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 March 31, 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 April 30, 1997: Common Stock, No Par Value:
4,756,537 shares issued and 4,755,398 shares outstanding.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Three Months Ended
March 31,
---------
1997 1996
---- ----
INTEREST INCOME:
Interest and fees on loans $6,448 $4,258
Interest on mortgage-backed securities 5,270 5,193
Interest and dividends on debt and
equity securities 645 1,289
Dividends on Federal Home Loan Bank of
New York ("FHLBNY") stock 124 90
------ ------
Total interest and dividend income 12,487 10,830
------ ------
INTEREST EXPENSE:
Deposits 4,234 4,250
Borrowed funds 2,000 1,379
------ ------
Total interest expense 6,234 5,629
------ ------
NET INTEREST INCOME 6,253 5,201
Provision for loan losses 125 125
------ ------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 6,128 5,076
NON-INTEREST INCOME:
Service charges 348 239
Other income 25 425
------ ------
Total non-interest income 373 664
------ ------
NON-INTEREST EXPENSE:
Salaries and employee benefits 2,388 2,090
Occupancy, net 577 521
Federal deposit insurance premiums 72 277
Professional fees 144 142
Insurance premiums 95 88
Data processing fees 170 62
Foreclosed real estate expense, net 7 62
Other 837 616
------ ------
Total non-interest expense 4,290 3,858
------ ------
Income before income taxes 2,211 1,882
Income taxes 827 677
------ ------
Net Income $1,384 $1,205
====== ======
Net income per share of common stock $0.32 $0.25
===== =====
Weighted average number of common
shares outstanding 4,339,951 4,864,186
========= =========
See accompanying notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(DOLLARS IN THOUSANDS)
March 31, December 31,
1997 1996
---- ----
(Unaudited)
ASSETS
Cash and amounts due from depository
institutions $ 10,036 $ 6,586
Mortgage-backed securities available
for sale 278,659 240,974
Debt and equity securities available
for sale 37,127 40,243
Loans receivable, net 327,610 325,470
Accrued interest receivable, net 4,505 4,296
Real estate owned, net 389 563
Premises and equipment, net 6,366 6,296
FHLBNY stock, at cost 7,935 7,768
Excess of cost over fair value of net
assets acquired 128 137
Other assets 4,629 3,709
-------- -------
Total assets $677,384 $636,042
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits $458,676 $457,056
Borrowed funds:
Securities sold under agreements
to repurchase 134,000 82,400
FHLBNY advances 16,200 24,800
-------- --------
Total borrowed funds 150,200 107,200
Advance payments by borrowers for taxes
and insurance 1,888 1,853
Accounts payable and other liabilities 3,601 2,998
-------- --------
Total liabilities 614,365 569,107
-------- --------
Shareholders' equity 63,019 66,935
-------- --------
Total liabilities and shareholders'
equity $677,384 $636,042
======== ========
See accompanying notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(DOLLARS IN THOUSANDS)
Three Months Ended
March 31,
---------
1997 1996
---- ----
Cash flows from operating activities:
Net income $ 1,384 $ 1,205
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 125 125
Depreciation and amortization 234 155
Net amortization of deferred premiums and
unearned discounts 167 466
Amortization of RRP awards and allocation
of ESOP shares 284 -
Net (gain) loss on sale of real estate owned (9) 8
Changes in assets and liabilities:
Increase in accrued interest and dividends
receivable (209) (279)
Increase in accrued interest payable 219 444
Decrease in other assets 418 268
Increase in accounts payable and other
liabilities 384 162
-------- -------
Net cash provided by operating activities 2,997 2,554
-------- -------
Cash flows from investing activities:
Net disbursement from lending activities (978) (844)
Purchase of loans (1,293) (26,830)
Principal repayments from mortgage-backed
securities 10,494 17,233
Purchase of mortgage-backed securities (51,915) (78,162)
Proceeds from maturities of debt securities 3,000 10,000
Purchase of FHLBNY stock (167) (2,661)
Proceeds from sale of real estate owned 183 133
Purchases and improvements of premises and
equipment (304) (383)
-------- -------
Net cash used in investing activities (40,980) (81,514)
------- -------
Cash flows from financing activities:
Net increase in deposits 1,620 6,798
Repayment of FHLBNY borrowings (135,400) (57,091)
