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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 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,
January 26, 1999 announcing registrant's year
end and fourth 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, January 26, 1999
announcing registrant's year end
and fourth 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: January 29, 1999 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,
January 26, 1999 announcing registrant's year
end and fourth quarter earnings.
Statewide Financial Corp. Reports Strong
Fourth Quarter 1998 Earnings and Increased
Earnings Per Share
FOR IMMEDIATE RELEASE Contact: Tony Cicatiello
732-382-1066
JERSEY CITY, N.J., (January 26, 1999)--Statewide Financial Corp.
(NASDAQ: SFIN), the holding company for Statewide Savings Bank S.L.A.
today reported fourth quarter 1998 net income of $1,353,000, or $0.35
per share, assuming dilution as compared to net income of $1,430,000,
or $0.34 per share, assuming dilution, for the same quarter during
1997. Basic earnings per share were $0.36 for fourth quarter 1998,
equal to the fourth quarter of 1997.
The Company also reported net income for the year ended December 31,
1998 of $3,530,000, or $0.86 per share, assuming dilution, compared to
$5,587,000, or $1.30 per share, assuming dilution, for the year ended
December 31, 1997. Earnings during the current year include a pre-tax
charge of $1.9 million incurred during the third quarter to recognize
additional amortization of premiums related to prepayment speeds in
the Company's mortgage-backed investment securities portfolio. Basic
earnings per share for the year ended December 31, 1998, were $0.90
compared to $1.34 per share for the same period of the prior year.
Victor M. Richel, Chairman, President and Chief Executive Officer
stated, "This has been a solid year of accomplishment for our bank and
we are very pleased with our fourth quarter performance. Our long
term strategic plan to grow core deposits and develop business and
wholesale lending has strengthened our financial position and we look
optimistically to 1999 as our momentum continues". Richel noted that
during 1998, Statewide:
Formed Statewide Mortgage Funding, a wholesale funding operation,
to provide secured short-term financing to mortgage bankers.
Expanded our commercial lending operations through the employment
of additional commercial lenders and support staff.
Established an SBA lending operations function.
Increased non-interest income revenues 54% over the prior year.
Realigned our retail distribution network through the sale of our
Passaic, N.J. in-store branch and the opening of a branch in
North Arlington, N.J.
Increased the quarterly dividend midway through 1998 by 18.2% to
$0.13 per share, or $0.52 on an annualized basis.
Repurchased 363,000 shares of the Company's common stock,
representing 8% of the shares outstanding at the beginning of the
year, and raising the total repurchases to 21% since the initial
public offering.
At December 31, 1998, the Company's total assets were $717.5 million,
compared to $652.6 million at September 30, 1998, and $675.3 million
at December 31, 1997. The period-end balance increased $64.9 million
from September 30, 1998, because of increases in the net loan
portfolio and growth through purchases of mortgage-backed and debt
securities. Loans at December 31, 1998 increased $11.9 million over
September 30, 1998 as a result of a $15.5 million, or 23.8% increase
in the construction, multi-family, commercial mortgage and business
loan portfolios, along with a $6.6 million, or 16.0% increase in the
Statewide Funding portfolio. This growth was partially offset by
repayments in the one-to-four family mortgage loan portfolio, which
declined $10.2 million, or 4.9% during the quarter. Investments in
securities increased during the fourth quarter of 1998 as the
Company's borrowing rates declined with the decrease in the Federal
Funds target rate, allowing leverage to again be a viable growth
strategy. Consequently, the mortgage-backed securities portfolio
increased $49.3 million between September 30, 1998 and December 31,
1998, through purchases of $77.0 million which more than offset $27.1
million of normal amortization and accelerated prepayments realized
during the quarter; and the debt securities portfolio grew $16.6
million during the quarter from $20.6 million of purchases partially
offset by maturities, sales and normal amortization of federal agency
and corporate debt.
Assets at December 31, 1998 increased $42.2 million over those at
December 31, 1997. Loans at December 31, 1998 were $33.9 million
higher than a year ago as originations from Statewide Mortgage
Funding, commercial mortgage, commercial business and consumer loans
more than offset repayments in these portfolios and in the one-to-four
family mortgage loan portfolio during the current-year period. Growth
in construction, multi-family, commercial mortgage and business loans
of $28.6 million, or 55.2%, coupled with growth of $47.8 million in
Statewide Mortgage Funding, established during mid-year 1998, more
than offset declines of $44.2 million in the one-to-four family
mortgage loan portfolio. Debt securities at December 31, 1998 were
$49.2 million more than the outstanding balance at the prior year end,
primarily reflecting the purchase of $77.0 million of corporate debt,
offset by maturities, calls and sales of $28.1 million of federal
agency debt during the period. At December 31, 1998 mortgage-backed
securities were $42.0 million less than the investment at the
beginning of the year reflecting pay downs of $114.7 million during
the year, partially offset by purchases of mortgage-backed securities
as previously mentioned.
