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, 1997 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, 1997: Common Stock, No Par Value:
4,711,537 shares issued and 4,710,398 shares outstanding.
STATEWIDE FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Three Months Six Months
Ended June 30, Ended June 30,
------------- ------------
1997 1996 1997 1996
---- ---- ---- ----
INTEREST INCOME:
Interest and fees on loans $ 6,514 $ 4,837 $ 12,962 $ 9,095
Interest on mortgage-backed
securities 5,423 5,438 10,693 10,631
Interest and dividends on debt
and equity securities 625 1,068 1,270 2,357
Dividends on Federal Home Loan
Bank of New York ("FHLBNY") stock 128 109 252 199
------ ------ ------ ------
Total interest and dividend
income 12,690 11,452 25,177 22,282
------ ------ ------ ------
INTEREST EXPENSE:
Deposits 4,219 4,156 8,453 8,406
Borrowed funds 2,216 1,883 4,216 3,262
------ ------ ------ ------
Total interest expense 6,435 6,039 12,669 11,668
------ ------ ------ ------
NET INTEREST INCOME 6,255 5,413 12,508 10,614
Provision for loan losses 125 125 250 250
------ ------ ------ ------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 6,130 5,288 12,258 10,364
------ ------ ------ ------
NON-INTEREST INCOME:
Service charges 343 311 691 550
Other income 47 203 72 630
------ ------ ------ ------
Total non-interest income 390 514 763 1,180
------ ------ ------ ------
NON-INTEREST EXPENSE:
Salaries and employee benefits 2,385 2,077 4,773 4,167
Occupancy, net 563 517 1,140 1,038
Federal deposit insurance premiums 74 281 146 558
Professional fees 185 174 329 316
Insurance premiums 76 109 171 197
Data processing fees 143 88 313 150
Foreclosed real estate expense, net 7 (5) 14 57
Other 844 758 1,681 1,376
------ ------ ------ ------
Total non-interest expense 4,277 3,999 8,567 7,859
------ ------ ------ ------
Income before income taxes 2,243 1,803 4,454 3,685
Income taxes 852 649 1,679 1,326
------ ------ ------ ------
Net income $ 1,391 $ 1,154 $ 2,775 $ 2,359
======= ======= ======== =======
Net income per share of common
stock $0.33 $0.24 $0.65 $0.49
===== ===== ===== =====
Weighted average number of
common shares outstanding 4,242,171 4,853,965 4,290,775 4,859,075
========= ========= ========= =========
See accompanying notes to consolidated financial statements.
STATEWIDE FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(DOLLARS IN THOUSANDS)
June 30, December 31,
1997 1996
---- ----
(UNAUDITED)
ASSETS
Cash and amounts due from depository
institutions $ 7,310 $ 6,586
Mortgage-backed securities available
for sale 284,769 240,974
Debt and equity securities available
for sale 30,245 40,243
Loans receivable, net 327,871 325,470
Accrued interest receivable, net 4,399 4,296
Real estate owned, net 274 563
Premises and equipment, net 6,245 6,296
FHLBNY stock, at cost 8,265 7,768
Excess of cost over fair value of
net assets acquired 121 137
Other assets 3,715 3,709
------- -------
Total assets $673,214 $636,042
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits $448,470 $457,056
Borrowed funds:
Securities sold under agreements
to repurchase 147,000 82,400
FHLBNY advances 6,900 24,800
------- -------
Total borrowed funds 153,900 107,200
------- --------
Advance payments by borrowers for
taxes and insurance 1,987 1,853
Accounts payable and other
liabilities 3,377 2,998
------- --------
Total liabilities 607,734 569,107
------- --------
Shareholders' equity 65,480 66,935
------- --------
Total liabilities and
shareholders' equity $673,214 $636,042
======== ========
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,
---------
1997 1996
---- ----
Cash flows from operating activities:
Net income $ 2,775 $ 2,359
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 250 250
Provision for losses on real estate owned - 18
Depreciation and amortization 487 325
Net amortization of deferred premiums and
unearned discounts 368 1,032
Amortization of RRP awards and allocation
of ESOP shares 589 -
Net (gain) loss on sale of real estate owned (13) 7
Changes in assets and liabilities:
Increase in accrued interest and dividends
receivable (103) (380)
Increase in accrued interest payable 44 205
Decrease (increase) in other assets 84 (392)
Increase in accounts payable and other
liabilities 335 345
------- -------
Net cash provided by operating activities 4,816 3,769
------- -------
Cash flows from investing activities:
Net disbursement from lending activities (612) (10,092)
Purchase of loans (2,097) (63,342)
Principal repayments from mortgage-backed
securities 22,756 34,604
Purchase of mortgage-backed securities (67,102) (97,900)
Proceeds from maturities of debt securities 10,000 13,000
Purchase of FHLBNY stock (497) (4,294)
Proceeds from sale of real estate owned 339 225
Purchases and improvements of premises and
equipment (436) (742)
------- -------
Net cash used in investing activities (37,649) (128,541)
------- -------
Cash flows from financing activities:
Net (decrease) increase in deposits (8,586) 8,383
Repayment of FHLBNY borrowings (517,650) (100,514)
Borrowings from FHLBNY 564,350 215,389
Increase in advance payments by borrowers
for taxes and insurance 134 696
Cash dividends paid (880) -
Purchase of common stock (3,811) (2,618)
------- -------
Net cash provided by financing activities 33,557 121,336
------- -------
Net increase (decrease)in cash and cash
equivalents 724 (3,436)
Cash and cash equivalents at beginning of
period 6,586 8,203
------- -------
Cash and cash equivalents at end of period $ 7,310 $ 4,767
======= =======
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Income taxes $ 1,175 $ 1,076
======= =======
Interest $12,625 $11,277
======= =======
Transfer from loans receivable to real
estate owned, net $ 37 $ 158
======== =======
Change in unrealized loss, net of income tax,
on securities available for sale $ (128) $(5,301)
======= =======
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, 1997. 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 and Insurance, 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 Annual Report on Form 10-K for the year ended December 31,
1996.
