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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 26, 1999
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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 26, 1999 announcing registrant's third
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, October 26, 1999
announcing registrant's third
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: November 8, 1999 By: Bernard F. Lenihan
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Senior Vice President,
Chief Financial Officer,
Secretary and Treasurer
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 26, 1999 announcing registrant's third
quarter earnings.
FOR IMMEDIATE RELEASE CONTACT: Bernard F. Lenihan
October 26, 1999 201-795-4000
Tony Cicatiello
732-382-1066
STATEWIDE FINANCIAL CORP. REPORTS RECORD THIRD QUARTER 1999 EARNINGS
Statewide Financial Corp. (NASDAQ: SFIN), the holding company for
Statewide Savings Bank S.L.A. today reported third quarter 1999 net
income of $1,628,000, or $0.42 per share, assuming dilution, as
compared to a net loss of $341,000, or $0.09 per share, assuming
dilution, for the same quarter during 1998. Basic earnings per share
were $0.44 for the third quarter of 1999, as compared to a basic loss
per share of $0.09 for the third quarter of 1998.
Net income for the third quarter of 1998 was affected by a pre-tax
charge of $1.9 million to recognize additional amortization of
premiums related to prepayment speeds in the Company's mortgage-backed
investment securities portfolio.
Net income for the nine months ended September 30, 1999, totaled
$4,154,000, or $1.08 per share, assuming dilution, compared to
$2,177,000, or $0.52 per share, assuming dilution, for the same period
of the prior year. Earnings for the nine months ending September 30,
1999 include pre-tax acquisition costs of $503,000 incurred in
connection with the Company's pending acquisition by Independence
Community Bank Corp.("Independence"). Excluding acquisition costs,
net income totaled $4,473,000, or $1.16 per share, assuming dilution,
for the nine months ended September 30, 1999. Earnings during the
nine months ended September 30, 1998 reflected the $1.9 million pre-
tax charge as discussed above. Basic earnings per share for the nine
months ended September 30, 1999 were $1.13 per share, compared to
$0.55 per share for the same period of the prior year. Basic earnings
per share for the nine months ended September 30, 1999, excluding
acquisition costs, were $1.21 per share.
"The record results for the third quarter of this year reflect the
tireless efforts and dedication of Statewide's management and staff
along with the successful implementation of past initiatives and
continued progress toward reaching our strategic goals," stated Victor
M. Richel, chairman, president and chief executive officer of
Statewide Financial Corp. He added that "continued strong commercial
loan growth, including lending to mortgage bankers by Statewide
Funding, was the significant factor in our revenue growth, as well in
our core deposit growth, as relationship building efforts continued to
yield significant results. As a result of this combination, average
interest earning assets grew 14% during the current year's quarter
over the prior year's quarter, and net interest margin increased to
3.76%."
The Company's total assets were $743.7 million at September 30, 1999
compared to $717.5 million at December 31, 1998. The period-ended
balances increased $26.2 million between these periods principally
from growth in the commercial and consumer loan portfolios and the
mortgage-backed securities portfolio, partially offset by declines in
debt securities, one-to-four family mortgage loans and a slight
pullback in the Statewide Funding lines of credit to mortgage bankers.
Loans at September 30, 1999 increased $22.9 million over December 31,
1998 as a result of growth of $25.6 million, or 31.9%, in the
construction, multi-family, commercial mortgage and business loan
portfolios, along with a $3.8 million, or 9.3%, increase in the
consumer loan portfolio. This growth was partially offset by a slight
decline in the one-to-four family mortgage loan portfolio of $1.0
million, or 0.5%, despite originations of $37.9 million during the
period. In addition, outstanding Statewide Funding loans to mortgage
bankers declined from $47.8 million to $42.9 million as mortgage
refinancings declined. However, while utilization under lines of
credit has declined, more customers have been added; so that total
lines of credit have increased $48.7 million to $127.2 million at
September 30, 1999.
