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 21, 1999
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Commission File Number 1-13936
__________________________
BOSTONFED BANCORP INC.
________________________________________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 52-1940834
________________________________________________________________________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
17 New England Executive Park, Burlington, Massachusetts 01803
________________________________________________________________________________
(Address of principal executive offices) (Zip Code)
(617) 273-0300
________________________________________________________________________________
(Registrant's telephone number, including area code)
Not Applicable
________________________________________________________________________________
(Former name, former address and former fiscal year,
if changed since last report)
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ITEM 5. Other Events
On January 21, 1999, BostonFed Bancorp, Inc. issued the press release which is
included as Exhibit 99(a) hereto.
ITEM 7. Financial Statements and Exhibits
---------------------------------
The following exhibits are included with this Report:
Exhibit 99.1 Press Release dated January 21, 1999.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
By: /s/ John A. Simas
----------------------------------
John A. Simas
Senior Vice-President and Chief
Financial Officer
Dated: January 22, 1999
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Exhibit 99.1 - PRESS RELEASE
FOR IMMEDIATE RELEASE January 21, 1999
Contact: Amy L. Timmerman, Investor Relations - 781-221-6396
John A. Simas, EVP and CFO - 781-221-6307
FAX: (781) 221-7594
BostonFed Bancorp, Inc. announces 4th quarter results, payment of $.10 per share
dividend, the intention to repurchase 5% of its outstanding common stock and the
1999 Annual Meeting date.
Burlington, MA.- BostonFed Bancorp, Inc. (AMEX- BFD) (the "Company"), the parent
of Boston Federal Savings Bank ("BFS"), a federally-chartered stock savings
bank, and Broadway National Bank ("BNB"), a national chartered commercial bank,
announced earnings of $2.0 million, or $.41 basic earnings per share, $.39
diluted earnings per share, for the fourth quarter of 1998, compared to earnings
of $1.7 million, or $.33 basic and $.31 diluted earnings per share for the
fourth quarter of 1997. The current quarter's earnings amount to a 24%
improvement in basic earnings per share and a 26% improvement in diluted
earnings per share compared to last year's fourth quarter. For the year ended
December 31, 1998, earnings amounted to $7.6 million, or $1.50 basic and $1.43
diluted earnings per share, compared to $7.1 million, or $1.28 basic and $1.24
diluted earnings per share for the comparable period in 1997. Basic and diluted
earnings per share for the year ended December 31, 1998 improved by 17% and 15%
respectively, compared to the prior year. The year ended December 31, 1998 was
positively impacted by gain on sale of loans of $3.2 million (before income
taxes) whereas last year's gain on sale of loans amounted to $1.1 million
(before income taxes). Earnings for the year ended December 31, 1997, were also
enhanced by $1.2 million (before income taxes) from real estate operations,
which included $891,000 (before income taxes), from the sale of a land
sub-division owned by a subsidiary of BFS. The Company's annualized return on
average stockholders' equity was 9.44% during the fourth quarter of 1998,
compared to 8.27% for the fourth quarter of 1997 (annualized). BNB's income and
expenses for the period of January 1, 1997 through February 7, 1997 are not
included in the following discussion and tables as the acquisition of BNB, using
the purchase method of accounting, became effective February 8, 1997. See "Cash
Earnings Summary" for a discussion of cash earnings during the above referenced
periods.
Also yesterday, the Company's Board of Directors declared a quarterly cash
dividend amounting to $.10 per common share. The dividend is payable on or about
February 17, 1999 to shareholders of record at the close of business on February
3, 1999. This is the twelfth consecutive quarterly cash dividend paid by the
Company.
Additionally, the Board authorized management to repurchase up to 254,996
shares, or 5% of the Company's outstanding common stock, commencing after
completion of the Company's existing stock repurchase of which 12,517 shares
remain to be purchased. Pursuant to the Company's repurchase program, the shares
will be purchased by the Company from time to time, depending upon market
conditions, in open market transactions. This is the sixth 5% repurchase program
undertaken by the Company.
The Board also voted to hold the Company's fourth Annual Meeting of Stockholders
on April 28, 1999 at 2:00 p.m., Eastern Daylight Time, at the Burlington
Marriott, 1 Mall Road, Burlington, Massachusetts. The record date for
shareholders entitled to vote at the Annual Meeting will be March 5, 1999. The
Company intends to mail its proxy solicitation materials on or about March 24,
1999.