2. Shareholders' Equity
The components of shareholders' equity were as follows:
June 30, December 31,
1997 1996
---- ----
(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; 4,711,537 shares issued
and 4,710,398 shares outstanding at June
30, 1997, and 4,946,264 shares issued and
4,911,533 shares outstanding at December
31, 1996 - -
Additional paid in capital 43,182 46,807
Unallocated Employee Stock Ownership Plan
("ESOP") shares (3,491) (3,703)
Unearned Recognition and Retention Plan
("RRP") shares (2,097) (1,872)
Retained earnings - substantially restricted 27,692 25,797
Treasury stock, at cost, 1,139 and 34,731
shares at June 30, 1997 and December 31,
1996 (14) (430)
Net unrealized gain on securities available
for sale, net of income tax 208 336
------- -------
Total shareholders' equity $65,480 $66,935
======= =======
3. Net Income Per Share
Net income per share is computed by dividing net income by the
weighted average number of shares outstanding. Stock options which
were dilutive have been considered in computing the weighted average
number of common shares outstanding, utilizing the Treasury stock
method.
4. Recent Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 128,
"Earnings Per Share". SFAS 128 supersedes Accounting Principles Board
("APB") Opinion No. 15, "Earnings Per Share", and specifies the
computation, presentation, and disclosure requirements for earnings
per share ("EPS") for entities with publicly held common stock or
potential common stock. SFAS 128 replaces Primary EPS and Diluted EPS
with Basic EPS and Diluted EPS, respectively. SFAS 128 also requires
dual presentation of Basic and Diluted EPS on the face of the income
statement for entities with complex capital structures and a
reconciliation of the information utilized to calculate Basic EPS to
that used to calculate Diluted EPS.
SFAS 128 is effective for financial statement periods ending after
December 15, 1997. Earlier application is not permitted. After
adoption, all prior period EPS is required to be restated to conform
with SFAS 128. The Company expects that the adoption of SFAS 128 will
result in Basic EPS being approximately the same as EPS currently
reported and Diluted EPS will be lower than currently reported EPS.
SFAS 129, "Disclosure of Information about Capital Structure", was
issued in February 1997. SFAS 129 is effective for periods ending
after December 15, 1997. SFAS 129 lists required disclosures about
capital structure that had been included in a number of separate
statements and opinions of authoritative accounting literature. As
such, the adoption of SFAS 129 is not expected to have a significant
impact on the disclosures in financial statements of the Company.
In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive
Income. SFAS 130 established standards for reporting and display of
comprehensive income and its components in a full set of general
purpose financial statements. Under SFAS 130, comprehensive income is
separated into net income and other comprehensive income. Other
comprehensive income includes items previously recorded directly in
equity, such as unrealized gains or losses on securities available for
sale. SFAS 130 is effective for interim and annual periods beginning
after December 15, 1997. Comparative financial statements provided
for earlier periods are required to be reclassified to reflect
application of the provisions of the Statement.
In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments
of an Enterprise and Related Information. SFAS 131 establishes
reporting standards for operating segments in annual financial
statements and requires those enterprises to report selected financial
information about operating segments in interim financial reports to
shareholders. SFAS 131 is effective for financial statements for
periods beginning after December 15, 1997.
5. Non-Performing Loans and the Allowance for Loan Losses
Non-performing loans were as follows:
June 30, December 31,
1997 1996
-------- ------------
(Dollars in thousands)
Loans delinquent 90 days or more:
Non-accrual $2,276 $2,334
Accruing 324 404
------ ------
Total net loans delinquent 90 days or more $2,600 $2,738
====== ======
Loans delinquent 90 days or more as a
percentage of total net loans outstanding .79% .84%
=== ===
An analysis of the allowance for loan losses for the periods ended
June 30, 1997 and 1996 were as follows:
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
-------------- --------------
1997 1996 1997 1996
---- ---- ---- ----
(Dollars in thousands)
Balance at beginning of period $2,665 $3,331 $2,613 $3,241
Provision charged to operations 125 125 250 250
Charge offs, net (43) (45) (116) (80)
------ ------ ------ ------
Balance at end of period $2,747 $3,411 $2,747 $3,411
====== ====== ====== ======
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,
--------- ---------
1997 1996 1997 1996
---- ---- ---- ----
SELECTED FINANCIAL RATIOS (1):
Return on Average Assets .82% .70% .82% .74%
Return on Average Shareholders' Equity 8.78% 6.79% 8.67% 6.74%
Capital to Assets 9.73% 9.90% 9.73% 9.90%
Net Interest Rate Spread (2) 3.33% 2.92% 3.33% 2.93%
Net Interest Margin (3) 3.77% 3.37% 3.77% 3.40%
Non-Interest Income to Average Assets .23% .31% .23% .37%
Non-Interest Expense to Average Assets 2.51% 2.43% 2.53% 2.46%
Efficiency Ratio (4) 65.60% 70.99% 65.79% 71.32%
Ratio of Interest-Earning Assets to
Interest-Bearing Liabilities 111.10% 112.07%111.27% 112.69%
June 30, December 31,
1997 1996
---- ------
REGULATORY CAPITAL RATIOS:
Tangible Capital Ratio 9.36% 9.41%
Core Capital Ratio 9.36% 9.41%
Risk-Based Capital Ratio 24.62% 26.21%
ASSET QUALITY RATIOS:
Non-Performing Loans to Total Net
Loans .79% .84%
Non-Performing Loans to Total Assets .39% .43%
Non-Performing Assets to Total
Assets .43% .52%
Allowance for Loan Losses to Non-
performing Loans 105.65% 95.43%
Allowance for Loan Losses to Total
Net Loans .84% .80%
OTHER DATA:
Number of Deposit Accounts 54,727 53,695
Number of Offices 16 16
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 cost 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 realized net income of $1,391,000, or $0.33 per share, for
the quarter ended June 30, 1997, as compared to $1,154,000 or $0.24
per share, for the same quarter of the prior year. This represents an
increase in net income and earnings per share of 21% and 38%,
respectively, for the second quarter of 1997 as compared to the same
period in 1996. Earnings for the six months ended June 30, 1997
totaled $2,775,000, or $0.65 per share, an increase of 18% and 33%
respectively, as compared to net income of $2,359,000, or $0.49 per
share for the six months ended June 30, 1997. Second-quarter earnings
for 1997 increased slightly from 1996 first-quarter net income of
$1,384,000, and earnings per share for the second quarter were 3%
higher than the $0.32 earned in the prior quarter.
