SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
( ) Quarterly report pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934 for the Quarterly period
ended June 30, 2000.
( ) Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the transition period
from _______to ______.
No. 001-15351
(Commission File Number)
JADE FINANCIAL CORP.
(Exact Name OF Registrant as Specified in its Charter)
Pennsylvania 23-3002586
(State of Incorporation) (IRS Employer ID Number)
213 W. Street Road
Feasterville, PA 19053
(Address of principal executive offices)
(215)322-9000
(Registrant's telephone number)
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 ( )
Number of Shares Outstanding
as of June 30, 2000
COMMON STOCK ($.01 PAR VALUE) 1,872,923
(Title of Class) Outstanding Shares
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Financial Statements (Unaudited)
Consolidated Statement of Financial Condition
as of June 30, 2000 and December 31, 1999
Consolidated Statement of Income for the Three and Six
Months Ended June 30, 2000 and 1999.
Consolidated Statement of Cash Flows for the Six
Months Ended June 30, 2000 and 1999.
Notes to Consolidated Financial Statements
Management's discussion and Analysis of Financial
Condition and Results of Operations
Quantitative and Qualitative Disclosure About Market
Risk
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Change in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other information
PART III. SIGNATURES
PART 1. FINANCIAL STATEMENTS
JADE FINANCIAL CORP.
Consolidated Statement of Financial Condition
ASSETS June 30, December 31,
2000 1999
(In Thousands) (Unaudited) (Audited)
Cash and cash equivalents:
Cash and due from banks $ 7,322 $ 6,630
Interest bearing deposits in other financial
institutions 243 47
Federal Funds 10,775 6,565
Restricted cash 0 0
Total cash and cash equivalents $ 18,340 $ 13,242
Investment securities, available-for-sale 40,563 40,783
Mortgage-backed securities available-for-sale 7,952 8,859
Investment securities held-to-maturity 0 0
Mortgage-backed securities held-to-maturity
(fair value of $3,366 and $4,209) 3,461 4,314
BankZip.Com 2,500 2,500
Loans receivable, net 124,018 114,081
Property, equipment and leasehold
improvements, net of accumulated depreciation 1,895 1,890
Federal Home Loan Bank stock, at cost 1,000 834
Accrued interest receivable 891 802
Other Real Estate Owned (OREO) 0 0
Reorganization costs, net 145 162
Bank Owned Life Insurance - BOLI 10,286 10,021
Deferred tax asset, net 1,361 1,177
Prepaid expenses and other assets 1,320 911
TOTAL ASSETS $213,732 $199,576
LIABILITIES AND EQUITY
LIABILITIES:
Deposits $164,427 $156,124
Advances from FHL Bank 20,000 15,000
Advances from borrowers for taxes 862 618
Accounts payable and accrued expenses 764 594
Total liabilities $186,053 $172,336
EQUITY:
Common Stock, $.01 par value, 1,872,923 shares
issued and outstanding at 6/30/00 19 19
Additional Paid-in Capital 14,159 14,130
Contra Equity - unearned common stock acquired
by the Employee Stock Ownership Plan (986) (1,044)
Commitments and contingencies (Note 16) 0 0
Retained Earnings, (See Notes 11 and 12) 16,338 15,853
Accumulated other comprehensive income (loss) (1,851) (1,718)
Total Equity $ 27,679 $ 27,240
TOTAL LIABILITIES AND EQUITY $213,732 $199,576
JADE FINANCIAL CORP.