Mortgage-backed securities increased $11.3 million between December
31, 1998 and September 30, 1999 as the Company continued its growth
strategy with the purchase of $144.3 million of mortgage-backed
securities and private label collateralized mortgage obligations,
which more than offset $62.0 million of sales and $64.2 million in
normal amortization and accelerated prepayments recorded during the
period. At September 30, 1999, the debt securities portfolio declined
$19.0 million to $49.4 million from $68.3 million at December 31,
1998, reflecting calls, maturities and sales of U.S. Treasury, Agency
and corporate debt. Also, during the second quarter of this year,
Statewide purchased an additional $2.3 million of FHLBNY stock.
Borrowed funds totaled $235.0 million at September 30, 1999 as
compared to $206.7 million at December 31, 1998. The increase of
$28.3 million in borrowed funds during the current year was used in
conjunction with growth in core deposits to fund: growth in loans,
maturities of certificates of deposit for holders who sought rates
higher than the Company's alternate borrowing rates and repurchases of
the Company's common stock. Borrowed funds consist of $28.0 million
in overnight advances, $61.0 million of short term repurchase
agreements which mature within 7 days and $146.0 million which have
final maturity dates ranging from July 2000 to September 2002, but are
callable earlier at the lender's option. Of this $146.0 million,
$86.0 million have interest rates ranging from 5.43% to 5.54% and are
callable quarterly through maturity, and $60.0 million have an
interest rate of 5.52% and are first callable in November 1999 and
quarterly thereafter.
Deposits totaled $448.6 million at September 30, 1999 as compared to
$443.7 million at December 31, 1998. The increase in total deposits
for the current year resulted primarily from growth in core deposits
of $9.5 million, partially offset by a decrease of $4.6 million in
certificates of deposit as the Company continued with its strategy of
not matching competitors' most aggressive interest rates unless the
Company believes that a key relationship is in jeopardy. At September
30, 1999, core deposits were $282.1 million compared to $272.6 million
at December 31, 1998. Within core deposits, savings and checking
accounts increased $6.9 million and $4.9 million, respectively,
reflecting the Company's continued relationship building efforts, and
the expansion of the Company's branch network during the second
quarter of this year. Partially offsetting these increases was a
decrease in money market accounts of $2.3 million.
Shareholders' equity decreased $6.7 million during the current year to
$53.8 million at September 30, 1999 from $60.5 million at December 31,
1998. The decrease during the first nine months resulted from the
repurchase and retirement of 112,000 shares of the Company's common
stock for $2.2 million during the first quarter of 1999, the
declaration of three quarterly cash dividends, and a decrease of $8.4
million (net of tax) in the September 30, 1999 market value of the
Company's investment portfolio from the valuation at December 31,
1998. Partially offsetting these decreases were the current year's net
income of $4.2 million, funds received from the exercise of stock
options, and the allocation of shares under the Company's Employee
Stock Ownership Plan (ESOP) and other benefit plans.
The results of operations for the three and nine months ended
September 30, 1999 reflect increases in net interest income, before
provisions for loans losses, of $2.9 million and $4.2 million,
respectively, from the same periods a year ago. The prior year's net
interest income included a $1.9 million charge for the recognition of
additional premium amortization on mortgage-backed securities.
Excluding this special charge incurred during 1998, net interest
income before provision for loan losses for the current-year periods
increased $1.0 million and $2.3 million, respectively. These
increases during the periods reflect continued growth in average loan
and investment security balances and the change in mix in deposits
from higher rate certificates of deposit into lower rate core
deposits, partially offset by the cost of additional borrowing to fund
growth in assets and to repurchase the Company's common stock during
the first quarter of this year. The net interest margin was 3.76% and
3.70% for the three and nine months ended September 30, 1999,
respectively, as compared to 3.39% and 3.41% for the three and nine
months ended September 30, 1998. Also contributing to higher earnings
for the periods were increased recurring non-interest income. The
results of operations also reflect merger related costs, branch
openings and consolidations and normal salary and wage increases which
caused non-interest expense to increase during the current nine-month
period compared to the same period last year. However, non-interest
expense for the three-month period decreased from year-ago levels
primarily as a result of termination of the Statewide Employee Stock
Ownership Plan ("ESOP") on June 30, 1999.
