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
September 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 September 30, 2000
1,872,923
Outstanding Shares
COMMON STOCK ($.01 PAR VALUE)
(Title of Class)
TABLE OF CONTENTS
PART 1. FINANCIAL INFORMATION
Financial Statements (Unaudited)
Consolidated Statement of Financial Condition
as of September 30, 2000 and December 31, 1999
Consolidated Statement of Income for the Three and Nine
Months Ended September 30, 2000 and 1999.
Consolidated Statement of Cash Flows for the Nine
Months Ended September 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
September 30, December 31,
2000 1999
(Unaudited) (Audited)
(In Thousands)
ASSETS
Cash and cash equivalents:
Cash and due from banks $ 11,856 $ 6,630
Interest bearing deposits in
other financial institutions 350 47
Federal Funds 4,527 6,565
Restricted cash 0 0
Total cash and cash
equivalents $ 16,733 $ 13,242
Investment securities,
available-for-sale 40,543 40,783
Mortgage-backed securities
available-for-sale 7,745 8,859
Investment securities held-to-
maturity 0 0
Mortgage-backed securities held-
to-maturity (fair value of
$3,038 and $4,209) 3,117 4,314
BankZip.Com (convertible debenture) 1,250 2,500
Loans receivable, net 127,275 114,081
Property, equipment and leasehold
improvements, net of accumulated
depreciation 2,647 1,890
Federal Home Loan Bank stock,
at cost 1,000 834
Accrued interest receivable 1,176 802
Other Real Estate Owned (OREO) 0 0
Reorganization costs, net 132 162
Bank Owned Life Insurance - BOLI 10,420 10,021
Deferred tax asset, net 1,525 1,177
Prepaid expenses and other assets 1,313 911
TOTAL ASSETS $214,876 $199,576
LIABILITIES AND EQUITY
LIABILITIES:
Deposits $165,937 $156,124
Advances from FHLBank 20,000 15,000
Advances from borrowers for taxes 468 618
Accounts payable and accrued
expenses 777 594
Total liabilities $187,182 $172,336
EQUITY:
Common Stock, $.01 par value,
1,872,923 shares issued and
outstanding at 9/30/00 19 19
Additional Paid-in Capital 14,173 14,130
Contra Equity - unearned common
stock acquired by the Employee
Stock Ownership Plan (957) (1,044)
Commitments and contingencies
(Note 16) 0 0
Retained Earnings,
(See Notes 11 and 12) 16,628 15,853
Accumulated other comprehensive
income (loss) (2,169) (1,718)
Total Equity $ 27,694 $ 27,240
TOTAL LIABILITIES AND
EQUITY $214,876 $199,576
JADE FINANCIAL CORP.
CONSOLIDATED STATEMENT OF INCOME
Three months ended Nine months ended
September 30, September 30,
2000 1999 2000 1999
(Unaudited) (Unaudited)
(In thousands) (In thousands)
INTEREST INCOME:
Interest on loans $2,670 $2,253 $ 7,547 $6,595
Investment and mortgage- backed securities 838 840 2,568 2,247
Interest-earning deposits 27 17 51 72
Federal Funds 102 27 280 210
Total interest income $3,637 $3,137 $10,446 $9,124
INTEREST EXPENSE:
Interest on deposits $1,510 $1,308 $ 4,291 $3,950
Interest on borrowed funds 343 56 737 59
Total interest expense $1,853 $1,364 $5,028 $4,009
Net Interest Income $1,784 $1,773 $5,418 $5,115
PROVISION FOR POSSIBLE LOAN LOSSES 135 135 565 405
Net interest income after provision for
possible loan losses $1,649 $1,638 $4,853 $4,710
NONINTEREST INCOME:
Loan fees $ 8 $ 10 $ 32 $ 36
Service charges 144 133 409 355
Other Income 337 142 1,006 387
Security/Other gains or losses 12 0 (88) 0
Total noninterest income $ 501 $ 285 $1,359 $ 778
NONINTEREST EXPENSES:
Compensation and employee benefits $ 916 $ 732 $2,744 $2,194