CONSOLIDATED STATEMENT OF INCOME
Three months ended Six months ended
June 30, June 30,
2000 1999 2000 1999
(Unaudited) (Unaudited)
(In thousands) (In thousands)
INTEREST INCOME:
Interest on loans $2,516 $2,188 $4,877 $4,342
Investment and mortgage-
backed securities 855 775 1,730 1,407
Interest -earning deposits 17 27 24 55
Federal Funds 78 55 178 183
Total interest income $3,466 $3,045 $6,809 $5,987
INTEREST EXPENSE:
Interest on deposits $1,420 $1,317 $2,781 $2,642
Interest on borrowed funds 189 3 394 3
Total interest expense $1,609 $1,320 $3,175 $2,645
Net Interest Income $1,857 $1,725 $3,634 $3,342
PROVISION FOR POSSIBLE LOAN
LOSSES 115 135 430 270
Net interest income
after provision for
possible loan losses $1,742 $1,590 $3,204 $3,072
NON INTEREST INCOME:
Loan fees $ 12 $ 13 $ 24 $ 26
Service charges 131 110 265 222
Other Income 372 146 669 245
Security gains or losses (100) 0 (100) 0
Total noninterest income $ 415 $ 269 $ 858 $ 493
NON INTEREST EXPENSES:
Compensation and employee
benefits $ 911 $ 729 $1,828 $1,462
Office and occupancy costs 377 437 784 832
Printing and Postage 66 66 128 128
Loan servicing 45 38 76 82
Professional fees 110 41 188 84
Bank and MAC charges 170 179 335 355
Advertising, marketing and
promotions 50 33 97 75
Insurance Expense 22 32 67 55
Other - Foundation Expense 0 0 0 0
Total noninterest
expenses $1,751 $1,555 $3,503 $3,073
INCOME BEFORE PROVISION
FOR INCOME TAXES $ 406 $ 304 $ 559 $ 492
Provision for federal and
state income taxes
Current 125 112 223 172
Deferred (31) 0 (116) (2)
Total income tax
provision $ 94 $ 112 $ 107 $ 170
NET INCOME $ 312 $ 192 $ 452 $ 322
JADE FINANCIAL CORP
CONSOLIDATED STATEMENT OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
Six Months Ended
June 30, June 30,
2000 1999
Unaudited Unaudited
(Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 452 $ 322
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Amortization of premium/discount on
investments and mortgage-backed
securities 48 86
Depreciation and amortization 202 191
(Gain) loss on sale of investment
securities (100) -
(Premium) discount on first mortgage
sales - -
(Gain) loss on sale/disposal of asset - -
Provision for losses on loans 430 270
Change in assets and liabilities:
(Increase) decrease in deferred tax
asset (184) (2)
(Increase) decrease in accrued
interest receivable (89) (111)
(Increase) decrease in BOLI asset (265) -
(Increase) decrease in Reorganization
costs (17) (6)
(Increase) decrease in prepaid
expenses and other assets (409) (572)
Increase (decrease) in accounts
payable and accrued expenses 170 1,055
Net cash provided by operating
activities 238 1,233
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of FHLB Stock 166 -
Purchase of investment securities,
available-for-sale (1,000) (14,400)
Sales of investment securities,
available-for-sale - -
Mortgage-backed security purchases,
available for sale - (7,670)
Mortgage-backed security sales - -
Mortgage-backed security maturities
and principal repayments 2,184 5,238
Maturities and principal repayments of
investment securities, available-
for-sale 527 3,500
(Increase) decrease in total loans
receivable, net (10,367) (5,453)
Proceeds from sale of real estate owned
net of expenses - -
Proceeds from sale of loans - -
Proceeds from sale of equipment - -
Capital expenditures (197) (30)
Decrease in Share Insurance Fund 0 29
Net cash provided by (used in)
investing activities (8,687) (18,786)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in deposits, net $ 8,303 $ 4,766
Net increase(decrease) in advances FHLB 5,000 3,000
Net increase(decrease) in advances for
borrowers 244 222
Net cash provided by (used in)
financing activities 13,547 7,988
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS 5,098 (9,565)
Cash and cash equivalents, beginning of
year 13,242 18,351
CASH AND CASH EQUIVALENTS, END OF YEAR $ 18,340 $ 8,786
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the year for:
Interest on deposits $ 2,781 $ 2,642
Income Taxes $ 160 $ 251
Noncash activities:
Increase in unrealized loss on
investment mortgage-backed
securities available-for-sale,
net of taxes $ 133 $ 1,466
JADE FINANCIAL CORP.
Notes To Consolidated Financial Statements
(UNAUDITED)
1. BASIS OF PRESENTATION:
JADE Financial Corp. (the "Holding Company") was
incorporated under Pennsylvania law in July 1998 by IGA Federal
Savings in connection with the conversion of the Company from a
savings institution to a federally chartered capital stock
savings bank, the issuance of the Company's stock to the Holding
Company and the offer and sale of the Holding Company's common
stock by the Holding Company (the "Conversion"). Upon
consummation of the Conversion on October 4, 1999, the Holding
Company became the holding company for the Company. See Note 2
for a more detailed description of the mutual to stock
conversion. No pro forma effect has been given to the sale of
the Holding Company's common stock in the Conversion.