Interest income for the three and nine months ended September 30, 1999
increased $3.6 million and $6.0 million, respectively, as compared to
the same periods of the prior year. Excluding the $1.9 million charge
incurred during 1998, interest income for the current-year periods
increased $1.7 million and $4.1 million, respectively. Of these
increases, interest income on loans accounted for $0.9 million and
$2.4 million, respectively, primarily from continued growth in lending
to mortgage bankers by Statewide Funding and from growth in commercial
loans. Average balances of these portfolios increased $57.8 million
and $69.9 million for the three months and nine months ended September
30, 1999, over the same periods of the prior year. Also, during the
current-year three and nine-month periods, the average consumer loan
portfolio increased $3.6 million and $3.4 million, respectively.
Partially offsetting the growth in these portfolios was the effect
from significant increases in mortgage refinancing activity which
caused a decline in the average one-to-four family loan portfolio for
the current-year three and nine-month periods ended September 30, 1999
of $18.0 million and $32.2 million, respectively, over the same
periods of last year despite originations of $37.9 million during the
nine months ended September 30, 1999. Yields in the one-to-four
family loans declined 8 basis points during the current three-month
period and 13 basis points during the current nine-month period to
7.36% and 7.40%, respectively. Interest income on securities,
excluding the effect of the 1998 charge, increased during the current
quarter and the current year-to-date period over the same periods of
the prior year by $0.8 million and $1.7 million, respectively. This
increase reflects purchases in the investment securities portfolio
during the fourth quarter of 1998 and first half of 1999 when greater
spreads between funding rates and yields on securities allowed
leveraging to be a viable growth strategy.
The average cost of deposits and borrowed funds decreased 13 basis
points and 17 basis points during the three months and nine months
ended September 30, 1999, as compared to the same periods a year ago.
These decreases were a result of a change in the mix of deposits along
with lower costs for both deposits and borrowings, partially offset by
an increase in short-term borrowed funds. The Company lowered its
overall cost of core deposits because the increase in no or low
interest cost transaction accounts was greater than the increase in
core savings accounts. In addition, the Company lowered interest
rates offered to its depositors during the period of general interest
rate decline during 1998. As a result, the cost of deposits decreased
44 basis points from the September 30, 1998 quarter, to 2.95% for the
quarter ended September 30, 1999. Similarly, the cost of deposits for
the current-year nine-month period decreased 46 basis points to 2.99%
as compared to the same period last year. Also, during the current-
year quarter and current year-to-date period the costs of borrowings
decreased 13 basis points and 21 basis points, respectively, as
compared to the prior-year period. The current-year periods reflect
higher borrowing levels which were used to fund asset growth. These
additional borrowings continue to remain short term, and are similar
to the duration or repricing characteristic inherent in the asset
growth. The increased borrowing levels, partially offset by costs
paid on deposits and borrowed funds resulted in an interest expense
increase of $0.8 million and $1.8 million during the three and nine
months ended September 30, 1999, respectively, as compared to the same
period of the prior year.
Provision for loan losses totaled $249,000 and $747,000 for the three
and nine months ended September 30, 1999, an increase of $78,000 and
$276,000 over the three and nine-month periods 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 for the three and nine months ended September 30,
1999 totaled $774,000 and $2,427,000, respectively, as compared to
$650,000 and $2,131,000 for the same periods of the prior year.
