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
March 31, 2001.
( ) 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
Outstanding Shares Common Stock Number of Shares Outstanding
($.01 Par Value) 1,872,923
(Title of Class) (as of March 31, 2001)
TABLE OF CONTENTS
PART 1. FINANCIAL INFORMATION
Financial Statements (Unaudited)
Consolidated Statement of Financial Condition
as of March 31, 2001 and December 31, 2000
Consolidated Statement of Income for the Three
Months Ended March 31, 2001 and 2000.
Consolidated Statement of Cash Flows for the
Three Months Ended March 31, 2001 and 2000.
Notes to Consolidated Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations
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
March 31, December 31,
2001 2000
(Unaudited) (Audited)
(In Thousands)
ASSETS
Cash and cash equivalents:
Cash and due from banks $ 2,674 $ 5,012
Interest bearing deposits in other
financial institutions 1,173 217
Federal funds 29,004 55,630
Restricted cash 0 0
Total cash and cash equivalents $ 32,851 $ 60,859
Investment securities, available-for-
sale 1,960 1,910
Mortgage-backed securities available-
for-sale 24,866 11
Investment securities held-to-maturity 0 0
Mortgage-backed securities held-to-
maturity (fair value of $3,820 and
$3,820) 2,540 2,841
Allowance for investment losses 0 0
Loans receivable, net 129,169 129,942
Property, equipment and leasehold
improvements, net of accumulated
depreciation 2,603 2,809
Federal Home Loan Bank stock, at cost 1,000 1,000
Accrued interest receivable 753 609
Other real estate owned (OREO) 0 0
Reorganization costs, net 112 122
Bank owned life insurance (BOLI) 10,701 10,557
Deferred tax asset, net 1,951 1,718
Prepaid expenses and other assets 3,080 1,361
TOTAL ASSETS $211,586 $213,739
LIABILITIES AND EQUITY
LIABILITIES:
Deposits $181,783 $166,261
Advances from Federal Home Loan Bank 0 18,000
Advances from borrowers for taxes 673 730
Accounts payable and accrued expenses 433 884
Total liabilities $182,889 $185,875
EQUITY:
Common stock, $.01 par value,
1,872,923 shares issued and
outstanding at March 31, 2001 19 19
Additional paid-in capital 14,119 14,189
Contra equity - unearned common stock
acquired by the Employee Stock
Ownership Plan (899) (928)
Commitments and contingencies
(Note 16) 0 0
Retained earnings, (See Notes 11 and
12) 15,240 14,644
Accumulated other comprehensive
income (loss) 218 (60)
Total equity $ 28,697 $ 27,864
TOTAL LIABILITIES AND EQUITY $211,586 $213,739
JADE FINANCIAL CORP.
CONSOLIDATED STATEMENT OF INCOME
Three months ended
March 31,
2001 2000
(Unaudited)
(In thousands)
INTEREST INCOME:
Interest on loans $2,679 $2,361
Investment and mortgage-backed securities 345 875
Interest-earning deposits 15 7
Federal funds 427 100
Total interest income $3,466 $3,343
INTEREST EXPENSE:
Interest on deposits $1,746 $1,361
Interest on borrowed funds 31 205
Total interest expense $1,777 $1,566
Net Interest Income $1,689 $1,777
PROVISION FOR POSSIBLE LOAN LOSSES 125 315
Net interest income after provision for
possible loan losses $1,564 $1,462
NONINTEREST INCOME:
Loan fees $ 29 $ 12
Service charges 124 134
Other income 354 297
Security/other gains or losses 1 0
Total noninterest income $ 508 $ 443
NONINTEREST EXPENSES:
Compensation and employee benefits $ 871 $ 917
Office and occupancy costs 504 441
Printing and Postage 166 62
Loan servicing 31 31
Professional fees 71 78
Bank and MAC charges 86 165
Advertising, marketing and promotions 16 47
Insurance expense 37 11
Total noninterest expenses $1,782 $1,752
INCOME BEFORE PROVISION FOR INCOME TAXES $ 290 $ 153
Provision for federal and state income
taxes
Current - 98
Deferred - (85)
Total income tax provision $ - $ 13
NET INCOME $ 290 $ 140
JADE FINANCIAL CORP
CONSOLIDATED STATEMENT OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
Three Months Ended
March 31, March 31,
2001 2000
(Unaudited)
(Dollars in Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 290 $ 140
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Amortization of premium/discount on investments
and mortgage-backed securities 7 24
Depreciation and amortization 166 108
(Gain) loss on sale of investment securities - -
(Premium) discount on first mortgage sales - -
(Gain) loss on sale/disposal of asset (1) -
Provision for losses on loans 125 315
Change in assets and liabilities:
(Increase) decrease in deferred tax asset (128) (130)
(Increase) decrease in accrued interest
receivable (145) (296)
(Increase) decrease in BOLI asset (144) (131)
(Increase) decrease in prepaid expenses and
other assets (1,629) (296)
Increase (decrease) in accounts payable and
accrued expenses (378) (59)
Net cash provided by operating activities (1,837) (325)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of FHLB Stock - -
Purchase of investment securities, available-
for-sale (25,073) (1,000)
Sales of investment securities, available-for-sale - -
Mortgage-backed security purchases, available
for sale - -
