-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, V4HUd0epNwC82lDCmKo5Wewt9W6Yv8WzUGALcAeciBW1px/nh6y3GWB9LVB0Dyb6 Gr6rY72mvD8z2A8bp1id3w== 0000950109-98-003263.txt : 19980518 0000950109-98-003263.hdr.sgml : 19980518 ACCESSION NUMBER: 0000950109-98-003263 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: YONKERS FINANCIAL CORP CENTRAL INDEX KEY: 0001005508 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 133870836 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-27716 FILM NUMBER: 98621852 BUSINESS ADDRESS: STREET 1: 6 EXECUTIVE PLAZA CITY: YONKERS STATE: NY ZIP: 10701-9858 BUSINESS PHONE: 9149684500 MAIL ADDRESS: STREET 1: 6 EXECUTIVE PLAZA CITY: YONKERS STATE: NY ZIP: 10701-9858 10-Q 1 QUARTERLY REPORT SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 -------------------- FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1998 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________________ to __________ Commission File Number 0-27716 YONKERS FINANCIAL CORPORATION - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 13-3870836 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification Number) incorporation or organization) 6 EXECUTIVE PLAZA, YONKERS, NEW YORK 10701 - -------------------------------------------------------------------------------- (Address of principal executive offices) Registrant's telephone number, including area code: (914) 965-2500 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Classes of Common Stock Number of Shares Outstanding, March 31, 1998 - ----------------------- -------------------------------------------- $0.01 Par Value 3,015,763 YONKERS FINANCIAL CORPORATION FORM 10-Q QUARTERLY PERIOD ENDED MARCH 31, 1998 Page Number ------ PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Consolidated Balance Sheets at March 31, 1998 and September 30, 1997............................................ 1 Consolidated Statements of Income for the Three and Six Months Ended March 31, 1998 and 1997.......................... 2 Consolidated Statement of Changes in Stockholders' Equity for the Six Months Ended March 31, 1998........................... 3 Consolidated Statements of Cash Flows for the Six Months Ended March 31, 1998 and 1997....................................... 4 Notes to Consolidated Financial Statements...................... 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations......................................... 8 Item 3. Quantitative and Qualitative Disclosures About Market Risk...... 18 PART II. OTHER INFORMATION Item 1. Legal Proceedings............................................... 19 Item 2. Changes in Securities........................................... 19 Item 3. Defaults Upon Senior Securities................................. 19 Item 4. Submission of Matters to a Vote of Security Holders............. 19 Item 5. Other Information............................................... 19 Item 6. Exhibits and Reports on Form 8-K................................ 19 Signature Page.................................................. 20 Explanatory Note: This Quarterly Report on Form 10-Q contains certain forward- looking statements consisting of estimates with respect to the financial condition, results of operations and business of the Company that are subject to various factors which could cause actual results to differ materially from these estimates. These factors include changes in general, economic and market, and legislative and regulatory conditions, and the development of an interest rate environment that adversely affects the interest rate spread or other income anticipated from the Company's operations and investments. i Part I. Item 1. YONKERS FINANCIAL CORPORATION AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands, except share data)
At March 31, 1998 At September 30, 1997 ASSETS Cash and cash equivalents: Cash and due from banks $ 6,188 $ 2,046 Short-term investments 1,024 1,547 --------- --------- Total cash and cash equivalents 7,212 3,593 --------- --------- Securities: Available for sale, at fair value (amortized cost of $105,597 at March 31, 1998 and $85,336 at September 30, 1997) 106,488 86,286 Held to maturity, at amortized cost (fair value of $60,757 at March 31, 1998 and $76,902 at September 30, 1997) 60,200 76,329 --------- --------- Total securities 166,688 162,615 --------- --------- Real estate mortgage loans held for sale, at lower of cost or market value 10,486 20,437 --------- --------- Loans receivable, net: Real estate mortgage loans 143,737 112,357 Consumer and commercial business loans 7,541 7,419 Allowance for loan losses (1,243) (1,093) --------- --------- Total loans receivable, net 150,035 118,683 --------- --------- Accrued interest receivable 3,102 2,845 Federal Home Loan Bank ("FHLB") stock 4,010 3,005 Office properties and equipment, net 1,133 902 Other assets 1,195 876 --------- --------- Total assets $ 343,861 $ 312,956 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Deposits $ 228,642 $ 207,933 Securities repurchase agreements 67,608 54,096 FHLB advances 1,500 6,000 Other liabilities 751 1,049 --------- --------- Total liabilities 298,501 269,078 --------- --------- Stockholders' equity (note 2): Preferred stock (par value $0.01 per share; 100,000 shares authorized; none issued or outstanding) -- -- Common stock (par value $0.01 per share: 4,500,000 shares authorized; 3,570,750 shares issued) 36 36 Additional paid-in capital 34,929 34,734 Unallocated common stock held by employee stock ownership plan ("ESOP") (2,285) (2,428) Unamortized awards of common stock under management recognition plan ("MRP") (985) (1,125) Treasury stock, at cost (554,987 shares at March 31, 1998 and 549,987 shares at September 30, 1997) (7,610) (7,513) Retained income, substantially restricted 20,740 19,605 Net unrealized gain on available-for-sale securities, net of taxes 535 569 --------- --------- Total stockholders' equity 45,360 43,878 --------- --------- Total liabilities and stockholders' equity $ 343,861 $ 312,956 ========= =========
