FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 1998 Commission file number
2-99779
National Consumer Cooperative Bank
(Exact name of registrant as specified in its charter)
United States of America 52-1157795
(12 U.S.C. Section 3001 et seq.) (I.R.S. Employer
(State or other jurisdiction of Identification No.)
incorporation or organization)
1401 Eye Street, NW, Suite 700, Washington, D.C. 20005
(Address of principal executive offices)
Registrant's telephone number, including area code (202)336-7700
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 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.
Outstanding at June 30, 1998
Class C 219,022
(Common stock, $100.00 par value)
Class B 839,353
(Common stock, $100.00 par value)
Class D 3
(Common stock, $100.00 par value)
National Consumer Cooperative Bank
(doing business as National Cooperative Bank)
and Subsidiaries
INDEX
PART I FINANCIAL INFORMATION Page No.
Item 1 Consolidated balance sheets -
June 30, 1998 and December 31, 1997........ 3
Consolidated statements of income - for
the three and six months ended June 30, 1998
and 1997.................................... 4
Consolidated statements of cash flows - for
the six months ended June 30, 1998 and
1997........................................ 5-6
Condensed notes to the consolidated
financial statements - June 30, 1998........ 7-10
Item 2 Management's discussion and analysis of
financial condition and results of operations
- for the three and six months ended June 30,
1998 and 1997................................ 11-21
PART II OTHER INFORMATION
Item 2 Changes in Securities......................... 22
Item 6 Exhibits ..................................... 22
Exhibit 10.15 - First Amendment to Third Amended and
Restated Loan Agreement with Fleet Bank as Agent
Exhibit 27 - Financial Data Schedule
NATIONAL COOPERATIVE BANK
CONSOLIDATED BALANCE SHEETS
June 30, 1998 and December 31, 1997
(Unaudited)
June 30, December 31,
1998 1997
Assets
Cash and cash equivalents $ 51,441,012 $ 21,689,245
Restricted cash 5,906,793 6,884,572
Investment securities
Available-for-sale 48,619,638 61,268,440
Held-to-maturity 1,942,312 1,942,312
Loans and lease financing 590,191,044 584,635,993
Loans held for sale 275,097,652 189,132,330
Less: Allowance for loan losses (17,261,231) (17,638,136)
848,027,465 756,130,187
Other assets 24,765,527 21,389,059
Total assets $980,702,747 $869,303,815
Liabilities and Members' Equity
Liabilities
Deposits $108,664,150 $ 83,825,979
Patronage dividends payable in cash 8,396,613 5,872,708
Other liabilities 19,303,475 17,072,271
Borrowings
Short-term 307,586,947 243,120,607
Long-term 218,614,206 204,793,392
526,201,153 447,913,999
Subordinated debt 182,743,967 182,785,385
Total borrowings 708,945,120 630,699,384
Total liabilities 845,309,358 737,470,342
Members' equity
Common stock
Class B 83,935,265 84,004,502
Class C 21,902,233 21,904,447
Class D 300 300
Retained earnings
Allocated 11,194,703 8,109,931
Unallocated 17,827,210 17,474,132
Unrealized gain on investment
securities available-for-sale 533,678 340,161
Total members' equity 135,393,389 131,833,473
Total liabilities and members'
equity $980,702,747 $869,303,815
NATIONAL COOPERATIVE BANK
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Six Months Ended Three Months Ended
June 30, June 30,
1998 1997 1998 1997
Interest income
Loans and lease financing $32,257,380 $30,888,106 $16,395,484 $15,516,939
Investment securities 3,014,790 3,105,894 1,500,049 1,571,061
Total interest income 35,272,170 33,994,000 17,895,533 17,088,000
Interest expense
Deposits 2,122,364 2,017,134 1,131,042 984,181
Short-term borrowings 6,689,079 5,625,341 3,567,391 2,734,477
Long-term debt, other
borrowings and
subordinated debt 13,170,918 13,042,669 6,760,332 6,770,374
Total interest expense 21,982,361 20,685,144 11,458,765 10,489,032
Net interest income 13,289,809 13,308,856 6,436,768 6,598,968
Provision for loan losses 782,881 1,389,000 430,002 687,000
Net interest income after