Borrowings from FHLBNY 178,400 126,702
Increase in advance payments by
borrowers for taxes and insurance 35 295
Cash dividends paid (443) -
Purchase of common stock (2,779) -
-------- -------
Net cash provided by financing activities 41,433 76,704
------ ------
Net increase (decrease) in cash and
cash equivalents 3,450 (2,256)
Cash and cash equivalents at beginning of
period 6,586 8,203
-------- -------
Cash and cash equivalents at end of period $ 10,036 $ 5,947
======== =======
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Income taxes $ - $ 97
======== =======
Interest $ 6,015 $ 5,185
======== =======
Transfer from loans receivable to real
estate owned, net $ - $ 158
======== =======
Change in unrealized loss, net of income
tax, on securities available for sale $ (2,362) $(3,099)
======== =======
See accompanying notes to consolidated financial statements
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 March 31, 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, the Office of Thrift Supervision 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:
March 31, 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; 4,773,764 shares issued, and
4,772,625 shares outstanding at March 31,
1997, and 4,946,264 shares issued and
4,911,533 shares outstanding at December
31, 1996 - -
Additional paid in capital 44,141 46,807
Unallocated Employee Stock Ownership shares (3,597) (3,703)
Unearned Recognition and Retention Plan
shares (2,223) (1,872)
Retained earnings - substantially restricted 26,738 25,797
Treasury stock, at cost, 1,139 and 34,731
shares at March 31, 1997 and December 31,
1996 (14) (430)
Net unrealized (loss) gain on securities
available for sale, net of income tax (2,026) 336
------- -------
Total shareholders' equity $63,019 $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. Recently Issued 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.
5. Non-Performing Loans and the Allowance for Loan Losses
Non-performing loans were as follows:
March 31, December 31,
1997 1996
---- ----
(Dollars in thousands)
Loans delinquent 90 days or more:
Non-accrual $2,386 $2,334
Accruing 531 404
------ ------
Total loans delinquent 90 days or more $2,917 $2,738
====== ======
Loans delinquent 90 days or more as a
percentage of total loans outstanding,
net .89% .84%
=== ===
An analysis of the allowance for loan losses for the three month
periods ended March 31, 1997 and 1996 follows:
March 31,
-------------
1997 1996
---- ----
(Dollars in thousands)
Balance at beginning of period $2,613 $3,241
Provision charged to operations 125 125
Charge-offs, net (73) (35)
----- ------
Balance at end of period $2,665 $3,331
====== ======
SELECTED FINANCIAL AND REGULATORY RATIOS AND OTHER DATA
At or For the
Three Months Ended
March 31,
---------
1997 1996
---- ----
SELECTED FINANCIAL RATIOS (1):
Return on Average Assets .82% .78%
Return on Average Shareholders' Equity 8.57% 6.70%
Capital to Assets 9.30% 11.10%
Net Interest Rate Spread (2) 3.34% 2.95
Net Interest Margin (3) 3.78% 3.44%
Non-Interest Income to Average Assets .22% .43%
Non-Interest Expense to Average Assets 2.55% 2.49%
Efficiency Ratio (4) 65.99% 71.66%
Ratio of Interest-Earning Assets to
Interest-Bearing Liabilities 111.44% 113.35%
March 31, December 31,
1997 1996
---- ----
REGULATORY CAPITAL RATIOS:
Tangible Capital Ratio 9.02% 9.41%
Core Capital Ratio 9.02% 9.41%
Risk-Based Capital Ratio 24.56% 26.21%
ASSET QUALITY RATIOS:
Non-Performing Loans to Total Net
Loans .89% .84%
Non-Performing Loans to Total Assets .43% .43%
Non-Performing Assets to Total Assets .49% .52%
Allowance for Loan Losses to
Non-performing Loans 91.36% 95.43%
Allowance for Loan Losses to Total
Net Loans .81% .80%
OTHER DATA:
Number of Deposit Accounts 54,834 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 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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Overview
The following discussion and analysis refers to the Company and its
wholly-owned subsidiary, 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 $1,384,000, or $0.32 per share, for
the quarter ended March 31, 1997 as compared to $1,205,000, or $0.25,
per share for the same quarter of the prior year and $1,305,000, or
$0.29, for the quarter ended December 31, 1996. This represents an
increase in net income of 15% and 6% over March 31, 1996 and December
31, 1996, respectively.
