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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) January 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 dated Tuesday,
January 27, 1998 announcing fourth quarter 1997
and full year 1997 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
dated Tuesday, January 27, 1998
announcing fourth quarter 1997 and
full year 1997 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: January 29, 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 dated Tuesday,
January 27, 1998 announcing fourth quarter 1997
and full year 1997 earnings.
FOR IMMEDIATE RELEASE Contact: Augustine F. Jehle
January 12, 1998 (201) 795-4000
Anthony S. Cicatiello
(732) 382-1066
STATEWIDE FINANCIAL CORP. REPORTS INCREASE
IN FOURTH QUARTER 1997 AND FULL YEAR NET INCOME
*ANNUAL NET INCOME ROSE 15%
*ANNUAL EARNINGS PER SHARE UP 24%
JERSEY CITY, N.J., (January 27, 1998) -- Statewide Financial Corp.
(NASDAQ: SFIN), the holding company for Statewide Savings Bank S.L.A.
today reported fourth quarter 1997 net income of $1,430,000, or $0.34
per share, assuming dilution. This compares to net income of
$1,305,000, or $0.29 per share, assuming dilution, for the same
quarter of 1996, and net income of $1,382,000, or $0.32 per diluted
share for the third quarter of 1997. This represents increases in net
income and diluted earnings per share of 10% and 17% over the same
quarter last year, and 3% and 6% over the results of the immediately
preceding quarter. Basic earnings per share were $0.36 and $0.29 for
the fourth quarter of 1997 and 1996, respectively, and $0.33 for the
third quarter of 1997.
The Company also reported net income for the year ended December 31,
1997 of $5,587,000, or $1.30 per share, assuming dilution, compared to
$4,869,000, or $1.05 per share, assuming dilution, for 1996. This
represents an increase in net income and diluted earnings per share of
15% and 24% over last year. Earnings during 1996 were affected by a
one-time industry-wide assessment on thrift institutions to
recapitalize the Savings Association Insurance Fund (SAIF). The impact
of this charge has been added back to the prior-year results in order
to normalize these comparisons. Inclusive of the one-time SAIF
assessment, the Company reported net income of $3,172,000, or $0.68
per share, assuming dilution, for the year ended December 31, 1996.
Basic earnings per share were $1.34 for 1997 and $1.05 for 1996 as
adjusted, and $0.68 for 1996 inclusive of the SAIF assessment.
Basic Earnings Per Share and Diluted Earnings Per Share have replaced
Primary and Fully Diluted Earnings Per Share reporting for periods
ending subsequent to December 15, 1997, with prior period
restatements. Basic Earnings Per Share, unlike the former Primary
Earnings Per Share, excludes all dilution, while Diluted Earnings Per
Share reflects the potential dilution that could occur if common stock
equivalents were exercised or converted into common stock which then
share in earnings.
"Statewide's profitability and outstanding progress during 1997
provided us with a solid foundation to address challenges for
continued improvement during the coming year," stated Chairman,
President and Chief Executive Officer Victor M. Richel. "We have
enhanced and strengthened our franchise during this past year with our
continued shift in the mix of interest earning assets and interest
bearing liabilities, along with enhanced service to our customers with
continued infrastructure alignments and enhancements such as the
introduction of a Debit Card, an Attorney Trust deposit product, and
commercial PC Banking." Richel continued, "Our emphasis in developing
commercial business is reflected in the growth of our commercial
business portfolio, which increased 81% this year, offsetting
accelerated prepayments of one-to-four family mortgage loans caused by
declining interest rates. Core deposits continue to grow, increasing
4.4%, including growth of $7.8 million, or 47.1%, in non-interest
bearing demand accounts. Non-performing loans and assets declined from
the prior year, which improved asset quality ratios. Shareholder value
was enhanced through repurchase of 427,497 shares of our Company's
stock in 1997 and through a 10% increase in dividends implemented
during the third quarter of last year."