The increase in net income for current quarter and six months ended
June 30, 1997, as compared to comparable periods in the prior year,
reflects increases in net interest income after provision for loan
losses of $0.8 million and $1.9 million, respectively. These
increases reflect growth in average interest-earning assets and
changes in the mix within the loan portfolio, offset by increases in
average deposits and borrowing levels over both the current quarter
and six-month period of the prior year. Lower non-interest income and
higher non-interest expense also contributed to the change in net
income for the current year periods.
FINANCIAL CONDITION
At June 30, 1997 total assets were $673.2 million, compared to $636.0
million at December 31, 1996, and to $677.4 million at March 31, 1997.
Although period-ended balances declined $4.2 million between March 31,
1997 and June 30, 1997, the average balance of interest-earning assets
increased $6.9 million, including $3.1 million from the increase in
the commercial real estate and commercial business loan portfolios,
and $2.7 million from the increase in the multi-family mortgage
portfolio. These increases represent second quarter growth of 15.2%
and 32.7% in the average balance of the respective portfolios, and are
a result of continued emphasis toward origination of higher yielding
non-residential loans.
The average balance of the residential one-to-four family mortgage
portfolio decreased approximately $5.2 million, or 2.0%, during this
period while the average balance of mortgage-backed and debt
securities increased approximately $5.0 million, or 1.6%. Principal
amortization and prepayments from the residential mortgage portfolio
were reinvested into mortgage-backed securities which provided better
returns and durations than those available on one-to-four family
residential real estate mortgages if the Company had matched the
aggressive pricing within its market areas.
Total assets increased $37.2 million, or 5.8% between December 31,
1996 and June 30, 1997. The principal component of this increase was
the growth in mortgage-backed securities which increased from $241.0
million to $284.8 million, with the majority of the increase occurring
during the first quarter of 1997. The Company sold securities in the
third quarter of 1996 and, during 1997, reinvested the proceeds of
this sale into higher yielding securities.
Growth in assets during the six month period from December 31, 1996
was funded with increases of $46.7 million in borrowed funds as part
of the Company's continued strategy to leverage its excess capital.
Borrowed funds at June 30, 1997 increased $3.7 million over the
preceding quarter, in part to liquidate certificates of deposits for
holders who sought rates higher than the Company's alternate borrowing
rate.
Borrowed funds were $153.9 million at June 30, 1997. Of this
amount, $65.9 million mature within 60 days and an additional $28.0
million, at an interest rate of 5.54%, is callable at the lender's
option within 90 days, and quarterly thereafter for three years. It
is the intention of the Company to keep these borrowing maturities
short-term, subject to prevailing market interest rates, at least into
the fourth quarter of 1997.
Deposits totaled $448.5 million at June 30, 1997 as compared to $457.1
million at December 31, 1996, and $458.7 million at March 31, 1997.
These decreases of 1.9% and 2.2% from March 31, 1997 and December 31,
1996, respectively, resulted from reductions in higher-costing
certificates of deposit. Lower-costing core deposits increased $1.1
million, or $0.4% from March 31, 1997, and $4.0 million, or 1.6%, from
December 31, 1996. The Company continues to increase its core deposit
base by attracting new customers through product development and by
cross selling products to existing customers.
Shareholders' equity increased $2.5 million during the quarter to
$65.5 million at June 30, 1997 from $63.0 million at March 31, 1997,
but decreased $1.4 million from $66.9 million at December 31, 1996.
The increase from the preceding quarter resulted primarily from net
income of $1.4 million for the quarter and an increase of $2.2 million
(net of tax) in the June 30, 1997 market value of the Company's
investment portfolio over the March 31, 1997 valuation, partially
offset by the repurchase of 62,227 shares of the Company's stock and
declaration of a quarterly dividend. The decrease for the six-month
period of 1997 resulted primarily from the repurchase of 234,727
shares of the Company's stock, and the declaration of two dividends,
partially offset by net income of $2.8 million and allocations of ESOP
shares and other employee benefit plans during the period.
RESULTS OF OPERATIONS
THREE-MONTH PERIODS ENDING JUNE 30, 1997 AND 1996
Net Income. For the three months ended June 30, 1997, net income
increased $237,000, or 21%, to $1,391,000 from $1,154,000 for the same
period of the prior year. This increase was primarily caused by an
increase in net interest income, partially offset by a decrease in
non-interest income and an increase in non-interest expense. Net
income per share for the period increased $0.09 per share, or 38%, to
$0.33 per share from $0.24 per share for the same period of the prior
year reflecting: (1) common stock repurchases during the period,
which reduced the weighted average number of outstanding shares used
to calculate earnings per share by 12.6%, and (2) the increase in net
income which includes the cost of capital to acquire such shares.
Interest Income. Total interest and dividend income increased $1.2
million, or 10.8%, to $12.7 million for the three months ended June
30, 1997 from $11.5 million for the three months ended June 30, 1996.
During the last half of 1996, the Company changed its mix of interest-
earning assets by purchasing one-to-four family residential mortgages,
and selling lower yielding mortgage-backed securities. In addition,
the Company has focused its lending efforts, during this period on
originating commercial and consumer loans. Consequently, both the
average balance of, and the yield from, interest-earning assets is
higher. The average balance of interest-earning assets is $18.1
million, or 2.8%, higher during the three months ended June 30, 1997
compared to the same period a year ago; and the related yield has
increased between the two periods to 7.67% from 7.13%. Specifically,
the yield on mortgage-backed securities was enhanced between the two
periods by the sale of lower yielding securities, as noted above. In
addition, during 1997 the Company purchased mortgage-backed securities
with yields in excess of the average yields in place at June 30, 1996.
These factors combined to increase yields on mortgage-backed
securities 76 basis points to 7.47% for the current quarter compared
to 6.71% for the same quarter last year.
Interest Expense. Interest expense increased $0.4 million, or 6.6%,
during the current quarter, as compared to the same quarter of the
prior year. Interest expense on deposits increased $0.1 million while
interest expense on borrowed funds increased $0.3 million or 17.7%.
The cost of total interest-bearing deposits increased 5 basis points
because of higher interest rates paid for certificates of deposit,
partially offset by increased balances in lower yielding core
deposits. There is significant competition for certificates of
deposit within the Company's market area. Although the Company does
not seek to match the most aggressive of its competitors, it does
offer competitive rates which, on average, were higher this quarter
than the same quarter last year. By not matching the most aggressive
competitive pricing, the Company's average balance of certificates of
deposit decreased $12.8 million this quarter compared to the same
quarter last year. However, the Company's emphasis on core deposits
has lead to an increase in these average balances of $14.4 million for
the current quarter compared to the same quarter last year. This
change in deposit mix occurred through cross selling efforts by the
Company, attracting new customers through product development, and by
not matching aggressively priced certificates of deposit rates offered
by competitors.