The increase in net income for the current quarter ended March 31,
1997 reflects an increase in net interest income after provision for
loan losses over the preceding quarter and the same quarter of the
prior year of $0.7 million and $1.1 million, respectively. This
increase reflects growth in average interest-earning assets and
changes in the mix within the loan portfolio toward higher yielding
commercial loans and commercial mortgages, net of an increase in
borrowing cost due to higher borrowing levels over both the preceding
and year ago quarters. Lower non-interest income and higher non-
interest expense partially offset the increase in net income for the
current quarter.
Financial Condition
At March 31, 1997, total assets increased $41.3 million, or 6.5%, from
$636.0 million at December 31, 1996 to $677.4 million at March 31,
1997. During the first quarter of 1997, the Company continued to
change its mix within its loan portfolio to higher yielding loans. The
commercial loan and commercial and multi-family mortgage portfolio
increased $6.6 million, or 25%, during the quarter to $32.8 million
from $26.2 million at December 31, 1996. This resulted through
continued development of business relationships which allowed the
Company to originate and increase its commercial and commercial
mortgage type product portfolio. Also during the quarter, mortgage-
backed securities increased $37.7 million from $241.0 million to
$278.7 million. This increase resulted primarily from the purchase of
Federal Home Loan Mortgage Corporation ("FHLMC") and Federal National
Mortgage Association ("FNMA") mortgage-backed securities which have
estimated lives, considering expected prepayments, consistent with
five and ten year Treasury instruments.
Growth in assets during the quarter was primarily funded with borrowed
funds, and to a lesser extent through deposit growth as the Company
continued with its strategy of leveraging its excess capital.
Borrowed funds at March 31, 1997 totaled $150.2 million, an increase
of $43.0 million over December 31, 1996. Borrowed funds at March 31,
1997 include $134.0 million of securities sold to the FHLBNY under
agreement to repurchase, of which $60.0 million is at a fixed rate of
5.52% for a five year term, callable at the lender's option after
three years, and the remainder matures within ninety days. It is the
intention of the Company to keep these borrowing maturities short-
term, subject to prevailing market interest rates, at least into the
third calendar quarter of 1997.
Deposits totaled $458.7 million at March 31, 1997, an increase of $1.6
million as compared to December 31, 1996. During the quarter, the mix
of deposits has changed. Higher costing certificates of deposit
accounts have been decreasing and have been replaced with lower
costing core deposits as a result of marketing strategies emphasizing
customer relationships, rather than matching the most aggressively
priced certificates of deposit offered by its competition. During
this period, core deposits increased $3.0 million while certificates
of deposits decreased $1.4 million.
At March 31, 1997, shareholders' equity was $63.0 million as compared
to $66.9 million at December 31, 1996. The ratios of equity to total
assets were 9.3% at March 31, 1997 and 10.5% at December 31, 1996.
The $3.9 million decrease in shareholders' equity resulted from the
purchase on the open market and retirement of 172,500 shares of the
Company's common stock for $2.8 million, a decrease of $2.4 million
(net of tax) in the March 31, 1997 market value of the Company's debt,
equity and mortgage-backed securities as compared to their December
31, 1996 market value, and dividends paid during the quarter of
$443,000. Offsetting these decreases were net income of $1.4 million
for the quarter, and allocations of ESOP shares and other employee
benefit plans during the period totaling $284,000.