Deposits totaled $443.7 million at December 31, 1998, as compared to
$438.3 million at September 30, 1998 and $443.9 million at December
31, 1997. Core deposits increased $8.8 million, or 3.3% to $272.6
million at December 31, 1998. This growth included an increase in
non-interest bearing demand deposits of $ 3.9 million, or 13.3%, from
the Company's successful commercial business efforts. Partially
offsetting this core deposit growth was a decrease of $3.4 million in
higher-costing certificates of deposit, consistent with management's
strategy of not matching the most aggressive rates for these deposits.
The decrease of $0.2 million in total deposits between December 31,
1997 and December 31, 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 controlled
runoff of certificates of deposit. Despite the branch sale, core
deposits increased $14.0 million, or 5.4%. Growth in savings accounts
of $14.5 million coupled with a $5.9 million increase in non-interest
bearing demand and NOW accounts was partially offset by a decrease in
money market deposits of $6.4 million. Excluding the sale of the
deposits of the Passaic branch, total deposits increased $6.3 million
during 1998, of which core deposits increased $18.3 million, or 7.1%,
and certificates of deposit decreased $12.0 million, or 6.5%.
Borrowed funds were $206.7 million at December 31, 1998. Of this
amount, $60.3 million matures within 30 days, $0.4 million matures
within 90 days and the remaining $146.0 million have final maturity
dates ranging from July 2000 to September 2002. All of the $146.0
million 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
callable quarterly through maturity, and borrowed funds of $60.0
million, with an interest rate of 5.52%, are first callable in
November 1999 and quarterly thereafter. Borrowed funds increased over
both the preceding quarter and from December 31, 1997 by $60.4 million
and $46.4 million, respectively, as the Company used these funds to
support asset growth, particularly later in the year, in line with the
Company's strategy to leverage its excess capital; to support
repurchases of the Company's Common Stock; and to liquidate
certificates of deposit for holders who sought rates higher than the
Company's alternate borrowing rates.
Shareholders' equity at December 31, 1998 was $60.5 million, a $0.7
million decrease from September 30, 1998, and $4.4 million less than
December 31, 1997. The decreases during both the current quarter and
full year, resulted primarily from the repurchase and retirement of
137,800 shares and 363,258 shares, respectively, of the Company's
common stock and the payment of quarterly dividends. Partially
offsetting these decreases were current quarter and full year earnings
of $1.4 million and $3.5 million, respectively, and employee benefit
plans allocations during the periods. In addition, the change in
shareholders' equity during the current quarter reflects a $0.4
million (net of taxes) gain in the market value of the Company's
investment portfolio from its September 30, 1998 value, and the change
to shareholders' equity during the full year includes a $0.4 million
reduction (net of taxes) in the market value of the Company's
investment portfolio from its December 31, 1997 valuation.
The results of operations for the three months and twelve months ended
December 31, 1998 reflect decreased net interest income, before
provision for loan losses, over the same periods of the prior year of
$36,000 and $2.8 million, respectively. The full year 1998 decrease
in net interest income includes a $1.9 million charge for the
recognition of additional premium amortization on mortgage-backed
securities recorded during the third quarter of 1998. In addition,
the decrease in net interest income for the full year of 1998 over
last year reflects the lack of spread differential between short and
longer term investments which existed for the greater part of 1998 and
led to margin compression as cash pay-downs were reinvested into a
lower interest rate environment, and average interest-earning assets
declined as the Company de-leveraged compared to the prior year. The
results of operations for both periods also include increased non-
interest expense substantially due to increased staffing, support and
marketing to generate increased commercial and consumer loans and core
deposits, partially offset by increases in non-interest income as a
result of loan and deposit growth and fee structure changes.