Mortgage-backed security sales - -
Mortgage-backed security maturities and principal
repayments 691 1,197
Maturities and principal repayments of investment
securities, available-for-sale 527
(Increase) decrease in total loans receivable, net 773 (2,503)
Proceeds from sale of real estate owned net of
expenses -
Proceeds from sale of loans - -
Proceeds from sale of equipment - -
Capital expenditures (28) (129)
Decrease in Share Insurance Fund 0 0
Net cash provided by (used in) investing
activities (23,637) (1,908)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in deposits, net $ 15,522 $12,024
Net increase(decrease) in advances FHLB (18,000) -
Net increase(decrease) in advances for borrowers (56) 60
Net cash provided by (used in) financing
activities (2,534) 12,084
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS: (28,008) 9,851
Cash and cash equivalents, beginning of period 60,859 13,242
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 32,851 $23,093
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest on deposits and borrowings $ 1,777 $ 1,566
Income taxes - -
Jade Financial Corp.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(IN THOUSANDS)
Three Months Ended
March 31,
2001 2000
(unaudited)
Net income $290 $140
Other comprehensive income, net if tax:
Accumulated comprehensive gain (loss)
investments available for sale 218 (60)
Other comprehensive income 218 (60)
Comprehensive Income 508 80
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 (the "Company")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.
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 three months ended
March 31, 2001 are not necessarily indicative of the results to
be expected for the year ending December 31, 2001. 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, 2000, contained in
the Holding Company's Form 10-KSB filed with the Securities
Exchange Commission on April 2, 2001.
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.
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:
Presented below is information with respect to the
calculation of basic and diluted earnings per share for the three
months ended March 31, 2001.
Three Months Ended
March 31, 2001
Net income $ 290,000
Weighted average number of common shares
outstanding 1,872,923
Average ESOP shares not committed
to be released (116,004)
Weighted average number of common shares
outstanding for basic earnings per share
computation purposes 1,756,919
Dilutive effects of employee stock options 0
Weighted average shares and common share
equivalents 1,756,919
Basic earnings per share $ 0.17
Diluted earnings per share $ 0.17
4. COMPREHENSIVE INCOME:
Statement of Financial Accounting Standards (SFAS) No. 130,
Reporting Comprehensive Income, was effective for the Company 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 March 31, 2001 is as follows:
Three Months Ended
September 30, 2001
Net income $290,000
Unrealized holding gains (losses)
arising during the period net
of tax effect 218,000
Comprehensive Income $508,000
6. NEW ACCOUNTING STANDARDS:
SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities, is effective for the Bank for years beginning
July 1, 1999. The Holding Company 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 Holding Company'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 periods ended March 31, 2001
and 2000:
SELECTED FINANCIAL RATIOS
At or for the
Three months ended
March 31,
2001 2000
Selected Financial Condition Data:
Performance Ratios:(1)
Return on assets (ratio of net income
to average total assets) 0.58% 0.28%
Return on equity (ratio of net income
to average equity) 4.13% 2.09%
Earnings per common share $ 0.17 $ 0.08
Interest rate spread(2) 3.38% 3.77%
Net interest margin(3) 3.56% 3.96%
Operating expenses to average total
assets 3.54% 3.52%
Average interest-earning assets to
average interest-bearing liabilities 104.36% 105.45%
Asset Quality Ratios:
Non-performing assets to total assets
at end of period 0.03% 0.05%
Allowance for loan losses to non-
performing assets 31.13% 13.86%
Allowance for loan losses to gross
loans receivable 1.28% 1.32%
Capital Ratios:
Equity to total assets at end of period 13.56% 13.47%
Average equity to average assets 13.93% 13.47%
Book value per share $15.32 $14.59
Other Data:
Number of full service offices 5 5
(1) Ratios for the three month period 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 MARCH 31, 2001 AND DECEMBER 31, 2000
Our total assets decreased $2.1 million from $213.7 million
to $211.6 million or .98% from December 31, 2000 to March 31,
2001. Our total liabilities decreased $3.0 million from
$185.9 million to $182.9 million or 1.61% from December 31, 2000
to March 31, 2001. We had no borrowings from the Federal Home
Loan Bank as of March 31, 2001. The decreased assets and
liabilities at March 31, 2001 compared to December 31, 2000 is a
result of the pay-off of the Bank's Federal Home Loan Bank
advances.