See accompanying notes to unaudited consolidated financial statements. 1 YONKERS FINANCIAL CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In thousands, except per share data)
For the Three Months For the Six Months Ended March 31, Ended March 31, -------------------- -------------------- 1998 1997 1998 1997 ---- ---- ---- ---- Interest and dividend income: Loans $ 3,137 $ 2,002 $ 6,218 $ 3,882 Securities 3,008 3,011 5,872 5,745 Other earning assets 101 94 210 220 -------- -------- -------- -------- Total interest and dividend income 6,246 5,107 12,300 9,847 -------- -------- -------- -------- Interest expense: Deposits 2,214 1,914 4,400 3,821 Securities repurchase agreements 1,036 441 1,837 694 FHLB advances 43 37 87 106 -------- -------- -------- -------- Total interest expense 3,293 2,392 6,324 4,621 -------- -------- -------- -------- Net interest income 2,953 2,715 5,976 5,226 Provision for loan losses 75 75 250 150 -------- -------- -------- -------- Net interest income after provision for loan losses 2,878 2,640 5,726 5,076 -------- -------- -------- -------- Non-interest income: Service charges and fees 212 196 433 380 Net gain (loss) on sales of real estate mortgage loans held for sale 58 (12) 194 (17) Net loss on sales of securities (37) (33) (52) (34) Other 15 14 30 38 -------- -------- -------- -------- Total non-interest income 248 165 605 367 -------- -------- -------- -------- Non-interest expense: Compensation and benefits 975 809 1,967 1,666 Occupancy and equipment 223 182 435 348 Federal deposit insurance costs 32 31 64 121 Data processing service fees 128 118 259 228 Other 621 409 1,083 769 -------- -------- -------- -------- Total non-interest expense 1,979 1,549 3,808 3,132 -------- -------- -------- -------- Income before income tax expense 1,147 1,256 2,523 2,311 Income tax expense 459 508 1,027 896 -------- -------- -------- -------- Net income $ 688 $ 748 $ 1,496 $ 1,415 ======== ======== ======== ======== Earnings per common share (note 3): Basic $ 0.26 $ 0.27 $ 0.56 $ 0.49 Diluted 0.25 0.26 0.54 0.47
See accompanying notes to unaudited consolidated financial statements. 2 YONKERS FINANCIAL CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited) (In thousands, except share data)
Unamortized Unallocated Awards of Additional Common Common Common Paid-in Stock Held Stock Stock Capital by ESOP Under MRP ----- ------- ------- --------- Balance at September 30, 1997 $ 36 $34,734 ($2,428) ($1,125) Net income -- -- -- -- Dividends paid ($0.13 per share) -- -- -- -- Common stock repurchased (5,000 shares) -- -- -- -- Amortization of MRP awards -- -- -- 140 Tax benefits from vested MRP awards -- 62 -- -- ESOP shares released for allocation (14,283 shares) -- 133 143 -- Decrease in net unrealized gain on available-for-sale securities, net of taxes -- -- -- -- ------- ------- ------- ------- Balance at March 31, 1998 $ 36 $34,929 ($2,285) ($ 985) ======= ======= ======= ======= Net Unrealized Total Treasury Retained Gain on Stockholders' Stock Income Securities Equity ----- ------ ---------- ------ Balance at September 30, 1997 ($ 7,513) $ 19,605 $ 569 $ 43,878 Net income -- 1,496 -- 1,496 Dividends paid ($0.13 per share) -- (361) -- (361) Common stock repurchased (5,000 shares) (97) -- -- (97) Amortization of MRP awards -- -- -- 140 Tax benefits from vested MRP awards -- -- -- 62 ESOP shares released for allocation (14,283 shares) -- -- -- 276 Decrease in net unrealized gain on available-for-sale securities, net of taxes -- -- (34) (34) -------- -------- -------- -------- Balance at March 31, 1998 ($ 7,610) $ 20,740 $ 535 $ 45,360 ======== ======== ======== ========
See accompanying notes to unaudited consolidated financial statements 3 YONKERS FINANCIAL CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands)
For the Six Months Ended March 31, --------------------- 1998 1997 ---- ---- Cash flows from operating activities: Net income $ 1,496 $ 1,415 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 250 150 Depreciation and amortization expense 124 91 Amortization of deferred fees, discounts and premiums, net (5) (165) Net (gain) loss on sales of real estate mortgage loans held for sale (194) 17 Net loss on sales of securities 52 34 Other adjustments, net (397) (804) -------- -------- Net cash provided by operating activities 1,326 738 -------- -------- Cash flows from investing activities: Purchases of available-for-sale securities (41,051) (45,430) Proceeds from principal payments, maturities and calls of securities: Available-for-sale 14,533 3,202 Held-to-maturity 15,574 8,812 Proceeds from sales of securities: Available-for-sale 6,111 7,377 Held-to-maturity 630 235 Disbursements for loan originations (66,583) (11,561) Principal collections on loans 9,830 6,162 Proceeds from sales of loans 35,192 1,105 Purchases of FHLB stock (1,005) (1,045) Other investing cash flows, net (201) 187 -------- -------- Net cash used in investing activities (26,970) (30,956) -------- -------- Cash flows from financing activities: Net increase in deposits 20,709 7,175 Net (decrease) increase in borrowings with original terms of three months or less: Securities repurchase agreements (20,818) 16,479 FHLB advances (4,500) (5,000) Proceeds from longer-term securities repurchase agreements 34,330 12,229 Common stock repurchased (97) (6,450) Dividends paid (361) (289) -------- -------- Net cash provided by financing activities 29,263 24,144 -------- -------- Net increase (decrease) in cash and cash equivalents 3,619 (6,074) Cash and cash equivalents at beginning of period 3,593 12,500 -------- -------- Cash and cash equivalents at end of period $ 7,212 $ 6,426 ======== ======== Supplemental information: Interest paid $ 6,104 $ 4,288 Income taxes paid 920 720 ======== ========