The average balance of borrowed funds increased $19.8 million, or
14.2% for the quarter ended June 30, 1997, as compared to the same
quarter of the prior year. The increase in borrowed funds were
primarily used to fund growth in first mortgage and commercial
business loans. The cost of borrowed funds increased 18 basis points
to 5.59% from 5.41% for the quarter ended June 30, 1996 reflecting the
anticipation of the March 25, 1997 increase in the Federal Funds rate.
Changes in this rate impact the Company because of the significant
portion of borrowed funds whose maturities are less than ninety days.
Net Interest Income. Net interest income increased 15.6% to $6.3
million for the quarter ended June 30, 1997, from $5.4 million during
the same quarter a year ago. The increase is the result of interest
income growing at a quicker pace than interest expense. During the
current quarter, the net interest margin grew 40 basis points to 3.77%
from 3.37% during the quarter ended June 30, 1996, primarily from
asset sales during the latter half of 1996 whose proceeds were
reinvested into higher yielding loans and mortgage-backed securities,
partially offset by a slightly slower growth in interest-earning
assets as compared to interest-bearing liabilities.
Table 1 following presents a summary of the Company's interest-earning
assets and their average yields, interest-bearing liabilities and
their average costs and shareholders' equity for the three months
ending June 30, 1997 and 1996. Average loans include non-accrual
loans, and related yields include loan fees which are considered
adjustments to yields.
Table 1
<TABLE>
Three Months Ended June 30,
--------------------------------------
1997 1996
---------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Average InterestAverage Average Interest Average
Balance Yield/ Balance Yield/
Cost Cost
------- -------- ---- ------- -------- ----
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest-earning assets:
First mortgage loans $279,209 $ 5,348 7.66% $208,257 $3,995 7.67%
Consumer and other loans 35,540 859 9.69 34,094 801 9.40
Commercial business 13,052 307 9.43 1,770 41 9.27
Mortgage-backed
securities 288,294 5,423 7.47 324,367 5,438 6.71
Debt securities 36,222 625 6.95 66,575 1,064 6.39
Money market investments - - - 317 4 5.05
FHLBNY Stock 8,193 128 6.25 7,007 109 6.22
------- ------- ------- -------
Total interest-earning
assets 660,510 12,690 7.67% 642,382 11,452 7.13%
------- ---- ------ ----
Non-interest-earning
assets 20,164 16,364
------- -------
Total assets $680,674 $658,746
======== ========
Liabilities and
shareholders' equity:
Interest-bearing
liabilities:
Savings accounts $141,147 1,018 2.89% $129,654 920 2.84%
NOW accounts 48,547 342 2.83 44,983 316 2.81%
Money market accounts 44,424 350 3.16 45,103 340 3.02%
Certificates of deposit 201,467 2,509 5.00 214,268 2,580 4.82%
Borrowed funds 158,931 2,216 5.59 139,164 1,883 5.41%
------- ------- -------- -------
Total interest-bearing
liabilities 594,516 6,435 4.34% 573,172 6,039 4.21%
------- ------- ---- -------- ------- ----
Non-interest-bearing
deposits 18,361 12,774
Other non-interest-bearing
liabilities 4,416 4,813
------- --------
Total non-interest-bearing
liabilities 22,777 17,587
------- --------
Total liabilities 617,293 590,759
Shareholders' equity 63,381 67,987
--------
Total liabilities and
shareholders' equity $680,674 $658,746
======== ========
Net interest income $ 6,255 $ 5,413
======= =======
Net interest rate spread 3.33% 2.92%
==== ====
Net interest margin 3.77% 3.37%
==== ====
Ratio of interest-earning
assets to interest-bearing
liabilities 111.10% 112.07%
====== ======
</TABLE>
Provision for Loan Losses. The provision for loan losses for the
three months ended June 30, 1997 was $125,000, identical to that
provided for during the same period of the prior year. The provision
for the three months ended June 30, 1997 was determined by management
after review of, among other things, the Company's loan portfolio, the
risk inherent in the Company's lending activities and the economy in
the Company's market areas. Further provisions for loan losses will
continue to be based upon management's assessment of the loan
portfolio and its underlying collateral, trends in non-performing
loans, the current economic condition and other factors which warrant
recognition in order to maintain the allowance for loan losses at
levels sufficient to provide for estimated losses. As of June 30,
1997, non-performing loans decreased $4.5 million, or 63.4%, to $2.6
million from $7.1 million for the same quarter end of the prior year.
Non-performing loans represent 0.79% of total net loans outstanding at
June 30, 1997, compared to 2.63% at June 30, 1996. At June 30, 1997,
the allowance for loan losses was $2.7 million, or 105.7% of total
non-performing loans, compared to 48.2% at June 30, 1996.
Non-Interest Income. Total non-interest income decreased $124,000 to
$390,000 for the three months ended June 30, 1997 from $514,000 for
the same period of the prior year. The prior year non-interest income
includes $169,000 from the collection of unaccrued interest associated
with loans whose principal had been repaid in prior periods.
Excluding this non-recurring item, non-interest income increased
$45,000, or 13%, for the current quarter, as compared to the same
period of the prior year. This increase resulted primarily from
higher mortgage late charges, ATM usage, along with increased fees
from the sale of annuities during the second quarter of 1997.
Non-Interest Expense. Total non-interest expense for the three months
ended June 30, 1997, totaled $4.3 million, an increase of $278,000, or
7.0%, from $4.0 million recorded during the same period of the prior
year.
Salaries and employee benefits expense for the three months ended June
30, 1997 increased $308,000, or 14.8%, compared to the same period a
year ago. Salary and related costs increased approximately $118,000,
primarily as a result of a new branch which opened during the fourth
quarter of 1996, and more commercial and institutional loan officers,
and administrative staff hired during the latter part of 1996. Other
benefit expenses increased approximately $190,000 primarily related to
the Company's ESOP program and retirement plan and the Company's
Recognition and Retention Plans for Executive Officers and Employees,
adopted midway through 1996.