Recurring non-interest income, which excludes net security gains and a
$0.3 million gain recorded on the sale of the Passaic branch in the
second quarter 1998, grew $0.1 million, or 20.0%, and $0.6 million, or
31.2%, for the three and nine months ended September 30, 1999 over the
same periods of the prior year. "Service fee growth for the current-
year periods reflect the continued benefit of the Company's fee
enhancement initiative implemented during mid-1998 along with higher
fees earned in our mortgage funding division," Richel stated. Current
quarter and year-to-date growth over the same periods of the prior
year reflect increased ATM revenue from greater volume in non-customer
ATM usage, growth in both wire transfer and branch service fees as
more commercial services are being provided to the Company's expanding
commercial customer base, and higher annuity sales generated in the
retail branches. Partially offsetting the current quarter's growth
was a decrease in deposit account activity fees. However, the year-
to-date deposit account fees well exceed the fees earned during the
same period of last year. Current year-to-date non-interest income
also includes fees of $66,000 from sales of SBA loans with no like
fees earned during the preceding year. In addition, wholesale
mortgage funding transaction fees earned during the three and nine
months ended September 30, 1999 totaled $72,000 and $182,000,
respectively, as compared to $16,000 for both the three and nine
months ended September 30, 1998.
Non-interest expense for the three and nine months ended September 30,
1999 totaled $4.8 million and $14.6 million, respectively, excluding
acquisition costs, as compared to $4.8 million and $13.9 million for
the same periods of the prior year. Increased non-interest expense
for the current year nine-month period primarily reflects higher
salaries, benefits costs and operating costs associated with expansion
initiatives of the Bank, partially offset by lower professional fees
and net insurance costs.
Salary and benefit costs for the current year three-month and nine-
month periods fully reflect staff additions during 1998 for the newly
formed Statewide Funding division, for the opening of the North
Arlington, New Jersey, branch and for expansion within the commercial
lending division, whereas there was limited related expense for these
staff additions in the prior-year periods. In addition, current-year
periods also reflect the opening of the Maplewood, New Jersey branch
during late second quarter of this year. Also contributing to the
rise in the current-year periods' expense were normal merit increases,
incentive plan accruals, employee training and education. In
addition, effective June 30, 1999, in accordance with the terms and
conditions of the merger agreement with Independence, Statewide
terminated its ESOP. This plan termination reduced the current-year's
quarter salary and benefits below the comparable quarter of the prior
year and partially offset the current-year's nine month rise mentioned
above over the comparable prior-year period. In addition, the prior
year-ago periods reflected higher costs related to the Company's
ongoing FIRREA litigation against the Federal government, for the
review of the Company benefit programs, and its fee enhancement
program.
Acquisition costs incurred in connection with the Company's pending
acquisition by Independence for the three and nine months ending
September 30, 1999 totaled $15,000 and $503,000, respectively. These
costs primarily consisted of professional fees paid and were not
included in the comparative analysis for the periods discussed in the
preceding paragraph.
The Company announced on April 13, 1999 that it had entered into a
definitive agreement to merge with Independence. Under the terms of
the agreement, which is subject to approval by regulatory authorities
and by Statewide shareholders, the Company's shareholders will receive
a combination of stock and cash subject to election, proration and
allocation procedures. Based on Independence's closing price on April
12, 1999, the transaction has an implied per share value of $25.31 per
Statewide Financial Corp. share. The transaction will be accounted
for as a purchase and is expected to close by January 31, 2000.
Headquartered in Jersey City, New Jersey, Statewide Savings Bank is a
state chartered stock savings and loan association that conducts
business from 15 locations in Hudson, Union, Essex and Bergen
counties. Statewide's deposits are insured by the Savings Association
Insurance Fund (SAIF) of the Federal Deposit Insurance Corporation
(FDIC).
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 1999.
Forward-looking statements can be identified by the use of words as
"believes", "expects", "estimate" and "anticipated" or similar
expressions. Such statements are not historical facts and involve
certain risk and uncertainties. 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 control of the Company.
Accordingly, investors should not rely upon these forward-looking
statements in making investment decisions.