Results of Operations
Three-Month Periods Ending March 31, 1997 and 1996
Net Income. For the three months ended March 31, 1997, net income
increased $179,000, or 14.9%, to $1,384,000 from $1,205,000 for the
same period of the prior year. Net income per share for the period
increased $0.07 per share, or 28%, to $0.32 per share from $0.25 per
share for the same period of the prior year due to increased earnings
and the effect of stock repurchases. The increase in net income
resulted primarily from an increase in net interest income, partially
offset by a decrease in non-interest income and an increase in non-
interest expense.
Interest Income. Total interest and dividend income increased $1.7
million, or 15.3%, to $12.5 million for the three months ended March
31, 1997 from $10.8 million for the three months ended March 31, 1996.
This growth in interest income is the result of a $49.0 million, or
8.1%, increase in the average balance of total interest-earning assets
coupled with increases in average yield on total interest-earning
assets. The average yield earned on interest-earning assets increased
to 7.65% for the three months ended March 31, 1997 from 7.17% for the
same prior year period. The increase in interest-earning assets is
attributable to the growth in average balances of first mortgage,
consumer loans and commercial business loans, offset by reductions in
mortgage-backed and debt and equity securities. The increase in
average yield reflects the reinvestment of proceeds received on the
sale of lower yielding securities in prior periods into higher
yielding assets, offset by the purchase and origination of first
mortgage loans at market rates which were less than the average
carried on the books during the prior year period.
Interest Expense. Interest expense increased $0.6 million, or 10.8%,
during the current quarter as compared to the same quarter of the
prior year. Interest expense on deposits basically remained flat,
while interest expense on borrowed funds increased $0.6 million, or
45.0%. Average interest-bearing deposits increased $9.2 million, or
2.1%, for the quarter ended March 31, 1997 as compared to the quarter
ended March 31, 1996. The increase in average deposits is primarily
the result of two branch openings in 1996, increased relationships
with affinity groups, and cross selling efforts by the Company.
Interest expense on deposits remained flat as a result of the
reduction in average cost of interest-bearing deposits to 3.90% for
the current quarter as compared to 3.94% for the quarter ended March
31, 1996. This decrease in cost resulted as higher yielding
certificate of deposit accounts have been allowed to roll-off and were
replaced with lower yielding core deposits.
The average balance of borrowed funds increased $43.8 million, or
43.0%, from the same quarter of the prior year. The cost of borrowed
funds increased 15 basis points to 5.57 % from 5.42% for the quarter
ended March 31, 1996. During December 1996, the Company extended the
maturity of $60.0 million of its short-term borrowed funds to a five
year term, callable at the lender's option after three years, at a
rate of 5.52%. The increase in borrowed funds was primarily used to
fund growth in one-to-four family, consumer, commercial and commercial
mortgage loans.