The accompanying consolidated financial statements of the
Holding Company have been prepared in accordance with
instructions to Form 10-QSB. Accordingly, they do not include
all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.
However, such information reflects all adjustments (consisting
solely of normally recurring adjustments) which are, in the
opinion of management, necessary for fair statement of results
for the interim periods.
The results of operations for the six months ended June 30,
2000 are not necessarily indicative of the results to be expected
for the year ending December 31, 2000. The consolidated
financial statements and notes thereto should be read in
conjunction with the audited financial statements and notes
thereto for the year ended December 31, 1999, contained in the
Holding Company's Form 10K filed with the Securities Exchange
Commission on March 31, 2000.
2. CONVERSION TO CAPITAL STOCK FORM OF OWNERSHIP:
On May 26, 1999, the Board of Directors of the Company
adopted a Plan of Conversion to convert from a federal mutual
savings bank to a federal capital stock savings bank. The
conversion was accomplished through the formation of the Holding
Company in July, 1998, the adoption of a federal stock charter,
and the sale of all of the Company's stock to the Holding Company
on October 4, 1999.
A subscription offering ("offering") of the shares of common
stock of the Holding Company was conducted whereby the shares
were offered initially to eligible account holders, the Company's
Employee Stock Ownership Plan ("ESOP"), supplemental eligible
account holders and other members of the Company (collectively
"subscribers"). During the offering, subscribers submitted
orders for common stock along with full payment for the order in
either cash, by an authorization to withdraw funds for payment
from an existing deposit account at the Company upon issuance of
stock, or a combination of cash and account withdrawal.
Subscription funds received in connection with the offering were
placed in segregated savings accounts in the Company. For these
orders that were to be funded through account withdrawals, the
Company placed "holds" on those accounts, restricting withdrawal
of any amount which would reduce the account balance below the
amount of the order. At September 30, 1999, the Company held
$12.0 million in subscription segregated savings accounts and had
restricted withdrawals from deposit accounts in the amount of
$2.0 million.
The Holding Company issued 1,872,923 shares in connection
with the Conversion. Gross proceeds from the offering were
$14,500,024, which includes the $8 value of the 145,000 shares
issued to the IGA Employee Stock Ownership Plan and 60,420 shares
sold to the Company for transfer to the IGA Charitable
Foundation.
The Company issued all its outstanding capital stock to the
Holding Company in exchange for approximately one-half of the net
proceeds. The Holding Company accounted for the purchase in a
manner similar to a pooling of interests whereby assets and
liabilities of the Company maintain their historical cost basis
in the consolidated company.
3. EARNINGS PER COMMON SHARE:
Earnings per common share for the quarter ended June 30,
1999 is not applicable, as IGA Federal Savings' (the Bank's)
conversion from mutual-to-stock form was not completed until
October 4, 1999. Presented below is information with respect to
the calculation of basic and diluted earnings per share for the
three months ended June 30, 2000.
Three Months Ended
June 30, 2000
Net Income $ 312,000
Weighted average number of common shares
outstanding 1,872,923
Average ESOP shares not committed to be
released (130,500)
Weighted average number of common shares
outstanding for basic earnings per
share computation purposes 1,742,423
Dilutive effects of employee stock options 0
Weighted average shares and common share
equivalents 1,742,423
Basic earnings per share $ 0.18
Diluted earnings per share $ 0.18
4. COMPREHENSIVE INCOME:
Statement of Financial Accounting Standards (SFAS) No. 130,
Reporting Comprehensive Income, will be effective for the Bank
for the year beginning July 1, 1998, and establishes reporting
and display of comprehensive income in the financial statements.
Comprehensive income represents net earnings and certain amounts
reported directly in stockholders' equity, such as the net
unrealized gain or loss on available-for-sale securities. The
Bank adopted SFAS No. 130 effective June 30, 1998.