SELECTED FINANCIAL CONDITION DATA September 30, December 31,
1999 1998
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dollars in thousands, except per
share data
Total Assets $ 743,736 $ 717,517
Loans, Net $ 389,394 $ 366,458
Debt and Equity Securities $ 49,355 $ 68,312
Mortgage-backed Securities $ 259,363 $ 248,035
Other Real Estate Owned, Net $ 367 $ 523
Total Deposits $ 448,551 $ 443,705
Borrowed Funds $ 235,000 $ 206,681
Shareholders' Equity $ 53,796 $ 60,499
Book Value per share $ 13.27 $ 14.57
SELECTED OPERATING DATA For the Three For the Nine
Months Ended Months Ended
September 30, September 30,
dollars in thousands, except 1999 1998 1999 1998
per share data ---- ---- ---- ----
Interest Income $13,351 $ 9,738 $39,478 $33,478
Interest Expense 6,562 5,810 19,382 17,581
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Net Interest Income 6,789 3,928 20,096 15,897
Provision For Loan Losses 249 171 747 471
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Net Interest Income After
Provision For Loan Losses 6,540 3,757 19,349 15,426
Non-interest Income 774 650 2,401 2,131
Net Gain of Sale of
Investment Securities - - 26 -
Foreclosed Real Estate
Expense, Net 14 15 23 41
Other Non-interest Expense 4,752 4,778 15,121 13,855
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Income Before Income Taxes 2,548 (386) 6,632 3,661
Income Tax Expense 920 (45) 2,478 1,484
------- ------- ------- -------
Net Income $ 1,628 $ (341) $ 4,154 $ 2,177
======= ======= ======= =======
Earnings per share:
Basic $ 0.44 $ (0.09) $ 1.13 $ 0.55
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Diluted $ 0.42 $ (0.09) $ 1.08 $ 0.52
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Weighted Average Number
of Shares:
Basic 3,722,278 3,914,679 3,692,097 3,981,646
Diluted 3,897,351 3,914,679 3,856,615 4,161,318
SELECTED FINANCIAL RATIOS(1) At or For the At or For the
Three Months Nine Months
Ended Ended
September 30, September 30,
1999 1998 1999 1998
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Return on Average Assets 0.88% (0.21)% 0.75% 0.44%
Return on Average Equity 12.18% (2.25)% 9.73% 4.58%
Capital to Assets 7.23% 9.38 % 7.23% 9.38%
Net Interest Rate Spread(2) 3.55% 3.11 % 3.48% 3.12%
Net Interest Margin 3.76% 3.39 % 3.70% 3.41%
Non-interest Income to Average Assets 0.42% 0.40 % 0.43% 0.43%
Non-interest Expense to Average Assets 2.56% 2.93 % 2.72% 2.81%
Efficiency Ratio(4) 65.16% 104.70 % 69.63% 78.68%
Average Interest-earning Assets to
Average Deposits and Borrowings 104.61% 107.67 %105.61% 108.06%
REGULATORY CAPITAL RATIOS: September 30, December 31,
1999 1998
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Tangible Capital Ratio 7.59% 7.95%
Core Capital Ratio 7.59% 7.95%
ASSET QUALITY RATIOS:
Non-Performing Loans to Total Net Loans 0.55% 0.68%
Non-Performing Loans to Total Assets 0.29% 0.35%
Non-Performing Assets to Total Assets 0.34% 0.42%
Allowance for Loan Losses to Non-
Performing Loans 164.86% 122.73%
Allowance for Loan Losses to Total Net
Loans 0.90% 0.83%
OTHER DATA
Number of Deposit Accounts 51,958 52,272
Number of Offices(5) 15 16
Notes to Selected Financial Ratios
(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 70 Sip Avenue and Martin Luther King branches were
consolidated into the PATH branch during the second quarter of
1999, and on June 5, 1999 the Maplewood branch opened for
business. The Passaic branch was sold as of the close of business
on April 10, 1998, and the North Arlington branch opened for
business on May 9, 1998.
