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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) April 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,
April 21, 1998 announcing Registrant's first
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 Press Release dated Tuesday,
April 21, 1998 announcing
Registrant's first 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: April 22, 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 Press Release dated Tuesday, April 21, 1998
announcing Registrant's first quarter earnings.
FOR IMMEDIATE RELEASE Contact: Augustine F. Jehle
April 21, 1998 (201)795-4000
Anthony S. Cicatiello
(732)382-1066, ext. 234
STATEWIDE FINANCIAL CORP. ANNOUNCES
FIRST QUARTER 1998 EARNINGS OF $0.31 PER SHARE
AND NEW COMMERCIAL LENDING INITIATIVES
JERSEY CITY, N.J., (April 21, 1998) -- Statewide Financial Corp.
(NASDAQ: SFIN), the holding company for Statewide Savings Bank S.L.A.,
today reported net income of $1,304,000, or $0.31 per share, assuming
dilution, for the quarter ended March 31, 1998, as compared to
$1,384,000, or $0.31 per share, assuming dilution, for the same
quarter during 1997. Basic earnings per share were $0.32 for first
quarter 1998, equal to the first quarter of 1997.
"The industry continues to be faced with the challenge of narrowed
spreads between long-term and short-term interest rates," stated
Victor M. Richel, Chairman, President and Chief Executive Officer.
"Net interest margins are under pressure, as record level refinancings
accelerate prepayments, while similar yield reinvestment opportunities
are limited. Our strategic plan has been, and continues to be,
designed to make us less dependent upon the specific direction of
interest rates by evolving into a full-service community bank which
serves the middle-market business community as well as our existing
residential base of customers. Our commercial loan portfolio
continues to develop significantly, as exemplified by the increase in
our non-residential, multi-family and construction mortgage and
business loan portfolios of $6.1 million, or 11.8%, during the
quarter, representing prudent growth with diligent regard to quality."
Richel noted that, "Our continued emphasis on cross sales training has
resulted in a significant increase in the level of branch-originated
consumer and small market business loan applications and closures
during the quarter. In addition, during this period, our local
advisory councils' referrals resulted in $5.2 million of loan
closings, and at March 31, 1998, the current advisory councils'
pipeline consists of approximately $7.2 million of loan applications
at various stages of review. These asset-generation initiatives have
also resulted in increases in non-interest bearing deposits, as
customers build upon their relationships with us. These are some of
the reasons why, despite significant prepayments within our loan and
securities portfolios, and generally flat or declining market rates of
interest, our net interest margin for the first quarter was 3.72%,
compared to 3.78% for the year ago quarter, and 3.77% for the
preceding quarter, representing decreases of only 6 and 5 basis
points, respectively."
Richel went on to state that, "I am also pleased to announce that we
have formed the Statewide Mortgage Funding Group, a division of
Statewide Savings Bank, to provide commercial lines of credit to
mortgage bankers. The division will be headed by a seasoned banking
executive with more than 10 years of experience in the commercial
credit business. We expect to have loans originated through this
program by the end of the second quarter. We believe that the
long-term earnings benefit of this new line of business will more than
offset the near-term start-up costs. We are also expanding our
commercial asset growth capabilities with the addition of two seasoned
commercial lending officers, both of whom have extensive experience in
Hudson, Union and Essex counties. These two actions provide
significant additions to our ability to continue to generate assets,
and I believe they will markedly accelerate the implementation of our
strategic plan."
Richel continued, "In addition to our commercial initiatives, we
continue to strive to improve our retail distribution network.
Effective May 9, 1998, we will open 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 offers potential for significant size and its
location is operationally well suited. On April 9, 1998 we
transferred the lease, and sold the deposits from, our Passaic
in-store branch to Banco Popular. Our experience with in-store
banking has 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 not
sufficient to justify the higher operational costs of in-store
banking."
Richel noted, "There are no indications that the current flat interest
rate yield curve environment is likely to change in the immediate
future. Our revenue enhancement efforts, coupled with our branch
efficiency actions, are decisive alternatives to extending duration
risks within the current interest rate environment." He further
stated, "We believe that significant levels of prepayments will
continue in the second quarter, and we know that negative pressure to
earnings will be caused by the start-up costs of establishing the
Funding Group's line of business, up-front costs of new lending
personnel and start-up costs for a new branch, as well as by the fact
that the new lending initiatives will not yet have significant revenue
impact. As a result of these factors, we believe that the Company's
earnings per share for the second quarter of 1998 could be flat, or
even off several cents, from first quarter 1998 earnings."
At March 31, 1998, the Company's total assets were $670.6 million,
compared to $675.3 million at December 31, 1997. The period-ended
balances decreased $4.7 million between these periods principally from
accelerated prepayments on mortgage-backed securities and one-to-four
family mortgages. Purchases of debt securities, originations within
the commercial portfolio, and increased federal funds sold partially
offset the decreases indicated above with the balance used to pay down
short-term borrowings. Multi-family, construction, commercial mortgage
and business loans continue to be the fastest growing segment of the
Company's loan portfolio, which increased $6.1 million, or 11.8%,
during the quarter.
Borrowed funds were $146.0 million at March 31, 1998. These borrowings
have final maturity dates ranging from July 2000 to September 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 $14.3 million from December 31, 1997. During the first
quarter of 1998, the Company used cash flow from its securities and
residential first mortgage portfolios to repay short-term borrowings,
rather than reinvesting the funds in securities in a falling interest
rate market with significant duration risk.