Richel noted that, "During the fourth quarter of 1997, the Company
continued its emphasis upon originating quality commercial mortgages
and business loans and consumer loans, while growing its core
deposits. Low- interest rates during the quarter, helped the Company
toward its goal of reducing its cost of deposits; though lower
longer-term rates also contributed to higher principal prepayments for
loans and mortgage-backed securities, thereby reducing yields for
these assets, and limiting reinvestment opportunities." He stated
that, "1998 will likely be affected by falling interest rates which
may squeeze margins, continue to accelerate mortgage prepayments and
lower the yield on loan and investment portfolios. The margin realized
between the rates we pay on deposits and borrowings, and the rates we
collect on loans, may narrow as longer-term interest rates fall while
short-term rates remain steady. We have responded by reducing our
interest cost on certain core deposits accounts, and by continuing our
emphasis on fee income and originations of commercial and consumer
loans. Despite these efforts, assuming the continuation of the current
interest rate environment, we believe our first quarter 1998 results
may be negatively impacted by continued prepayments in both the
mortgage loan portfolio and the mortgage-backed securities portfolio
and by the Company's reduced use of borrowings to fund loan
originations and securities purchases. As a result of these factors,
we believe that the Company's earnings per share for the first quarter
of 1998 could be flat, or even off several cents from fourth quarter
1997 earnings, although we continue to believe that full year 1998
results will surpass full year 1997 results."
At December 31, 1997, the Company's total assets were $675.3 million,
compared to $703.1 million at September 30, 1997, and $636.0 million
at December 31, 1996. The period-ended balances decreased $27.8
million between September 30, 1997 and December 31, 1997, principally
from net sales, calls and accelerated prepayments in the securities
portfolio. Partially offsetting the securities' decrease was an
increase of $3.4 million in net loans. Multi-family, commercial
mortgage and business loans continue to be the Company's fastest
growing segment of the Company's loan portfolio, which increased $9.2
million, or 24.1%, during the quarter. In addition, consumer loan
portfolio growth during the quarter was $1.1 million, or 3.0%.
However, increased residential first mortgage prepayments contributed
to a decline in the one-to-four family mortgage portfolio of $7.7
million, or 3.1%.
Assets at December 31, 1997 were $39.3 million more than those at
December 31, 1996. Increases in the securities portfolio accounted for
the majority of this asset growth, despite increased prepayments of
mortgage-backed securities and calls of debt securities throughout the
year. During 1997, the Company continued to invest in mortgage-backed
securities which provided better returns and durations than those that
would have been provided by originating one-to-four family residential
real estate mortgages in this tightened interest rate environment.
Consequently, this limited re-investment coupled with normal principal
amortization and accelerated prepayments, due to falling longer-term
interest rates, caused the one-to-four family residential first
mortgage portfolio to decrease $21.4 million, or 8.1%, during 1997.
Offsetting this decrease, commercial and consumer loan originations
increased those portfolios $21.2 million, or 80.9%, and $3.7 million,
or 10.8%, respectively, along with an increase in the construction
loan portfolio of $3.9 million to $4.3 million at December 31, 1997,
leading to a net increase in total loans of $7.4 million during 1997.
Borrowed funds were $160.3 million at December 31, 1997. Of this
amount $14.3 million matures overnight and the balance has final
maturity dates ranging from July 23, 2000 to September 16, 2002. All
are callable earlier at the lender's option. Borrowings of $86.0
million with interest rates ranging from 5.43% to 5.54% are first
callable in 1998, and borrowings of $60.0 million with an interest
rate of 5.52% are first callable in November 1999. Borrowed funds
decreased $27.8 million over the preceding quarter, and increased
$53.1 million from December 31, 1996. During the fourth quarter of
1997, the Company used cash flow from its securities portfolio to
repay short-term borrowings, rather than re-investing the funds in a
falling interest rate market with significant duration risk. The
increase in borrowed funds over the prior year-end was used: in part
to support asset growth, particularly earlier in the year, in line
with the Company's strategy to leverage its excess capital; in part to
support repurchase of the Company's Common Stock; and in part to
liquidate certificates of deposit for holders who sought rates higher
than the Company's alternate borrowing rates.
Deposits totaled $443.9 million at December 31, 1997, as compared to
$442.5 million at September 30, 1997 and $457.1 million at December
31, 1996. The increase in total deposits from the prior quarter
resulted from the increase in core deposits which grew $4.3 million,
while higher costing certificates of deposits decreased $2.9 million.
Likewise core deposits grew for the year, increasing $10.8 million, or
4.4% over December 31, 1996 levels, as customer relationships were
developed through continued marketing efforts. Total deposits
decreased $13.2 million, or 2.9%, from the prior year-end from the
controlled runoff of certificates of deposit throughout the year. The
Company's strategy during 1997 was, and continues to be, to not match
the competition's aggressive rates unless management believes that
relationships with deposit holders who have other deposit or loan
relationships are in jeopardy.