Office and occupancy costs 420 477 1,204 1,309
Printing and Postage 68 60 196 188
Loan servicing 46 44 122 126
Professional fees 116 30 304 114
Bank and MAC charges 179 190 514 545
Advertising, marketing and promotions 29 36 126 111
Insurance Expense 29 30 96 85
Other - Foundation Expense 0 0 0 0
Total noninterest expenses $1,803 $1,599 $5,306 $4,672
INCOME BEFORE PROVISION FOR INCOME TAXES $ 347 $ 324 $ 906 $ 816
Provision for federal and state income taxes
Current 58 145 281 317
Deferred 0 (30) (116) (32)
Total income tax provision $ 58 $ 115 $ 165 $ 285
NET INCOME $ 289 $ 209 $ 741 $ 531
JADE FINANCIAL CORP
CONSOLIDATED STATEMENT OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
Nine Months Ended
September 30, September 30,
2000 1999
Unaudited Unaudited
(Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 741 $ 547
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Amortization of premium/discount on investments
and mortgage-backed securities 71 117
Depreciation and amortization 315 294
(Gain) loss on sale of investment securities 88 -
(Premium) discount on first mortgage sales - -
(Gain) loss on sale/disposal of asset - -
Provision for losses on loans 565 405
Change in assets and liabilities:
(Increase) decrease in deferred tax asset (348) (32)
(Increase) decrease in accrued interest receivable (374) (426)
(Increase) decrease in BOLI asset (399) -
(Increase) decrease in Reorganization costs (30) -
(Increase) decrease in prepaid expenses and
other assets (402) (1,028)
Increase (decrease) in accounts payable and
accrued expenses 183 378
Net cash provided by operating activities 410 255
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 3,134 6,547
Maturities and principal repayments of investment
securities, available-for-sale 949 3,500
(Increase) decrease in total loans receivable, net (13,759) (8,473)
Proceeds from sale of real estate owned net of
expenses - -
Proceeds from sale of loans - -
Proceeds from sale of equipment - -
Capital expenditures (1,072) (118)
Decrease in Share Insurance Fund 0 29
Net cash provided by (used in) investing activities (11,582) (20,585)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in deposits, net $ 9,813 $ 13,476
Net increase(decrease) in advances FHLB 5,000 6,000
Net increase(decrease) in advances for borrowers (150) (130)
Net cash provided by (used in) financing activities 14,663 19,346
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS: 3,491 (984)
Cash and cash equivalents, beginning of year 13,242 18,351
CASH AND CASH EQUIVALENTS, END OF YEAR $ 16,733 $ 17,367
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest on deposits $ 4,291 $ 3,950
Income Taxes $ 210 $ 177
Noncash activities:
Increase in unrealized loss on investment mortgage-
backed securities available-for-sale, net of taxes $ 451 $1,715
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 at September
30, 1999.
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 a fair presentation at and
for the interim periods.
The results of operations for the nine months ended
September 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 proceeds from the sale of 145,000
shares to the IGA Employee Stock Ownership Plan and 60,420 shares
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
September 30, 1999 is not applicable, because 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 and nine months ended
September 30, 2000.