See accompanying notes to unaudited consolidated financial statements. 4 YONKERS FINANCIAL CORPORATION AND SUBSIDIARY Notes to Consolidated Financial Statements (Unaudited) (1) Basis of Presentation --------------------- Yonkers Financial Corporation (the "Holding Company") was incorporated under the laws of the State of Delaware and on April 18, 1996 became the savings and loan holding company of The Yonkers Savings and Loan Association, FA (the "Association") in connection with the Association's conversion from a federally chartered mutual savings and loan association to a federally chartered stock savings and loan association, pursuant to its Plan of Conversion. The Holding Company's principal business, subsequent to the Conversion, is the ownership of its wholly owned subsidiary, the Association. Collectively, the Holding Company and the Association are referred to herein as the "Company". The unaudited consolidated financial statements included herein have been prepared in conformity with generally accepted accounting principles. In the opinion of management, the unaudited consolidated financial statements include all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the financial position and results of operations for the interim periods presented. The results of operations for the three and six months ended March 31, 1998 are not necessarily indicative of the results of operations which may be expected for the fiscal year ending September 30, 1998. Certain financial information and footnote disclosures normally included in annual financial statements prepared in conformity with generally accepted accounting principles have been omitted pursuant to the rules and regulations of the Securities and Exchange Commission. The unaudited interim consolidated financial statements presented herein should be read in conjunction with the annual consolidated financial statements of the Company as of and for the fiscal year ended September 30, 1997, included in the Form 10-K. (2) Stockholders' Equity -------------------- Concurrent with the Conversion, on April 18, 1996 the Holding Company sold 3,570,750 shares of its common stock in a subscription and community offering at a price of $10 per share, resulting in gross proceeds of $35.7 million (including $2.9 million attributable to the shares purchased by the Holding Company's Employee Stock Ownership Plan). After deducting conversion costs of $1.1 million, the net proceeds were $34.6 million. The Holding Company used $17.3 million of the net proceeds to acquire all of the common stock issued by the Association in the Conversion. The remaining proceeds were retained by the Holding Company. On a consolidated basis, the net offering proceeds were $31.7 million after deducting shares purchased by the Holding Company's Employee Stock Ownership plan ("ESOP"). 5 On September 4, 1996, the Holding Company received approval from the OTS to repurchase up to 10% of its outstanding common stock, or 357,075 shares, for the treasury. The Holding Company completed this repurchase in the quarter ended December 31, 1996 at a total cost of $4.6 million. On October 30, 1996, the Company's stockholders approved (i) the Yonkers Financial Corporation 1996 Management Recognition Plan ("MRP") and (ii) the Yonkers Financial Corporation 1996 Stock Option and Incentive Plan (the "Option Plan"). The Holding Company funded the MRP in the quarter ended December 31, 1996 by purchasing 4% of its outstanding common stock, or 142,830 shares, in the open market at a total cost of $1.8 million. Grants for a total of 108,905 shares have been made to employees and directors under the MRP, and the remaining 33,925 shares are included in treasury stock at March 31, 1998 and available for future awards. Under the Option Plan, grants of 285,233 options have been made through March 31, 1998, at a weighted average exercise price of approximately $13.01 per share. On May 1, 1997, the Holding Company received approval from the OTS to repurchase up to 5% of its outstanding common stock, or 158,987 shares, for the treasury. The Holding Company completed this repurchase in the quarter ended September 30, 1997 at a total cost of $2.5 million. On January 28, 1998, the Holding Company received approval from the OTS to repurchase up to 5% of its outstanding common stock, or 151,038 shares, for the treasury. Through March 31, 1998, the Holding Company had repurchased 5,000 shares of the 151,038 approved shares at a total cost of $97,000. (3) Earnings Per Share ------------------ During the quarter ended December 31, 1997, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share", which requires presentation of both basic earnings per share ("EPS") and diluted EPS by all entities with complex capital structures. Basic EPS excludes dilution and is computed by dividing income available to common stockholders by the weighted- average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock (such as stock options) were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. Diluted EPS is computed by dividing net income by the weighted average number of common shares outstanding for the period plus common- equivalent shares computed using the treasury stock method. SFAS No. 128 requires the restatement of all prior period EPS data to conform to the new requirements. 6 The table below summarizes the number of shares utilized in the Company's EPS calculations for the three and six months ended March 31, 1998 and 1997. For purposes of computing basic EPS, net income applicable to common stock equaled net income for each of the periods presented.