The Company's comprehensive income for the three months
ended June 30, 2000 and 1999 are as follows:
Three Months Ended
June 30,
2000 1999
(Dollars in Thousands)
Net income $312 $ 192
Unrealized holding gains (losses)
arising during the period net
of tax effect (43) (561)
COMPREHENSIVE INCOME $269 $(369)
5. Investment Valuation
Jade Financial Corp, together with three other financial
institutions participated in the initial capitalization of
BankZip.com, an Internet banking company. The total
capitalization of BankZip.com was $13.9 million and Jade
contributed $2.5 million in the form of a convertible
subordinated note. BankZip is in the process of seeking an
additional $20 million of capital. They have informed Jade that
they expect to complete all or a substantial part of this
financing before September 30, 2000 and have advised legal
counsel and the outside auditors in writing that they do not
believe at this time that the investment is impaired. Jade
management has agreed with BankZip's assessment; however, the
continued viability of BankZip, and therefore the value of the
Jade investment, may be dependent upon BankZip's ability to raise
capital.
6. NEW ACCOUNTING STANDARDS:
Statement of Financial Accounting Standards (SFAS) No. 130,
Reporting Comprehensive Income, is effective for the Bank for the
period beginning July 1, 1998, and establishes reporting and
display of comprehensive income in the financial statements.
Comprehensive income represents net earnings and certain amounts
reported directly in stockholders' equity, such as the net
unrealized gain or loss on available-for-sale securities. The
Bank adopted SFAS No. 130 effective June 30, 1998.
SFAS No. 133, Accounting for Derivation Instruments and
Hedging Activities, will be effective for the Bank for years
beginning July 1, 1999. The Bank currently has no activity
subject to SFAS 133.
In October 1998, the FASB issued SFAS No. 134, Accounting
for Mortgage-Backed Securities Retained after the Securitization
of Mortgage Loans Held-for-Sale by a Mortgage Banking Enterprise.
SFAS No. 134 changes the way mortgage banking firms account for
certain securities and other interests they retain after
securitizing mortgage loans that were held-for-sale. Under
current practice, a bank that securitizes credit card receivables
has a choice in how it classifies any retained securities based
on its intent and ability to hold or sell those investments.
SFAS No. 134 gives the mortgage banking firms the opportunity to
apply the same intent-based accounting that is applied by other
companies. SFAS No. 134 will be effective for the fiscal quarter
beginning after December 15, 1998. Management of the Bank
anticipates that the implementation of SFAS No. 134 will not have
a material impact on the Bank's financial condition or results of
operations.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table sets forth certain selected financial
ratios for the Company at or for the period ended, June 30, 2000:
SELECTED FINANCIAL RATIOS
At or For the At or For the
Three months ended Six Months ended
June 30, June 30,
2000 1999 2000 1999
Selected Financial Condition Data:
Performance Ratios: (1)
Return on assets (ratio of net
income to average total assets) 0.62% 0.43% 0.45% 0.37%
Return on equity (ratio of net
income to average equity) 4.71% 5.11% 3.39% 4.26%
Earnings per common share $0.18 - $0.26 -
Interest rate spread (2) 3.88% 3.89% 3.83% 3.87%
Net interest margin (3) 4.06% 4.07% 4.01% 4.02%
Operating expenses to average
total assets 3.47% 3.50% 3.49% 3.50%
Average interest-earning assets
to average interest-bearing
liabilities 105.05% 105.63% 105.25% 104.71%
Asset Quality Ratios:
Non-performing assets to total
assets at end of period 0.02% 0.08% 0.02% 0.08%
Allowance for loan losses to
non-performing assets 3671.11% 814.69% 3671.11% 814.69%
Allowance for loan losses to
gross loans receivable 1.31% 1.07% 1.31% 1.07%
Capital Ratios:
Equity to total assets at end
of period 12.95% 7.90% 12.95% 7.90%
Average equity to average assets 13.11% 8.46% 13.29% 8.62%
Book value per share $14.78 - $14.78 -
Other Data:
Number of full service offices 5 5 5 5
(1) Ratios for the three and six month periods are annualized
where appropriate.
(2) Difference between weighted average yield on interest-
earning assets and weighted average cost of interest-
bearing liabilities.
(3) Net Interest as a percentage of average interest-earning
assets.