Net interest income, before provision for loan losses was $6.1 million
for the three months ended December 31, 1998, compared to $6.2 million
during the same quarter last year. This reduction reflects a decrease
in investment securities, and the yield thereon, partially offset by
loan growth, a change in the mix of loans toward higher yielding
commercial and consumer loans, growth in core deposits, and a
reduction in rates paid on interest-bearing liabilities. The decrease
in the average balance of, and yield on, investment securities,
results from the interest rate environment and pay downs mentioned
previously. The average balance of the mortgage-backed and
collateralized mortgage securities portfolio declined $101.6 million
from the same period of the prior year. Partially offsetting this was
an increase in the average debt securities portfolio of $41.4 million,
and an increase in average short-term investments of $5.7 million.
Interest income on loans increased $578,000, or 8.9%, for the current
quarter over the same period a year ago, as the average balance of
loans outstanding increased $29.1 million, or 8.8% while related yield
decreased 1 basis point to 7.88%. Within this increase, loans to
commercial business, including wholesale loans to mortgage bankers,
commercial mortgage, multi-family, and construction loans grew $69.9
million, or 154.2%. Also during this period, the average consumer
loan portfolio increased $2.9 million, or 7.7%. All of these
increases reflect the Company's emphasis, through strong service and
support, on profitable lending relationships. Partially offsetting
these increases was a decrease of $43.8 million, or 17.7%, in the one-
to-four family mortgage loan portfolio caused by accelerated
prepayments and normal amortization of principal.
Market interest rates during the fourth quarter were lower than the
year-ago-period; consequently, the Company reduced the rates it paid
on deposits. Average borrowing levels were also lower than the same
period a year ago because of cash flows from investments and loan
portfolios. In addition, commercial and retail efforts have increased
the low cost core deposit base, and the Company has continued with its
strategy of not matching the most aggressive rates for certificates of
deposit. As a result, the cost of deposits and borrowings has been
reduced by $626,000 and 28 basis points for the quarter compared to
the same period last year.
During the twelve months ended December 31, 1998 the average balance
of loans outstanding increased $12.0 million, or 3.7%, from the year-
ago period, and the related yield increased 3 basis points to 7.94%
from 7.91%. Growth during the current year resulted from increases of
$43.2 million, or 115.7% in the average balances of the commercial
business loan portfolios, principally as a result of the successful
commencement of Statewide Mortgage Funding and the addition of lending
and support staff throughout the year. In addition, as a result of
retail banking and marketing efforts, the average balance of the
consumer loan portfolio during 1998 was $3.4 million, or 9.3%, higher
than the same period in the prior year. Offsetting these increases
were reductions to the net loans and investment securities as a result
of the lower interest rate environment and the associated principal
pay downs as previously discussed. The average balance of the one-to-
four family mortgage loan portfolio decreased $34.6 million, or 13.6%,
and the average balances of the investment portfolios decreased $46.2
million.
The cost of deposits and borrowings for the year ended December 31,
1998 was lower by $2.2 million, and 23 basis points, as compared to
the prior-year period for the same reasons as mentioned in the fourth
quarter discussion.
Provision for loan losses for the three months and twelve months ended
December 31, 1998 increased to $171,000 and $642,000 respectively,
from $125,000 and $500,000 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 twelve months ended December 31,
1998 totaled $0.7 million and $2.9 million respectively, as compared
to $0.6 million and $1.7 million for the same periods of the prior
year. Recurring non-interest income, which excludes a $0.3 million
gain on the sale of the Passaic branch during the second quarter of
1998, and net security gains during these periods, grew $225,000, or
45.7%, and $891,000, or 53.8% for the three and twelve months ended
December 31, 1998 over the same periods of the prior year. Richel
stated, "Growth in both new products and increased services to
customers is reflected in enhanced fees for the current year."
Current year growth over the same periods of the prior year reflects
increased deposit account fees for monthly maintenance on checking and
savings products, returned check assessment charges, ATM surcharges
for non-customer service usage, increased earned loan fees and
charges, and higher annuity sales generated through cross selling
efforts.
Non-interest expense for the three and twelve months ended December
31, 1998 totaled $4.6 million and $18.5 million respectively, as
compared to $4.4 million and $17.1 million for the same periods of the
prior year. The current year periods reflect increases over the prior
year periods in salaries and benefits costs, professional fees,
occupancy, postage, communications and ATM and MAC service costs.