Occupancy costs increased $46,000, or 8.9%, for the current quarter as
compared to the same period of the prior year. This increase resulted
from higher depreciation for branch facilities renovations as well as
for work stations and other data processing equipment procured in
conjunction with the upgrade of the Company's operating system in
October 1996.
Federal Deposit Insurance Premium expense decreased $207,000, or
73.7%, for the current quarter over the same period last year as a
result of the enactment of the Deposit Insurance Funds Act of 1996
which lowered the Company's deposit insurance expense rate from 23
cents per $100 of deposits to 6.4 cents per $100 of deposits effective
January 1, 1997.
Data processing expense increased $55,000 for the current quarter over
the same quarter of the previous year. The increase reflects
additional costs as the Company upgraded its operating system and all
of its applications during the fourth quarter of 1996, to provide more
capability for services to its customers base.
The remaining components of non-interest expense increased $76,000, or
7.3%, from $1,036,000 for the three months ended June 30, 1996 to
$1,112,000 for the current quarter. This increase primarily related
to the adoption of the Company's Recognition and Retention Plans for
Directors, which were adopted midway through 1996. Other contributing
factors were higher usage of ATM machines during the current quarter,
and increased expense from loan generation activities. Partially
offsetting these expenses were lower advertising and insurance costs.
Income Tax Expense. The increase in income tax for the period is
principally the result of the tax effect of the increase in pre-tax
income recorded during the period.
SIX-MONTH PERIODS ENDED JUNE 30, 1997 AND 1996
Net Income. For the six months ended June 30, 1997, net income
increased $416,000, or 17.6%, to $2,775,000 from $2,359,000 for the
same period last year due to higher net interest income, partially
offset by a reduction in non-interest income, and an increase in non-
interest expense. Net income per share for the period increased $0.16
per share, or 33%, to $0.65 per share from $0.49 per share for the
same period of the prior year. This increase reflects: (1) common
stock repurchases during the period which reduced the weighted average
number of outstanding shares used to calculate earnings per share by
11.7%; and, (2) the increase in net income which includes the cost of
capital to acquire such shares.
Interest Income. Total interest and dividend income increased $2.9
million, or 13.0%, to $25.2 million for the six months ended June 30,
1997, from $22.3 million for the six months ended June 30, 1996.
During the last half of 1996, the Company changed its mix of interest-
earning assets by purchasing one-to-four family residential mortgages
and selling lower yielding mortgage-backed securities. In addition,
the Company has focused its lending efforts during this period on
originating commercial and consumer loans. Consequently, both the
average balance of, and the yield from, interest-earning assets is
higher. The average balance of interest-earning assets is $33.6
million, or 5.4%, higher during the six months ended June 30, 1997
compared to the same period a year ago, and the related yield has
increased between the two periods to 7.66% from 7.15%. Specifically,
the yield on mortgage-backed securities was enhanced between the two
periods by the sale of lower yielding securities, as noted above. In
addition, during 1997 the Company purchased mortgage-backed securities
with yields in excess of the average yields in place at June 30, 1996.
These factors combined to increase yields on mortgage-backed
securities 82 basis points to 7.49% for the six months ended June 30,
1997 compared to 6.67% for the same period last year.
Interest Expense. Interest expense increased $1,001,000, or 8.6%, to
$12.7 million for the six-month period of 1997 compared to the same
period of the prior year. Interest expense on deposits remained flat,
while interest expense on borrowed fund increased $1.0 million, or
29.3%. The cost of total interest-bearing deposits increased 1 basis
point because of higher rates paid for certificates of deposit,
partially offset by increased balances in lower yielding core
deposits. There is significant competition for certificates of
deposit within the Company's market area. Although the Company does
not seek to match the most aggressive of its competitors, it does
offer competitive rates, which on average were higher during the first
six months of 1997 than the first six months of the prior year. By
not matching the most aggressive competitive pricing, the Company's
average balance of certificates of deposit decreased $11.0 million
during the six months ended June 30, 1997 compared to the six months
ended June 30, 1996. However, the Company's emphasis on core deposits
has lead to an increase in these average balances of core deposits of
$16.4 million during the current six-month period over the same period
a year ago. This change in deposit mix occurred through cross selling
efforts by the Company, attracting new customers through product
development, and by not matching aggressively price certificates of
deposit rates offered by competitors.
Average borrowed funds increased $31.8 million, or 26.4%, for the
first six months of 1997 over the same period of 1996. The average
rate paid on borrowed funds for the six month period of 1997 increased
to 5.58% from 5.41% for the comparable prior year period. The
increase in borrowed funds reflects the Company's continued strategy
to leverage its excess capital, and this growth, along with the
increase in deposits, funded the increase in assets for the period.
The increase in the cost of the funds reflects the short-term interest
environment during the six-month periods ending June 30, 1996 and
1997, including the anticipation of the March 25, 1997 increase in the
Federal Funds rate. Changes in this rate impact the Company because
of the significant portion of borrowed funds whose maturities are less
than ninety days.
Net Interest Income. For the six months ended June 30, 1997, net
interest income increased $1,894,000, or 17.8,% over the comparable
period last year. This increase was attributable to a 37 basis point
increase in the net interest margin and a 5.4% growth in average
interest-earning assets. During the six-month period ended June 30,
1997, the net interest margin was 3.77% compared to 3.40% for the six
months ended June 30, 1996. The increase was primarily from asset
sales during the latter half of 1996 with the proceeds reinvested into
higher yielding loans and mortgage-backed securities, partially offset
by slower growth in interest-earning assets as compared to interest-
bearing liabilities.
Table 2 following presents a summary of the Company's interest-earning
assets and their average yields, interest-earing liabilities and their
average costs and shareholders' equity for the six months ended June
30, 1997 and 1996. The average balance of loans includes non-accrual
loans, and associated yields include loan fees which are considered
adjustments to yield.