For the Three Months For the Six Months Ended March 31, Ended March 31, --------------- ----------------- 1998 1997 1998 1997 ---- ---- ---- ---- (In Thousands) Weighted average common shares outstanding for computation of basic EPS (1) 2,699 2,809 2,695 2,913 Common-equivalent shares due to the dilutive effect of stock options and MRP awards (2) 86 108 89 89 -- --- -- -- Weighted average common shares for computation of diluted EPS 2,785 2,917 2,784 3,002 ===== ===== ===== =====
(1) Excludes unvested MRP awards and unallocated ESOP shares that have not been committed to be released. (2) Computed using the treasury stock method. 7 Part I. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Comparison of Financial Condition at March 31, 1998 and September 30, 1997 Total assets at March 31, 1998 increased $30.9 million to $343.9 million from $313.0 million at September 30, 1997. Asset growth was funded primarily through deposit inflows and proceeds from borrowings under securities repurchase agreements. Deposit liabilities increased $20.7 million to $228.6 million at March 31, 1998 from $207.9 million at September 30, 1997. Borrowings under securities repurchase agreements increased $13.5 million to $67.6 million at March 31, 1998 from $54.1 million at September 30, 1997. Funds provided by deposit growth and borrowings, as well as proceeds from sales of loans held for sale, were primarily invested in securities and new loans. Overall, total loans (loans receivable and loans held for sale) increased $21.4 million to $160.5 million at March 31, 1998 from $139.1 million at September 30, 1997. This increase primarily reflects originations (net of principal payments) of $56.8 million, less $35.2 million in loans sold. The $21.4 million net increase in total loans primarily reflects increases of $20.1 million in one-to four-family mortgage loans, $1.0 million in multi-family loans, $419,000 in commercial real estate loans and $71,000 in construction loans, partially offset by a decrease of $336,000 in land loans. Total securities increased $4.1 million to $166.7 million at March 31, 1998 from $162.6 million at September 30, 1997. The securities portfolio at March 31, 1998 reflects a $20.2 million increase in available-for-sale securities and a $16.1 million decrease in held-to-maturity securities, compared to September 30, 1997. The increase in available-for-sale securities primarily reflects purchases of $41.1 million (including purchases of longer term, fixed rate securities funded with borrowings under repurchase agreements), partially offset by $14.5 million in principal payments, maturities and calls, and $6.1 million in proceeds from sales. The Company's overall interest rate risk, as measured by the sensitivity of its net portfolio value to instantaneous interest rate changes, may have increased somewhat as a result of funding a portion of these security purchases with shorter term borrowings. The decrease in held-to- maturity securities primarily reflects principal payments, maturities and calls of $15.6 million. Available-for-sale securities represented 63.9% of the total securities portfolio at March 31, 1998, compared to 53.1% at September 30, 1997. Management has increased the level of available-for-sale securities to enhance the Company's overall financial flexibility, including the ability to reposition the portfolio or reduce borrowings in response to changes in interest rates and other market conditions. Borrowings at March 31, 1998 reflect a $13.5 million increase in securities repurchase agreements to $67.6 million compared to $54.1 million at September 30, 1997, partially offset by a $4.5 million decrease in FHLB advances. The Company began 8 to utilize repurchase agreements during the quarter ended September 30, 1996 as a means of leveraging available capital to support further asset growth (primarily loans and available-for-sale securities) and increase net interest income. For information regarding the terms of the repurchase agreements, see "Liquidity and Capital Resources". Stockholders' equity increased $1.5 million, from $43.9 million at September 30, 1997 to $45.4 million at March 31, 1998, primarily attributable to net income of $1.1 million retained after dividends. The ratio of stockholders' equity to total assets was 13.19% at March 31, 1998 compared to 14.02% at September 30, 1997. Book value per share (computed based on total shares issued less treasury shares) was $15.04 at March 31, 1998, up from $14.53 at September 30, 1997. See "Liquidity and Capital Resources" for information regarding the Association's regulatory capital amounts and ratios. Total non-performing assets decreased $92,000, from $1.5 million at September 30, 1997 to $1.4 million at March 31, 1998, reflecting a net decrease of $62,000 in non-accrual loans past due ninety days or more and a $30,000 net reduction in real estate owned. The ratio of non-performing assets to total assets was 0.41% at March 31, 1998 compared to 0.48% at September 30, 1997. The allowance for loan losses was $1.2 million or 0.82% of total loans receivable at March 31, 1998, compared to $1.1 million or 0.90% at September 30, 1997. The ratio of the allowance for loan losses to non-performing loans was 115.52% at March 31, 1998 compared to 96.05% at September 30, 1997. Comparison of Operating Results for the Three Months Ended March 31, 1998 and 1997 Net income for the three months ended March 31, 1998 was $688,000 or basic earnings per common share of $0.26, compared to net income of $748,000 or basic earnings per common share of $0.27 for the quarter ended March 31, 1997. Diluted earnings per common share were $0.25 for the quarter ended March 31, 1998 compared to $0.26 for the same period in 1997. The $60,000 decrease in net income was attributable to a $430,000 increase in non-interest expense partially offset by a $238,000 increase in net interest income, an $83,000 increase in non-interest income and a $49,000 decrease in income tax expense. Net interest income increased $238,000 to $3.0 million for the three months ended March 31, 1998 from $2.7 million for the three months ended March 31, 1997. The increase reflects higher average interest-earning assets primarily attributable to the reinvestment of proceeds from deposit growth and borrowings, partially offset by a decline in the average interest rate spread and net interest margin. The interest rate spread was 