COMPARISON OF FINANCIAL CONDITION AT JUNE 30, 2000 AND
DECEMBER 31, 1999
Our total assets increased $14.1 million from $199.6 million
to $213.7 million or 7.06% from December 31, 1999 to June 30,
2000. Our total liabilities increased $13.8 million from $172.3
million to $186.1 million or 8.01% from December 31, 1999 to
June 30, 2000. We had $20.0 million borrowed from the Federal
Home Loan Bank as of June 30, 2000. The increase in assets and
liabilities at June 30, 2000 compared to December 31, 1999 is
primarily attributable to an increase in deposit balances and an
increase in borrowings from the Federal Home Loan Bank.
Total loans increase $10.4 million from $115.3 million to
$125.7 million or 9.02 % from December 31, 1999 to June 30, 2000.
The increase was primarily the result of increased loan
originations as illustrated by the following loan composition
table:
At June 30, At December 31,
2000 1999
Amount Percent Amount Percent Variance % Change
Real Estate Loans:
One- to four-family $ 47,345 37.67% $ 43,434 37.66% $ 3,911 9.00%
Commercial 4,075 3.24% 2,996 2.60% 1,079 36.01%
Total real estate loans 51,420 40.91% 46,430 40.25% 4,990 10.75%
Consumer Loans:
Home equity 25,766 20.50% 24,172 20.96% 1,594 6.59%
Automobile 27,497 21.88% 24,406 21.16% 3,091 12.66%
Credit cards 9,713 7.73% 10,955 9.50% (1,242) -11.34%
Signature loans 5,983 4.76% 5,414 4.69% 569 10.51%
Other 2,123 1.69% 2,498 2.17% (375) -15.01%
Commercial 3,176 2.53% 1,469 1.27% 1,707 116.20%
Total consumer loans 74,258 59.09% 68,914 59.75% 5,344 7.75%
Total loans 125,678 100.00% 115,344 100.00% 10,334 8.96%
Less:
Deferred fees and
discounts (8) 21
Allowance for losses (1,652) (1,284)
Total loans receivable,
net $124,018 $114,081
On December 14, 1999, the Holding Company invested
$2,500,000 in a two year convertible debenture issued by
BankZip.com, a start-up internet banking company for community
banks. The debenture is convertible into 1 million shares of
common stock upon the earlier of an initial public offering by
BankZip or the day prior to the maturity date. The company,
which spun off in December 1999 from Patriot Bank of Pottstown,
is building a national network of community banks through which
BankZip would offer end-to-end internet services, such as opening
an account, account balances and transferring funds. In addition
to software, BankZip is proposing to give participating community
institutions access to customer service through a call center it
would operate and marketing that would be conducted on a national
scale. Alliance Partners (community banks), also offer a
national portfolio of BankZip.com co-branded financial service
products, including brokerage and insurance. Once an Alliance
Partner is signed up, the service can be deployed in as few as
thirty days. Fully developed, BankZip.com expects to support
approximately 500 banks with as many as 4,000 branches and 5,000
ATMs across the nation within five years.
Our total equity increased from $27.2 million to $27.7
million or 1.8% from December 31, 1999 to June 30, 2000 due to an
increase in retained earnings. Accumulated and other
comprehensive income increased slightly from ($1.7) million at
December 31, 1999 to ($1.8) million at June 30, 2000.
Asset Quality
The following table sets forth non-performing assets as of
June 30, 2000 and December 31, 1999 (Dollars in thousands):
At June 30, At December 31,
2000 1999
(Dollars in Thousands)
Non-accruing loans:
One- to four-family $ 5 $ 73
Home equity 0 55
Automobile 9 21
Credit cards 1 11
Signature loans 0 2
Commercial 30 32
Other 0 0
Total 45 194
Accruing loans delinquent more
than 90 days:
One- to four-family 0 0
Home equity 0 0
Automobile 0 0
Credit cards 0 0
Signature loans 0 0
Other 0 0
Total 0 0
Foreclosed assets 0 17
Renegotiated loans 0 0
Total non-performing assets $ 45 $211
Non-performing assets as a percent
of total loans 0.04% 0.18%
Non-performing assets as a percent
of total assets 0.02% 0.11%
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED
JUNE 30, 2000 AND JUNE 30, 1999.