Salary and benefits costs reflect current year staff additions and
annual wage increases. During 1998, staffing increased for the newly
formed Statewide Mortgage Funding division, expansion of the
commercial lending division and for the opening of the North Arlington
N.J. branch. Higher professional fees were incurred in conjunction
with the Company's ongoing FIRREA litigation against the Federal
government, and for review of Company benefit programs, and its fee
enhancement program. Higher occupancy costs occurred from increased
capital improvements related to furnishings and repairs and
maintenance costs from ongoing renovations throughout the Company,
along with improvements related to the opening of the North Arlington
branch, the creation of the Funding division, and operating systems
enhancements. Non-interest expense related to the full year 1998
comparison to the prior year period also includes increased costs
related to the Company's ESOP and other pension related programs;
increased marketing costs related to the opening of the North
Arlington branch and product name recognition; and data processing
costs related to systems enhancements and increased processing
activity. Offsetting the increases stated above were the elimination
of operating costs through the sale of the Passaic branch and cost
minimization efforts including the virtual elimination of 1998
executive incentive plan benefits and reduction of certain director
benefits. In addition, lower correspondent bank service charges and
other miscellaneous losses partially reduced non-interest expense for
the current year periods.
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 December 31, December 31,
dollars in thousands, except per 1998 1997
share data ---- ----
Total Assets $717,517 $675,316
Loans, Net $366,458 $332,509
Debt and Equity Securities $ 68,312 $ 19,093
Mortgage-backed Securities $248,035 $290,044
Other Real Estate Owned, Net $ 523 $ 440
Total Deposits $443,705 $443,878
Borrowed Funds $206,681 $160,300
Shareholders' Equity $ 60,499 $ 64,907
Book Value per share $ 14.57 $ 14.39
SELECTED OPERATING DATA For the Three For the Twelve
Months Ended Months Ended
December 31, December 31,
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dollars in thousands, except
per share data 1998 1997 1998 1997
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Interest Income $11,783 $12,445 $45,261 $50,191
Interest Expense 5,642 6,268 23,223 25,384
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Net Interest Income 6,141 6,177 22,038 24,807
Provision For Loan Losses 171 125 642 500
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Net Interest Income After
Provision For Loan Losses 5,970 6,052 21,396 24,307
Non-interest Income 717 492 2,848 1,656
Net Gain on Sale of
Investment Securities 4 69 4 69
Foreclosed Real Estate
Expense, Net 44 46 85 71
Other Non-interest Expense 4,547 4,326 18,402 17,041
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Income Before Income Taxes 2,100 2,241 5,761 8,920
Income Tax Expense 747 811 2,231 3,333
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Net Income $ 1,353 $ 1,430 $ 3,530 $ 5,587
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Earnings per share:
Basic $ 0.36 $ 0.36 $ 0.90 $ 1.34
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Diluted $ 0.35 $ 0.34 $ 0.86 $ 1.30
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Weighted Average Number of
Shares:
Basic 3,804,584 4,022,148 3,936,527 4,165,046
Diluted 3,915,514 4,213,218 4,099,343 4,310,217
At or For the At or For the
Three months Twelve months
Ended Ended
December 31, December 31,
SELECTED FINANCIAL RATIOS(1): 1998 1997 1998 1997
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Return on Average Assets 0.82% 0.84% 0.54% 0.82%
Return on Average Equity 9.04% 9.02% 5.65% 8.74%
Capital to Assets 8.43% 9.61% 8.43% 9.61%
Net Interest Rate Spread (2) 3.61% 3.47% 3.17% 3.45%
Net Interest Margin (3) 3.88% 3.78% 3.46% 3.77%
Non-Interest Income to
Average Assets 0.44% 0.29% 0.43% 0.24%
Non-Interest Expense to
Average Assets 2.79% 2.57% 2.80% 2.52%
Efficiency Ratio (4) 68.66% 66.81% 77.32% 65.91%
Average Interest Earning
Assets to Average Deposits
and Borrowings 107.64% 108.29% 107.95% 108.20%
December 31, December 31,
REGULATORY CAPITAL RATIOS: 1998 1997
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Tangible Capital Ratio 7.95% 8.96%
Core Capital Ratio 7.95% 8.96%
ASSET QUALITY RATIOS:
Non-Performing Loans to Total Net Loans 0.68% 0.75%
Non-Performing Loans to Total Assets 0.35% 0.37%
Non-Performing Assets to Total Assets 0.42% 0.44%
Allowance for Loan Losses to Non-
Performing Loans 122.73% 113.18%
Allowance for Loan Losses to Total Net
Loans 0.83% 0.85%
OTHER DATA
Number of Deposit Accounts 52,272 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.