Three Months Ended Nine Months Ended
September 30, 2000 September 30, 2000
Net Income $ 289,000 $ 741,000
Weighted average number of common
shares outstanding 1,872,923 1,872,923
Average ESOP shares not committed to
be released (130,500) (130,000)
Weighted average number of common
shares outstanding for basic
earnings per share computation
purposes 1,742,423 1,742,423
Dilutive effects of employee stock
options 0 0
Weighted average shares and common
share equivalents 1,742,423 1,742,423
Basic earnings per share $ 0.17 $ 0.43
Diluted earnings per share $ 0.17 $ 0.43
4. COMPREHENSIVE INCOME:
Statement of Financial Accounting Standards (SFAS) No. 130,
Reporting Comprehensive Income, was 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 September 30, 2000 and 1999 are as follows:
Three Months Ended
September 30,
2000 1999
(Dollars in Thousands)
Net income $ 289 $ 209
Unrealized holding gains (losses)
arising during the period net
of tax effect (318) (249)
COMPREHENSIVE INCOME $ (29) $ (40)
5. INVESTMENT VALUATION
JADE, together with three other financial institutions
participated in the initial capitalization of BankZip.com, an
internet banking company. The total capitalization of BankZip was
$13.9 million and JADE contributed $2.5 million in the form of a
convertible note. On September 15, 2000, an involuntary
bankruptcy petition was filed against ZipFinancial.Com, Inc. by
one of its vendors, the petition was subsequently dismissed on
October 23, 2000. On November 2, 2000, BankZip completed
$410,000 in additional financing and is seeking additional
financing of $1.5 to $2.0 million. The company has entered into
a term sheet with a strategic investor to provide a $1.0 million
line of credit. The ability to draw on the line of credit will
be dependent on sales. The continued viability of the company is
dependent on its ability to raise additional capital. No
assurances can be given that the company will be able to raise
additional capital. To reflect the uncertainty surrounding this
investment, as of September 30, 2000, JADE has established an
equity account valuation reserve pursuant to SFAS 115 of 50% or
$1.25 million while BankZip seeks additional financing.
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, is 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 was effective for the fiscal quarter
beginning after December 15, 1998. The implementation of SFAS No.
134 did 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 September 30,
2000:
SELECTED FINANCIAL RATIOS
At or For the At or For the
Three months ended Nine Months ended
September 30, September 30,
2000 1999 2000 1999
Selected Financial Condition Data:
Performance Ratios:(1)
Return on assets (ratio of net income
to average total assets) 0.55% 0.47% 0.49% 0.40%
Return on equity (ratio of net income
to average equity) 4.18% 5.89% 3.66% 4.79%
Earnings per common share $0.17 - $0.43 -
Interest rate spread(2) 3.61% 4.05% 3.75% 3.96%
Net interest margin(3) 3.79% 4.18% 3.93% 4.10%
Operating expenses to average total assets 3.44% 3.58% 3.47% 3.54%
Average interest-earning assets to
average interest-bearing liabilities 104.55% 104.19% 105.01% 104.24%
Asset Quality Ratios:
Non-performing assets to total assets at end
of period 0.06% 0.09% 0.06% 0.09%
Allowance for loan losses to non-
performing assets 1192.09% 722.22% 1192.09% 722.22%
Allowance for loan losses to gross
loans receivable 1.28% 1.10% 1.28% 1.10%
Capital Ratios:
Equity to total assets at end of period 12.89% 7.44% 12.89% 7.44%
Average equity to average assets 13.19% 7.94% 13.26% 8.40%
Book value per share $14.79 - $14.79 -
Other Data:
Number of full service offices 5 5 5 5
(1) Ratios for the three and nine 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 Income as a percentage of average interest-
earning assets.