JADE FINANCIAL CORP.
AVERAGE BALANCE SHEET
The following table presents the total dollar amounts of
interest income and interest expense on the indicated amounts of
average interest-earning assets or interest-bearing liabilities
together with the weighted average interest rates for the three
month periods ended June 30, 2000 and 1999. Average balance
calculations were based on daily balances.
3 months ended June 30, 3 months ended June 30,
2000 1999
Average Interest (Annualized) Average Interest (Annualized)
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Balance Paid Rate Balance Paid Rate
(Dollars in Thousands) (Dollars in Thousands)
Interest-earning assets:
Loans receivable $122,148 $2,516 8.24% $107,560 $2,188 8.14%
Investments 60,812 950 6.25% 62,015 857 5.53%
Total earning assets 182,960 3,466 7.58% 169,575 3,045 7.18%
Non-interest earning assets 19,111 8,026
Total assets $202,071 $177,601
Interest-bearing liabilities:
Savings deposits $ 73,509 372 2.02% $ 72,768 369 2.03%
NOW accounts 10,730 0 0.00% 10,377 0 0.00%
Money market accounts 11,303 128 4.53% 10,444 80 3.06%
Certificates of deposit 67,251 920 5.47% 66,142 868 5.25%
Other notes payable - FHLB 11,378 189 6.64% 800 3 1.50%
Total interest-bearing
liabilities 174,171 1,609 3.70% 160,531 1,320 3.29%
Non-interest bearing liabilities 1,415 2,050
Total liabilities 175,586 162,581
Equity 26,485 15,020
Total liabilities and equity $202,071 $177,601
Net interest-earning assets $ 8,789 $ 9,044
Net interest spread $1,857 3.88% $1,725 3.89%
Net interest margin 4.06% 4.07%
Ratio of average interest-
earning assets to average
interest-bearing liabilities 105.05% 105.63%
For the three months ended June 30,
2000 vs. 1999
Increase (decrease) due to
Total
Rate/ Increase
Rate Volume Volume (Decrease)
(In Thousands)
Interest-earning assets:
Loans receivable $110 $1,187 $ (969) $328
Investments 447 (66) (288) 93
Total earning assets 557 1,121 (1,257) 421
Interest-bearing liabilities:
Savings deposits (3) 15 (9) 3
Checking accounts 0 0 0 0
Money market accounts 153 26 (131) 48
Certificates of deposit 147 58 (153) 52
Other notes payable-FHLB 41 159 (14) 186
Total interest-bearing
liabilities 338 258 (307) 289
Change in net interest income $219 $ 863 $ (950) $132
Net Income:
Net income for the three months ended June 30, 2000 was
$312,000. Net income for the comparable period in 1999 was
$192,000. The increase in the current period when compared to
the prior period was due to a significant increase in lending
from the prior period as average loans increased by $14.5 million
or 13.48% from $107.6 million for the three months ended June 30,
1999 to $122.1 million for the three months ended June 30, 2000.
Our net interest spread remained virtually unchanged as the
increase in our earning assets matched the increase in our cost
of funds.
Core earnings, defined as pretax earnings adjusted for
securities sales transactions and unusual or non-recurring
expense or income items, were $506,000 for the three months ended
June 30, 2000 compared to $304,000 in the prior year period.
The following table summarizes the components of adjusted
pretax core earnings:
Three Months Ended
June 30,
2000 1999
(Dollars in Thousands)
Net interest income $1,857 $1,725
Provision for loan losses 115 135
Noninterest income excluding gains
and losses 515 269
Noninterest expense 1,751 1,555
ADJUSTED PRETAX CORE EARNINGS $ 506 $ 304
INTEREST INCOME.
Total interest income increased $421,000 or 13.83% from $3.0
million for the second quarter of 1999 compared to $3.4 million
for the second quarter of 2000. This increase resulted from an
increase in average earning assets of $13.4 million, or 7.9% from
$169.6 million for the three months ended June 30, 1999 to $183.0
million for the three months ended June 30, 2000. The average
yield or rate paid on earning assets also increased 40 basis
points from 7.18% for the second quarter of 1999 compared to
7.58% for the second quarter of 2000.
INTEREST EXPENSE.
