1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended December 31, 1999
or
[ ] Transition Report Pursuant to Section 13 or 15(d)of the Securities
Exchange Act of 1934
For the transition period from ___________ to _____________
Commission File Number: 00025027
COHOES BANCORP, INC.
(Exact name of registrant as specified in its charter)
Delaware 14-1807865
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
75 Remsen Street, Cohoes, New York 12047
(Address of principal executive offices) (Zip Code)
(518)233-6500
(Registrant's telephone number, including area code)
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.
[ X ] Yes [ ] No
As of February 2, 2000, there were 8,814,877 shares of the registrant's
common stock outstanding.
FORM 10-Q
Cohoes Bancorp, Inc.
INDEX
Page
PART 1 - FINANCIAL INFORMATION Number
- ------------------------------ ------
Item 1. Financial Statements
Consolidated Statements of Financial Condition at
December 31, 1999 and June 30, 1999 3
Consolidated Statements of Income for the three and
six months ended December 31, 1999 and 1998 4-5
Consolidated Statements of Changes in Stockholders' Equity
for the six months ended December 31, 1999 and 1998 6-7
Consolidated Statements of Cash Flows for the six
months ended December 31, 1999 and 1998 8
Notes to Consolidated Interim Financial Statements 9-13
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 14-22
Item 3. Quantitative and Qualitative Disclosures about Market Risk 23
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 23
Item 2. Changes in Securities and Use of Proceeds 23
Item 3. Defaults Upon Senior Securities 23
Item 4. Submission of Matters to a Vote of Security Holders 23
Item 5. Other Information 23
Item 6. Exhibits and Reports on Form 8-K 23
Signature Page 24
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
COHOES BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
December 31, June 30,
1999 1999
(In thousands)
ASSETS:
CASH AND CASH EQUIVALENTS:
Cash and due from banks $ 23,670 $ 8,886
Federal funds sold 2,130 1,870
Interest-bearing deposits with banks 125 358
Total cash and cash equivalents 25,925 11,114
MORTGAGE LOANS HELD FOR SALE - 339
SECURITIES AVAILABLE FOR SALE 42,364 44,742
INVESTMENT SECURITIES, approximate fair value of $54,964 and $53,721 56,233 54,455
NET LOANS RECEIVABLE 567,093 521,005
ACCRUED INTEREST RECEIVABLE 3,972 3,776
BANK PREMISES AND EQUIPMENT 7,924 7,801
OTHER REAL ESTATE OWNED 902 724
MORTGAGE SERVICING RIGHTS 745 840
OTHER ASSETS 3,726 5,674
Total assets $708,884 $650,470
LIABILITIES AND STOCKHOLDERS' EQUITY:
LIABILITIES:
Due to depositors $476,205 $446,123
Mortgagors' escrow deposits 8,131 10,787
Borrowings 88,600 49,045
Other liabilities 5,938 5,085
Total liabilities 578,874 511,040
Commitments and contingent liabilities
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; 5,000,000 share authorized;
none issued - -
Common stock, $.01 par value; 25,000,000 shares authorized;
9,535,225 shares issued at December 31, 1999 and June 30, 1999 95 95
Additional paid-in capital 93,001 93,004
Retained earnings-subject to restrictions 56,899 55,173
Treasury stock, at cost (512,848 shares at December 31, 1999) (6,601) -
Unallocated common stock held by ESOP (8,280) (8,598)
Unearned RRP shares (4,482) -
Accumulated other comprehensive loss, net (622) (244)
Total stockholders' equity 130,010 139,430
Total liabilities and stockholders' equity $708,884 $650,470
See accompanying notes to consolidated interim financial statements.