provision for losses 12,506,928 11,919,856 6,006,766 5,911,968
Non-interest income
Gain on sale of loans 3,921,355 1,741,309 291,233 332,882
Loan and deposit
servicing fees 1,252,183 1,111,943 638,218 556,747
Other 2,403,555 1,998,748 1,124,211 893,371
Total non-interest
income 7,577,093 4,852,000 2,053,662 1,783,000
Non-interest expenses
Compensation and
employee benefits 7,840,291 5,708,107 4,021,268 3,016,036
Contractual services 1,938,536 1,726,286 1,021,556 883,067
Occupancy and equipment 2,133,897 1,887,376 1,184,866 935,968
Contribution to NCB
Development Corporation 0 250,000 0 125,000
Other 1,313,623 1,108,170 776,532 628,479
Total non-interest
expenses 13,226,347 10,679,939 7,004,222 5,588,550
Income before income taxes 6,857,674 6,091,917 1,056,206 2,106,418
Provision for income taxes 669,874 739,532 377,341 402,385
Net income $ 6,187,800 $ 5,352,385 $ 678,865 $ 1,704,033
Distribution of net income
Patronage dividends $ 6,187,800 $ 5,352,385 $ 678,865 $ 1,704,033
Retained earnings
$ 6,187,800 $ 5,352,385 $ 678,865 $ 1,704,033
NATIONAL COOPERATIVE BANK
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the six months ended June 30, 1998 1997
Cash flows from operating activities
Net income $ 6,187,800 $ 5,352,385
Adjustments to reconcile net income to net
cash (used in) provided by operating activities
Provision for loan losses 782,881 1,389,000
Depreciation and amortization 2,516,843 2,791,804
Gain on sale of assets (3,921,355) (1,741,309)
Loans originated for sale (315,866,638) (85,561,715)
Proceeds from sale of loans held for sale 230,613,858 134,011,720
(Increase) decrease in other assets (1,195,459) 2,108,595
Increase in other liabilities 2,231,203 2,181,056
Net cash (used in) provided by operating
activities (78,650,867) 60,531,536
Cash flows from investing activities
Redemption of restricted cash 1,003,495 -
Purchases of investment securities
Available-for-sale - (4,736,872)
Proceeds from maturities and sales
of investment securities
Available-for-sale 10,913,301 2,478,010
Held-to-maturity - 150,642
Net increase in loans and lease financing (14,525,039) (57,543,936)
Proceeds from sale of portfolio loans 8,156,400 -
Purchases of premises and equipment - (225,418)
Net cash provided by (used in)investing
activities 5,548,157 (59,877,574)
Cash flows from financing activities
Net increase(decrease) in deposits 24,838,171 (8,729,566)
Net increase(decrease) in short-term
borrowings 64,466,340 (800,000)
Proceeds from issuance of long-term debt 34,800,078 40,000,000
Repayment on long-term debt (21,000,000) (19,000,000)
Sale of common stock - 300
Dividends paid (250,112) (210,150)
Net cash provided by financing activities 102,854,477 11,260,584
Increase in cash and cash equivalents 29,751,767 11,914,546
Cash and cash equivalents, beginning of year 21,689,245 17,150,534
Cash and cash equivalents, end of period $ 51,441,012 $ 29,065,080
NATIONAL COOPERATIVE BANK
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Supplemental schedule of noncash investing and financing activities:
For the six months ended June 30, 1998 1997
Unrealized gain (loss) on investment
securities available-for-sale $ 193,518 $ (41,648)
Interest paid $21,502,177 $19,962,864
Income taxes paid $ 600,000 $ 705,554
Loans charged off $ 1,272,829 $ 22,327
NATIONAL COOPERATIVE BANK
CONDENSED NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
The accompanying financial statements have been prepared
without audit and reflect all adjustments (consisting only of
normal recurring adjustments) which were, in the opinion of
management, necessary to a fair statement of the results of the
interim period presented. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted. Accordingly, these condensed financial
statements should be read in conjunction with the financial
statements and the notes thereto included in NCB's most current
annual report. The results of operations for the interim periods
are not necessarily indicative of the results of the entire year.