Net Interest Income. For the quarter ended March 31, 1997, net
interest income increased $1.1 million, or 20.2%, over the comparable
prior year period. 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 34 basis points to 3.78% from
3.44% during the quarter ended March 31, 1996. The increase primarily
resulted from the yield on interest-earning assets growing faster than
the cost of interest-bearing liabilities, partially offset by 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 March 31, 1997 and 1996. Average loans include non-accrual
loans, and related yields include loan fees which are considered
adjustments to yields.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-------------------------------------------------------
1997 1996
--------------------------- ---------------------------
Average Period Average Average Period Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
---------------- ---------- ------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest-earning assets:
First mortgage loans $280,378 $ 5,351 7.63% $176,106 $ 3,499 7.95%
Consumer and other loans 34,930 838 9.73 30,832 743 9.64
Commercial business 10,825 259 9.70 695 16 9.21
Mortgage-backed securities 280,674 5,270 7.51 312,907 5,193 6.64
Debt securities 38,825 645 6.65 76,795 1,266 6.59
Money market investments 18 - 5.35 1,644 23 5.60
FHLBNY stock 7,911 124 6.27 5,595 90 6.43
-------- ------- -------- -------
Total interest-earning assets 653,561 $12,487 7.65 604,574 $10,830 7.17
Non-interest-earning assets 19,228 ======= 15,989 =======
-------- --------
Total assets $672,789 $620,563
======== ========
Liabilities and shareholders'
equity:
Interest-bearing liabilities:
Savings accounts $138,737 $ 986 2.88 $123,364 $ 823 2.67
NOW accounts 47,446 328 2.80 44,506 309 2.78
Money market accounts 44,269 351 3.22 44,174 328 2.97
Certificates of deposit 210,375 2,569 4.95 219,535 2,790 5.08
Borrowed funds 145,623 2,000 5.57 101,810 1,379 5.42
-------- ------- -------- -------
Total interest-bearing liabilities 586,450 $ 6,234 4.31 533,389 $ 5,629 4.22
-------- ======= -------- =======
Non-interest-bearing deposits 16,806 10,531
Other non-interest-bearing
liabilities 4,900 4,704
-------- --------
Total non-interest-bearing
liabilities 21,706 15,235
-------- --------
Total liabilities 608,156 548,624
Shareholders' equity 64,633 71,939
-------- --------
Total liabilities and share-
holders' equity $672,789 $620,563
======== ========
Net interest income $ 6,253 $ 5,201
======= =======
Net interest rate spread 3.34% 2.95%
==== ====
Net interest margin 3.78% 3.44%
==== ====
Ratio of interest-earning assets
to interest-bearing liabilities 111.44% 113.35%
====== ======
</TABLE>
Provision for Loan Losses. The provision for loan losses for the
three months ended March 31, 1997 was $125,000, identical to that
provided for during the same period of the prior year. The provision
for the three months ended March 31, 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 March 31,
1997, non-performing loans decreased $3.5 million, or 54.3%, to $2.9
million from $6.4 million for the same quarter of the prior year.
Non-performing loans represent .89% of total net loans outstanding at
March 31, 1997 compared to 2.86% at March 31, 1996. At March 31,
1997, the allowance for loan losses was $2.7 million, or 91.4%, of
total non-performing loans compared to 52.2% at March 31, 1996.
Non-Interest Income. Total non-interest income decreased $291,000 to
$373,000 for the three months ended March 31, 1997 from $664,000 for
the same period of the prior year. The prior year non-interest income
includes $356,000 from the collection of unaccrued interest associated
with loans whose principal had been repaid in prior periods. The
effect of this non-recurring income to earnings per share increased
the prior period earnings by $0.05 per share. Excluding this non-
recurring item, non-interest income increased $65,000, or 21%, for the
current quarter as compared to the same quarter of the prior year.
This primarily was a result of higher transaction account and returned
item fees recorded during this period.
Non-Interest Expense. Total non-interest expense increased $432,000,
or 11.2%, to $4.3 million for the current quarter from $3.9 million
for the same period of the prior year.
Salaries and employee benefits expense for the three months ended
March 31, 1997 increased $298,000, or 14.3%, compared to the same
period a year ago. Salary and related costs increased approximately
$124,000, primarily as a result of new branch openings in prior
periods, increased executive and loan administrative staffing during
the latter part of 1996, and increased costs of medical benefits.
Other benefit expenses increased approximately $167,000, primarily
related to the Company's ESOP program, employee incentive plans, and
the Company's employee RRP plan adopted during the third quarter of
1996.
Occupancy costs increased $56,000, or 10.7%, for the current quarter
as compared to the same period of the prior year. This increase
resulted principally from higher depreciation expense on capital
improvements, furniture purchased for renovated facilities, and
equipment purchased and costs related to the installation of the new
operating system installed during 1996.