COHOES BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
For the three months ended December 31,
1999 1998
(In thousands, except per share amounts)
INTEREST INCOME:
Loan receivable $10,717 $ 8,800
Securities available for sale 572 544
Investment securities 849 731
FHLB stock 83 63
Federal funds sold 51 409
Bank deposits 1 9
Total interest income 12,273 10,556
INTEREST EXPENSE:
Deposits 4,203 4,589
Escrow deposits 27 238
Borrowings 1,279 709
Total interest expense 5,509 5,536
Net interest income 6,764 5,020
Provision for loan losses 610 180
Net interest income after Provision for loan losses 6,154 4,840
NONINTEREST INCOME:
Service charges on deposits 230 204
Loan servicing revenue 76 103
Recovery on other real estate owned 140 -
Write off of equity investment (950) -
Other 406 490
Total noninterest income (98) 797
NONINTEREST EXPENSE:
Compensation and benefits 2,542 2,101
Occupancy 822 689
Deposit insurance & assessments 21 15
Advertising 95 118
Contribution to Cohoes Savings Foundation - 2,777
Merger termination fee - 2,000
Other 919 928
Total noninterest expense 4,399 8,628
Income (loss) before income tax expense 1,657 (2,991)
Income tax expense (benefit) 567 (1,153)
NET INCOME (LOSS) $ 1,090 $(1,838)
Net income per share
Basic $ .13 $ N/A
Diluted $ .13 $ N/A
See accompanying notes to consolidated interim financial statements.
COHOES BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
For the six months ended December 31,
1999 1998
(In thousands, except per share amounts)
INTEREST INCOME:
Loan receivable $20,929 $17,390
Securities available for sale 1,172 1,249
Investment securities 1,714 1,438
FHLB stock 155 127
Federal funds sold 53 450
Bank deposits 3 18
Total interest income 24,026 20,672
INTEREST EXPENSE:
Deposits 8,348 9,386
Escrow deposits 72 277
Borrowings 2,203 1,082
Total interest expense 10,623 10,745
Net interest income 13,403 9,927
Provision for loan losses 950 360
Net interest income after provision for loan losses 12,453 9,567
NONINTEREST INCOME:
Service charges on deposits 433 402
Loan servicing revenue 152 208
Recovery on other real estate owned 140 -
Write off of equity investment (950) -
Other 789 865
Total noninterest income 564 1,475
NONINTEREST EXPENSE:
Compensation and benefits 5,143 4,113
Occupancy 1,586 1,485
Deposit insurance & assessments 38 27
Advertising 218 193
Contribution to Cohoes Savings Foundation - 2,777
Merger termination fee - 2,000
Other 1,725 1,826
Total noninterest expense 8,710 12,421
Income (loss) before income tax expense 4,307 (1,379)
Income tax expense (benefit) 1,572 (524)
NET INCOME (LOSS) $ 2,735 $ (855)
Net income per share
Basic $ .32 $ N/A
Diluted $ .32 $ N/A
See accompanying notes to consolidated interim financial statements.
COHOES BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
(In thousands)
Unallocated
Accumulated common
Additional other com- stock Unearned Compre-
Common paid in Retained Treasury prehensive held by RRP hensive
stock capital earnings stock loss, net ESOP shares Total income
Six Months Ended
December 31, 1999
Balance at June 30, 1999 $95 $93,004 $55,173 $ - $(244) $(8,598) $ - $139,430
Net Income, July 1, 1999 -
December 31, 1999 - - 2,735 - - - - 2,735 $2,735
ESOP shares committed
to be released - (3) - - - 318 - 315
Cash dividends paid - - (1,009) - - - - (1,009)
Public market purchase of 857,170
shares of Cohoes Bancorp, Inc.
common stock - - - (11,083) - - - (11,083)
Granting of restricted stock
under RRP - - - 4,505 - - (4,505) -
Forfeited shares under RRP - - - (23) - - 23 -
Change in unrealized loss on
securities available for sale,
net - - - - (378) - - (378) (378)
Balance, December 31, 1999 $95 $93,001 $56,899 $ (6,601) $(622) $(8,280) $(4,482) $130,010 $2,357
COHOES BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
(In thousands)
Unallocated
Accumulated common
Additional other com- stock Unearned Compre-
Common paid in Retained Treasury prehensive held by RRP hensive
stock capital earnings stock income, net ESOP shares Total loss
Six Months Ended
December 31, 1998
Balance at June 30, 1998 $ - $ - $53,270 $- $12 $ - $- $ 53,282
Net loss, July 1, 1998 -
December 31, 1998 - - (855) - - - - (855) $(855)
Issuance of 9,257,500 shares
of $.01 par value common
stock in initial public
offering, netof conversion
related expenses 92 90,258 - - - - - 90,350
Issuance of 277,725 shares
of $.01 par value common
stock to the Cohoes Savings
Foundation 3 2,774 - - - - - 2,777
Open market purchase of Cohoes
Bancorp, Inc. common stock
by ESOP trustee - - - - - (9,137) - (9,137)
Allocation from shares purchased
with 1998 contribution - - - - - 220 - 220
Change in unrealized gain on
securities available for sale,
net - - - - 79 - - 79 79
Balance, December 31, 1998 $95 $93,032 $52,415 $- $91 $(8,917) $- $136,716 $(776)
See accompanying notes to consolidated interim financial statements.
