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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) July 21, 1998
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Statewide Financial Corp.
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(Exact name of registrant as specified in its charter)
New Jersey 0-26546 22-3397900
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(State or other jurisdiction of (Commission (IRS Employer
incorporation) File Number) Identification No.)
70 Sip Avenue, Jersey City, New Jersey 07306
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (201) 795-4000
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Item 1. Changes in Control of Registrant.
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Not Applicable.
Item 2. Acquisition or Disposition of Assets.
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Not Applicable.
Item 3. Bankruptcy or Receivership.
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Not Applicable.
Item 4. Changes in Registrant's Certifying Accountant.
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Not Applicable.
Item 5. Other Events.
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Registrant issued a press release on Tuesday,
July 21, 1998 announcing Registrant's second
quarter earnings.
Item 6. Resignations of Registrant's Directors.
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Not Applicable.
Item 7. Exhibits and Financial Statements.
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Exhibit No. Description
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99 Registrant issued a press
release on Tuesday, July 21,
1998 announcing Registrant's
second quarter earnings.
Item 8. Change in fiscal year
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Not Applicable.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, Statewide Financial Corp. has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.
STATEWIDE FINANCIAL CORP.
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(Registrant)
Dated: July 24, 1998 By: Bernard F. Lenihan
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Senior Vice President and
Chief Financial Officer
EXHIBIT INDEX
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CURRENT REPORT ON FORM 8-K
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Exhibit No. Description
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99 Registrant issued a press release on Tuesday,
July 21, 1998 announcing Registrant's second
quarter earnings.
FOR IMMEDIATE RELEASE Contact: Augustine F. Jehle
July 21, 1998 (201) 795-4000
Anthony S. Cicatiello
(732) 382-1066, ext. 234
STATEWIDE FINANCIAL CORP. ANNOUNCES
SECOND QUARTER 1998 EARNINGS
JERSEY CITY, N.J., (July 21, 1998) -- Statewide Financial Corp.
(NASDAQ: SFIN), the holding company for Statewide Savings Bank S.L.A.,
today reported second quarter 1998 net income of $1,214,000, or $0.29
per share, assuming dilution, as compared to $1,391,000, or $0.32 per
share, assuming dilution, for the same quarter during 1997. Basic
earnings per share were $0.30 for second quarter 1998, as compared to
$0.33 per share for the second quarter of 1997. For the six months
ended June 30, 1998, net income totaled $2,518,000, or $0.60 per
share, assuming dilution, compared to $2,775,000, or $0.64 per share,
assuming dilution. Basic earnings per share for the six months ended
June 30, 1998, were $0.63 per share compared to $0.65 per share for
the same period of the prior year.
"This has been the most eventful quarter in the history of Statewide,"
stated Chairman, President and Chief Executive Officer Victor M.
Richel. During the quarter, Statewide:
- Started Statewide Funding, a wholesale funding operation
which provides secured short-term financing to mortgage
bankers;
- Started its SBA lending operations;
- Realigned its retail distribution network through the sale
of its Passaic in-store branch and the opening of a branch
in North Arlington, N.J.;
- Expanded its commercial lending operations through the
employ of additional commercial lenders and support staff;
and
- Grew non-interest income through fee structure changes
implemented mid-quarter.
"This combination of new business initiatives and realignment of
branch sites designed to strengthen our franchise has caused us to
incur start-up expenses which have reduced the current quarter's
income, but which should increase our earnings in future periods,"
Richel added.
Richel continued, "I have previously noted that the current flat
interest rate yield curve environment is likely to be with us for a
while. The actions taken this quarter are decisive alternatives to
extending duration risk within the current interest rate climate.
Richel further stated, "The significant levels of prepayments
experienced in the second quarter were expected."
Richel continued, "Despite the negative impact to this quarter's
earnings, we are greatly pleased with the results of these new
operations. Statewide Funding originated $18.8 million in loans
during June, its first full month of operations, and on average, had
$7.9 million of outstanding loans during that month. At June's month
end, Statewide Funding had $10.1 million in loans outstanding under
lines of credit totaling $28.0 million, and had applications for $35.0
million of loans in various stages of review. This business provides
a natural hedge to the prepayment risks associated with the current
rate environment, and allows for continued involvement in our region's
strong housing market."
Richel added that, "Although our new commercial lenders were on board
during only the last half of the second quarter, they helped us grow
our commercial mortgage and business loan portfolios 33%, to $69.3
million, at June 30, 1998, from the preceding quarter's levels.