Federal Deposit Insurance Premium expense decreased $205,000, or
74.0%, for the current quarter over the same period last year. This
decrease resulted from the enactment into law of the Deposit Insurance
Fund Act of 1996 on September 30, 1996. As a result, the Company's
deposit insurance expense rate of 23 cents per $100 of deposits was
reduced to 6.4 cents per $100 of deposits.
Data processing expense increased $108,000 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 customer base.
The remaining components of non-interest expense increased $175,000,
or 19.3%, from $908,000 for the three months ended March 31, 1996 to
$1,083,000 for the current quarter. This increase resulted primarily
from increased costs related to marketing and advertising, higher
branch and mortgage related activities, and increased director related
expenses.
Income Tax Expense. The increase in income tax for the period is
solely the result of the tax effect of the increase in pre-tax income
recorded during the period.
Three Month Periods Ended March 31, 1997 and December 31, 1996
Net Income. For the three months ended March 31, 1997, net income
increased $79,000, or 6.1%, to $1,384,000 from $1,305,000 for the
quarter ended December 31, 1996. The increase in net income was
primarily the result of higher net interest income, partially offset
by a reduction in non-interest income, and an increase in non-interest
expense.
Interest Income. Total interest and dividend income increased $1.3
million, or 12.1%, to $12.5 million for the three months ended March
31, 1997 as compared to the preceding three months ended December 31,
1996. The increase in interest income resulted from an increase of
$49.4 million in average interest-earning assets during the current
quarter, coupled with a 27 basis point increase in average yield on
interest-earning assets to 7.65% for the three month period ended
March 31, 1997. Average first mortgage loans basically remained flat
for the quarter, although the mix of the loan portfolio continued to
change and approximately $4.9 million of new loans were recorded
during the quarter at higher rates. The average balance of higher
yielding commercial and multi-family mortgage and commercial business
loans increased $5.7 million during this period. Along with the
growth in targeted loan categories, the yields on the investment
portfolio increased over the preceding quarter, as a result of
mortgage-backed securities purchased in the fourth quarter of 1996 and
the first quarter of 1997. Specifically, during the quarter, the
Company's mortgage-backed securities portfolio increased $37.7 million
to $278.7 million at March 31, 1997 from $241.0 million at December
31, 1996.
Interest Expense. Interest expense increased $611,000, or 10.9%, to
$6.2 million for the three months ended March 31, 1997 as compared to
the preceding quarter. The average balance on deposits increased $3.4
million, or 0.8%, for the three months ended March 31, 1997 over the
preceding three month period. The average cost of deposits of 3.90%
for the current quarter was equal to that of the preceding quarter.
The growth in deposits was primarily in lower yielding core deposit.
The average balance of borrowed funds increased $48.5 million, or
49.9%, from the three months ended December 31, 1996, while the
average borrowing rate decreased from 5.61% to 5.57%. The increase in
borrowed funds was used to fund the growth in interest-earning assets
which occurred during this quarter.
Net Interest Income. For the three months ended March 31, 1997, net
interest income increased $733,000, or 13.3%, over the preceding
period. The increase resulted from interest income growing at a
quicker pace during the quarter than interest expense. During the
current quarter, the net interest margin grew 13 basis points to 3.78%
from 3.65% during the three months ended December 31, 1996. The
increase primarily resulted from the yield on interest-earning assets
growing faster than the yield on interest-bearing liabilities,
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-bearing liabilities and
their average costs and shareholders' equity for the three months
ended March 31, 1997 and the three months ended December, 31 1996. The
average balance of loans includes non-accrual loans, and associated
yields include loan fees which are considered adjustments to yield.