2.88% for the current quarter compared to 3.35% for the quarter ended March 31, 1997, while the net interest margin was 3.53% in the current quarter compared to 4.03% in the year-ago period. The narrower spread and margin primarily reflect (i) an overall lower asset yield from the origination of mortgage loans (including refinancings) in the current lower interest rate environment and (ii) higher average rates paid on interest- 9 bearing deposits and borrowings, as well as the larger proportion of higher rate borrowings to total interest-bearing funding. Interest and dividend income totaled $6.2 million for the three months ended March 31, 1998, an increase of $1.1 million compared to $5.1 million for the three months ended March 31, 1997. This increase reflects the effect of a $65.4 million increase in total average interest-earning assets, partially offset by a 12 basis point decrease in the average yield on such assets to 7.46% for the three months ended March 31, 1998 from 7.58% for the same period in the prior year. Interest income on loans increased $1.1 million for the three months ended March 31, 1998 compared to the same period in the prior year, reflecting the effect of a $62.1 million increase in the average balance partially offset by a 62 basis point decrease in the average yield to 8.20% for the three months ended March 31, 1998 from 8.82% for the same period in the prior year. The increase in the average balance of loans was primarily attributable to an increase in one-to-four family residential loans. The lower average yield reflects the repricing of adjustable rate mortgage loans and the origination of new loans (including refinancings) in the current lower interest rate environment. On a combined basis, interest and dividend income on mortgage-backed and other securities was substantially unchanged at $3.0 million for the three months ended March 31, 1998 and 1997. Interest on mortgage-backed securities increased by $438,000, attributable to the effects of a $24.9 million increase in the average balance and a 4 basis point increase in the average yield, while interest on other securities declined by $441,000, primarily attributable to a $22.1 million decrease in the average balance and a 29 basis point decrease in the average yield. Interest and dividend income on other earning assets increased $7,000, attributable to a $515,000 increase in the average balance. Interest expense totaled $3.3 million for the three months ended March 31, 1998, an increase of $901,000 compared to interest expense of $2.4 million for the three months ended March 31, 1997. Interest expense on deposits increased $300,000 compared to the same period in the prior year, reflecting the effect of a $21.2 million increase in the average balance and a 17 basis point increase in the average rate on interest-bearing deposits to 4.14% for the three months ended March 31, 1998 from 3.97% for the prior-year quarter. The increase in the average rate on interest-bearing deposits primarily reflects a shift from lower rate savings and shorter-term certificates of deposit into generally higher rate longer-term certificates of deposit. The increase in average interest-bearing deposits consisted of a $13.2 million increase in average savings certificate accounts (to $122.7 million from $109.5 million) and a $10.1 million increase in average NOW, club and money market accounts (to $46.0 million from $35.9 million), partially offset by a $2.1 million decrease in average regular savings accounts (to $45.1 million from $47.2 million). 10 Interest expense on borrowings increased $601,000 to $1.1 million for the three months ended March 31, 1998 from $478,000 for the three months ended March 31, 1997, as the Company continued to increase borrowings to leverage available capital and support further asset growth. Substantially all of this increase was attributable to interest on borrowings under securities repurchase agreements, which had an average balance of $70.8 million and an average rate of 5.85% for the three months ended March 31, 1998 compared to $30.9 million and 5.70%, respectively, for the prior-year quarter. The increase in the average rate reflects a shift from generally lower rate shorter-term borrowings into generally higher rate longer-term borrowings. The Company has recently increased its utilization of longer-term repurchase agreements as a means of controlling its overall interest rate risk in the event of a rise in market interest rates. See "Liquidity and Capital Resources" for a further discussion of the Company's securities repurchase agreements. The provision for loan losses was $75,000 for each of the three-month periods ended March 31, 1998 and 1997. Loan charge-offs were $6,000 and recoveries were $4,000 during the three months ended March 31, 1998, compared to $9,000 in charge-offs and $6,000 in recoveries during the same period in 1997. Non-performing loans totaled $1.1 million at March 31, 1998, substantially unchanged from September 30, 1997 and down from $1.7 million at March 31, 1997. The ratio of non-performing loans to total loans receivable was 0.71% at March 31, 1998, compared to 0.94% at September 30, 1997 and 1.85% at March 31, 1997. The allowance for loan losses was $1.2 million or 0.82% of total loans receivable at March 31, 1998, compared to $1.1 million or 0.90% at September 30, 1997 and $1.1 million or 1.17% at March 31, 1997. The ratio of the allowance for loan losses to non-performing loans was 115.52% at March 31, 1998, compared to 96.05% at September 30, 1997 and 62.57% at March 31, 1997. Management estimates the allowance for loan losses based on an analysis of various factors, including the value of the underlying collateral, growth and composition of the loan portfolio, the relationship of the allowance for loan losses to outstanding loans, historical loss experience, delinquency trends and prevailing economic conditions. Although the Company maintains its allowance for loan losses at a level it considers adequate to absorb probable losses, there can be no assurance that such losses will not exceed the estimated amounts or that additional substantial provisions for losses will not be required in future periods. 11 The following table sets forth certain asset quality ratios and other data at the dates indicated:
