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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) October 27, 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,
October 27, 1998 announcing Registrant's third
quarter results and stock repurchase program.
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, October 27, 1998 announcing
Registrant's third quarter results and
stock repurchase program.
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: November 5, 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,
October 27, 1998 announcing Registrant's third
quarter results and stock repurchase program.
FOR IMMEDIATE RELEASE Contact: Augustine F. Jehle
October 27, 1998 (201) 795-4000
Anthony S. Cicatiello
(732) 382-1066 ext. 234
Statewide Financial Corp. Reports Third Quarter
Net Loss of $0.09 Per Share
Special Charge Taken for Premium Amortization
Announces New Stock Repurchase Program
JERSEY CITY, N.J., (October 27, 1998) -- Statewide Financial Corp.
(NASDAQ: SFIN), the holding company for Statewide Savings Bank S.L.A.
announced today that the Company has taken a pretax charge of
$1,876,000, or $0.31 per share, basic and diluted, to recognize
additional premium amortization in the Company's mortgage-backed
investment securities portfolio related to current and anticipated
pre-payment speeds.
Victor M. Richel, Chairman, President and Chief Executive Officer
stated, "In light of current market conditions, reductions in medium
term interest rates and a continued high volume of pre-payments, the
Company believes it is prudent to adjust its pre-payment assumptions
regarding mortgage-backed investment securities. The Company will
continue to monitor the actual performance of these portfolios and
will continue to focus on its fundamental corporate objectives to
reallocate assets to higher yielding commercial and consumer loans and
strengthen its corporate franchise."
Richel continued, "Despite this charge to third quarter earnings, the
Company continues to realize significant growth and benefits from our
current and previous initiatives. Although there have been record
level prepayments and intensive middle market competition, the average
balance of total loans, for both current and year-to-date periods,
increased 4.4% and 1.9% over the third quarter and year-to-date
periods of the prior year."
Richel added that, "success in the execution of our plan to fill the
service void to small and medium businesses is reflected in the growth
of our commercial mortgage and business loan portfolios. The average
balance of these portfolios has grown 62.4% and 63.7% during the
current year periods over the same periods of the prior year. In
addition, Statewide Mortgage Funding, a wholesale funding division
initiated in June of this year to provide mortgage bankers with
short-term financing secured by underlying real estate mortgages,
exceeded our expectations by originating $120.6 million in loans since
inception. At September 30, 1998 Funding had $41.2 million in loans
outstanding, under lines of credit granted of $76.6 million, and for
the quarter then ended, had average loans outstanding of $25.1
million. Moreover, as a result of expansion of, and emphasis through,
our retail branch network, as well as continued marketing efforts, the
average balance of the consumer loan portfolio has also grown 9.1% and
9.8% during the current year periods over the same periods of the
prior year."
"New business initiatives, including staffing and support in
commercial lending, Statewide Funding, a new retail branch opening,
and increased marketing has, as expected, resulted in higher cost
during this quarter, and for the year-to-date, compared to the same
periods of the prior year. The benefit of these costs has been a
significant increase in commercial and consumer loans generated and
demand deposits gathered." Richel added that "throughout 1998 the
Company has partially offset expense growth by actions such as
eliminating certain operating costs through the sale of its Passaic
branch, eliminating the current year's executive incentive plan
benefits, and reducing certain director benefits." He further noted
that "despite this expense control, the rapid pace of first mortgage
loans and securities repayment has more than offset the significant
increase in asset generation." He continued that "in this uncertain
interest rate environment, we maintained excess cash in short-term
instruments, rather than expose the Company to extended duration risk,
with the consequence that both interest-earning assets and the
associated yield, decreased from the same periods of the prior year."
The Company reported, including the special charge, a net loss of
$341,000, or $0.09 per share, assuming dilution, for the three months
ended September 30, 1998 as compared to net income of $1,382,000, or
$0.32 per share, assuming dilution, for the same quarter during 1997.