Table 2
<TABLE>
Six Months Ended June 30,
--------------------------------------
1997 1996
---------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Average Interest Average Average InterestAverage
Balance Yield/ Balance Yield/
Cost Cost
------- ------- ---- ------- -------- ----
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest-earning assets:
First mortgage loans $279,790 $10,699 7.65% $192,183 $ 7,498 7.80
Consumer and other loans 35,237 1,697 9.71 32,464 1,543 9.51
Commercial business 11,945 566 9.56 1,232 54 8.77
Mortgage-backed securities 284,505 10,693 7.49 318,638 10,631 6.67
Debt securities 37,516 1,270 6.79 71,683 2,330 6.50
Money market investments 9 - 5.35 981 27 5.50
FHLBNY stock 8,053 252 6.26 6,301 199 6.32
-------- ------- -------- ------
Total interest-earning
assets 657,055 25,177 7.66% 623,482 22,282 7.15%
------- ---- ------- ----
Non-interest-earning assets 19,698 16,172
-------- --------
Total assets $676,753 $639,654
======== ========
Liabilities and
shareholders' equity:
Interest-bearing
liabilities:
Savings accounts $139,949 2,004 2.89% $126,509 1,743 2.76%
NOW accounts 48,000 670 2.81 44,745 625 2.79
Money market accounts 44,347 701 3.19 44,639 668 2.99
Certificates of deposits 205,896 5,078 4.97 216,900 5,370 4.95
Borrowed funds 152,313 4,216 5.58 120,486 3,262 5.41
-------- ------- -------- -------
Total Interest-bearing
liabilities 590,505 12,669 4.33% 553,279 11,668 4.22%
-------- ------- ---- -------- ------- ----
Non-interest-bearing
deposits 17,588 11,653
Other Non-interest-bearing
liabilities 4,656 4,759
-------- --------
Total Non-interest-earning
liabilities 22,244 16,412
-------- --------
Total liabilities 612,749 569,691
Shareholders' equity 64,004 69,963
-------- --------
Total liabilities and
shareholders' equity $676,753 $639,654
======== ========
Net interest income $12,508 $10,614
======= =======
Net interest rate spread 3.33% 2.93%
==== ====
Net interest margin 3.77% 3.40%
==== ====
Ratio of interest-earning
asset to interest-bearing
liabilities 111.27% 112.69%
====== ======
</TABLE>
Provision for Loan Losses. No change occurred in the provision for
loan losses between the six months ended June 30, 1997 and the six
months ended June 30, 1996. During both periods $250,000 was
provided. The provision for loan losses for the six month periods was
determined by management after review of, among other things, the
Company's loan portfolio, the risk inherent in the Company's lending
activities and the economy in the Company's market areas. Further
provisions for loan losses will continue to be based upon management's
assessment of the loan portfolio and its underlying collateral, trends
in non-performing loans, the current economic condition and other
factors which warrant recognition in order to maintain the allowance
for loan losses at levels sufficient to provide for estimated losses.
At June 30, 1997, the allowance for loan losses was $2.7 million, or
105.7%, of total non-performing loans compared to 48.2% at June 30,
1996.
Non-Interest Income. Total non-interest income decreased $417,000 to
$763,000 for the six months ended June 30, 1997 from $1,180,000 for
the same period of the prior year. The prior year non-interest income
includes $525,000 from the collection of unaccrued interest associated
with loans whose principal had been repaid in prior periods.
Excluding this non-recurring item, non-interest income increased
$108,000, or 17%, for the current six months, as compared to the same
period of the prior year. This increase resulted primarily from
higher mortgage late charges and ATM usage, along with increased fees
from the sale of annuities during the second quarter of 1997.
Non-Interest Expense. Total non-interest expense for the six months
ended June 30, 1997, totaled $8.6 million, an increase of $708,000, or
9.0%, from $7.9 million recorded during the same period of the prior
year.
Salaries and employee benefits expense for the six months ended June
30, 1997 increased $606,000, or 14.5%, compared to the same period a
year ago. Salary and related costs increased approximately $208,000,
primarily as a result of costs related to two new branches opened
during 1996, whereas there is limited or no expense for these new
offices in the prior year period. In addition, the current-year
period fully reflects staffing costs for commercial and institutional
loan officers and support hired during the fourth quarter of 1996.
Other benefit expenses increased approximately $398,000 primarily
related to the Company's ESOP program and retirement plan, and the
Company's Recognition and Retention Plans for Executive Officers and
Employees adopted midway through 1996.
Occupancy costs increased $102,000, or 9.8%, for the six months ended
June 30, 1997 over the same period last year. This increase resulted
from higher depreciation for branch facilities renovations as well as
for work stations and other data processing equipment procured in
conjunction with the upgrade of the Company's operating system in
October 1996.
Federal Deposit Insurance Premium expense decreased $412,000, or
73.8%, for the six month period ended June 30, 1997 over the same
period last year as a result of the enactment of the Deposit Insurance
Funds Act of 1996 which lowered the Company's deposit insurance
expense rate of 23 cents per $100 of deposits to 6.4 cents per $100 of
deposits effective January 1, 1997.
Data processing expense increased $163,000 for the six month period
ended June 30, 1997 as compared to the same period of the prior year.
The increase reflects additional costs as the Company upgraded its
operating system and all of its applications during the fourth quarter
of 1996.
The remaining components of non-interest expense increased $249,000,
or 12.9%, from $1,946,000 for the six months ended June 30, 1996 to
$2,195,000 for six months ended June 30, 1997. This increase
primarily related to the adoption of the Company's Recognition and
Retention Plans for Directors which were adopted midway through 1996.
Other contributing factors were higher usage of ATM machines during
the current six-month period, and increased expense from loan
generation activities. Partially offsetting these expense increases
were lower advertising, insurance costs and real estate owned
expenses.
Income Tax Expense. The increase in income tax for the period is
principally the result of the tax effect of the increase in pre-tax
income recorded during the period.
THREE-MONTH PERIODS ENDED JUNE 30, 1997 AND MARCH 31, 1997
Net Income. For the three months ended June 30, 1997, net income
increased slightly to $1,391,000 from $1,384,000 for the quarter ended
March 31, 1997. Net income per share for the period increased $0.01
per share, or 3%, to $0.33 per share from $0.32 per share for the
preceding quarter reflecting: (1) common stock repurchases during the
period which reduced the weighted average number of outstanding shares
used to calculate earnings per share by 2.3%; and, (2) the increase in
net income, which includes the cost of capital to acquire such shares.
Interest Income. Total interest and dividend income increased
$203,000, or 1.6%, to $12.7 million for the three months ended June
30, 1997, as compared to the preceding three months ended March 31,
1997. The increase in interest income resulted from the Company's
continued emphasis toward origination of higher yielding non-
residential loans, which caused an increase of $6.9 million in average
interest-earning assets during the current quarter, coupled with a 2
basis point increase in average yield on interest-earning assets to
7.67% for the three-month period ended June 30, 1997. Average higher
yielding commercial real estate and commercial business loans
increased $3.1 million and average multi-family mortgage loans
increased $2.7 million during the quarter over the preceding quarter.