COMPARISON OF FINANCIAL CONDITION AT SEPTEMBER 30, 2000 AND
DECEMBER 31, 1999
Our total assets increased $15.3 million from $199.6 million
to $214.9 million or 7.67% from December 31, 1999 to
September 30, 2000. Our total liabilities increased $14.8
million from $172.3 million to $187.1 million or 8.59% from
December 31, 1999 to September 30, 2000. We had $20.0 million
borrowed from the Federal Home Loan Bank as of September 30,
2000. The increase in assets and liabilities at September 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 $13.6 million from $115.3 million to
$129.0 million or 11.88 % from December 31, 1999 to September 30,
2000. The increase was primarily the result of increased loan
originations in almost all loan categories except credit cards,
as illustrated by the following loan composition table:
At September 30, At December 31,
2000 1999
Amount Percent Amount Percent Variance % Change
Real Estate Loans:
One- to four-family $ 49,219 38.17% $ 43,434 37.66% $ 5,785 13.32%
Commercial 4,197 3.25% 2,996 2.60% $ 1,201 40.09%
Total real estate
loans 53,416 41.42% 46,430 40.25% $ 6,986 15.05%
Consumer Loans:
Home equity 26,344 20.43% 24,172 20.96% $ 2,172 8.99%
Automobile 28,326 21.97% 24,406 21.16% $ 3,920 16.06%
Credit cards 9,692 7.52% 10,955 9.50% $(1,263) -11.53%
Signature loans 5,965 4.63% 5,414 4.69% $ 551 10.18%
Other 2,074 1.61% 2,498 2.17% $ (424) -16.97%
Total consumer loans 72,401 56.14% 67,445 58.47% $ 4,956 7.35%
Commercial Loans 3,141 2.44% 1,469 1.27% $ 1,672 113.82%
Total loans 128,958 100.00% 115,344 100.00% $13,614 11.80%
Less:
Deferred fees and
discounts (26) 21
Allowance for losses (1,657) (1,284)
Total loans receivable,
net $127,275 $114,081
On December 14, 1999, JADE purchased a convertible debenture
in the amount of $2.5 million with an initial rate of 5.45% from
ZipFinancial.Com.Inc (d/b/a Bankzip.com). BankZip aggregates and
provides Internet-based services to community financial
institutions. This menu of Internet services has two dimensions-
an external consumer dimension and an internal bank operations
dimension. From a consumer banking perspective, the aggregated
services, such as online applications, instant online loan
decisions, full call center support and marketing support, enable
community financial institutions to provide a complete online
banking solution for existing customers and attract new
customers. BankZip's menu of Internet services also allows
community financial institutions to convert back-office processes
to a more cost-effective online environment. By converting back-
office processes to an online environment, financial institutions
can convert fixed expense to variable expense. As a result,
financial institutions can realize significant cost savings and
efficiencies while simultaneously enhancing their ability to
deliver products and services to online and offline customers.
On September 15, 2000, an involuntary bankruptcy petition
was filed against ZipFinancial.Com, Inc. by one of its vendors;
however, the petition was subsequently dismissed on October 23,
2000. On November 2, 2000, BankZip completed $410,000 in
additional financing and is seeking additional financing of $1.5
to $2.0 million. The company has entered into a term sheet with
a strategic investor to provide a $1.0 million line of credit.
The ability to draw on the line of credit will be dependent on
sales. The continued viability of the company is dependent on
its ability to raise additional capital. No assurances can be
given that the company will be able to raise additional capital.
To reflect the uncertainty surrounding this investment, as of
September 30, 2000, JADE has established an equity account
valuation reserve pursuant to SFAS 115 of 50% or $1.25 million
while BankZip seeks additional financing.
Our total equity increased from $27.2 million to
$27.7 million or 1.84% from December 31, 1999 to September 30,
2000 due to an increase in retained earnings. Accumulated and
other comprehensive income increased from ($1.7) million at
December 31, 1999 to ($2.2) million at September 30, 2000.
Asset Quality
The following table sets forth non-performing assets as of
September 30, 2000 and December 31, 1999 (Dollars in thousands):
September 30, December 31,
2000 1999
Non-accruing loans:
One- to four-family $ 73 $ 73
Home equity 12 55
Automobile 29 21
Credit cards 13 11
Signature loans 2 2
Commercial 0 32
Other 10 0
Total 139 194
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 $139 $211
Non-performing assets as a
percent of total loans 0.11% 0.18%
Non-performing assets as a
percent of total assets 0.06% 0.11%
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 2000 AND SEPTEMBER 30, 1999.
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 September 30, 2000 and 1999. Average balance
calculations were based on daily balances.