Basic loss per share was $0.09 for the third quarter of 1998, as
compared to basic earnings per share of $0.33 for the third quarter of
1997. For the nine months ended September 30, 1998, net income totaled
$2,177,000, or $0.52 per share, assuming dilution, compared to
$4,157,000, or $0.96 per share assuming dilution, for the same period
of the prior year. Basic earnings per share for the nine months ended
September 30, 1998, were $0.55 per share compared to $0.99 per share
for the same period of the prior year.
Separately, the Company announced that its Board of Directors had
approved a new stock repurchase program pursuant to which the Company
may repurchase up to $4,500,000 in the Company's common stock.
Purchases may be made from time to time in open market or privately
negotiated transactions. Richel stated, "We believe this decision
reflects the confidence that the Board and senior management has in
the achievement of our strategic plan. Current market valuations of
our stock, in light of our strategic accomplishments, make repurchases
a prudent use of our capital."
At September 30, 1998, the Company's total assets were $652.6 million,
compared to $656.6 million at June 30, 1998, and $675.3 million at
December 31, 1997. The period-end balances decreased $4.0 million
between June 30, 1998 and September 30, 1998, as increases in the net
loan portfolio and the debt and equity securities portfolio were
offset by a decrease in the mortgage-backed securities portfolio.
Loans at September 30, 1998 were $22.8 million higher than at June 30,
1998 as a result of Statewide Funding originations of $101.8 million,
commercial mortgage and business loan originations of $6.3 million,
and consumer loan originations of $4.6 million. These efforts more
than offset repayments in these portfolios resulting in period-end
loan balance growth over the preceding quarter-end of $31.1 million,
$0.9 million and $0.8 million, respectively, to balances of $41.2
million, $60.1 million and $40.6 million respectively. In addition,
repayments of residential mortgages, net of originations, resulted in
a $11.0 million decline in the one-to-four family mortgage loan
portfolio from the June 30, 1998 balance.
The mortgage-backed securities portfolio decreased $27.5 million
between September 30, 1998 and the preceding quarter, principally from
normal amortization and significantly accelerated prepayments.
Partially offsetting this decline was an increase in debt securities
from the purchase of $25.0 million of corporate debt, offset by calls
of $18.9 million of federal agency debt during the quarter.
As compared to December 31, 1997, assets at September 30, 1998 were
$22.7 million lower for reasons similar to those noted above. Loans
at September 30, 1998 were $22.1 million higher than at December 31,
1997 as originations from Statewide Funding, commercial mortgage and
business loans and consumer loans more than offset repayments in these
and the one-to-four family mortgage loan portfolios from the December
31, 1997 balances. Debt securities at September 30, 1998 were $32.6
million more than the December 31, 1997 total, primarily reflecting
the purchase of $56.5 million of corporate debt, offset by maturities
and calls of $22.9 million of federal agency debt during the period.
At September 30, 1998 the mortgage-backed securities portfolio
reflected pay downs of $87.8 million from the beginning of the year.
Cash was utilized in loan portfolio growth, purchases of debt
securities, repurchases of the Company's common stock, and pay downs
of short term borrowings. The remaining cash was invested into short
term instruments in order to limit duration risk in the current low
interest rate environment.
Borrowed funds were $146.3 million at September 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 currently callable quarterly through maturity, and
borrowed funds of $60.0 million with an interest rate of 5.52% is
first callable in November, 1999 and callable quarterly thereafter.
Borrowed funds remained flat as compared to the preceding quarter and
decreased $14.0 million from December 31, 1997.
Deposits totaled $438.3 million at September 30, 1998, as compared to
$440.5 million at June 30, 1998 and $443.9 million at December 31,
1997. The decrease in total deposits from the prior quarter resulted
primarily from a decrease of $5.5 million in certificates of deposit
as depositors continue to seek higher rates and investment
alternatives. Partially offsetting this decrease was an increase in
core deposits of $3.3 million, or 1.3% to $263.8 million at September
30, 1998 reflecting cross selling and marketing initiatives. Growth in
non-interest bearing demand accounts of $3.2 million coupled with a
$6.3 million increase in savings accounts were partially offset by
decreases in NOW accounts of $1.9 million and money market deposits of
$4.3 million.