Certain reclassifications have been made to the prior-period
amounts to conform with the current year's presentation.
1. Cash, Cash Equivalents and Investment Securities
As of June 30, 1998, NCB's portfolio of investment securities,
cash and cash equivalents had an average adjusted maturity of 4
years with interest rates in those portfolios varying from 5.00% to
8.38%.
Cash and Investments Investments
Cash Available- Held-to-
Equivalents for-Sale Maturity
Cash $ 4,492,356 $ - $ -
Federal funds 28,233,011 - -
Money market securities 18,715,645 676,410 -
Mutual funds - 1,472,035 -
Mortgage-backed securities - 5,008 1,942,312
Corporate bonds - 9,658,051 -
U.S. Treasury and
Agency obligations - 9,782,380 -
Interest-only receivables - 27,025,754 -
$51,441,012 $48,619,638 $1,942,312
At June 30, 1998, the investments in the available-for-sale
portfolio were recorded at aggregate fair value. Restricted cash
of $5,906,793 is held by a trustee for the benefit of certificate
holders in the event of loss on certain loans sold in 1993 and
1992, the remaining balance of which totalled $50,493,942 and
$60,327,747 at June 30, 1998. The restricted cash will become
available to NCB I, Inc., as the principal balance of the
respective loans decreases. The loans sold have original maturities
of ten to fifteen years. On March 25, 1998, $1,003,495 was received
as a reduction of the restricted cash account due to loan
repayments.
Interest-only receivables substantially pertain to blanket loans
to cooperative housing corporations.
2. Loans and Lease Financing
Loans and leases outstanding by category at June 30, 1998 were:
Commercial loans $367,956,858
Lease financing 34,876,194
Real estate loans
Residential 455,580,822
Commercial 6,874,822
$865,288,696
At June 30, 1998 and December 31, 1997 loans held for sale were
$275.1 million and $189.1 million, respectively.
3. Impaired Assets
Loans that were impaired at June 30, 1998 and 1997 totalled
$4,461,303 and $6,616,343, respectively. The 1998 impaired loans
are comprised of nonaccrual loans and a restructured loan totaling
$3,445,153 and $1,016,150, respectively. The 1997 impaired loans
are comprised of nonaccrual loans and a restructured loan totaling
$5,577,108 and $1,039,235, respectively. A specific allowance of
$886,781 and $1,594,418 has been set aside for these loans at June
30, 1998 and 1997, respectively, as management's best estimate of
their fair value is less than the recorded investment in the
loans. During 1998 and 1997, the interest collected on the
nonaccrual loans was applied to reduce the outstanding principal.
Interest earned on the restructured loan totalled $47,294 and
$48,333 during the first six months ended June 30, 1998 and 1997,
respectively.
At June 30, 1998 there were no commitments to lend additional
funds to borrowers whose loans are impaired.
At June 30, 1998 and 1997, NCB had real estate acquired through
foreclosure of $4,272,020 and $208,338, respectively, which are
classified as other assets.
4. Allowance for Loan Losses
The following is a summary of the activity in the allowance for
loan losses during the six months ended June 30, 1998:
Balance at January 1, 1998 $17,638,136
Provision for loan losses 782,881
Charge-offs (1,272,829)
Recoveries of loans previously
charged-off 113,043
Balance at June 30, 1998 $17,261,231
The allowance for loan losses as a percentage of average loans
and lease financing at June 30, 1998 was 2.2%.