Three months ended September 30, Three months ended September 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 $127,972 $2,670 8.35% $109,191 $2,253 8.25%
Investments 60,502 967 6.39% 60,350 884 5.86%
Total earning assets 188,474 3,637 7.72% 169,541 3,137 7.40%
Non-interest earning
assets 21,038 9,168
Total assets $209,512 $178,709
Interest-bearing
liabilities:
Savings deposits $ 69,030 354 2.05% $ 72,985 373 2.04%
NOW accounts 10,035 0 0.00% 9,961 0 0.00%
Money market accounts 12,073 147 4.87% 10,463 85 3.25%
Certificates of deposit 69,142 1,009 5.84% 65,307 850 5.21%
Other notes payable -
FHLB 20,000 343 6.86% 4,000 56 5.60%
Total interest-bearing
liabilities 180,280 1,853 4.11% 162,716 1,364 3.35%
Non-interest bearing
liabilities 1,593 1,797
Total liabilities 181,873 164,513
Equity 27,639 14,196
Total liabilities and
equity $209,512 $178,709
Net interest-earning
assets $ 8,194 $ 6,825
Net interest spread $1,784 3.61% $1,773 4.05%
Net interest margin 3.79% 4.18%
Ratio of average
interest-earning
assets to average
interest-bearing
liabilities 104.55% 104.19%
For the three months For the nine months
ended September 30, ended September 30,
2000 vs. 1999 2000 vs. 1999
Increase (decrease) due to Total Increase (decrease) due to Total
Rate/ Increase Rate/ Increase
Rate Volume Volume (Decrease) Rate Volume Volume (Decrease)
(In Thousands) (In Thousands)
Interest-earning
assets:
Loans receivable $101 $1,550 ($1,234) $417 $11 $1,256 ($315) $952
Investments 322 9 (248) 83 367 114 (111) 370
Total earning assets 423 1,559 (1,482) 500 378 1,370 (426) 1,322
Interest-bearing
liabilities:
Savings deposits 5 (81) 57 (19) (29) (28) 15 (42)
Checking accounts 0 0 0 0 0 0 0 0
Money market accounts 170 52 (160) 62 153 17 (37) 133
Certificates of deposit 412 200 (453) 159 203 123 (76) 250
Other notes payable - FHLB 50 896 (659) 287 0 752 (74) 678
Total interest-bearing
liabilities 637 1,067 (1,215) 489 327 864 (172) 1,019
Change in net interest
income ($214) $492 ($267) $11 $51 $506 ($254) $303
Net Income:
Net income for the three months ended September 30, 2000 was
$289,000. Net income for the comparable period in 1999 was
$209,000. 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 $18.8 million
or 17.22% from $109.2 million for the three months ended
September 30, 1999 to $128.0 million for the three months ended
September 30, 2000. The increase in volume was offset by a
decline of 44 basis points in our net interest spread caused by
rising interest rates and our negative gap position.
Core earnings, defined as pretax earnings adjusted for
securities sales transactions and unusual or non-recurring
expense or income items, were $335,000 for the three months ended
September 30, 2000 compared to $324,000 in the prior year period.
The following table summarizes the components of adjusted
pretax core earnings:
Three Months Ended
September 30,
2000 1999
(Dollars in Thousands)
Net interest income $1,784 $1,773
Provision for loan losses 135 135
Noninterest income excluding
gains and losses 489 285
Noninterest expense 1,803 1,599
ADJUSTED PRETAX CORE EARNINGS $ 335 $ 324
INTEREST INCOME. Total interest income increased $500,000 or
16.13% from $3.1 million for the third quarter of 1999 compared
to $3.6 million for the third quarter of 2000. This increase
resulted from an increase in average earning assets of $19.0
million, or 11.21% from $169.5 million for the three months ended
September 30, 1999 to $188.5 million for the three months ended
September 30, 2000. The average yield paid on earning assets
also increased 32 basis points from 7.40% for the third quarter
of 1999 compared to 7.72% for the third quarter of 2000.
INTEREST EXPENSE. Total interest expense increased $489,000, or
34.93% from $1.4 million for the third quarter of 1999 compared
to $1.9 million for the third quarter of 2000. This increase was
mainly attributable to an increase in borrowed funds and a 76
basis point increase in the overall cost of interest-bearing
liabilities caused by rising interest rates and the increased use
of higher cost borrowed funds.