COHOES BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the six months ended December 31,
1999 1998
(In thousands)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS:
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 2,735 $ (855)
Adjustments to reconcile net income to net cash provided by
operating activities-
Charitable contribution to the Cohoes Savings Foundation - 2,777
Depreciation 682 647
Amortization of purchased and originated mortgage servicing rights 95 97
Provision for loan losses 950 360
Provision for deferred tax (benefit) expense (45) (1,394)
Net gain on sale of securities available for sale - (2)
Net premium amortization of investment securities 19 33
Net discount amortization of securities available for sale - (5)
Net gain on sale of mortgage loans (12) (7)
Proceeds from sale of loans held for sale 2,363 493
Loans originated for sale (2,012) (448)
ESOP compensation 315 220
(Increase) decrease in interest receivable (196) 150
Decrease (Increase) in other assets, net of deferred tax
(benefit) expense 1,993 (2,689)
Increase in other liabilities 853 724
Net loss on sale of other real estate owned 185 315
Total adjustments 5,190 1,271
Net cash provided by operating activities 7,925 416
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from investment securities called - 8,000
Proceeds from maturity of investment securities 500 -
Purchase of investment securities (2,014) (17,513)
Proceeds from securities available for sale called - 22,300
Proceeds from the sale of securities available for sale 634 646
Purchase of securities available for sale (1,324) (14,168)
Proceeds from principal reduction in investment securities 3,071 5,139
Proceeds from principal reduction in securities available for sale 2,690 3,924
Net loans made to customers (51,210) (55,276)
Proceeds from sale of other real estate owned 455 795
Capital expenditures (805) (808)
Net cash used in investing activities (48,003) (46,961)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in mortgagors' escrow deposits (2,656) (1,829)
Net increase in borrowings 39,555 29,581
Net increase in deposits 30,082 71,002
Net proceeds from the issuance of common stock - 90,350
Purchase of ESOP common stock - (9,137)
Purchase of treasury shares (11,083) -
Cash dividends paid (1,009) -
Net cash provided by financing activities 54,889 179,967
Net increase in cash and cash equivalents 14,811 133,422
CASH AND CASH EQUIVALENTS, beginning of period 11,114 14,229
CASH AND CASH EQUIVALENTS, end of period $ 25,925 $147,651
ADDITIONAL DISCLOSURE RELATIVE TO CASH FLOWS:
Interest paid $ 10,205 $ 10,497
Taxes paid 2,025 540
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES:
Transfer of loans to other real estate owned $ 817 $ 1,075
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES:
Granting of restricted stock under RRP $ 4,505 $ -
See accompanying notes to consolidated interim financial statements.
COHOES BANCORP, INC.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1. Basis of Presentation
Cohoes Bancorp, Inc. ("Company") was incorporated under Delaware law in
September 1998 as a savings and loan holding company to purchase 100% of the
common stock of the Cohoes Savings Bank ("Bank"). On December 31, 1998,
Cohoes Bancorp, Inc. completed its initial public offering of 9,257,500
shares of common stock in connection with the conversion of the Bank from a
mutual form institution to a stock savings bank (the "Conversion").
Concurrently with the Conversion, Cohoes Bancorp, Inc. acquired all of the
Bank's common stock.
The consolidated financial statements included herein reflect all normal
recurring adjustments which are, in the opinion of management, necessary to
present a fair statement of the results for the interim periods presented.