Shareholders' equity decreased $0.9 million during the quarter to
$64.9 million at December 31, 1997, from $65.8 million at September
30, 1997, and $2.0 million during the year from $66.9 million at
December 31, 1996. The decrease from both the preceding quarters and
from December 31, 1996, resulted primarily from the repurchase and
retirement of the Company's stock in the amounts of 81,770 shares and
427,497 shares, respectively, and the payment of quarterly dividends.
Partially offsetting these decreases was net income of $1.4 million
and $5.6 million for the quarter and year ended December 31, 1997,
respectively, and allocations of shares under the Company's Employee
Stock Ownership Plan (ESOP), and other employee benefit plans during
the periods. In addition, Shareholders' equity includes an after-tax
gain of $0.9 million for the increase in market value of securities
over cost at December 31, 1997. This is $0.4 million less than the
gain at September 30, 1997 and $0.6 million more than the gain at
December 31, 1996.
The results of operations for the three and twelve months ended
December 31, 1997 reflect increases in net interest income, after
provisions for loans losses, of $0.7 million and $3.2 million
respectively, from the same periods a year ago. The increases reflect
growth in average loans and investment securities at higher yields
offset by an increase in borrowing costs due to increased average
borrowing levels. The net interest margin for the quarter ended
December 31, 1997 was 3.78%, an increase of 13 basis points over the
same period of the prior year. For the twelve months ended December
31, 1997, the net interest margin was 3.77%, compared to 3.45% for the
same period in the prior year.
Net interest income after provisions for loan losses, for the three
months ended December 31, 1997 increased $0.1 million, or 0.9%, from
the prior quarter. A higher volume of loan and mortgage-backed
securities prepayments was offset by reductions in the cost of core
deposits and decreases in higher-yielding certificates of deposits.
The net interest margin for the quarter ended December 31, 1997 was
3.78% compared to 3.73% for the quarter ended September 30, 1997.
Non-interest income totaled $492,000 for the three months and $1.7
million for the twelve months ended December 31, 1997, $278,000 and
$0.7 million less than the same periods of the prior year. These
decreases resulted from unaccrued interest income being realized
during the preceding year's periods with no like events occurring
during this current year. Excluding these items, non-interest income
increased $74,000, or 17.7%, and $191,000, or 13.0%, for the three-
and twelve-month periods ended December 31, 1997, as compared to the
same periods of the preceding year. These increases for the periods
resulted primarily from increased deposit account maintenance and
service fees and earnings related to annuity sales offset by lower
mortgage late charges. During the fourth quarter of 1997, non-interest
income increased $91,000 over the preceding quarter of 1997, as a
result of higher deposit account maintenance and service fees,
surcharges, and annuity fees, offset by lower mortgage late charges.
During the year ended December 31, 1996, the Company incurred a loss
of $1,093,000 from sales of securities, compared to a gain of $69,000
for the current year. Proceeds from the 1996 sales approximated
$110.8 million and were used, in conjunction with additional
borrowings and deposits, to fund loan growth and for redeployment into
higher-yielding securities. Proceeds from the sales of securities
during 1997 approximated $30.6 million and were primarily used to
repay short-term borrowings.
Non-interest expense for the three and twelve months ended December
31, 1997 totaled $4.4 million and $17.1 million respectively, as
compared to $4.0 million and $15.8 million for the same periods of the
prior year, exclusive of the one-time SAIF assessment. The
current-year increases over the same periods of the prior year reflect
staffing and support costs necessary to meet the Company's commercial,
retail and productivity targets and to position the Company for
continued growth and increased profitability, and normal wage and
salary increases. Current year periods fully reflect the costs
related to two new branches opened during 1996, whereas there is
limited expense for these new offices in the prior year periods.
These periods also reflect increased furniture, fixtures, and
equipment, data processing and other operational cost incurred for the
refurbishment of existing facilities and installation of a new
operating system, which were performed during the latter part of 1996.
The current year's periods also fully include costs for the
Recognition and Retention Plans for Directors, Executive Officers and
Employees, whereas these costs are only reflected in the second half
of the prior year. The current year's periods also reflect higher
costs related to the Company's ESOP program over the same periods of
the prior year because of increases in the market value of the
Company's stock over these periods. ESOP expense is recorded as
compensation based on the market value of the shares awarded. In
addition, marketing and bank operational costs have increased during
the three- and twelve-month periods ended December 31, 1997 over the
same periods of the prior year, because of deposit gathering and loan
origination activity. Offsetting these expense increases for the
three and twelve months ended December 31, 1997 was a lower assessment
rate for deposit insurance.