These increases represent second quarter growth of 15.2% and 32.7% in
the average balance of these portfolios, respectively. Other
activities in interest-earning assets included a decrease in the
average balance of one-to-four family residential mortgages of $5.2
million, or 1.6%, due to principal amortization and prepayments, the
proceeds of which were reinvested into mortgage-backed securities,
which increased approximately $5.0 million, or 1.6%. During this
period, investments in mortgage-backed securities provided better
returns and durations than those which were available from one-to-
four family residential real estate mortgages if the Company had
matched the aggressive pricing within its market.
Interest Expense. Interest expense increased $201,000, or 3.2%, to
$6.4 million for the three months ended June 30, 1997, as compared to
the preceding quarter. Average deposit balances decreased $5.2
million, or 1.2%, for the three months ended June 30, 1997 as compared
to the preceding three month period. This change resulted from a
decrease in average certificates of deposit of $8.9 million, partially
replaced with lower yielding core deposits of $3.7 million. The
average cost of deposits decreased 1 basis point to 3.89% for the
current quarter as compared to 3.90% for the prior quarter.
The average balance in borrowed funds increased $13.3 million, or
9.1%, from the three months ended March 31, 1997. The average rate
paid on borrowed funds increased 2 basis points to 5.59% for the
current quarter, as compared to 5.57% for the preceding quarter. The
increase in borrowed funds was used in part to liquidate certificates
of deposits for holders who sought rates higher than the Company's
alternate borrowing rate and to support increased asset growth.
Net Interest Income. For the three months ended June 30, 1997, net
interest income remained flat as compared to the preceding period,
while the net interest margin decreased 1 basis point to 3.77% for the
quarter ended June 30, 1997. The slight decrease in the net interest
margin primarily resulted from the yield on interest-earning assets
growing slower than the cost of interest-bearing liabilities, coupled
with a slightly slower growth in interest-earning assets as compared
to interest-bearing liabilities. The additional growth in interest-
bearing liabilities occurred in part from costs to fund the Company's
stock repurchases, offset by a higher average balance of non-interest-
bearing deposits during the second quarter.
Table 3 following presents a summary of the Company's interest-earning
assets and their average yields, interest-bearing liabilities and
their average costs and shareholders' equity for the three months
ended June 30, 1997 and the three months ended March 31, 1997. The
average balance of loans includes non-accrual loans, and associated
yields include loan fees which are considered adjustments to yield.
Table 3
<TABLE>
Three Months Ended Three Months Ended
June 30, 1997 March 31, 1997
------------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Average Interest Average Average InterestAverage
Balance Yield/ Balance Yield/
Cost Cost
------- ------- ---- ------- -------- ----
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest-earning assets:
First mortgage loans $279,209 $ 5,348 7.66% $280,378 $ 5,351 7.63%
Consumer and other loans 35,540 859 9.69 34,930 838 9.73
Commercial business 13,052 307 9.43 10,825 259 9.70
Mortgage-backed securities 288,294 5,423 7.47 280,674 5,270 7.51
Debt securities 36,222 625 6.95 38,825 645 6.65
Money market investments - - - 18 - 5.35
FHLBNY stock 8,193 128 6.25 7,911 124 6.27
-------- ------- -------- -------
Total interest-earning
assets 660,510 12,690 7.67% 653,561 12,487 7.65%
Non-interest-earning assets 20,164 ------- ---- 19,228 ------- ----
-------- --------
Total assets $680,674 $672,789
======== ========
Liabilities and
shareholders' equity:
Interest-bearing
liabilities:
Savings accounts $141,147 1,018 2.89% $138,737 986 2.88
NOW accounts 48,547 342 2.83 47,446 328 2.80
Money market accounts 44,424 350 3.16 44,269 351 3.22
Certificates of deposit 201,467 2,509 5.00 210,375 2,569 4.95
Borrowed funds 158,931 2,216 5.59 145,623 2,000 5.57
-------- ------- -------- -------
Total interest-bearing
liabilities 594,516 6,435 4.34% 586,450 6,234 4.31
-------- ------- ---- -------- -------
Non-interest-bearing
deposits 18,361 16,806
Other non-interest-bearing
liabilities 4,416 4,900
-------- --------
Total non-interest-bearing
liabilities 22,777 21,706
-------- --------
Total liabilities 617,293 608,156
Shareholders' equity 63,381 64,633
-------- --------
Total liabilities and
shareholders' equity $680,674 $672,789
======== ========
Net interest income $ 6,255 $ 6,253
======= =======
Net interest rate spread 3.33% 3.34%
==== ====
Net interest margin 3.77% 3.78%
==== ====
Ratio of interest-earning
assets to interest-bearing
liabilities 111.10% 111.44%
====== ======
</TABLE>
Provision for Loan Losses. No change occurred in the provision for
loan losses between the three months ended June 30, 1997 and three
months ended March, 1997. During both quarters the provision equaled
$125,000. These provisions were determined by management after review
of, among other things, the Company's loan portfolio, the risk
inherent in the Company's lending activities and the economy in the
Company's market areas. As of June 30, 1997, non-performing loans
decreased $317,000, or 10.9%, to $2.6 million from $2.9 million at
March 31, 1997. Non-performing loans represent 0.79% of total net
loans outstanding, at June 30, 1997, compared to 0.89% at March 31,
1997. At June 30, 1997, the allowance for loan losses was $2.7
million, or 105.7%, of total non-performing loans compared to 91.4% at
March 31, 1997.
Non-Interest Income. Total non-interest income increased slightly to
$390,000 for the three months ended June 30, 1997 from $373,000 for
the preceding quarter. The current and prior quarter's non-interest
income include no unusual items as was recorded in prior year periods.
The increase for the second quarter over the previous quarter resulted
primarily from higher fees on the sale of annuities.
Non-Interest Expense. Non-interest expense totaled $4,277,000 for the
three months ended June 30, 1997, compared to $4,290,000 for the three
months ended March 31, 1997. The decrease resulted primarily from
lower occupancy, data processing, insurance and advertising expenses
incurred during the current period. Offsetting these reductions were
increased costs related to furniture, fixture, and equipment
depreciation, professional fees, and loan and deposit operations
activities.