Deposits totaled $452.0 million at March 31, 1998, as compared to
$443.9 million at December 31, 1997. Total deposits increased $8.1
million, or 1.8%, during the quarter. The increase in total deposits
from the prior quarter resulted from growth of $6.1 million, or 2.3%,
in core deposits coupled with an increase of $2.1 million, or 1.1%, in
certificates of deposit. "As the Company continues its relationship
selling efforts, core deposits continue to grow," Richel stated.
Shareholders' equity increased $1.0 million during the quarter to
$65.9 million at March 31, 1998, from $64.9 million at December 31,
1997. The increase resulted primarily from the current quarter net
income of $1.3 million, allocations of shares under the Company's
Employee Stock Ownership Plan (ESOP) and other employee benefit plans,
and options exercised during the period. Partially offsetting these
increases were the declaration of the quarterly dividend of $0.5
million and a decrease of $0.3 million (net of tax) in the March 31,
1998 market value of the Company's investment portfolio from the
valuation at December 31, 1997.
The results of operations for the three months ended March 31, 1998
reflect a decrease in net interest income, after provisions for loan
losses, over the same period a year ago, of $0.2 million. The
decrease reflects the decline in average assets during the current
period and a contraction in the quarterly net interest margin. These
occurrences were mostly caused by increased prepayments of mortgages
and securities, which in turn caused associated premiums to be
amortized at a faster pace, and associated cash flows to be reinvested
at lower yields in short-term instruments. In addition, yields on
interest-earning assets declined at a more rapid pace than costs of
deposits and borrowings from the same quarter a year ago. The net
interest margin for the quarter ended March 31, 1998 was 3.72%, 6
basis points less than the 3.78% earned the same quarter a year ago.
Provision for loan losses increased $25,000 to $150,000 for the three
months ended March 31, 1998, from $125,000 for the same quarter of 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 totaled $534,000 for the three months ended March
31, 1998, an increase of $161,000, or 43.2%, over the same period of
the prior year. The increase reflects increased ATM surcharges to
non-customers, higher annuity sales generated through the Bank's
branch network, income realized on an asset written off in a prior
period, and increased letter of credit and deposit account fees.
Non-interest expense for the three months ended March 31, 1998 totaled
$4.4 million, an increase of $0.1 million over the same period of the
prior year. This change reflects increases in salaries and benefits
due to higher 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. ESOP
expense is recorded as compensation based on the market value of the
shares awarded. Increased professional fees and lending and branch
operations costs, offset by lower insurance costs, also contributed to
the slight increase in non-interest expense.
Statewide Financial Corp. is the holding company for Statewide Savings
Bank S.L.A., a savings and loan association headquartered in Jersey
City, N.J. Statewide Savings Bank conducts thrift business and offers
commercial banking services through its 15 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 March 31, December 31,
(dollars in thousands, except per 1998 1997
share data) --------- ------------
Total Assets $670,561 $675,316
Loans, Net $329,523 $332,509
Debt and Equity Securities $ 27,652 $ 19,093
Mortgage-backed Securities $263,305 $290,044
Other Real Estate Owned, Net $ 496 $ 440
Total Deposits $452,007 $443,878
Borrowed Funds $146,000 $160,300
Shareholders's Equity $ 65,910 $ 64,907
Book Value per share $ 14.60 $ 14.39
SELECTED OPERATING DATA For the Three
(dollars in thousands, except Months Ended
per share data) March 31,
1998 1997
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Interest Income $11,967 $12,487
Interest Expense 5,905 6,243
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Net Interest Income 6,062 6,253
Provision for Loan Losses 150 125
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Net Interest Income After Provision
for Loan Losses 5,912 6,128
Non-Interest Income 534 373
Foreclosed Real Estate Expense, Net 20 7
Other Non-Interest Expense 4,344 4,283
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Income Before Income Taxes 2,082 2,211
Income Tax Expense 778 827
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Net Income $ 1,304 $ 1,384
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Earnings Per Share:
Basic $ 0.32 $ 0.32
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Assuming Dilution $ 0.31 $ 0.31
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Weighted Average Number of Shares:
Basic 4,029,156 4,293,979
Assuming Dilution 4,229,390 4,404,263
SELECTED FINANCIAL RATIOS (1): At or For the
Three Months
Ended March 31,
1998 1997
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Return on Average Assets 0.78% 0.82%
Return on Average Equity 8.09% 8.57%
Capital to Assets 9.83% 9.30%
Net Interest Rate Spread (2) 3.42% 3.46%
Net Interest Margin (3) 3.72% 3.78%
Non-Interest Income to Average Assets 0.32% 0.22%
Non-Interest Expense to Average
Assets 2.62% 2.55%
Efficiency Ratio (4) 66.46% 65.99%
Average Interest-Earning Assets to
Average Deposits and Borrowings 108.30% 108.34%
REGULATORY CAPITAL RATIOS: March 31, December 31,
1998 1997
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Tangible Capital Ratio 9.24% 8.96%
Core Capital Ratio 9.24% 8.96%
ASSET QUALITY RATIOS:
Non-Performing Loans to Total Net
Loans 0.89% 0.75%
Non-Performing Loans to Total Assets 0.44% 0.37%
Non-Performing Assets to Total
Assets 0.51% 0.44%
Allowance for Loan Losses to Non-
Performing Loans 98.40% 113.18%
Allowance for Loan Losses to Total
Net Loans 0.88% 0.85%
OTHER DATA
Number of Deposit Accounts 55,282 54,677
Number of Offices (5) 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 weighted
average yield on average interest-earning assets and 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.