March 31, 1998 September 30, 1997 March 31, 1997 -------------- ------------------ -------------- (Dollars in thousands) Non-performing loans $1,076 $1,138 $1,723 Real estate owned, net 349 379 359 ------ ------ ------ Total non-performing assets $1,425 $1,517 $2,082 ====== ====== ====== Non-performing loans to total loans receivable 0.71% 0.94% 1.85% Non-performing assets to total assets 0.41% 0.48% 0.73% Allowance for loan losses to: Non-performing loans 115.52% 96.05% 62.57% Total loans receivable 0.82% 0.90% 1.17%
The Company applies Statement of Financial Accounting Standards ("SFAS") No. 114 to loans that are individually evaluated for collectibility in accordance with its normal loan review procedures (principally loans in the commercial mortgage, multi-family, construction and land loan portfolios). SFAS No. 114 does not apply to smaller-balance homogeneous loans in the Company's one- to four-family mortgage and consumer loan portfolios. The Company's recorded investment in impaired loans consisted of non-accrual commercial mortgage, construction and land loans totaling $495,000 at March 31, 1998 and $740,000 at September 30, 1997. All of these loans were collateral-dependent loans measured based on the fair value of the collateral in accordance with SFAS No. 114. The Company determines the need for an allowance for impairment under SFAS No. 114 on a loan-by-loan basis. At March 31, 1998 and September 30, 1997, such an allowance was not required with respect to the Company's impaired loans due to the sufficiency of the related collateral values. The average recorded investment in impaired loans was $634,000 and $818,000 for the three months ended March 31, 1998 and 1997, respectively. Interest income recognized on impaired loans (while such loans were considered to be impaired) was not significant for the three months ended March 31, 1998 and 1997. Non-interest income for the three months ended March 31, 1998 increased $83,000 to $248,000 from $165,000 for the three months ended March 31, 1997. Increases of $70,000 in the net gain (loss) on sales of loans held for sale and $16,000 in service charges and fee income were partially offset by an increase of $4,000 in the net loss on sales of securities. The increase in the net gain on sales of loans reflects increased sales activity, as $12.3 million in loan sales were completed (with servicing retained) during the current quarter. The increase in service charges and fee income primarily reflects increases in transaction volume. 12 Non-interest expense for the three months ended March 31, 1998 increased $430,000 to $2.0 million from $1.5 million for the three months ended March 31, 1997. The increase was primarily attributable to an increase in other non- interest expense of $212,000 and an increase in compensation and benefits expense of $166,000. The increase in other non-interest expense was primarily attributable to additional costs associated with the expansion of the Company's business activities and review of additional growth opportunities. The increase in compensation and benefits expense primarily reflects increased costs due to (i) additional staffing resulting from the establishment of an in-store branch and the expansion of lending operations, and (ii) a $38,000 increase in employee stock ownership plan expenses due to an increase in the Company's stock price. Income tax expense decreased $49,000 from $508,000 for the three months ended March 31, 1997 to $459,000 for the three months ended March 31, 1998, primarily reflecting lower pre-tax income. Comparison of Operating Results for the Six Months Ended March 31, 1998 and 1997 Net income for the six months ended March 31, 1998 was $1.5 million or basic earnings per common share of $0.56 compared to net income of $1.4 million or basic earnings per common share of $0.49 for the six months ended March 31, 1997. Diluted earnings per common share were $0.54 for the six months ended March 31, 1998 compared to $0.47 for the same period in 1997. The $81,000 increase in net income was attributable to a $750,000 increase in net interest income and a $238,000 increase in non-interest income partially offset by a $676,000 increase in non-interest expense, a $131,000 increase in income tax expense and a $100,000 increase in the provision for loan losses. Net interest income increased $750,000 to $6.0 million for the six months ended March 31, 1998 from $5.2 million for the six months ended March 31, 1997. The increase reflects higher average interest-earning assets primarily attributable to the reinvestment of proceeds from deposit growth and borrowings, partially offset by a decline in the average interest rate spread and net interest margin. The interest rate spread was 3.03% for the current six-month period compared to 3.27% for the six months ended March 31, 1997, while the net interest margin was 3.69% in the current period compared to 3.97% in the year- ago period. The narrower spread and margin primarily reflect the higher average rates paid on interest-bearing deposits and borrowings, as well as the larger proportion of higher rate borrowings to total interest-bearing funding. Interest and dividend income totaled $12.3 million for the six months ended March 31, 1998, an increase of $2.5 million compared to $9.8 million for the six months ended March 31, 1997. This increase reflects the effect of a $60.5 million increase in total average interest-earning assets and an 11 basis point increase in the average yield on 13 such assets to 7.60% for the six months ended March 31, 1998 from 7.49% for the same period in the prior year. Interest income on loans increased $2.3 million for the six months ended March 31, 1998 compared to the same period in the prior year, reflecting the effect of a $57.9 million increase in the average balance partially offset by a 23 basis point decrease in the average yield to 8.43% for the six months ended March 31, 1998 from 8.66% for the same period in the prior year. The increase in the average balance of loans was primarily attributable to an increase in one-to four-family residential loans. The lower average yield reflects the repricing of adjustable rate mortgage loans and the origination of new loans (including refinancings) in the current lower interest rate environment. On a combined basis, interest and dividend income on mortgage-backed and other securities increased $127,000 for the six months ended March 31, 1998 as compared to the same period in the prior year. Interest on mortgage-backed securities