5. Statement of Comprehensive Income
The following is a statement of comprehensive income for the six
months ended June 30, 1998:
Net income $6,187,800
Other comprehensive income, net of tax:
Unrealized gains on securities:
Unrealized holding gains arising
during period 193,517
Comprehensive income $6,381,317
6. Statement of Changes in Members' Equity
The following is a summary of the activity in members' equity for the six
months ended June 30, 1998:
Retained Retained Total
Common Earnings Earnings Unrealized Members'
Stock Allocated Unallocated Gain Equity
Balance, December 31, 1997 $105,909,249 $ 8,109,931 $17,474,132 $ 340,161 $131,833,473
Net income - - 6,187,800 - 6,187,800
Adjustment to 1996 patronage
dividends paid in 1997 (71,451) - - - (71,451)
Other dividends paid - - (250,111) - (250,111)
1998 patronage dividends to be
distributed in cash - - (2,499,839) - (2,499,839)
Retained in form of equity - 3,084,772 (3,084,772) - 0
Unrealized gain on investment
securities available-for-
sale - - - 193,517 193,517
Balance, June 30, 1998 $105,837,798 $11,194,703 $17,827,210 $ 533,678 $135,393,389
NATIONAL COOPERATIVE BANK
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997
SUMMARY
Net income for the six months ended June 30, 1998 of $6.2 million
increased 15.6% compared with $5.4 million for the six months ended
June 30, 1997. The variance resulted primarily from an increase in
non-interest income of $2.7 million and a decrease in the provision
for loan losses in the amount of $606 thousand which was partially
offset by a $2.5 million increase in non-interest expenses. For
the three month period, net income declined to $679 thousand from
$1.7 million due primarily to an increase in non-interest expenses.
Total assets were $980.7 million at June 30, 1998, representing
growth of $111.4 million or 12.8% from $869.3 million at December
31, 1997. This growth resulted from increases in loan originations
and cash and cash equivalents.
The return on average total assets was 1.41% for the first six
months of 1998 compared with 1.29% for the same period in 1997.
The return on average equity for the first six months of 1998 and
1997 was 9.18% and 8.41%, respectively.
NET INTEREST INCOME
Net interest income slightly decreased .14% or $19 thousand for
the first six months of 1998 compared with the same period a year
ago. As shown on Table 1, the net interest spread decreased 7
basis points to 2.19% from 2.26% while net interest yield on
interest earning assets was 3.12% and 3.29% for the six months
ended June 30, 1998 and 1997, respectively.
For the three months ending June 30, 1998, net interest income
decreased 2.5% or $162 thousand from the same period in 1997. As
shown on Table 2A, the decrease was largely due to lower yields on
investments and commercial loans and leases.
For the six months ended June 30, 1998, interest income increased
3.8% or $1.3 million to $35.3 million from $34.0 million during the
prior year. As shown on Table 2, the increase was due to increased
volume of real estate loans (most of which were held for sale) and
higher average yield on the commercial loan and lease portfolio.
For the three months ended June 30, 1998, interest income went
up $807.5 thousand to $17.9 million. The average rate on interest
earning assets decreased to 8.28% during the three months ended
June 30, 1998 compared with 8.49% in the same period in 1997. The
increase in interest income was mostly due to a higher average
balance of the interest earning assets for the time period.
Interest expense increased $1.3 million to $22.0 million for the
six months ended June 30, 1998 compared with $20.7 million for the
same period ended June 30, 1997. The increased interest expense is
largely a result of a higher issuance of notes payable required to
fund loan volume. The average rate on interest bearing liabilities
decreased 5 basis points to 6.09% compared with 6.14%.
For the three month period ended June 30, 1998, interest expense
increased $1.0 million to $11.5 million from $10.5 million a year
ago due to increased warehouse funding. The average rate on
interest bearing liabilities decreased to 6.20% compared with 6.25%
in the same period in 1997.
NON-INTEREST INCOME
Non-interest income for the six months ended June 30, 1998 was
$7.6 million representing an increase of 56.2% or $2.7 million from
$4.9 million for the same period last year. Non-interest income is
composed of gains from sale of loans, servicing fees, origination
fees and advisory fees. The majority of the increase was caused by
increased gains due to a higher amount of assets sold to the
secondary market. Assets sold were $239.7 million and $133.2
million for the first six months of 1998 and 1997, respectively.