Non-interest expense for the current quarter was $0.2 million more
than the $4.2 million incurred for the three months ended September
30, 1997. Increases in the current quarter, as compared to the
preceding quarter, resulted from increased marketing, data processing
and ESOP costs.
Income tax expense for the three months and twelve months ended
December 31, 1997 and the three months ended December 31, 1996 reflect
the tax on those periods' income at the Company's effective tax rate.
Income tax expense for the 12 months ended December 31, 1996 reflects
a tax benefit from the reversal of a $702,000 tax liability previously
established which expired during the quarter ended September 30, 1996.
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, Bergen and Passaic
counties. Statewide's deposits are insured by the Savings Association
Insurance Fund (SAIF) of the Federal Deposit Insurance Corporation
(FDIC).
SELECTED FINANCIAL CONDITION DATA December 31, December 31,
dollars in thousands, except per 1997 1996
share data ---- ----
Total Assets $675,316 $636,042
Loans, Net $332,509 $325,470
Debt and Equity Securities $ 19,093 $ 40,243
Mortgage-backed Securities $290,044 $240,974
Other Real Estate Owned, Net $ 440 $ 563
Total Deposits $443,878 $457,056
Borrowed Funds $160,300 $107,200
Shareholders' Equity $ 64,907 $ 66,935
Book Value per share $ 14.39 $ 13.63
SELECTED OPERATING DATA For the Three For the Twelve
dollars in thousands, Months Ended Months Ended
except per share data December 31, December 31,
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1997 1996 1997 1996
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Interest Income $12,445 $11,143 $50,191 $45,278
Interest Expense 6,268 5,623 25,384 23,656
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Net Interest Income 6,177 5,520 24,807 21,622
Provision for Loan Losses 125 125 500 500
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Net Interest Income After
Provision For Loan Losses 6,052 5,395 24,307 21,122
Non-interest Income 492 770 1,656 2,382
Net Gain (Loss) on Sale
of Investment Securities 69 2 69 (1,093)
Foreclosed Real Estate
Expense, Net 46 31 71 105
FDIC SAIF Assessment 0 0 0 2,651
Other Non-interest Expense 4,326 3,930 17,041 15,687
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Income Before Income Taxes 2,241 2,206 8,920 3,968
Income Tax Expense 811 901 3,333 796
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Net Income $ 1,430 $ 1,305 $ 5,587 $ 3,172
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Earnings per share:
Basic $ .36 $ .29 $1.34 $ .68
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Diluted $ .34 $ .29 $1.30 $ .68
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Weighted Average Number of
Shares:
Basic 4,021,781 4,429,020 4,164,861 4,648,310
Diluted 4,212,851 4,471,125 4,310,032 4,662,451
SELECTED FINANCIAL At or For the Three At or For the
RATIOS(1): Months Twelve Months
Ended December 31, Ended December 31,
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1997 1996 1997 1996
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Return on Average Assets .84% .84% .82% .49%
Return on Average Equity 9.02% 7.71% 8.74% 4.67%
Capital to Assets 9.61% 10.52% 9.61% 10.52%
Net Interest Rate Spread(2) 3.30% 3.17% 3.31% 2.99%
Net Interest Margin(3) 3.78% 3.65% 3.77% 3.45%
Non-Interest Income to
Average Assets .29% .49% .24% .37%
Non-Interest Expense to
Average Assets, Exclusive of
SAIF Assessment Charge 2.57% 2.54% 2.52% 2.45%
Efficiency Ratio, Exclusive
of SAIF Assessment Charge(4) 66.81% 68.14% 65.91% 69.92%
Average Interest-Earning
Assets to Average Interest-
Bearing Liabilities 112.94% 113.04% 111.88% 112.32%
REGULATORY CAPITAL RATIOS: December 31, December 31,
1997 1996
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Tangible Capital Ratio 8.96% 9.41%
Core Capital Ratio 8.96% 9.41%
ASSET QUALITY RATIOS:
Non-Performing Loans to Total Net
Loans .75% .84%
Non-Performing Loans to Total Assets .37% .43%
Non-Performing Assets to Total Assets .44% .52%
Allowance for Loan Losses to Non-
Performing Loans 113.18% 95.43%
Allowance for Loan Losses to Total
Net Loans .85% .80%
OTHER DATA
Number of Deposit Accounts 54,677 53,695
Number of Offices 16 16
Notes to Selected Financial Ratios
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(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.