Furthermore, our SBA lending program was initiated in June with the
addition of a former SBA administrator to head our efforts. We have
since closed our first conforming loan under the program, and expect
non-interest income from sales of these loans to begin in the third
quarter."
Richel indicated that, "In addition to our revenue-generation efforts,
we continue to strive to improve our retail distribution network. On
May 9, 1998, we opened a branch in North Arlington, Bergen County.
This under-served banking community has demographics which are
identical to communities where our most successful branches are
located. It not only offers a significant base for deposit
relationships, but also has a strong business community. Our strategy
here, and system wide, is to build customer relationships with
emphasis on consumer and business lending. This opening was part of a
realignment begun on April 10, 1998, as we transferred the lease of,
and sold the deposits from, our Passaic in-store branch to Banco
Popular, realizing a pre-tax gain of $0.3 million. Our experience
with in-store banking demonstrated that it is most effective within an
urban area as a complement to our existing network, since it provides
safe and convenient seven-day-a-week customer access with extended
hours. We determined that our presence in the Passaic market was
insufficient to justify the higher operational costs of in-store
banking."
Richel continued, "We see significant market opportunities to serve
disenfranchised commercial and residential customers throughout our
region. The initiatives we have undertaken keep us on target to form
a solid, profitable business foundation as we grow and expand into the
best community bank in our market area."
Richel stated that, "We will continue to have significant levels of
prepayments and next quarter will reflect a full quarter's cost for
actions implemented this quarter. These start-up costs, coupled with
continued pressure to our net interest margin from ongoing prepayments
of securities and loans, have temporarily slowed our earnings growth.
However, our Statewide Funding Group should be break-even by the end
of the third quarter and generate returns by year end, and there
appears to be significant demand for our SBA product. As a result of
these and other factors, we believe that the Company's earnings per
share for the third quarter could be similar to this quarter, and
1998's full year's earnings could approximate between $1.22 and $1.25
per share, assuming dilution."
At June 30, 1998, the Company's total assets were $656.6 million,
compared to $670.6 million at March 31, 1998, and $675.3 million at
December 31, 1997. The period-end balances decreased $14.0 million
between March 31, 1998 and June 30, 1998, principally from accelerated
prepayments on mortgage-backed securities and one-to-four family
mortgages. "With the continued low interest rate environment, we
continue to see shrinkage in the mortgage-backed securities and one-
to-four family mortgage portfolios, as accelerated prepayment activity
continues in the marketplace," Richel stated. Partially offsetting
these declines were increases in debt securities from the purchase of
$22.0 million of federal agency debt during the quarter. Additionally,
commercial business and commercial mortgage loans increased $17.1
million, or 32.9%, to $69.3 million at June 30, 1998.
Assets at June 30, 1998 were $18.7 million lower than total assets at
December 31, 1997. Declines of $63.8 million, or 22.0%, in mortgage-
backed securities and $23.1 million, or 9.5%, in one-to-four family
mortgage loans were the primary causes for the drop in assets during
this period. Partially offsetting these decreases were originations in
commercial business and mortgage loans, which increased this portfolio
$21.8 million, or 46.0%, along with growth in debt securities which
increased $27.9 million, or 146.3%, during the first six months of
1998. The remaining cash flows were used to pay down short-term
borrowings and increase short-term instruments rather than re-
investing into longer term securities in a falling interest rate
market with significant duration risk.
Borrowed funds were $146.2 million at June 30, 1998. Of this amount,
$146.0 million have final maturity dates ranging from July 2000 to
September 2002. All are callable earlier at the lender's option.
Borrowed funds of $86.0 million, with interest rates ranging from
5.43% to 5.54%, are first callable in 1998, and borrowed funds of
$60.0 million, with an interest rate of 5.52%, are first callable in
November 1999. Borrowed funds increased $0.2 million over the
preceding quarter and decreased $14.1 million from December 31, 1997.
During 1998, the Company repaid its short-term borrowed funds with the
cash flow from its securities and mortgage portfolios.