Total loans decreased from $131.6 million to $130.8 million
or .61% from December 31, 2000 to March 31, 2001. The decrease
was primarily the result of a decrease in average balances in
home equity, automobile and credit card loans, as illustrated by
the following loan composition table:
At March 31, At December 31,
2001 2000
Amount Percent Amount Percent Variance % Change
Real Estate Loans:
One- to four-family $ 50,372 38.51% $ 50,103 38.07% $ 269 0.54%
Commercial 4,971 3.80 4,523 3.44 448 9.90
Total real estate loans 55,343 42.31 54,626 41.51 717 1.31
Consumer Loans:
Home equity 26,528 20.28 26,800 20.37% (272) -1.01
Automobile 27,978 21.39 28,395 21.58 (417) -1.47
Credit cards 9,150 7.00 10,395 7.90 (1,245) -11.98
Personal loans 6,095 4.66 5,947 4.52 148 2.49
Other 2,384 1.84 2,437 1.85 (53) -2.17
Commercial 3,307 2.53 2,995 2.28 312 10.42
Total consumer loans 75,442 57.69 76,969 58.49 $(1,527) -1.98
Total loans $130,785 100.00% 131,595 100.00% $ (810) -0.67
Less:
Deferred fees and discounts 65 (39)
Allowance for losses (1,681) (1,614)
Total loans receivable,
net $129,169 $129,942
Our total equity increased from $27.9 million to
$28.7 million or 2.9% from December 31, 2000 to March 31, 2001
due to an increase in retained earnings and other comprehensive
income from gains on the sale of investments.
Asset Quality
The following table sets forth non-performing assets as of
March 31, 2001 and December 31, 2000:
March 31, December 31,
2001 2000
(Dollars in Thousands)
Non-accruing loans:
One- to four-family 51 86
Home equity 0 0
Automobile 0 1
Credit cards 3 8
Personal loans 0 0
Commercial 0 0
Other 0 0
Total 54 95
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 $ 54 $112
Non-performing assets as a percent of
total loans 0.04% 0.09%
Non-performing assets as a percent of
total assets 0.03% 0.05%
COMPARISON OF OPERATING RESULTS
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND MARCH 31, 2000.
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 March 31, 2001 and 2000. Average balance
calculations were based on daily balances.