The decrease in total deposits between December 31, 1997 and September
30, 1998 resulted primarily from the transfer of the lease and the
sale of the deposits of the Company's Passaic N.J. branch during the
second quarter of 1998 coupled with further controlled runoff of
certificates of deposit. Despite the branch sale, core deposits
increased $5.1 million, or 2.0%, while certificates of deposit
decreased $10.7 million, or 5.8%. Growth in savings accounts of $11.0
million coupled with a $4.9 million increase in non-interest bearing
demand accounts were partially offset by decreases in NOW accounts of
$5.2 million and money market deposits of $5.6 million. Excluding the
sale of the deposits of the Passaic branch, total deposits increased
$1.0 million between December 31, 1997 and September 30, 1998, of
which core deposits increased $9.5 million and certificates of deposit
decreased $8.5 million.
Shareholders' equity decreased $2.6 million and $3.7 million during
the three-month and nine-month periods ended September 30, 1998,
respectively, to $61.2 million. The decreases during these periods
resulted primarily from repurchase and retirement of 225,458 shares of
the Company's common stock and the payment of quarterly dividends,
partially offset by the allocation of ESOP shares and other employee
benefit plans. The change to shareholders' equity in three-month
period also reflects a $75,000 (net of taxes) increase in the gain in
the market value of the Company's investment portfolio over its June
30, 1998 valuation and a $341,000 reduction from the quarter's net
loss. The change to shareholders' equity in the nine-month period
reflects a reduction in the gain in the market value of the Company's
investment portfolio over its December 31, 1997 valuation of $0.7
million (net of taxes) and an increase of $2,177,000 from the
year-to-date period's net income.
The results of operations for the three and nine months ended
September 30, 1998 reflect decreases in net interest income, before
provisions for loans losses, over the same periods a year ago, of $2.2
million and $2.7 million, respectively. Current year period decreases
include the $1.9 million charge for the recognition of additional
premium amortization on mortgage-backed securities. Aside from this
special charge, decreases during the current year periods primarily
resulted from premium amortization; margin compression as a result of
reinvesting cash pay-downs in a lower interest rate environment;
declines in average interest-earning assets as the Company
de-leveraged compared to prior periods because of the lack of spread
differential between short and longer-term investments; and increased
non-interest expense substantially due to staffing, support and
marketing efforts to implement the Company's plan of generating
commercial and consumer loans and related core deposits, partially
offset by increases in non-interest income as a result of the
Company's fee enhancement programs.
During the third quarter of 1998, the average balance of loans
outstanding increased $14.4 million, or 4.4%, and the related yield
increased 9 basis points to 7.95% from 7.86% from the same quarter
last year, reflecting changes in the components of the Company's loan
portfolio. Interest income from loans over the same periods increased
$363,000, or 5.6%. Within this increase mortgage loan yields increased
13 basis points concurrent with a $21.2 million growth in
non-residential mortgage loans as the Company continues with its
strategic plan to focus on commercial loan relationships. This
mortgage loan growth was offset by a reduction of $38.6 million in the
average balance of one-to-four family mortgage loans. As a result,
total interest on mortgage loans decreased $250,000 during the current
quarter over the same quarter last year.
The average balance of consumer loans increased $3.3 million, or 9.1%
for the current quarter over the same quarter last year reflecting the
Company's marketing efforts and its initiative in developing new loan
products in response to community demand. This resulted in a $21,000
rise in consumer loan income despite a decline of 60 basis points in
yield in this declining interest rate environment.
Average commercial business loans, including wholesale loans to
mortgage bankers, increased $28.5 million, or 186.9%, for the current
quarter over the same period last year. Statewide Funding had average
daily balances during the current quarter of $25.1 million, and the
average commercial business loan portfolio increased $3.4 million, or
22.4%. Consequently, current year quarterly interest income on
commercial business and wholesale loans to mortgage bankers increased
$592,000, or 169.6% over the same period last year.
The positive momentum in the loan portfolio was offset by a decrease
of $84.4 million in current quarter average balance of the
mortgage-backed securities portfolio from the same period of the prior
year. Partially offsetting this decline, along with the increase in
average loan portfolio mentioned above, was an increase in the average
debt securities portfolio of $21.4 million, or 75.5%, for the current
quarter over the same quarter last year. Average short term
investments also increased from zero during the third quarter of 1997
to $14.8 million for the current quarter.