Total interest expense increased $289,000, or 21.89% from
$1.3 million for the second quarter of 1999 compared to $1.6
million for the second quarter of 2000. This increase was mainly
attributable to interest on borrowed funds and a 40 basis point
increase in the overall cost of interest-bearing liabilities.
NET INTEREST INCOME.
Net interest income increased $132,000 or 7.65% from $1.7
million for the second quarter of 1999 compared to $1.9 million
for the second quarter of 2000. This increase is attributable to
a higher volume of earning assets.
PROVISION FOR LOAN LOSSES.
The provision for loan losses decreased by $20,000 or 14.81%
for the second quarter of 2000 compared to the second quarter of
1999. During the three months ended June 30, 2000, the Company
had charge-offs of $44,945 and recoveries of $29,782. At
June 30, 2000, the Company's allowance for loan losses totaled
$1.7 million which was 1.31% of total loans.
NONINTEREST INCOME.
Noninterest income increased $146,000 or 54.28% to $415,000
for the three months ended June 30, 2000 from $269,000 for the
three months ended June 30, 1999. The increase was due primarily
to income from Bank Owned Life Insurance (BOLI), title insurance
income, and increased fees from debit card transactions offset by
a loss of $100,000 to write down a subsidiary investment.
NONINTEREST EXPENSE.
Total noninterest expense increased $196,000 or 12.6% to
$1.8 million for the three months ended June 30, 2000 from $1.6
million for the three months ended June 30, 1999. This increase
resulted primarily from an increase in compensation and employee
benefits and an increase in professional fees.
FEDERAL INCOME TAXES.
The provision for federal income taxes increased relative to
the amount of taxable income for the period.
COMPARISON OF OPERATING RESULTS FOR THE SIX MONTHS ENDED JUNE 30,
2000 AND JUNE 30, 1999.
JADE FINANCIAL CORP.
AVERAGE BALANCE SHEET
The following table presents the total dollar amounts of
interest income and interest expense on the indicated amounts of
average interest-earning assets or interest-bearing liabilities
together with the weighted average interest rates for the six
month periods ended June 30, 2000 and 1999. Average balance
calculations were based on daily balances.
6 months ended June 30, 6 months ended June 30,
2000 1999
Average Interest (Annualized) Average Interest (Annualized)
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Balance Paid Rate Balance Paid Rate
(Dollars in Thousands) (Dollars in Thousands)
Interest-earning assets:
Loans receivable $119,122 $4,877 8.19% $106,775 $4,342 8.13%
Investments 62,120 1,932 6.22% 59,508 1,645 5.53%
Total earning assets 181,242 6,809 7.51% 166,283 5,987 7.20%
Non-interest earning assets 19,443 9,196
Total assets $200,685 $175,479
Interest-bearing liabilities:
Savings deposits $ 71,258 722 2.03% $ 71,815 746 2.08%
Checking accounts 10,456 0 0.00% 10,272 0 0.00%
Money market accounts 10,204 229 4.49% 10,294 157 3.05%
Certificates of deposit 67,760 1,830 5.40% 66,020 1,739 5.27%
Other notes payable - FHLB 12,530 394 6.29% 400 3 1.50%
Total interest-bearing
liabilities 172,208 3,175 3.69% 158,801 2,645 3.33%
Non-interest bearing liabilities 1,810 1,546
Total liabilities 174,018 160,347
Equity 26,667 15,132
Total liabilities and equity $200,685 $175,479
Net interest-earning assets $ 9,034 $ 7,482
Net interest spread $3,634 3.83% $3,342 3.87%
Net interest margin 4.01% 4.02%
Ratio of average interest-
earning assets to average
interest-bearing liabilities 105.25% 104.71%
Rate/Volume Analysis
For the six months ended June 30,
2000 vs. 1999
Increase (decrease) due to
Total
Rate/ Increase
Rate Volume Volume (Decrease)
(In Thousands)
Interest-earning assets:
Loans receivable $ 59 $1,004 $(528) $535
Investments 412 144 (269) 287
Total earning assets 471 1,148 (797) 822
Interest-bearing liabilities:
Savings deposits (37) (12) 25 (24)
Checking accounts 0 0 0 0
Money market accounts 148 (3) (73) 72
Certificates of deposit 88 92 (89) 91
Other notes payable-FHLB 0 182 209 391
Total interest-bearing
liabilities 199 259 72 530
Change in net interest income $272 $ 889 $(869) $292
Net Income:
Net income for the six months ended June 30, 2000 was
$452,000. Net income for the comparable period in 1999 was
$322,000. The increase is attributable to increased levels of
interest-earning assets, and a significant increase in
noninterest income. Our net interest spread and net interest
margin remained virtually unchanged as our cost of funds
increased relative to the increase in our earning assets.