The gain on sale of blanket mortgages and share loans was $3.9
million in the first half of 1998 compared with $1.7 million in the
same period in 1997. For the six months ended June 30, 1998 and
1997, NCB earned servicing income of $1.3 million and $1.1 million,
respectively based on loans serviced for others of $1.5 billion and
$1.2 billion at June 30, 1998 and 1997, respectively. Other income
increased 20.3% to $2.4 million for the six-month period ended June
30, 1998 compared with $2.0 million for the same period in 1997.
The majority of other income is related to commercial line of
business activities.
For the three month period ended June 30, non-interest income
increased by $270.7 thousand from $1.8 million at June 30, 1997 to
$2.1 million for the same period in the current year. The majority
of the increase was related to advisory fees received during the
second quarter of 1998.
No material changes in NCB's market risk profile occurred from
December 31, 1997 to June 30, 1998.
NON-INTEREST EXPENSES
Non-interest expenses for the six months ended June 30, 1998
increased 23.8% to $13.2 million from $10.7 million for the six
months ended June 30, 1997. Compensation and benefits, representing
59.3% and the largest component of non-interest expenses, increased
37.4% or $2.1 million. The increase was due to a higher employee
base at the start of 1998 and higher bonus accruals for the current
period compared with 1997. Contractual services, occupancy and
equipment and other expenses had a total increase of $664.2
thousand or 14.1% from $4.7 million for the six months ended June
30, 1997 to $5.4 million for the same period this year. The
majority of the variance was caused by increases in corporate
marketing and development, office space rent and equipment and
technology costs. Non-interest expenses, excluding the voluntary
contribution to NCB Development Corporation, increased slightly as
a percentage of average assets to 1.5% for the six months ended
June 30, 1998 from 1.3% for the six months ended June 30, 1997.
For the three months ended June 30, 1998, non-interest expenses
increased $1.4 million or 25.3% to $7.0 million from $5.6 million
for the same period in 1997. The increase was primarily
attibutable to the timing of new hires and higher bonus accruals.
Table 1
Rate Related Assets and Liabilities
(dollars in thousands)
Six Months Ended June 30,
ASSETS 1998 1997
Average Income/ Yields/ Average Income/ Yields/
Balance Expense Rates Balance Expense Rates
Interest earning assets
Real estate loans $395,449 $16,498 8.34% $346,845 $15,154 8.74%
Commercial loans
and leases 357,019 15,759 8.83% 370,954 15,734 8.48%
Total loans and leases 752,468 32,257 8.57% 717,799 30,888 8.61%
Investment securities
and cash equivalents 99,367 3,015 6.07% 91,402 3,106 6.80%
Total interest earning
assets 851,835 35,272 8.28% 809,201 33,994 8.40%
Allowance for loan losses (17,865) (16,197)
Non-interest earning assets
Cash 2,636 5,376
Other assets 39,799 29,375
Total non-interest
earning assets 42,435 34,751
Total assets $876,405 $827,755
LIABILITIES AND MEMBERS' EQUITY
Interest bearing liabilities
Subordinated debt $182,542 5,449 5.97% $182,542 5,167 5.66%
Notes payable 449,380 14,411 6.41% 405,611 13,501 6.66%
Deposits 89,624 2,122 4.74% 85,307 2,017 4.73%
Total interest bearing
liabilities 721,546 21,982 6.09% 673,460 20,685 6.14%
Other liabilities 20,108 26,999
Members' equity 134,751 127,296
Total liabilities and
members' equity $876,405 $827,755
Net interest earning
assets $130,289 $135,741
Net interest revenues
and spread $13,290 2.19% $13,309 2.26%
Net yield on
interest earning assets 3.12% 3.29%
Table 1A
Rate Related Assets and Liabilities
(dollars in thousands)
Three Months Ended June 30,
ASSETS 1998 1997
Average Income/ Yields/ Average Income/ Yields/
Balance Expense Rates Balance Expense Rates
Interest earning assets
Real estate loans $398,570 $ 8,209 8.24% $353,275 $ 7,364 8.34%
Commercial loans
and leases 371,659 8,186 8.81% 360,997 8,153 9.03%