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 Federal Home Bank of New York and 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, 1997, the Company had total liquid assets
(consisting of cash and due from banks, federal funds sold, debt and
mortgage-backed securities having final maturities within one year,
and accrued interest from debt and mortgage-backed securities), which
represent 1.2% of total assets and 1.9% of total deposits at June 30,
1997. At June 30, 1997 the Company had available to it $27.2 million
under a line of credit with the FHLBNY, expiring October 31, 1997 and,
approximately $8.9 million of excess collateral pledged with the
FHLBNY. In addition the Company has approximately $122.3 million of
unpledged debt, equity and mortgage-backed securities which are
classified as available for sale, and could be used to collateralize
additional borrowing or sold to provide liquidity.
At June 30, 1997, capital resources were sufficient to meet
outstanding loan commitments of $29.5 million, commitments on unused
lines of credit of $5.1 million and commercial letters of credit of
$2.0 million. Certificates of deposit which are scheduled to mature in
one year or less from June 30, 1997 totaled $156.3 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 operation will be
materially affected by a failure to renew these deposits. However,
the Company's prior experience indicates that a significant portion of
such deposits should remain with the Company.
During the six months ended June 30, 1997, investment and lending
activities represented the primary funding need. Purchase of
mortgage-backed securities exceeded maturities and principal
repayments of mortgage-backed and debt securities by $34.3 million.
In addition, $2.7 million was used for loan disbursements, net of
repayments, $8.6 million was required for net deposit withdrawals and
$3.8 million was used to repurchase common stock of the Company. The
principal source of funding these activities were increases in
borrowing, net of repayments, from the FHLBNY of $46.7 million and
cash provided by operating activities of $4.8 million.
During the six months ended June 30, 1996, investments 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 these investments were
increases in borrowing, net of repayments, from the FHLBNY of $114.9
million, and increase in deposits of $8.4 million.
At June 30, 1997, the Bank exceeded each of the regulatory capital
requirements applicable to it. The table below presents the Bank's
actual capital amounts and ratios at June 30, 1997 as compared to the
OTS minimum capital adequacy requirements and the OTS requirements for
classification as a well capitalized institution.
The Bank OTS Requirements
-------------- ----------------------------------
Minimum Capital For Classification
Adequacy As Well-Capitalized
--------------- -------------------
(dollars in thousands) Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
Tangible Capital $62,936 9.36% $10,090 1.50%
Tier 1 (core)Capital $62,936 9.36% $26,905 4.00% $33,632 5.00%
Risk Based Capital:
Tier 1 $62,936 23.67% $10,636 4.00% $15,953 6.00%
Total $65,467 24.62% $21,271 8.00% $26,589 10.00%
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.
The Company held its Annual Meeting of Shareholders during
the quarter ended June 30, 1997. The following is the
information required by this item:
(a) The Annual Meeting of Shareholders was held on
Wednesday, May 7, 1997.
(b) Directors Maria F. Ramirez and Stephen R. Tilton were
elected to new terms on the Board of Directors expiring
in 2000. The term of office of each of the following
directors continues beyond the annual meeting: Victor
M. Richel, Walter G. Scott, Thomas Sharkey, Sr. and
Thomas V. Whelan.
(c) The following matters were voted upon at the annual
meeting:
Proposal I - The election of Maria F. Ramirez and
Stephen R. Tilton each to three year terms on the Board
of Directors.
Name Votes Votes
In Favor Against
---- -------- -------
Maria F. Ramirez 3,652,612 44,635
Stephen R. Tilton 3,652,612 44,635
Proposal II - Approval of amendments to the Statewide
Financial Corp. 1996 Incentive Stock Option Plan:
Votes Votes Broker
In Favor Against Abstentions Non-Votes
-------- ------- ----------- ---------
3,548,478 137,828 10,941 0
Proposal III - Approval of amendments to the Statewide
Financial Corp. 1996 Stock Option Plan for Outside
Directors:
Votes Votes Broker
In Favor Against Abstentions Non-Votes
-------- ------- ----------- ---------
3,485,206 178,073 17,568 16,600
Proposal IV - Approval of amendments to the Statewide
Financial Corp. Recognition and Retention Plan for
Executive Officers and Employees:
Votes Votes Broker
In Favor Against Abstentions Non-Votes
-------- ------- ----------- ---------
3,491,187 174,978 13,682 16,400
Proposal V - Approval of amendments to the Statewide
Financial Corp. Recognition and Retention Plan for
Outside Directors:
Votes Votes Broker
In Favor Against Abstentions Non-Votes
-------- ------- ----------- ---------
3,500,953 180,103 18,823 368
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 28, 1997 announcing the Registrant's
earnings for the first quarter ended March 31,
1997.
2.) The Registrant filed a Current Report on Form 8-K
dated May 30, 1997 announcing the Registrant's
quarterly dividend.
3.) The Registrant filed a Current Report on Form 8-K
dated June 9, 1997 announcing Office of Thrift
Supervision approval for repurchase of up to 5% of
Registrant's outstanding shares.
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, 1997 By: Bernard F. Lenihan
BERNARD F. LENIHAN
Senior Vice President and Chief
Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 7,310
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 315,014
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 330,618
<ALLOWANCE> 2,747
<TOTAL-ASSETS> 673,214
<DEPOSITS> 448,470
<SHORT-TERM> 153,900
<LIABILITIES-OTHER> 5,364
<LONG-TERM> 0
0
0
<COMMON> 0
<OTHER-SE> 65,480
<TOTAL-LIABILITIES-AND-EQUITY> 673,214
<INTEREST-LOAN> 6,514
<INTEREST-INVEST> 6,048
<INTEREST-OTHER> 128
<INTEREST-TOTAL> 12,690
<INTEREST-DEPOSIT> 4,219
<INTEREST-EXPENSE> 6,435
<INTEREST-INCOME-NET> 6,255
<LOAN-LOSSES> 125
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 4,277
<INCOME-PRETAX> 2,243
<INCOME-PRE-EXTRAORDINARY> 1,391
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,391
<EPS-PRIMARY> .33
<EPS-DILUTED> .33
<YIELD-ACTUAL> 3.77
<LOANS-NON> 2,276
<LOANS-PAST> 324
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 2,492
<ALLOWANCE-OPEN> 2,665
<CHARGE-OFFS> 45
<RECOVERIES> 2
<ALLOWANCE-CLOSE> 2,747
<ALLOWANCE-DOMESTIC> 2,747
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