NET INTEREST INCOME. Net interest income increased by only
$11,000 for the third quarter of 2000 compared to the third
quarter of 1999. This increase is attributable to a higher
volume of earning assets and liabilities that was offset by a 39
basis point decrease in the net interest margin. This decrease
in the net interest margin was caused by rising interest rates
during the period and the fact that our interest bearing
liabilities repriced to reflect these higher rates more quickly
than our interest earning assets.
PROVISION FOR LOAN LOSSES. The provision for loan losses
remained unchanged at $135,000 for both the third quarter of
2000 and the third quarter of 1999. During the three months
ended September 30, 2000, the Company had charge-offs of $158,341
and recoveries of $28,167. At September 30, 2000, the Company's
allowance for loan losses totaled $1.7 million which was 1.28% of
total loans.
NONINTEREST INCOME. Noninterest income increased $216,000 or
75.79% to $501,000 for the three months ended September 30, 2000
from $285,000 for the three months ended September 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.
NONINTEREST EXPENSE. Total noninterest expense increased
$204,000 or 12.76% to $1.8 million for the three months ended
September 30, 2000 from $1.6 million for the three months ended
September 30, 1999. This increase resulted primarily from an
increase in compensation and employee benefits and an increase in
professional fees associated with our status as a public company.
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 NINE MONTHS ENDED
SEPTEMBER 30, 2000 AND SEPTEMBER 30, 1999.
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 nine month
periods ended September 30, 2000 and 1999. Average balance
calculations were based on daily balances.
Nine months ended September 30, Nine months ended September 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 $122,072 $7,547 8.24% $106,810 $6,595 8.23%
Investments 61,581 2,899 6.28% 59,568 2,529 5.66%
Total earning assets 183,653 10,446 7.58% 166,378 9,124 7.31%
Non-interest earning assets 19,975 9,405
Total assets $203,628 $175,783
Interest-bearing
liabilities:
Savings deposits $ 70,515 1,078 2.04% $ 71,839 1,120 2.08%
NOW accounts 10,316 0 0.00% 10,186 0 0.00%
Money market accounts 10,827 374 4.61% 10,297 241 3.12%
Certificates of deposit 68,221 2,839 5.55% 65,867 2,589 5.24%
Other notes payable - FHLB 15,020 737 6.54% 1,422 59 5.53%
Total interest-bearing
liabilities 174,899 5,028 3.83% 159,611 4,009 3.35%
Non-interest bearing
liabilities 1,738 1,403
Total liabilities 176,637 161,014
Equity 26,991 14,769
Total liabilities and
equity $203,628 $175,783
Net interest-earning assets $ 8,754 $ 6,767
Net interest spread $5,418 3.75% $5,115 3.96%
Net interest margin 3.93% 4.10%
Ratio of average interest-
earning assets to average
interest-bearing
liabilities 105.01% 104.24%
For the three months For the nine months
ended September 30, ended September 30,
2000 vs. 1999 2000 vs. 1999
Increase (decrease) due to Total Increase (decrease) due to Total
Rate/ Increase Rate/ Increase
Rate Volume Volume (Decrease) Rate Volume Volume (Decrease)
(In Thousands) (In Thousands)
Interest-earning
assets:
Loans receivable $101 $1,550 ($1,234) $417 $11 $1,256 ($315) $952
Investments 322 9 (248) 83 367 114 (111) 370
Total earning assets 423 1,559 (1,482) 500 378 1,370 (426) 1,322
Interest-bearing
liabilities:
Savings deposits 5 (81) 57 (19) (29) (28) 15 (42)
Checking accounts 0 0 0 0 0 0 0 0
Money market accounts 170 52 (160) 62 153 17 (37) 133
Certificates of deposit 412 200 (453) 159 203 123 (76) 250
Other notes payable - FHLB 50 896 (659) 287 0 752 (74) 678
Total interest-bearing
liabilities 637 1,067 (1,215) 489 327 864 (172) 1,019
Change in net interest
income ($214) $492 ($267) $11 $51 $506 ($254) $303
Net Income:
Net income for the nine months ended September 30, 2000 was
$741,000. Net income for the comparable period in 1999 was
$531,000. The increase is attributable to increased levels of
interest-earning assets, and a significant increase in
noninterest income, offset by a decrease in our net interest
spread and net interest margin.