Net interest income during the fourth quarter of 1998 was $8.1 million compared
to $7.9 million for the fourth quarter of 1997 as industry-wide margin
compression was offset by net interest income earned from asset growth. For the
year ended December 31, 1998, net interest income was $32.2 million, compared to
$30.9 million for the prior year. The net interest margin at 3.05% for the
quarter ended December 31, 1998 was 39 basis points lower than last year's
comparable quarter and 5 basis points lower than the quarter ended September 30,
1998. For the year ended December 31, 1998, the net interest margin of 3.17% is
25 basis points lower than last year. The net interest margin was compressed due
to the continuation of a relatively flat interest rate yield curve. The flat
yield curve has provided many adjustable-rate borrowers with an opportunity to
re-finance into lower yielding, fixed-rate loans. Market conditions also have
prompted the Company to offer discounted rates on new adjustable-rate loan
production for portfolio, also contributing to the decreased margin. The
majority of fixed-rate loan production was sold in the secondary market.
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The provision for loan losses was $455,000 for the quarter ended December 31,
1998, compared to $421,000 for the comparable quarter last year. The allowance
for loan losses increased from $6.6 million at December 31, 1997 to $8.5 million
at December 31, 1998 due to the provision and net recoveries. The allowance for
loan losses was 1,029% of non-performing loans and .88% as a percent of loans at
December 31, 1998, compared to 470% and .82%, respectively, at December 31,
1997. The Company's non-performing assets totaled $873,000, or .08% of assets at
December 31, 1998, compared to $1.6 million, or .16% of assets at December 31,
1997.
Gain on sale of loans increased to $1.0 million during the quarter ended
December 31, 1998, compared to $391,000 for the comparable quarter last year.
The reason for this increase was due to increased volume of fixed-rate loans
originated and sold during the current quarter due to generally lower market
interest rates. The continuation of a strong housing market and economy also
contributed to increased volume for financing of home purchases. Loan processing
and servicing fees generated a loss of $54,000 for the fourth quarter of 1998,
compared to income of 323,000 for the fourth quarter of 1997. The primary reason
for the decline is due to an adjustment to the originated mortgage servicing
rights ("omsr") of $276,000 during the fourth quarter of 1998 due to more rapid
loan prepayments than previously estimated. For the year ended December 31,
1998, loan processing and servicing fees totaled $477,000 compared to $1.2
million for the prior year. The reason for the decline is also due to
adjustments to the omsr in the amount of $481,000 for the year ended December
31, 1998 and a decrease in the balance of loans serviced that were sold before
omsr was recorded. These conditions are expected to continue in the foreseeable
future.
For the year ended December 31, 1998, real estate operations earned $71,000
compared to earnings of $1.2 million for the prior year. Approximately $891,000
of the $1.2 million was due to the sale of the land sub-division mentioned above
during the first quarter of 1997.
For the year ended December 31, 1998, other non-interest expenses increased to
$6.8 million compared to $5.8 million for the year ended December 31, 1997 due
to the inclusion of BNB expenses for the full year and consulting and legal
costs incurred to assist in establishing the Company's tax saving strategies
that included the formation of real estate investment trusts and securities
subsidiaries.
Income tax expense for the quarter ended December 31, 1998 was $1.3 million,
compared to $1.2 million for the quarter ended December 31, 1997. The effective
income tax rate was 39.2% during the current quarter, compared to 41.9% for the
quarter ended December 31, 1997. For the years ended December 31, 1998 and 1997
the effective tax rates were 40.3% and 43.8%, respectively. The lower effective
rates during the current quarter and year are due to the implementation of the
tax saving strategies.
Total assets at December 31, 1998 were $1.139 billion, compared to $974.7
million at December 31, 1997, an increase of $164.4 million, or 16.9%. Asset
growth was primarily in cash and cash equivalents of $12.5 million, investment
securities available for sale of $17.4 million and loans, net, of $151.9
million, partially offset by decreases in investment securities held to maturity
of $13.3 million and mortgage-backed securities held to maturity of $15.4
million. Cash and cash equivalents increased due to higher balances in Federal
Home Loan Bank overnight deposits and federal funds. The growth in investment
securities was essentially due to an investment in two mutual funds that invest
primarily in government agency mortgage-backed securities. Loans, net of
allowance for loan losses increased 19.2%, from a balance of $791.7 million at
December 31, 1997 to $943.7 million at December 31, 1998 as loan portfolio
origination exceeded amortization and prepayments.
Deposit accounts increased by $87.3 million from a balance of $619.8 million at
December 31, 1997 to a balance of $707.1 million at December 31, 1998. The
increase is mainly attributable to the successful rollout of a new 15-month
retail certificate of deposit acquisition program, a new money market deposit
account and growth in NOW account balances, offset by decreases in regular
certificates of deposit accounts at BFS.