increased by $829,000 attributable to the effects of a $22.0 million increase in the average balance and a 15 basis point increase in the average yield, while interest on other securities declined by $702,000, primarily attributable to a $19.1 million decrease in the average balance and a 9 basis point decrease in the average yield. Interest and dividend income on other earning assets decreased $10,000, attributable to a $305,000 decrease in the average balance and a 4 basis point decrease in the average yield. Interest expense totaled $6.3 million for the six months ended March 31, 1998, an increase of $1.7 million compared to interest expense of $4.6 million for the six months ended March 31, 1997. Interest expense on deposits increased $579,000 compared to the same period in the prior year, reflecting the effect of a $19.7 million increase in the average balance and an 18 basis point increase in the average rate on interest-bearing deposits to 4.18% for the six months ended March 31, 1998 from 4.00% for the prior-year period. The increase in the average rate on interest-bearing deposits primarily reflects a shift from lower rate savings and shorter-term certificates of deposit into generally higher-rate longer-term certificates of deposit. The increase in average interest-bearing deposits consisted of a $13.3 million increase in average savings certificate accounts (to $121.2 million from $107.9 million) and an $8.5 million increase in average NOW, club and money market accounts (to $44.4 million from $35.8 million), partially offset by a $2.2 million decrease in average regular savings accounts (to $45.1 million from $47.3 million). Interest expense on borrowings increased $1.1 million to $1.9 million for the six months ended March 31, 1998 from $800,000 for the six months ended March 31, 1997, as the Company continued to increase borrowings to leverage capital and support further asset growth. Substantially all of this increase was attributable to interest on borrowings under securities repurchase agreements, which had an average balance of $62.7 million and an average rate of 5.86% for the six months ended March 31, 1998 compared to $24.5 million and 5.67%, respectively, for the prior-year period. The increase in the 14 average rate reflects a shift from generally lower rate shorter-term borrowings into generally higher rate longer-term borrowings. The Company has recently increased its utilization of longer-term repurchase agreements as a means of controlling its overall interest rate risk in the event of a rise in market interest rates. The provision for loan losses was $250,000 and $150,000 for the six months ended March 31, 1998 and 1997, respectively. The current-period provision reflects the impact of higher net charge-offs and growth in loans receivable compared to the same six-month period in the prior year. Net loan charge-offs were $100,000 during the six months ended March 31, 1998, compared to $9,000 during the same period in 1997. The increase in net charge-offs in the 1998 period was primarily attributable to the settlement of two construction loans in the quarter ended December 31, 1997. Non-interest income for the six months ended March 31, 1998 increased $238,000 to $605,000 from $367,000 for the six months ended March 31, 1997. Increases of $211,000 in the net gain on sales of loans held for sale and $53,000 in service charges and fee income were partially offset by an increase of $18,000 in the net loss on sales of securities. The increase in the net gain on sales of loans reflects increased sales activity in the current year, as mortgage loans of $35.2 million were sold (with servicing retained) during the six-month period ended March 31, 1998. In comparison, loan sales during the six months ended March 31, 1997 amounted to $1.1 million. The increase in service charges and fee income primarily reflects increases in transaction volume. Non-interest expense for the six months ended March 31, 1998 increased $676,000 to $3.8 million from $3.1 million for the six months ended March 31, 1997. The increase was primarily attributable to an increase in other non- interest expense of $314,000 and an increase in compensation and benefits expense of $301,000. The increase in other non-interest expense was primarily attributable to additional costs associated with the expansion of the Company's business activities and review of additional growth opportunities. The increase in compensation and benefits expense primarily reflects increased costs due to (i) additional staffing resulting from the establishment of an in-store branch and the expansion of lending operations, and (ii) an $86,000 increase in employee stock ownership plan expenses due to an increase in the Company's stock price. Income tax expense increased $131,000 to $1.0 million for the six months ended March 31, 1998 from $896,000 for the three months ended March 31, 1997, primarily reflecting higher pre-tax income. Liquidity and Capital Resources The Company's primary sources of funds are deposits and borrowings; principal and interest payments on loans and securities; and proceeds from sales of loans and securities. While maturities and scheduled payments on loans and securities provide an indication of the timing of the receipt of funds, other sources of funds such as loan 15 prepayments and deposit inflows are less predictable due to the effects of changes in interest rates, economic conditions and competition. The main sources of liquidity for the Holding Company are net proceeds from the sale of stock and dividends received from the Association, if any. The main cash flows are payments of dividends to shareholders and any repurchases of the Holding Company's common stock. The Company is required to maintain an average daily balance of total liquid assets as a percentage of net withdrawable deposit accounts plus short- term borrowings, as defined by the regulations of the Office of Thrift Supervision. Effective November 24, 1997, the OTS reduced the liquid asset requirement from 5.0% to 4.0% and eliminated the 1.0% short-term liquidity ratio. At March 31, 1998, the Company's total liquidity ratio was 25.3%. The level of liquid assets is dependent on the Association's operating, financing and investing activities during any given period. The primary investing activities of the Company are the origination of real estate mortgage and other loans, and the purchase of