The results of operations for the three and six months ended December 31,
1999 are not necessarily indicative of the results of operations that may be
expected for the entire year ending June 30, 2000. Certain information and
note disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed
or omitted pursuant to the rules and regulations of the U.S. Securities and
Exchange Commission.
These consolidated financial statements should be read in conjunction
with the Company's 1999 Annual Report on Form 10K.
2. Earnings Per Share
On December 31, 1998, Cohoes Bancorp, Inc. completed its initial stock
offering of 9,257,500 shares of common stock. Concurrent with the offering,
approximately 8% of the shares issued (762,818) were purchased by the Cohoes
Bancorp, Inc. Employee Stock Ownership Plan ("ESOP") using the proceeds of a
loan from the Company to the ESOP. As of December 31, 1999, 71,538 shares
have been released from the ESOP trust for allocation to ESOP participants.
Consequently, the remaining 691,280 shares have not yet been released and
under AICPA Statement of Position 93-6, these shares will not be considered
outstanding for purposes of calculating per share amounts. Earnings per share
are not presented for periods prior to the initial public offering as the
Bank was a mutual savings bank, and had no stock outstanding. The following
is a reconciliation of the numerator and denominator for the basic and
diluted earnings per share (EPS) calculations for the six and three months
ended December 31,1999.
For the six months ended December 31, 1999:
Weighted
Average
Net income Shares Per share
(numerator) (denominator) Amount
(In thousands, except for and per share amounts)
Basic EPS $2,735 8,440,924 $ 0.32
Dilutive effect of potential common shares
related to stock based compensation plans - -
$2,735 8,440,924 $ 0.32
For the three months ended December 31, 1999:
Weighted
Average
Net income Shares Per share
(numerator) (denominator) Amount
(In thousands, except for and per share amounts)
Basic EPS $1,090 8,319,729 $0.13
Dilutive effect of potential common shares
related to stock based compensation plans - -
$1,090 8,319,729 $ 0.13
4. Loan Portfolio Composition
The following table sets forth the composition of the loan portfolio in
dollar amounts and percentage of the portfolio at the dates indicated.
December 31,1999 June 30, 1999
Amount % of Total Amount % of Total
(Dollars in thousands)
Real estate loans:
One-to-four family real estate $338,368 59.24% $320,721 61.12%
Multi-family and commercial real estate 161,333 28.24 138,288 26.35
Total real estate loans 499,701 87.48 459,009 87.47
Consumer loans:
Home equity lines of credit 19,851 3.48 20,090 3.83
Conventional second mortgages 11,507 2.01 12,724 2.42
Automobile loans 9,385 1.64 9,658 1.84
Other consumer loans 1,656 0.29 1,244 0.24
Total consumer loans 42,399 7.42 43,716 8.33
Commercial business loans 29,126 5.10 22,054 4.20
Total loans 571,226 100.00% 524,779 100.00%
Less:
Net deferred loan origination fees and costs 340 251
Allowance for loan losses (4,473) (4,025)
Net loans receivable $567,093 $521,005
5. Non-Performing Assets
The following table sets forth information regarding non-accrual loans,
other past due loans, troubled debt restructurings and other real estate
owned at the dates indicated.
December 31, June 30,
1999 1999
(Dollars in thousands)
Non-accrual loans:
One-to-four family real estate $2,283 $2,674
Multi-family and commercial real estate 1,160 1,364
Conventional second mortgages 31 9
Consumer loans 193 212
Commercial business loans 62 62
Total non-accrual loans 3,729 4,321
Loans contractually past due 90 days or more and still accruing interest:
Consumer loans - -
Total loans 90 days or more and still accruing interest - -
Troubled debt restructurings 631 672
Total non-performing loans 4,360 4,993
Other real estate owned (ORE) 902 724
Total non-performing assets $5,262 $5,717
Allowance for loan losses $4,473 $4,025
Coverage of non-performing loans 102.59% 80.62%
Total non-performing loans as a percentage of total loans .76% .95%
Total non-performing loans as a percentage of total assets .62% .77%
6. Allowance for Loan Losses
The following table sets forth the activity in the allowance for loan
losses at the dates and for the periods indicated.