Total loans and leases 770,229 16,395 8.51% 714,272 15,517 8.69%
Investment securities
and cash equivalents 94,540 1,500 6.35% 90,857 1,571 6.92%
Total interest earning
assets 864,769 17,895 8.28% 805,129 17,088 8.49%
Allowance for loan losses (17,827) (16,620)
Non-interest earning assets
Cash 3,215 6,584
Other assets 48,602 27,994
Total non-interest
earning assets 51,817 34,578
Total assets $898,759 $823,087
LIABILITIES AND MEMBERS' EQUITY
Interest bearing liabilities
Subordinated debt $182,542 2,767 6.06% $182,542 2,619 5.74%
Notes payable 468,521 7,561 6.46% 402,500 6,886 6.84%
Deposits 88,250 1,131 5.13% 86,243 984 4.56%
Total interest bearing
liabilities 739,313 11,459 6.20% 671,285 10,489 6.25%
Other liabilities 24,022 24,708
Members' equity 135,424 127,094
Total liabilities and
members' equity $898,759 $823,087
Net interest earning
assets $125,456 $133,844
Net interest revenues and
spread $ 6,436 2.08% $ 6,599 2.24%
Net yield on
interest earning assets 2.98% 3.28%
Table 2
Change in Net Interest Income
(dollars in thousands)
For the six months ended June 30, 1998 compared to 1997
Increase (decrease) due to changes in:
Average Average
Volume* Yield Net**
Interest Income
Cash equivalents and
investment securities $ 258 $ (349) $ (91)
Commercial loans and leases (603) 628 25
Real estate loans 2,051 (707) 1,344
Total interest income 1,706 (428) 1,278
Interest Expense
Deposits 102 3 105
Notes payable 1,417 (508) 909
Subordinated debt 0 283 283
Total interest expense 1,519 (222) 1,297
Net interest income $ 187 $ (206) $ (19)
* Average monthly balances
** Changes in interest income and interest expense due to changes
in rate and volume have been allocated to "change in average
volume" and "change in average rate" in proportion to the
absolute dollar amounts in each.
Table 2A
Change in Net Interest Income
(dollars in thousands)
For the three months ended June 30, 1998 compared to 1997
Increase (decrease) due to changes in:
Average Average
Volume* Yield Net**
Interest Income
Cash equivalents and
investment securities $ 62 $ (133) $ (71)
Commercial loans and leases 238 (205) 33
Real estate loans 933 (88) 845
Total interest income 1,233 (426) 807
Interest Expense
Deposits 23 124 147
Notes payable 1,081 (406) 675
Subordinated debt 0 148 148
Total interest expense 1,104 (134) 970
Net interest income $ 129 $ (292) $ (163)
* Average monthly balances
**Changes in interest income and interest expense due to changes
in rate and volume have been allocated to "change in average
volume" and "change in average rate" in proportion to the
absolute dollar amounts in each.
PROVISION FOR INCOME TAXES
The federal income tax provision is determined on the basis of
non-member income generated by NCB Savings Bank, FSB and reserves
set aside for the retirement of Class A notes and dividends on
Class C stock. NCB's subsidiaries are also subject to varying
levels of state taxation. The income tax provision for the six
months ended June 30, 1998 was $669.9 thousand compared with the
prior year's provision of $739.5 thousand.
CASH, CASH EQUIVALENTS AND INVESTMENT SECURITIES
Cash, cash equivalents and investment securities at June 30, 1998
increased $16.1 million or 17.6% from $91.8 million at year-end
1997 due to growth in deposits. As a percentage of interest
earning assets, cash, cash equivalents and investment securities
increased to 11.1% at June 30, 1998 from 10.6% at December 31,
1997.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses at June 30, 1998 decreased 2.1% to
$17.3 million from $17.6 million at December 31, 1997. The
allowance during the period was impacted by loans charged-off of
$1.3 million, recoveries of loans previously charged-off amounting
to $113 thousand, and the provision of $783 thousand. Overall,
credit quality was strong and improving. NCB's provision for loan
losses as a percentage of average loans and leases outstanding
decreased to .2% at June 30, 1998 compared with .4% for the same
period in 1997.