During the nine months ended September 30, 1998 the average balance of
loans outstanding increased $6.2 million, or 1.9%, and the related
yield increased 4 basis points to 7.96% from 7.92% from the year ago
period. The reasons are as stated above in the explanation of the
quarterly change except for average balances because additional
Company's resources were expanded in the second quarter of 1998 to
increase these loans and their impact to average balance calculations
is largely in the third quarter. Offsetting this increase in the
average balance of loans outstanding is a reduction in the
mortgage-backed securities portfolio of $42.7 million from the same
period last year, reflecting normal and accelerated repayments.
Throughout the decline in the interest rate environment, the Company
has been reducing the interest rates it pays for deposits as well
eliminating short term borrowings. In addition, the Company has
increased demand deposits from relationships with its commercial
customers. As a result, the cost of deposits and borrowings has been
reduced by $637,000, and 25 basis points for the quarter, and $1.5
million, and 21 basis points, for the year-to-date period as compared
to year ago periods.
For both the three-month and nine-month periods ended September 30,
1998, 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.
Although yields on total loans increased for both the current year
three-month and nine-month periods, total yields on interest-earning
assets declined more rapidly then the cost of deposits and borrowed
funds causing further contractions in the net interest margins for the
periods. The increased loan yield resulted from focused efforts on
originating higher yielding commercial and consumer loans. This
increase in yields, as well as the tightening of the spread between
interest-earning assets and deposits and borrowed funds and the $1.9
million mortgage backed security premium charge, are reflected in net
interest margin of 3.39% and 3.41% for the three and nine months ended
September 30,1998, respectively, as compared to 3.73% and 3.76% for
the three and nine months ended September 30, 1997. Excluding the $1.9
million charge to the current year periods, the net interest margin
would have declined 3 basis points and 5 basis points for the three
and nine months ended September 30, 1998 from the same periods of the
prior year.
Provision for loan losses for the three months and nine months ended
September 30, 1998 increased to $171,000 and $471,000 respectively,
from $125,000 and $375,000 for the same periods during the prior year.
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 nine months ended September 30,
1998 totaled $0.6 million and $2.1 million respectively, as compared
to $0.4 million and $1.2 million for the same periods of the prior
year. Non-interest income for the nine months ended September 30, 1998
includes a $0.3 million gain on the sale of the Passaic branch.
Excluding this one time gain realized in the second quarter of this
year, non-interest income grew $249,000, or 62.1%, and $666,000, or
57.2% for the three and nine months ended September 30, 1998 over the
same periods of the prior year. Richel stated, "Loan and deposit fees
and charges continue to grow, reflecting the benefits from the
implementation of prior period fee enhancement initiatives and the
growth of our business." The increase over the same periods of the
prior year reflect increased deposit account fees for monthly
maintenance and returned check assessment charges, ATM surcharges for
non-customer service usage, higher annuity sales generated throughout
the bank's retail network, and increased earned loan fees and charges.
Non-interest expense for the three and nine months ended September 30,
1998 totaled $4.8 million and $13.9 million respectively, as compared
to $4.2 million and $12.7 million for the same periods of the prior
year. The current year three-month and nine-month period increases
over the same periods of the prior year primarily reflect increases in
salaries and benefits due to current year staff increases for the
newly formed Mortgage Funding division, personnel additions to the
commercial lending division and staffing for the North Arlington N.J.
branch; normal wage increases; and increased costs related to the
Company's ESOP and other pension related programs. In addition, the
three and nine months ended September 30, 1998 reflect an unrealized
market loss leading to the diminution in the cash surrender value of
policies held in conjunction with Company insurance programs, whereas
in the year ago periods there had been gains; higher professional fees
related to costs incurred in conjunction with the Company's ongoing
FIRREA litigation against the Federal government, and marketing cost
increases related to new product promotion and advertising. These
costs are partially offset by lower stationery, printing and supplies,
and correspondent bank charges. Non-interest expenses for the nine
months ended September 30, 1998 also include increased professional
fees for the Company's non-interest income earnings enhancement
initiative and for review of Company benefit programs, as well as
increased marketing costs related to the opening of the North
Arlington branch and product name recognition. The expense increases
incurred to date have been expected, and throughout 1998 the Company
has partially offset expense growth by elimination of operating costs
through the sale of the Passaic branch, elimination of the current
year's executive incentive plan benefits, and reduction of certain
director benefits.