Deposits totaled $440.5 million at June 30, 1998, as compared to
$452.0 million at March 31, 1998 and $443.9 million at December 31,
1997. The decrease in total deposits from the prior quarter resulted
primarily from the transfer of the lease and the sale of the deposits
of the Passaic branch on April 10, 1998, coupled with further
controlled runoff of certificates of deposits. Excluding the sale of
the deposits of the Passaic branch, total deposits increased $3.1
million between December 31, 1997 and June 30, 1998, while core
deposits increased $6.2 million, or 2.4%, and certificates of deposits
decreased $3.1 million.
Shareholders' equity decreased $2.1 million and $1.1 million during
the three and six months ended June 30, 1998, respectively, to $63.8
million. The decreases during these periods resulted primarily from
the repurchase and retirement of 118,000 shares of the Company's
common stock for $2.7 million during the second quarter of 1998, along
with the payment of quarterly dividends and the reduction during the
three and six months ended June 30, 1998, of $0.5 million and $0.8
million, respectively, in the market value (net of taxes) of the
Company's investment portfolio. These decreases were partially offset
by net income of $1.2 million and $2.5 million for the three and six
months ended June 30, 1998, respectively, and the allocation of ESOP
shares and other employee benefit plans during the periods.
The results of operations for the three and six months ended June 30,
1998 reflect decreases in net interest income, before provisions for
loans losses, over the same periods a year ago, of $0.3 million and
$0.5 million, respectively. These decreases during the periods
primarily resulted from declines in average balances of one-to-four
family mortgage loans and mortgage-backed securities, along with the
continued overall downward trends in market yields on interest
sensitive products. Increased prepayments in mortgage-backed
securities caused related premiums to be amortized at a faster pace,
and related excess cash flows to be deployed into lower yielding
short-term instruments. Yields on interest-earning assets declined
more rapidly than the yields on deposits and borrowed funds, causing
further contractions in the net interest margins for the periods. The
tightening of spread between interest-earning assets and deposits and
borrowed funds is reflected in the net interest margin, which equaled
3.70% and 3.72% for the three and six months ended June 30,1998,
respectively, as compared to 3.77% for both the three and six months
ended June 30, 1997.
Provision for loan losses increased $25,000 per quarter to $150,000
and $300,000 for the three and six months ended June 30, 1998,
respectively, from $125,000 and $250,000 for the three months and six
months ended June 30, 1997. The increase in provision for loan losses
was determined by management after review of, among other things, the
Company's loan portfolio, the risk inherent in the Company's lending
activities, changes in the composition and volume of the Company's
loan portfolio, and the local economy in the Company's market area.
Non-interest income for the three and six months ended June 30, 1998
totaled $0.9 million and $1.5 million respectively, as compared to
$0.4 million and $0.8 million for the same periods of the prior year.
Included in non-interest income for 1998 is a $0.3 million gain on the
sale of the Passaic branch. Excluding this gain, the Company still
recorded increases in non-interest income of $0.3 million, or 73.8%,
and $0.4 million, or 54.8%, for the three and six months ended June
30, 1998 over the same periods of the prior year. Richel stated,
"Higher service fees are being realized as we expand our business and
grow into a full service community bank that offers greater services
to our customers." The increase over the same periods of the prior
year reflects increased deposit account fees as core deposits continue
to grow, ATM surcharges to non-customers, higher annuity sales
generated through the bank's branch network, income realized on an
asset previously written off in a prior period, and increased loan
fees and charges.
Non-interest expense for the three and six months ended June 30, 1998
totaled $4.7 million and $9.1 million respectively, as compared to
$4.3 million and $8.6 million for the same periods of the prior year.
The current year increases over the same periods of the prior year
primarily reflect increases in salaries and benefits due to increased
staffing for the newly formed mortgage funding group as well as
commercial lending staff additions; increased costs related to the
Company's ESOP program caused by increases in the value of the
Company's stock; and normal wage increases, partially offset by lower
incentive plan expenses. In addition to salaries and benefits, non-
interest expense increased because of professional fees related to our
earnings enhancement initiatives and benefit review costs, and
marketing costs related to bank product and name recognition
advertising and the opening of the North Arlington branch. Offsetting
these increases were lower insurance, stationery, printing and
supplies costs.
This news release contains forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934, as
amended regarding the Company's future performance during 1998. The
Company believes such statements to be reasonable and makes them in
good faith, however, such forward-looking statements almost always
vary from actual results, and the differences between assumptions
underlying such statements and actual results can be material.