mortgage-backed and other securities. At March 31, 1998, the Company had outstanding loan origination commitments of $39.2 million, unadvanced home equity lines of credit of $4.0 million and undisbursed construction loans in process of $1.4 million. The Company anticipates that it will have sufficient funds available to meet its current loan origination and other commitments. At March 31, 1998, the Company had the ability to obtain additional FHLB advances of approximately $83.2 million. Certificates of deposit scheduled to mature in one year or less from March 31, 1998 totaled $72.2 million. Based on the Company's most recent experience and pricing strategy, management believes that a significant portion of such deposits will remain with the Company. The Company's borrowings at March 31, 1998 included $67.6 million in borrowings under securities repurchase agreements. In these agreements, the Company borrows funds through the transfer of debt securities to the FHLB of New York, as counterparty, and concurrently agrees to repurchase the identical securities at a fixed price on a specified date. The Company accounts for these agreements as secured financing transactions since it maintains effective control over the transferred securities. Accordingly, the transaction proceeds are recorded as borrowings and the underlying securities continue to be carried in the Company's debt securities portfolio. Repurchase agreements are collateralized by the securities sold and, in certain cases, by additional margin securities. During the six months ended March 31, 1998, the average borrowings under these agreements amounted to $62.7 million and the maximum month-end balance outstanding was $72.7 million. 16 Additional information concerning outstanding repurchase agreements with the FHLB of New York as of March 31, 1998 is summarized as follows: Repurchase Borrowings - ------------------------------------------------------- Accrued Weighted Fair Value Remaining Term Interest Average Of Collateral to Maturity Amount Payable (1) Rate Securities (2) ----------- ------ ----------- ---- -------------- (Dollars in thousands) Under 30 days $17,767 $286 5.73% $21,081 30 days to 1 year 9,329 75 5.97 10,239 Over 1 year 40,512 212 5.79 40,907 ------- ---- ------- Total $67,608 $573 5.80% $72,227 ======= ==== ======= (1) Included in other liabilities in the consolidated balance sheet. (2) Represents the fair value of the mortgage-backed securities ($64.8 million) and other debt debt securities ($6.7 million) which were transferred to the counterparty, including accrued interest receivable of $731,000. These securities consist of available-for-sale securities and held-to-maturity securities with fair values of $65.7 million and $5.8 million, respectively. At March 31, 1998, the Company's "amount at risk" (excess of the carrying amount, or market value if higher, of the securities transferred to the FHLB of New York over the amount of the repurchase liability) was approximately $4.0 million. The weighted average remaining maturity of these agreements was approximately 32 months. At March 31, 1998, the Association exceeded all of its regulatory capital requirements with a tangible capital level of 11.4% of total adjusted assets, which is above the required level of 1.5%; core capital of 11.4% of total adjusted assets, which is above the required level of 4.0%; and total risk-based capital of 28.2%, which is above the required level of 8.0%. These regulatory capital requirements, which are applicable to the Association only, do not consider additional capital held at the Holding Company level, and require certain adjustments to stockholder's equity to arrive at the various capital amounts. Year 2000 Compliance Many existing computer programs use only two digits to identify a year in the date field. These programs were designed and developed without considering the impact on the upcoming change in the century. If not corrected, many computer applications could fail or create erroneous results by or at the year 2000. The year 2000 issue affects virtually all companies and organizations. The Company, working with its outside service providers, has developed a plan to ensure that its computer systems are year 2000 compliant. The Company believes that 17 the costs associated with ensuring year 2000 compliance will not materially affect the Company's future operating results or financial condition. Part I. Item 3. Quantitative and Qualitative Disclosures About Market Risk There have been no material changes in the Company's interest rate risk position since September 30, 1997. Other types of market risk, such as foreign exchange rate risk and commodity price risk, do not arise in the normal course of the Company's business activities. 18 PART II. OTHER INFORMATION Item 1. Legal Proceedings The Company is involved as plaintiff or defendant in various legal proceedings arising in the normal course of its business. While the ultimate outcome of these various legal proceedings cannot be predicted with certainty, it is the opinion of management that the resolution of these legal actions should not have a material effect on the Company's financial position, results of operations or liquidity. Item 2. Changes in Securities None Item 3. Defaults Upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit No. Name ----------- ---- 27 Financial Data Schedule (b) Reports on Form 8-K None 19 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 thereunto duly authorized. YONKERS FINANCIAL CORPORATION ----------------------------- (Registrant) Date: May 14, 1998 /s/ Richard F. Komosinski -------------------------- Richard F. Komosinski, President and Chief Executive Officer (Principal Executive Officer) Date: May 14, 1998 /s/ Joseph D. Roberto ----------------------- Joseph D. Roberto Vice President, Treasurer and Chief Financial Officer (Principal Financial Officer) 20 EX-27 2 FINANCIAL DATA SCHEDULE
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE QUARTERLY REPORT ON FORM 10-Q FOR THE FISCAL QUARTER ENDED MARCH 31, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS SEP-30-1998 MAR-31-1998 6,188 1,024 0 0 106,488 60,200 60,757 151,278 (1,243) 343,861 228,642 69,108 751 0 0 0 36 45,324 343,861 3,137 3,008 101 6,246 2,214 3,293 2,953 75 (37) 1,979 1,147 1,147 0 0 688 0.26 0.25 7.46 1,076 0 0 742 (1,170) 6 (4) (1,243) (1,243) 0 0
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