Core earnings, defined as pretax earnings adjusted for
securities sales transactions and unusual or non-recurring
expense or income items, were $659,000 for the six months ended
June 30, 2000 compared to $492,000 in the prior year period.
The following table summarizes the components of adjusted
pretax core earnings:
Six Months Ended
June 30,
2000 1999
(Dollars in Thousands)
$1,111 $1,111
Net interest income $3,634 $3,342
Provision for loan losses 430 270
Noninterest income excluding gains and
losses 958 493
Noninterest expense 3,503 3,073
ADJUSTED PRETAX CORE EARNINGS $ 659 $ 492
INTEREST INCOME.
Total interest income increased $822,000 or 13.73% from $6.0
million for the six months ended June 30, 1999 compared to $6.8
million for the six months ended June 30, 2000. This increase
resulted from an increase in average earning assets of $14.9
million, or 8.96% from $166.3 million for the six months ended
June 30, 1999 to $181.2 million for the six months ended June 30,
2000. The average yield or rate paid on earning assets also
increased 31 basis points from 7.20% for the six months ended
June 30, 1999 compared to 7.51% for the six months ended June 30,
2000.
INTEREST EXPENSE.
Total interest expense increased $530,000, or 20.04% from
$2.6 million for the six months ended June 30, 1999 compared to
$3.2 million for the six months ended June 30, 2000. This
increase was mainly attributable to an increase in total
interest-bearing liabilities of $13.4 million or 8.44% from 158.8
million for the six months ended June 30, 1999 compared to $172.2
million for the six months ended June 30, 2000 and a 36 basis
point increase in the overall cost of interest-bearing
liabilities.
NET INTEREST INCOME.
Net interest income increased $292,000 or 8.74% from $3.3
million for the six months ended June 30, 1999 compared to $3.6
million for the six months ended June 30, 2000. This increase is
attributable to a higher volume of earning assets.
PROVISION FOR LOAN LOSSES.
The provision for loan losses increased by $160,000 or
59.26% for the six months ended June 30, 2000 compared to the six
months ended June 30, 1999. This increase reflects anticipated
changes in the company's loan portfolio from that of a
traditional consumer focused credit union to a more diversified
banking company. We do not foresee the need to increase the
provision significantly in the future. During the six months
ended June 30, 2000, the Company had charge-offs of $137,229 and
recoveries of $74,886.
NONINTEREST INCOME.
Noninterest income increased $365,000 or 74.04% to $858,000
for the six months ended June 30, 2000 from $493,000 for the six
months ended June 30, 1999. The increase was due primarily to
income from Bank Owned Life Insurance (BOLI), title insurance
income, and increased fees from debit card transactions offset by
a loss of $100,000 to write down a subsidiary investment.
NONINTEREST EXPENSE.
Total noninterest expense increased $430,000 or 13.99% to
$3.5 million for the six months ended June 30, 2000 from $3.1
million for the six months ended June 30, 1999. This increase
resulted primarily from an increase in compensation and employee
benefits and an increase in professional fees.
FEDERAL INCOME TAXES.
The provision for federal income taxes increased relative to
the amount of taxable income for the period.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
A comprehensive qualitative and quantitative analysis
regarding market risk was disclosed in the Company's Conversion
Prospectus. No material changes in the assumptions used or
results obtained from the model have occurred.
Part II. OTHER INFORMATION
Item 1. Legal proceedings - None
Item 2. Change 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
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - None
(b) Reports on Form 8-K - None
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.
JADE FINANCIAL CORP.
(Registrant)
August 21, 2000 /s/Dorothy M. Bourlier
Dorothy M. Bourlier
Chief Financial Officer