Three months ended March 31, Three months ended March 31,
2001 2000
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 $131,085 $2,679 8.17% $116,095 $2,361 8.13%
Investments 50,774 787 6.20 63,428 982 6.19
Total earning assets 181,859 3,466 7.62 179,523 3,343 7.45
Non-interest earning assets 19,706 19,776
Total assets $201,565 $199,299
Interest-bearing
liabilities:
Savings deposits $ 64,378 343 2.13 $ 69,007 350 2.03
NOW accounts 9,775 0 0.00 10,183 0 0.00%
Money market accounts 12,126 104 3.43 9,106 101 4.44%
Certificates of deposit 87,073 1,299 5.97 68,269 910 5.33
Other notes payable - FHLB 2,865 31 4.33 13,681 205 5.99
Total interest-bearing
liabilities 176,217 1,777 4.03 170,246 1,566 3.68
Non-interest bearing liabilities (783) 2,205
Total liabilities 176,217 172,451
Equity 28,087 26,848
Total liabilities and equity $201,565 $199,299
Net interest-earning assets $ 5,642 $ 9,277
Net interest spread $1,689 3.59% $1,777 3.77%
Net interest margin 3.71% 3.96%
Ratio of average interest-earning
assets to average interest-
bearing liabilities 103.20% 105.45%
`
For the three months
ended March 31,
2001 vs. 2000
Increase (decrease) due to Total
Rate/ Increase
Rate Volume Volume (Decrease)
(In Thousands)
Interest-earning assets:
Loans receivable $ 47 $1,219 $ (948) $ 318
Investments 5 (764) 584 (195)
Total earning assets 52 435 (364) 123`
Interest-bearing liabilities:
Savings deposits 71 (94) 16 (7)
Checking accounts 0 0 0 0
Money market accounts (92) 134 (139) 57
Certificates of deposit 434 1,003 (1,048) 389
Other notes payable - FHLB 3,010 0 (709) (117)
Total interest-bearing 1,005 1,043 (1,780) (268)
liabilities
Change in net interest income $ (953) $ (608) $ 1,416 $(145)
Net Income:
Net income for the three months ended March 31, 2001 was
$290,000. Net income for the comparable period in 2000 was
$140,000. The increase in the current period when compared to
the prior period was primarily due to decreases in our provision
for possible loan losses and in our provision for income taxes
that was partially offset by a decrease in our net interest
income.
Interest Income. Total interest income increased $124,000
or 6.09% from $3.3 million for the first quarter of 2000 compared
to $3.5 million for the first quarter of 2001. This increase
resulted from an increase in average earning assets of
$2.3 million, or 1.28% from $179.5 million for the three months
ended March 31, 2000 to $181.8 million for the three months ended
March 31, 2001. The average yield earned on earning assets also
increased 17 basis points from 7.45% for the first quarter of
2000 compared to 7.62% for the first quarter of 2001.
Interest Expense. Total interest expense increased
$284,000, or 18.13% from $1.6 million for the first quarter of
2000 compared to $1.8 million for the first quarter of 2001.
This increase was mainly attributable to an increase in our
average interest-bearing liabilities and a shift in our deposit
mix to higher cost certificates of deposit.
Net Interest Income. Net interest income decreased by
$88,000, or 5.5% from $1.8 million for the first quarter of 2000
to $1.7 million for the first quarter of 2001. Our interest rate
margin decreased by 25 basis points from 3.96% for the first
quarter of 2000 to 3.71% for the same period of 2001. This
decrease is attributable to an increase in the volume of our
deposits, particularly our higher cost certificates of deposit,
and by rising interest rates paid on deposits during the period.
Additionally, 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
decreased $190,000 to $125,000 for the first quarter of 2001
compared to $315,000 for the first quarter of 2000. During the
three months ended March 31, 2001, the Company had charge-offs of
$97,000 and recoveries of $36,000. At March 31, 2001, the
Company's allowance for loan losses totaled $1.7 million which
was 1.28% of total loans.
Noninterest Income. Noninterest income increased $65,000 or
14.67% to $508,000 for the three months ended March 31, 2001 from
$443,000 for the three months ended March 31, 2000. The increase
was due primarily to income from loan fees, bank owned life
insurance (BOLI), title insurance income, and increased fees from
debit card transactions.
Noninterest Expense. Total noninterest expense increased
$30,000 or 1.71% to $1.8 million for the three months ended
March 31, 2001 from $1.7 million for the three months ended
March 31, 2000. This increase resulted primarily from an
increase in office and occupancy costs, insurance expense and
printing and postage fees related to the proxy solicitation for
the pending merger.
Federal Income Taxes. The provision for federal income
taxes decreased due to the utilization of a net operating loss
carry forward generated in 2000.
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 -
On March 20, 2001 a special meeting of the shareholders
of Jade Financial Corp. was held at its offices in
Feasterville, Pennsylvania. The only issue voted upon
by the shareholders was the approval and ratification
of the merger proposal among Jade Financial Corp., PSB
Bancorp, Inc. and PSB Merger Sub, Inc. The votes cast
on the previously referenced item were 1,454,461 for,
7,697 against, 1,140 withheld.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
Exhibits
(b) Reports on Form 8-K - None
(1) Form 8-K filed on February 14, 2001 to announce
the write-off of a $2.5 million investment in an
aggregator of Internet banking services.
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/ Mario L. Incollingo, Jr.
May 11, 2001 Mario L. Incollingo, Jr.
President