Federal Home Loan Bank advances increased by $81.0 million, to a balance of
$337.5 million at December 31, 1998 from a balance of $256.5 million at December
31, 1997. These advances were used to fund the increase in investments available
for sale, mortgage loans held for sale, and loans, net. Other borrowed money
(primarily repurchase agreements) which amounted to $7.1 million at December 31,
1997 was repaid during the current year.
During the fourth quarter of 1998 the Company completed a portion of its fifth
5% stock repurchase program and acquired 255,900 shares at an average price of
$18.28 per share. The Company has 12,517 shares remaining to be repurchased
under this program. The Company had 5,112,441 shares outstanding as of December
31, 1998.
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Total stockholders' equity was $81.8 million at December 31, 1998 or $16.84 per
share, compared to $81.6 million or $15.72 per share at December 31, 1997. The
net increase in total stockholders' equity of $200,000 during the year ended
December 31, 1998 was primarily due to the combined effects of net income and
the amortization of the Stock-based Incentive Plans, offset by the completion of
the fourth 5% stock repurchase program, partial completion of the fifth stock
repurchase program and dividends paid. The stockholders' equity to total assets
ratio of the Company was 7.2% at December 31, 1998 and 8.4% at December 31,
1997.
This earnings report may contain certain forward-looking statements which are
based on management's current expectations regarding economic, legislative, and
regulatory issues that may impact the Company's earnings in future periods.
Factors that could cause future results to vary materially from current
management expectations include, but are not limited to, general economic
conditions, changes in interest rates, deposit flows, real estate values, and
competition; changes in accounting principles, policies, or guidelines; changes
in legislation or regulation; and other economic, competitive, governmental,
regulatory and technological factors affecting the Company's operations,
pricing, products and services.
BOSTONFED BANCORP, INC.
Cash Earnings Summary
Cash earnings represent the amount by which tangible equity changes each period
due to operating results, which include reported earnings plus the non-cash
charges, net of taxes, for the amortization and appreciation of allocated shares
in the Company's Employee Stock Ownership Plan, ("ESOP") and stock-based
incentive plans, ("SIP"), and amortization of goodwill.
A reconciliation of reported earnings and cash earnings for the three and twelve
months ended December 31, 1998 and 1997 is as follows:
Three months ended Twelve months ended
12-31-98 12-31-97 12-31-98 12-31-97
(InThousands)
Reported Income $2,011 $1,735 $7,621 $7,055
Add:
ESOP Expense 332 166 1,559 1,360
SIP Expense 131 203 608 1,226
Goodwill 53 64 212 194
Deduct:
Tax on ESOP (80) (80) (320) (315)
Tax on SIP (55) (85) (255) (515)
Cash Earnings $2,392 $2,003 9,425 9,005
===== ===== ===== =====
Resultant Cash Earnings Data:
Basic Earnings Per Share $0.48 $0.38 $1.86 $1.64
Diluted Earnings Per Share $0.47 $0.36 $1.77 $1.58
Return on Assets (annualized) 0.86% 0.83% 0.89% 0.95%
Return on Equity (annualized) 11.23% 9.55% 11.16% 10.48%
Cash earnings indicates the addition to tangible capital, which measures the
Company's capacity for growth, ability to execute share repurchases or pay
dividends. As indicated above, cash earnings for the quarter ended December 31,
1998 amounted to $2.4 million, or $381,000 more than reported earnings
indicates. For the year, cash earnings amounted to $9.4 million, or $1.8 million
greater than reported earnings.
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<CAPTION>
BOSTONFED BANCORP, INC.