At or for the six months ended December 31,
1999 1998
(In thousands)
Allowance for loan losses, beginning period $4,025 $3,533
Charged-off loans:
Real estate loans
One-to-four family real estate 142 128
Multi-family and commercial real estate 36 34
Total real estate loan charge-offs 178 162
Commercial business loans charge-offs 367 -
Consumer loans
Home equity lines of credit - -
Conventional second mortgages - 24
Automobile loans 1 14
Credit cards 2 122
Other consumer loans 6 28
Total consumer loan charge-offs 9 188
Total charged-off loans 554 350
Recoveries on loans previously charged-off:
Real estate loans
One-to-four family real estate 27 113
Multi-family and commercial real estate - 16
Total real estate loan recoveries 27 129
Commercial business loan recoveries - 1
Consumer loans
Home equity lines of credit - -
Conventional second mortgages - -
Automobile loans 1 -
Credit cards 20 18
Other consumer loans 4 4
Total consumer loan recoveries 25 22
Total recoveries 52 152
Net loans charged-off 502 198
Provision for loan losses 950 360
Allowance for loan losses, end of period $4,473 $3,695
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
Cohoes Bancorp, Inc. ("Company"), headquartered in Cohoes, New York is a
savings and loan holding company incorporated in September 1998 under the
laws of the State of Delaware. The Company was organized at the direction of
Cohoes Savings Bank ("Bank") for the purpose of acquiring all of the common
stock of the Bank issued in connection with the conversion of the Bank from
mutual to stock form ("Conversion"). On December 31, 1998, the Bank completed
its Conversion, and the Company sold 9,257,500 shares of its common stock at
a price of $10.00 per share in a subscription offering ("Offering") to
certain depositors of the Bank. In connection with the Conversion and
Offering, the Company established the Cohoes Savings Foundation, Inc.
("Foundation") and made a charitable contribution of 277,725 shares of the
Company's common stock to the Foundation, which resulted in a one-time charge
relating to the funding of the Foundation of $2.8 million ($1.7 million net
of tax). The net proceeds from the Offering amounted to $90.4 million, and
the Company contributed 50% of the net proceeds from the Offering to the Bank
in exchange for all of the issued and outstanding shares of common stock of
the Bank. The Company had no significant assets or operations prior to
December 31, 1998. Per share data is reported for the period since
Conversion. Presently, the only significant assets of the Company are the
capital stock of the Bank, the Company's loan to the Employee Stock Ownership
Plan of the Company and the investments of the net proceeds from the Offering
retained by the Company. The Company is subject to the financial reporting
requirements of the Securities Exchange Act of 1934, as amended.
Financial Condition
For the six month period ended December 31, 1999, total assets of the
Company increased $58.4 million, or 9.0%, from $650.5 million at June 30,
1999 to $708.9 million at December 31, 1999. This increase in total assets
was primarily attributable to a $46.1 million, or 8.8%, increase in net loans
receivable which increased from $521.0 million at June 30, 1999 to $567.1
million at December 31, 1999, and a $14.8 million increase in cash and due
from banks, which increased from $8.9 million at June 30, 1999 to $23.7
million at December 31, 1999. These increases resulted from continued growth
in the loan portfolio, particularly mortgage loans and commercial business
loans, and from the increase in vault cash to prepare for Y2K liquidity needs
of our customers.
Deposits increased $30.1 million, or 6.7%, from $446.1 million at June
30, 1999, to $476.2 million at December 31, 1999. This increase was primarily
attributable to a $26.4 million increase in time deposits due to a highly
successful time deposit promotion in which the Company increased its
advertising for new deposits while maintaining competitive rates. Demand
balances also increased $4.0 million to $69.8 million at December 31, 1999
primarily due to the Company's decision to make the direct deposit of
January's social security payments available to its customers on December 31,
1999.
Borrowings, comprised primarily of Federal Home Loan Bank advances,
increased $39.6 million, or 80.7%, from $49.0 million at June 30, 1999 to
$88.6 million at December 31, 1999. This increase was primarily the result of
additional Federal Home Loan Bank advances used to fund loan growth.