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED MARCH 31, ENDED DECEMBER 31,
-------------------------- ----------------------------
1997 1996
--------------------------- ----------------------------
Average Period Average Average Period Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
---------------- ---------- ------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest-earning assets:
First mortgage loans $280,378 $ 5,351 7.63% $279,745 $ 5,273 7.54%
Consumer and other loans 34,930 838 9.73 34,883 816 9.36
Commercial business 10,825 259 9.70 7,435 178 9.58
Mortgage-backed securities 280,674 5,270 7.51 224,650 3,943 7.02
Debt securities 38,825 645 6.65 43,535 721 6.62
Money market investments 18 - 5.35 6,186 83 5.37
FHLBNY stock 7,911 124 6.27 7,768 129 6.64
-------- ------- -------- -------
Total interest-earning assets 653,561 $12,487 7.65 604,202 $11,143 7.38
Non-interest-earning assets 19,228 ======= 18,837 =======
-------- --------
Total assets $672,789 $623,039
======== ========
Liabilities and shareholders'
equity:
Interest-bearing liabilities:
Savings accounts $138,737 $ 986 2.88 $137,149 $ 990 2.89
NOW accounts 47,446 328 2.80 46,038 330 2.87
Money market accounts 44,269 351 3.22 44,724 355 3.18
Certificates of deposit 210,375 2,569 4.95 209,469 2,586 4.94
Borrowed funds 145,623 2,000 5.57 97,116 1,362 5.61
-------- ------- -------- -------
Total interest-bearing liabilities 586,450 $ 6,234 4.31 534,496 $ 5,623 4.21
-------- ======= -------- =======
Non-interest-bearing deposits 16,806 15,926
Other non-interest-bearing
liabilities 4,900 4,949
-------- --------
Total non-interest-bearing
liabilities 21,706 20,875
-------- --------
Total liabilities 608,156 555,371
Shareholders' equity 64,633 67,668
-------- --------
Total liabilities and share-
holders' equity $672,789 $623,039
======== ========
Net interest income $ 6,253 $ 5,520
======= =======
Net interest rate spread 3.34% 3.17%
==== ====
Net interest margin 3.78% 3.65%
==== ====
Ratio of interest-earning assets
to interest-bearing liabilities 111.44% 113.04%
====== ======
</TABLE>
Provision for Loan Losses. No change occurred in the provision for
loan losses between the three months ended March 31, 1997 and three
months ended December 31, 1996. 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 March 31, 1997, non-performing loans
increased $0.2 million, or 6.5%, to $2.9 million from $2.7 million at
December 31, 1996. Non-performing loans represent .89% of total net
loans outstanding at March 31, 1997 compared to .84% at December 31,
1996. At March 31, 1997, the allowance for loan losses was $2.7
million, or 91.4%, of total non-performing loans compared to 95.4% at
December 31, 1996.
Non-Interest Income. Total non-interest income decreased $399,000 to
$373,000 for the three months ended March 31, 1997 from $772,000 for
the preceding quarter. The prior quarter non-interest income includes
$352,000 from the collection of unaccrued interest associated with
loans whose principal had been repaid in prior periods. The effect of
this non-recurring income to earnings per share increased the prior
period earnings by $0.05 per share. Excluding this non-recurring
item, non-interest income decreased $47,000, or 11%, for the current
quarter as compared to the same quarter of the prior year. This
reduction resulted primarily from reductions in late and penalty fees.
Non-Interest Expense. Total non-interest expense increased $329,000,
or 8.3%, to $4,290,000 for the three months ended March 31, 1997 from
$3,961,000 for the preceding three month period. The increase
resulted primarily from higher advertising, data processing, and
administrative, branch, and lending operations expense recorded during
the quarter. Salaries and employee benefits also increased during the
quarter as a result of normal salary increases and higher benefits
costs incurred, along with increased insurance expense as a result of
credit adjustments recorded during the previous quarter for increased
cash surrender value on insurance policies in place. In addition, the
prior quarter included a $160,000 expense reversal related to a
favorable outcome of a federal tax issue.
