 30, 1996, the Company had liquid assets equivalent to 26.5%
of total assets and 39.7% of total deposits. Such assets consisted of
cash and Federal funds sold, and $169.9 million in unpledged debt,
equity and mortgage-backed securities classified as available for sale.
In addition, at September 30, 1996, the Company also had available to
it $13.7 million under a line of credit with the FHLB, expiring October
30, 1997, and approximately $9.3 million of excess collateral pledged
with the FHLB.
At September 30, 1996, capital resources were sufficient to meet
outstanding loan commitments of $23.7 million and commitments on unused
lines of credit of $4.8 million. Certificates of deposit which are
scheduled to mature in one year or less from September 30, 1996
totalled $172.3 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 nine months ended September 30, 1996, investment and lending
activities were the principal requirements for funding. Principal
repayments, maturities, calls and sales of mortgage-backed securities
and debt and equity securities exceeded purchases of mortgage-backed
securities by $17.1 million. Purchase and originations of loans
exceeded principal collections by $120.5 million. The principal
sources of funding for these investments were increases in borrowings,
net of repayments, from the FHLB of $102.1 million, sales of investment
securities of $53.6 million, and an increase in deposits of $4.3
million.
During the nine months ended September 30, 1995, investment activities
represented the primary funding need. Purchases of debt and equity
securities exceeded maturities and principal repayments of mortgage-
backed and debt and equity securities by $14.4 million. The principal
sources of funding for these purchases were the proceeds from the
issuance of common stock on September 29, 1995, excess of loan
repayments over loan originations and cash provided by operations.
At September 30, 1996, the Bank exceeded each of the regulatory capital
requirements applicable to it. The table below presents the Bank's
capital ratios at September 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 $ 9,939 1.50% $65,378 9.87% $55,439
Core Capital 26,503 4.0% 65,378 9.87% 38,875
Risk Based Capital 19,980 8.0% 67,142 26.88% 47,162
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.
Not applicable.
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 July 16, 1996 announcing the implementation
of Registrant's proposed stock repurchase program.
2.) The Registrant filed a Current Report on Form 8-K
dated July 22, 1996 announcing the Registrant's
earnings for the second quarter ended June 30,
1996.
3.) The Registrant filed a Current Report on Form 8-K
dated August 20, 1996 announcing the Registrant's
first quarterly dividend.
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: November 14, 1996 By: Bernard F. Lenihan
------------------
BERNARD F. LENIHAN
SENIOR VICE PRESIDENT AND CHIEF
FINANCIAL OFFICER<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 5,719
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 251,593
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 318,965
<ALLOWANCE> 3,487
<TOTAL-ASSETS> 662,067
<DEPOSITS> 442,353
<SHORT-TERM> 146,798
<LIABILITIES-OTHER> 7,559
<LONG-TERM> 0
0
0
<COMMON> 0
<OTHER-SE> 65,357
<TOTAL-LIABILITIES-AND-EQUITY> 662,067
<INTEREST-LOAN> 5,844
<INTEREST-INVEST> 5,870
<INTEREST-OTHER> 139
<INTEREST-TOTAL> 11,853
<INTEREST-DEPOSIT> 4,160
<INTEREST-EXPENSE> 6,365
<INTEREST-INCOME-NET> 5,488
<LOAN-LOSSES> 125
<SECURITIES-GAINS> (1,095)
<EXPENSE-OTHER> 6,623
<INCOME-PRETAX> (1,923)
<INCOME-PRE-EXTRAORDINARY> (492)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (492)
<EPS-PRIMARY> (.11)
<EPS-DILUTED> (.11)
<YIELD-ACTUAL> 3.35
<LOANS-NON> 5,167
<LOANS-PAST> 510
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 2,266
<ALLOWANCE-OPEN> 3,411
<CHARGE-OFFS> 51
<RECOVERIES> 2
<ALLOWANCE-CLOSE> 3,487
<ALLOWANCE-DOMESTIC> 3,487
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