Total stockholders' equity decreased $9.4 million, or 6.8%, from $139.4
million at June 30, 1999, to $130.0 million at December 31, 1999. The
decrease was primarily attributable to the repurchase of shares in the amount
of $11.1 million for treasury and the RRP Plan. The book value per share at
December 31, 1999 was $14.41.
Average Balance Sheets. The following tables set forth certain
information relating to the Company for the three and six months ended
December 31, 1999 and 1998. The yields and costs were derived by dividing
interest income or expense by the average balance of assets or liabilities,
respectively, for the periods shown. The yields include deferred fees and
discounts which are considered yield adjustments.
Three Months Ended December 31,
1999 1998
Average Interest Average Interest
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Balance Paid Rate Balance Paid Rate
(Dollars in thousands)
Interest-earning assets
Loans receivable $560,824 $10,717 7.58% $445,263 $ 8,800 7.84%
Securities available for sale 37.480 572 6.05 35,326 544 6.11
Investments securities 57,460 849 5.86 47,599 731 6.09
Federal funds sold 3,545 51 5.71 35,494 409 4.57
FHLB stock 4,868 83 6.76 3,552 63 7.04
Other interest-earning assets 99 1 4.01 600 9 5.95
Total interest-earning assets 664,276 12,273 7.33 567,834 10,556 7.38
Non-earning assets 25,455 23,391
Total assets $689,731 $591,225
Interest-bearing liabilities
Savings accounts $134,039 928 2.75 $128,281 970 3.00
School savings accounts 16,467 177 4.26 17,691 223 5.00
Money market accounts 25,342 208 3.26 20,325 165 3.22
Demand deposits 67,379 104 0.61 57,172 83 0.58
Time deposits 215,506 2,786 5.13 222,492 3,148 5.61
Escrow accounts 6,957 27 1.54 35,030 238 2.70
Borrowings 88,918 1,279 5.71 49,517 709 5.68
Total interest-bearing liabilities 554,608 5,509 3.94 530,508 5,536 4.14
Other liabilities 5,314 5,485
Stockholders' equity 129,809 55,232
Total liabilities and
stockholders' equity $689,731 $591,225
Net interest income $ 6,764 $ 5,020
Net interest rate spread 3.39% 3.24%
Net earning assets $109,668 $ 37,326
Net yield on average
interest-earning assets 4.04% 3.51%
Average interest-earning assets to
average interest-bearing 1.20X 1.07X
liabilities
Six Months Ended December 31,
1999 1998
Average Interest Average Interest
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Balance Paid Rate Balance Paid Rate
(Dollars in thousands)
Interest-earning assets
Loans receivable $550,289 $20,929 7.54% $434,762 $17,390 7.93%
Securities available for sale 38,346 1,172 6.06 39,634 1,249 6.25
Investments securities 57,564 1,714 5.91 47,683 1,438 5.98
Federal funds sold 1,858 53 5.66 19,261 450 4.63
FHLB stock 4,466 155 6.88 3,552 127 7.09
Other interest-earning assets 243 3 2.45 592 18 6.04
Total interest-earning assets 652,766 24,026 7.30 545,484 20,672 7.52
Non-earning assets 24,608 21,248
Total assets $677,374 $566,732
Interest-bearing liabilities
Savings accounts $135,353 1,931 2.83 $128,360 1,929 2.98
School savings accounts 16,756 359 4.25 17,682 469 5.26
Money market accounts 25,035 442 3.50 19,943 337 3.35
Demand deposits 67,521 207 0.61 55,503 168 0.60
Time deposits 210,129 5,409 5.11 225,994 6,483 5.69
Escrow accounts 8,361 72 1.71 21,824 277 2.52
Borrowings 77,287 2,203 5.65 37,264 1,082 5.76
Total interest-bearing liabilities 540,442 10,623 3.90 506,570 10,745 4.21
Other liabilities 5,644 5,482
Stockholders' equity 131,288 54,680
Total liabilities and
stockholders' equity $677,374 $566,732
Net interest income $13,403 $ 9,927
Net interest rate spread 3.40% 3.31%
Net earning assets $112,324 $ 38,914
Net yield on average
interest-earning assets 4.07% 3.61%
Average interest-earning assets to
average interest bearing 1.21X 1.08X
liabilities
Rate/Volume Analysis. The following table presents the extent to which
changes in interest rates and changes in the volume of interest-earning
assets and interest-bearing liabilities have affected the Company's interest
income and interest expense during the periods indicated. Information is
provided in each category with respect to (i) changes attributable to changes
in volume (changes in volume multiplied by prior rate), (ii) changes
attributable to changes in rate (changes in rate multiplied by prior volume)
and (iii) the net change. The changes attributable to the combined impact of
volume and rate have been allocated proportionately to the changes due to
volume and the changes due to rate.