Factors which may make actual results differ from anticipated results
include, but are not limited to, changes in market interest rates;
unforeseen competition; changes in customer economic activity which
may affect loan activity; changes in the economy of the Company's
market area, and other uncertainties, all of which are difficult to
predict and beyond the control of the Company. Accordingly, investors
should not rely upon these forward-looking statements in making
investment decisions.
Headquartered in Jersey City, N.J., Statewide Savings Bank is a state
chartered stock savings and loan association that conducts business
from 16 locations in Hudson, Union and Bergen counties. Statewide's
deposits are insured by the Savings Association Insurance Fund (SAIF)
of the Federal Deposit Insurance Corporation (FDIC).
SELECTED FINANCIAL CONDITION DATA June 30, December 31,
(dollars in thousands, except per 1998 1997
share data) --------- ------------
Total Assets $656,635 $675,316
Loans, Net $331,783 $332,509
Debt and Equity Securities $ 47,029 $ 19,093
Mortgage-backed Securities $226,286 $290,044
Other Real Estate Owned, Net $ 606 $ 440
Total Deposits $440,491 $443,878
Borrowed Funds $146,248 $160,300
Shareholders' Equity $ 63,810 $ 64,907
Book Value - per share $ 14.51 $ 14.39
SELECTED OPERATING DATA For the Three For the Six
(dollars in thousands, Months Ended Months Ended
except per share data) June 30, June 30,
1998 1997 1998 1997
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Interest Income $11,773 $12,690 $23,740 $25,177
Interest Expense 5,866 6,435 11,771 12,669
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Net Interest Income 5,907 6,255 11,969 12,508
Provision for Loan Losses 150 125 300 250
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Net Interest Income After
Provision for Loan Losses 5,757 6,130 11,669 12,258
Non-interest Income 947 390 1,481 763
Foreclosed Real Estate
Expense, Net 6 7 26 14
Other Non-interest Expense 4,733 4,270 9,077 8,553
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Income Before Income Taxes 1,965 2,243 4,047 4,454
Income Tax Expense 751 852 1,529 1,679
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Net Income $ 1,214 $ 1,391 $ 2,518 $ 2,775
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Earnings Per Share:
Basic $ 0.30 $ 0.33 $ 0.63 $ 0.65
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Diluted $ 0.29 $ 0.32 $ 0.60 $ 0.64
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Weighted Average Number of
Shares:
Basic 4,002,384 4,190,605 4,015,878 4,242,006
Diluted 4,203,942 4,321,626 4,216,774 4,362,659
SELECTED FINANCIAL RATIOS (1) At or for the At or for the
Three Months Six Months
Ended Ended
June 30, June 30,
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1998 1997 1998 1997
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Return on Average Assets 0.74% .82% 0.76% .82%
Return on Average Equity 7.46% 8.78% 7.77% 8.67%
Capital to Assets 9.72% 9.73% 9.72% 9.73%
Net Interest Rate Spread (2) 3.40% 3.46% 3.42% 3.46%
Net Interest Margin (3) 3.70% 3.77% 3.72% 3.77%
Non-interest Income to Average Assets 0.58% 0.23% 0.45% 0.23%
Non-interest Expense to Average Assets 2.88% 2.51% 2.75% 2.53%
Efficiency Ratio (4) 72.37% 65.60% 69.57% 65.79%
Ratio of Interest-earning Assets to
Average Deposits and Borrowings 108.21% 107.77% 108.26%108.05%
REGULATORY CAPITAL RATIOS: June 30, December 31,
1998 1997
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Tangible Capital Ratio 9.04% 8.96%
Core Capital Ratio 9.04% 8.96%
ASSET QUALITY RATIOS:
Non-performing Loans to Total Net
Loans 0.73% 0.75%
Non-performing Loans to Total Assets 0.37% 0.37%
Non-performing Assets to Total Assets 0.46% 0.44%
Allowance for Loan Losses to Non-
performing Loans 123.30% 113.18%
Allowance for Loan Losses to Total
Net Loans 0.89% 0.85%
OTHER DATA:
Number of Deposit Accounts 53,337 54,677
Number of Offices (5) 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 deposits and borrowed
funds.
(3) Net interest margin represents net interest income as a
percent of average interest-earning assets.
(4) Total non-interest expense divided by the sum of net interest
income after provision for loan losses, and recurring non-
interest income.
(5) The Passaic branch was sold to Banco Popular FSB as of the close
of business on April 10, 1998. On May 9, 1998, Statewide Savings
Bank S.L.A. opened the North Arlington branch.