Headquartered in Jersey City, New Jersey, 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 September 30, December 31,
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dollars in thousands, except
per share data 1998 1997
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Total Assets $652,628 $675,316
Loans, Net $354,606 $332,509
Debt and Equity Securities $ 51,728 $ 19,093
Mortgage-backed Securities $198,774 $290,044
Other Real Estate Owned, Net $ 727 $ 440
Total Deposits $438,322 $443,878
Borrowed Funds $146,279 $160,300
Shareholders' Equity $ 61,243 $ 64,907
Book Value per share $ 14.28 $ 14.39
SELECTED OPERATING DATA
For the Three For the Nine
Months Ended Months Ended
September 30, September 30,
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dollars in thousands,
except per share data 1998 1997 1998 1997
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Interest Income $9,738 $12,569 $33,478 $37,746
Interest Expense 5,810 6,447 17,581 19,116
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Net Interest Income 3,928 6,122 15,897 18,630
Provision For Loan Losses 171 125 471 375
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Net Interest Income After
Provision For Loan Losses 3,757 5,997 15,426 18,255
Non-interest Income 650 401 2,131 1,164
Foreclosed Real Estate
Expense, Net 15 11 41 25
Other Non-interest Expense 4,778 4,162 13,855 12,715
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(Loss) Income Before
Income Taxes (386) 2,225 3,661 6,679
Income Tax (Benefits)
Expense (45) 843 1,484 2,522
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Net (Loss) Income $ (341) $ 1,382 $ 2,177 $ 4,157
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(Loss) Earnings per share:
Basic $(0.09) $0.33 $0.55 $0.99
Diluted $(0.09) $0.32 $0.52 $0.96
Weighted Average Number
of Shares:
Basic 3,914,679 4,157,248 3,981,646 4,213,283
Diluted 3,914,679 4,305,557 4,161,318 4,343,154
At or For the At or For the
Three Months Ended Nine Months Ended
September 30, September 30,
SELECTED FINANCIAL RATIOS(1): 1998 1997 1998 1997
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Return on Average Assets (0.21)% 0.81% 0.44% 0.82%
Return on Average Equity (2.25)% 8.62% 4.58% 8.65%
Capital to Assets 9.38 % 9.36% 9.38% 9.36%
Net Interest Rate Spread (2) 3.11 % 3.40% 3.12% 3.44%
Net Interest Margin (3) 3.39 % 3.73% 3.41% 3.76%
Non-Interest Income to
Average Assets 0.40 % 0.23% 0.43% 0.23%
Non-Interest Expense to
Average Assets 2.93 % 2.44% 2.81% 2.50%
Efficiency Ratio (4) 74.26% 65.22% 71.12% 65.61%
Average Interest Earning
Assets to Average Deposits
and Borrowings 107.67% 108.42% 108.06% 108.18%
September 30, December 31,
REGULATORY CAPITAL RATIOS: 1998 1997
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Tangible Capital Ratio 9.11% 8.96%
Core Capital Ratio 9.11% 8.96%
ASSET QUALITY RATIOS:
Non-Performing Loans to Total Net Loans 0.70% 0.75%
Non-Performing Loans to Total Assets 0.38% 0.37%
Non-Performing Assets to Total Assets 0.49% 0.44%
Allowance for Loan Losses to
Non-Performing Loans 119.72% 113.18%
Allowance for Loan Losses to Total
Net Loans 0.83% 0.85%
OTHER DATA:
Number of Deposit Accounts 52,762 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 9, 1998. On May 9, 1998,
Statewide Savings Bank S.L.A. opened the North Arlington
Branch.