Three Months Ended December 31,1999 Six Months Ended December 31,1999
Compared to Compared to
Three Months Ended December 31,1998 Six Months Ended December 31,1998
Increase (Decrease) Total Increase (Decrease) Total
Due To Increase Due to Increase
Volume Rate (Decrease) Volume Rate (Decrease)
(Dollars in thousands)
Interest and dividend income from:
Loans receivable $3,750 $(1,833) $1,917 $5,848 $(2,309) $3,539
Securities available for sale 33 (5) 28 (40) (37) (77)
Investment securities 144 (26) 118 328 (52) 276
Federal funds sold (495) 137 (358) (636) 239 (397)
FHLB stock 36 (16) 20 38 (10) 28
Other interest-earning assets (6) (2) (8) (7) (8) (15)
Total interest and dividend income 3,462 (1,745) 1,717 5,531 (2,177) 3,354
Interest expense for:
Savings accounts 211 (253) (42) 202 (200) 2
School savings accounts (15) (31) (46) (24) (86) (110)
Money market accounts 41 2 43 89 16 105
Demand accounts 16 5 21 37 2 39
Time deposit accounts (97) (265) (362) (436) (638) (1,074)
Escrow accounts (137) (74) (211) (135) (70) (205)
Other borrowings 547 23 570 1,180 (59) 1,121
Total interest expense 566 (593) (27) 913 (1,035) (122)
Net interest income $2,896 $(1,152) $1,744 $4,618 $(1,142) $3,476
Comparison of Operating Results for the Three Months Ended December 31, 1999
and 1998
For the three months ended December 31, 1999 the Company recognized net
income of $1.1 million, as compared to a net loss of $1.8 million for the
three months ended December 31, 1998. Noninterest expense decreased $4.2
million for the three months ended December 31, 1999 as compared to the same
period last year. Net interest income increased $1.8 million for the three
months ended December 31, 1999 as compared to the same period last year.
These increases in net income were partially offset by a decrease in
noninterest income of $895,000 and an increase in income tax expense of $1.7
million for the three months ended December 31, 1999 as compared to the same
period last year.
Net Interest Income. Net interest income for the three months ended
December 31, 1999 was $6.8 million, up $1.8 million from the same period last
year. The increase was primarily the result of an increase of $96.5 million
in the balance of average earning assets from $567.8 million for the three
months ended December 31, 1998 to $664.3 million for the same period this
year. The balance of interest-bearing liabilities also increased during the
same period, up $24.1 million. The net impact of these volume increases was
an increase in net interest income of $2.9 million. The volume increases were
offset by a $1.2 million decrease in net interest income due to rate. The
yield on average earning assets decreased from 7.38% to 7.33% and the rate
paid on average interest-bearing liabilities decreased from 4.14% to 3.94%.
This resulted in an increase in net interest rate spread of 15 basis points
from 3.24% for the three months ended December 31, 1998 to 3.39% for the
three months ended December 31, 1999. The spread increased despite a decline
in the loan yield. Loans are the highest yielding asset category and
aggressive marketing allowed the Company to increase loans as a percentage of
average interest-earning assets from 78.4% in the 1998 quarter to 84.4% in
the 1999 quarter, which had a positive effect on spread. The Company's net
interest margin for the three months ended December 31, 1999 was 4.04%, up 53
basis points from 3.51% for the same period last year. The net interest
margin increased more than the increase in spread because average
stockholders' equity increased from $55.2 million to $129.8 million
principally due to the Offering.