Consolidated Balance Sheets
<S> <C> <C>
December 31, December 31,
--------------------------------------
1998 1997
--------------- --------------
(In Thousands)
(Unaudited)
Assets
- --------------
Cash and cash equivalents $ 37,201 $ 24,690
Investment securities available for sale 49,137 31,768
Investment securities held to maturity 7,302 20,630
Mortgage-backed securities available for sale 21,029 19,125
Mortgage-backed securities held to maturity 22,913 38,350
Mortgage loans held for sale 17,008 9,817
Loans, net of allowance for loan losses 943,662 791,728
Accrued interest receivable 5,549 5,163
Stock in FHLB of Boston & Federal Reserve Bank 17,802 16,613
Premises and equipment 6,614 6,842
Real estate owned 47 195
Other assets 10,859 9,759
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Total assets $ 1,139,123 $ 974,680
=============== ==============
Liabilities and Stockholders' Equity
- ---------------------------------------------------
Liabilities:
Deposit accounts $ 707,144 $ 619,821
Federal Home Loan Bank advances 337,500 256,500
Other borrowed money 0 7,140
Advance payments by borrowers for taxes and insurance 3,405 3,133
Other liabilities 9,280 6,475
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Total liabilities 1,057,329 893,069
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Stockholders' equity;
Common stock and additional paid- in- capital 66,483 65,348
Retained earnings 44,256 38,645
Accumulated Other Comprehensive Income 312 242
Less unallocated ESOP shares (2,418) (3,174)
Less unearned 1996 Stock-Based Incentive Plan (711) (1,304)
Less Treasury Stock (26,128) (18,146)
--------------- --------------
Total stockholders' equity 81,794 81,611
--------------- --------------
Total liabilities and stockholders' equity $ 1,139,123 $ 974,680
=============== ==============
Selected Financial Highlights -- (At End of Period)
- ---------------------------------------------------------------
Total stockholders' equity to total assets 7.2% 8.4%
Market value per share $17.63 $21.88
Book value per common share $16.84 $15.72
Number of shares outstanding 5,112,441 5,520,437
Non-performing loans (Dollars in Thousands) $826 $1,405
Real estate owned (Dollars in Thousands) $47 $195
Total non-performing assets (Dollars in Thousands) $873 $1,600
Total non-performing assets as a percent of
total assets 0.08% 0.16%
Allowance for loan losses (Dollars in Thousands) $8,500 $6,600
Allowance for loan losses as a percent of
non-performing loans 1029.06% 469.75%
Allowance for loan losses as a percent of
non-performing assets 973.65% 412.50%
Allowance for loan losses as a percent of loans 0.88% 0.82%
Total loans serviced for others (Dollars in Thousands) $648,279 $549,422
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BOSTONFED BANCORP, INC.
Consolidated Statements of Operations
<S> <C> <C> <C> <C>
-------------------------------------------------
Three Months Ended Twelve Months Ended
December 31, December 31,
---------------------------- -----------------------------
1998 1997 1998 1997
(In Thousands)
(Unaudited)
Interest income:
Loans $ 17,268 $ 15,222 $ 66,040 $ 58,805
Mortgage-backed securities 757 985 3,335 4,229
Investment securities 1,202 1,221 5,400 5,003
------------ ----------- ------------- -------------
Total interest income and dividend income 19,227 17,428 74,775 68,037
------------ ----------- ------------- -------------
Interest expense:
Deposit accounts 6,310 5,272 24,096 19,176
Borrowed funds 4,791 4,218 18,461 17,953
------------ ----------- ------------- -------------
Total interest expense 11,101 9,490 42,557 37,129
------------ ----------- ------------- -------------
Net interest income 8,126 7,938 32,218 30,908
Provision for loan losses 455 421 1,642 1,696
------------ ----------- ------------- -------------
Net interest income after provision 7,671 7,517 30,576 29,212
Non-interest income:
Loan processing and servicing fees (54) 323 477 1,241
Gain on sale of loans 1,043 391 3,173 1,114
Other 643 613 2,478 2,451
------------ ----------- ------------- -------------
Total non-interest income 1,632 1,327 6,128 4,806
------------ ----------- ------------- -------------
Non-interest expense:
Compensation and benefits 3,416 3,506 13,728 13,543
Occupancy and equipment 795 776 3,187 3,087
Federal deposit insurance premiums 82 77 327 293
Real estate operations (31) (44) (71) (1,230)
Other 1,735 1,545 6,761 5,765
------------ ----------- ------------- -------------
Total non-interest expense 5,997 5,860 23,932 21,458
------------ ----------- ------------- -------------
Income before income taxes 3,306 2,984 12,772 12,560
Income tax expense 1,295 1,249 5,151 5,505
============ =========== ============= =============
Net income $ 2,011 $ 1,735 $ 7,621 $ 7,055
============ =========== ============= =============
Selected Financial Highlights--
- --------------------------------------
(For the periods ending)
Basic earnings per share $0.41 $0.33 $1.50 $1.28
Diluted earnings per share $0.39 $0.31 $1.43 $1.24
Return on average assets(annualized) 0.72% 0.72% 0.72% 0.75%
Return on average stockholders'
equity(annualized) 9.44% 8.27% 9.02% 8.21%
Net interest rate spread(annualized) 2.57% 2.95% 2.69% 2.95%
Net interest margin(annualized) 3.05% 3.44% 3.17% 3.42%
Mortgage loan originations
(Dollars in Thousands) $252,526 $115,186 $864,319 $361,037
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