The loan loss allowance as a percentage of average loans and
leases remained flat at 2.3% on June 30, 1998 and December 31,
1997. Management considers the current allowance to be adequate to
absorb known and inherent risks in the loan portfolio.
As shown in Table 3, total impaired assets (restructured, non-
accruing loans and real estate owned) decreased from $9.2 million
at December 31, 1997 to $8.7 million at June 30, 1998. The
decrease was caused by the sale of various parcels of foreclosed
real estate which was partially offset by an increase in non-
accruing loans. Impaired assets as a percentage of loans and leases
outstanding plus real estate owned were 1.0% at June 30, 1998
compared with 1.2% at year-end 1997. The allowance for loan losses
as a percentage of impaired assets increased to 197.6% at June 30,
1998 from 192.2% at December 31, 1997.
TABLE 3
Impaired Assets
(dollars in thousands)
June 30, March 31, Dec. 31, Sept. 30, June 30,
1998 1998 1997 1997 1997
Real estate owned $4,272 $ 5,068 $5,114 $ 5,545 $ 208
Non-accruing 3,445 5,738 3,030 3,801 5,577
Restructured 1,016 1,022 1,027 1,032 1,039
Total $8,733 $11,828 $9,171 $10,378 $6,824
INTEREST BEARING LIABILITIES
Interest bearing liabilities
(dollars in thousands)
6/30/98 12/31/97 % Change
Deposits $108,664 $ 83,826 29.6%
Short-term debt 307,587 243,121 26.5%
Long-term debt 218,614 204,793 6.7%
Subordinated debt 182,744 182,785 0.0%
Total $817,609 $714,525 14.4%
Interest bearing liabilities increased 14.4% to $817.6 million at
June 30, 1998 from $714.5 million at December 31, 1997.
For the first six months of 1998, deposits at NCB Saving Bank,
FSB increased 29.6% to $108.7 million from $83.8 million at year-
end 1997. The growth was attributable to aggressive campaign to
attract local and national deposit accounts and cooperative
customers. Average maturity of the certificates of deposits is 15.4
months. Funds generated by the increased deposit activity were used
to originate single-family loans and increase liquidity.
At June 30, 1998, total short-term and long-term borrowings
(including the subordinated debt) increased 12.4% from year-end
1997. Proceeds from the borrowings were used predominantly to fund
growth in warehoused loans. NCB had approximately $307.6 million
outstanding on its short-term facilities at June 30, 1998. Included
in the short-term borrowings were revolving lines of credit of $214
million; commercial paper program with a face value of $60 million
and $33.7 million in borrowings from an affiliate and cooperative
customers. Long term debt increased 6.7% from year-end 1997 due to
the issuance of an additional $14.0 million under the new medium-
term note program. Unused capacities under the short term and long
term facilities of approximately $92.3 million and $73.0 million,
respectively, are sufficient to meet anticipated commitments during
1998.
Part II Other Information
Item 2. Changes in Securities
(c) During the period covered by this report, NCB sold three
shares of its Class C stock without registration under the
Securities Act of 1933 (the "1933 Act") in reliance on the exemption
from registration provided by section 4 (2) of the 1933 Act. The
stock was sold for $100 a share in cash without any underwriting
discounts or commissions to cooperative organizations eligible to
obtain loans from NCB. The stock was not offered to the general
public; the purchasers had access to essentially the same
information that would be contained in a registration statement and
had the capability to evaluate the merits of such an investment.
Item 6. Exhibits
The following exhibits are filed as part of this report:
Exhibit 10.15 - First Amendment to Third Amended and
Restated Loan Agreement with Fleet Bank as Agent
Exhibit 27 - Financial Data Schedule
SIGNATURE
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.
NATIONAL CONSUMER COOPERATIVE BANK
Date:
By:/s/ Richard L. Reed
Richard L. Reed,
Managing Director,
Chief Financial Officer
By:/s/ Marietta J. Orcino
Marietta J. Orcino
Vice President,
Tax & Regulatory Compliance