Core earnings, defined as pretax earnings adjusted for
securities sales transactions and unusual or non-recurring
expense or income items, were $994,000 for the nine months ended
September 30, 2000 compared to $816,000 in the prior year period.
The following table summarizes the components of adjusted
pretax core earnings:
Nine Months Ended
September 30,
2000 1999
(Dollars in Thousands)
Net interest income $5,418 $5,115
Provision for loan losses 565 405
Noninterest income excluding gains and
losses 1,447 778
Noninterest expense 5,306 4,672
ADJUSTED PRETAX CORE EARNINGS $ 994 $ 816
INTEREST INCOME. Total interest income increased $1.3 million or
14.29% from $9.1 million for the nine months ended September 30,
1999 compared to $10.4 million for the nine months ended
September 30, 2000. This increase resulted from an increase in
average earning assets of $17.3 million, or 10.40% from $166.4
million for the nine months ended September 30, 1999 to $183.7
million for the nine months ended September 30, 2000. The
average yield or rate paid on earning assets also increased 27
basis points from 7.31% for the nine months ended June 30, 1999
compared to 7.51% for the nine months ended September 30, 2000.
INTEREST EXPENSE. Total interest expense increased $1.0 million,
or 25.0% from $4.0 million for the nine months ended
September 30, 1999 compared to $5.0 million for the nine months
ended September 30, 2000. This increase was mainly attributable
to an increase in total interest-bearing liabilities of $15.3
million or 9.59% from $159.6 million for the nine months ended
September 30, 1999 compared to $174.9 million for the nine months
ended September 30, 2000 and a 48 basis point increase in the
overall cost of interest-bearing liabilities.
NET INTEREST INCOME. Net interest income increased $303,000 or
5.94% from $5.1 million for the nine months ended September 30,
1999 compared to $5.4 million for the nine months ended
September 30, 2000. This increase is attributable to a higher
volume of earning assets that was partially offset by a 17 point
compression in the net interest margin.
PROVISION FOR LOAN LOSSES. The provision for loan losses
increased by $160,000 or 39.51% for the nine months ended
September 30, 2000 compared to the nine months ended
September 30, 1999. This increase reflects changes in the
composition of the company's loan portfolio from that of a
traditional consumer focused credit union to a more diversified
banking company. During the nine months ended September 30,
2000, the Company had charge-offs of $295,570 and recoveries of
$103,053.
NONINTEREST INCOME. Noninterest income increased $581,000 or
74.68% to $1.4 million for the nine months ended September 30,
2000 from $778,000 for the nine months ended September 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
$634,000 or 13.49% to $5.3 million for the nine months ended
September 30, 2000 from $4.7 million for the nine months ended
September 30, 1999. This increase resulted primarily from an
increase in compensation and employee benefits, including the
ESOP, an increase in depreciation related to the purchase of a
new computer system, 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
On November 2, 2000 PSB Bancorp, Inc. and Jade Financial
Corp announced the execution of a definitive Agreement & Plan of
Merger pursuant to which PSB will acquire Jade Financial Corp.
and its wholly-owned subsidiary, IGA Federal Savings Bank in a
cash transaction valued at approximately $24.1 million. Pursuant
to the agreement, PSB will purchase all of the outstanding shares
of Jade Financial Corp. that PSB does not already own or that are
not owned by the JADE Employee Stock Ownership Plan ("ESOP")for
$13.55 per share in cash. The Jade ESOP may receive cash, PSB
stock or a combination of both.
Item 6. Exhibits and Reports on Form 8-K
Exhibits
(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.
By /s/ Dorothy M. Bourlier
November 10, 1999 Dorothy M. Bourlier
Chief Financial Officer
22