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 FHLBNY 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
March 31, 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
2.1% of total assets and 3.1% of total deposits at March 31, 1997. At
March 31, 1997, the Company had available to it $17.8 million under a
line of credit with the FHLBNY, expiring October 31, 1997, and
approximately $7.5 million of excess collateral pledged with the
FHLBNY. In addition, the Company has approximately $110.7 million of
unpledged debt, equity and mortgage-backed securities which are
classified as available for sale, and could be used to collateralize
additional borrowings or sold to provide liquidity.
At March 31, 1997, capital resources were sufficient to meet
outstanding loan commitments of $21.5 million, commitments on unused
lines of credit of $5.9 million and commercial letters of credit of
$2.5 million. Certificates of deposit, which are scheduled to mature
in one year or less from March 31, 1997 totaled $167.5 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,
trends and the Company's prior experience indicate that a significant
portion of such deposits should remain with the Company.
During the three months ended March 31, 1997, investment activities
represented the primary funding need. Purchase of mortgage-backed
securities exceeded maturities and principal repayments of mortgage-
backed and debt securities by $38.4 million. In addition funds were
used for loan disbursements, net of repayments of $2.3 million, and
the repurchase of the Company's common stock of $2.8 million. The
principal source of funding for these investments were increases in
borrowings, net of repayments, from the FHLBNY of $43.0 million, cash
provided by operating activities of $3.0 million and a net increase in
deposits of $1.6 million.
During the three months ended March 31, 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 $50.9 million. Purchase
and originations of loans exceeded principal collections by $27.7
million. The principal sources of funding these investments were
increases in borrowings, net of repayments, from the FHLBNY of $69.6
million and increase in deposits of $6.8 million.
At March 31, 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 March 31, 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
--------------- -----------------------------
For Classi-
fication
Minimum Capital As Well-
Adequacy Capitalized
------------- -------------
(Dollars in thousands) Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
Tangible Capital $61,353 9.02% $10,206 1.50%
Tier 1 (core) Capital 61,353 9.02 27,216 4.00 $34,020 5.00%
Risk Based Capital:
Tier 1 61,353 23.59 10,403 4.00 15,605 6.00%
Total $63,871 24.56% $20,807 8.00% $26,008 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.
None.
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 January 13, 1997 announcing the
appointment of Michael J. Griffin as President
of Statewide Savings Bank, the principal
operating subsidiary of Statewide Financial
Corp.
2. The Registrant filed a current report on Form
8-K on January 28, 1997 announcing the
Registrant's fourth quarter and full year
earnings for the period ending December 31,
1996.
3. The Registrant filed a current report on Form
8-K on February 25, 1997 announcing
Registrant's 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: May 14, 1997 By: Bernard F. Lenihan
Senior Vice President and Chief
Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 10,036
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 315,786
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 330,275
<ALLOWANCE> 2,665
<TOTAL-ASSETS> 677,384
<DEPOSITS> 458,676
<SHORT-TERM> 150,200
<LIABILITIES-OTHER> 5,489
<LONG-TERM> 0
0
0
<COMMON> 0
<OTHER-SE> 63,019
<TOTAL-LIABILITIES-AND-EQUITY> 677,384
<INTEREST-LOAN> 6,448
<INTEREST-INVEST> 5,915
<INTEREST-OTHER> 124
<INTEREST-TOTAL> 12,487
<INTEREST-DEPOSIT> 4,234
<INTEREST-EXPENSE> 6,234
<INTEREST-INCOME-NET> 6,253
<LOAN-LOSSES> 125
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 4,290
<INCOME-PRETAX> 2,211
<INCOME-PRE-EXTRAORDINARY> 1,384
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,384
<EPS-PRIMARY> .32
<EPS-DILUTED> .32
<YIELD-ACTUAL> 3.78
<LOANS-NON> 2,386
<LOANS-PAST> 531
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 2,209
<ALLOWANCE-OPEN> 2,613
<CHARGE-OFFS> 76
<RECOVERIES> 3
<ALLOWANCE-CLOSE> 2,665
<ALLOWANCE-DOMESTIC> 2,665
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