Interest Income. Interest income for the three months ended December 31,
1999 was $12.3 million, up from $10.6 million for the comparable period in
1998. The largest component of interest income is interest on loans. Interest
on loans increased from $8.8 million for the three months ended December 31,
1998 to $10.7 million for the three months ended December 31, 1999. This
increase of $1.9 million is the result of an increase in the average balance
of loans offset by a decrease in the average yield earned. The average
balance of loans increased $115.5 million to $560.8 million which accounted
for an increase in income due to volume of $3.8 million. The yield on loans,
however, decreased 26 basis points from 7.84% to 7.58% due to declines in
market interest rate conditions which accounted for a decrease in interest
income due to rate of $1.8 million.
Interest Expense. Interest expense remained constant for the quarter
ended December 31, 1999 compared to quarter ended December 31, 1998 at $5.5
million. The majority of the Company's interest expense is from the Company's
interest-bearing deposits. The largest category of interest-bearing deposits
is time deposits. Interest on time deposits for the quarter ended December
31, 1999 was $2.8 million, down $362,000 from $3.1 million for the quarter
ended December 31, 1998. This decrease is the result of a decrease in the
average balance of time deposits, from $222.5 million for the quarter ended
December 31, 1998 to $215.5 million for the quarter ended December 31, 1999
and a decrease of 48 basis points in the rates paid on these deposits from
5.61% for the quarter ended December 31, 1998 to 5.13% for the same period in
1999. The average balance of time deposits declined due to the Company's
emphasis on core deposits for most of calendar year 1999. The average rates
paid declined as time deposits originated in prior years at higher rates were
rolled over or replaced during periods of lower market interest rates.
Interest on savings accounts decreased $42,000 for the quarter ended
December 31, 1999 as compared to the same period last year. This decrease was
due largely to a reduction in rate paid on savings accounts which accounted
for a $253,000 savings in interest expense. The Company implemented a 25
basis point decrease in the rates paid on savings accounts in September 1999
due to competitors interest rates paid on comparable savings products. The
decrease was partially offset by an increase in average balance of $5.8
million. Interest on school savings accounts decreased $46,000, from $223,000
for the quarter ended December 31, 1998 to $177,000 for the quarter ended
December 31, 1999, substantially all of which was the result of a reduction
in rate on the school savings accounts of 74 basis points. Interest on money
market accounts increased $43,000, from $165,000 for the quarter ended
December 31, 1998 to $208,000 for the quarter ended December 31, 1999. The
increase is attributed to an increase in the average balance of money market
accounts of $5.0 million as well as an increase of 4 basis points in the
rates paid on these money market accounts, from 3.22% to 3.26%.
Interest on borrowings for the quarter ended December 31, 1999 was $1.3
million, up $570,000 from the same period last year. This increase is almost
entirely attributable to an increase of $39.4 million in the average balance
of borrowings. The Company borrowed additional funds during 1999 to support
asset growth, particularly in the loan portfolio, as part of the process of
leveraging the additional capital received in the Offering. Interest on
escrow accounts decreased $211,000, from $238,000 for the quarter ended
December 31, 1998 to $27,000 for the quarter ended December 31, 1999. The
decrease is attributed to an decrease in the average balance of escrow
accounts of $28.1 million as well as an decrease of 116 basis points in the
rates paid on these escrow accounts, from 2.70% to 1.54%. The average balance
of escrow accounts decreased because stock subscriptions received during the
quarter ended December 31, 1998, were classified as escrow accounts until the
Conversion was consummated and the funds were either used to purchase the
Company's common stock or returned to the subscriber in the case of an over
subscription. The remaining escrow accounts are primarily mortgage escrow
deposits which have lower rates than the rates paid on the stock
subscriptions, hence the decline in the average rate paid on escrow accounts.
Provision for Loan Losses. The provision for loan losses increased from
$180,000 for the quarter ended December 31, 1998 to $610,000 for the quarter
ended December 31, 1999. The increase in the provision is attributed to the
increase in the level of net charge-offs from $105,000 for the quarter ended
December 31, 1998 to $470,000 for the quarter ended December 31, 1998 and the
increase in the balance of loans outstanding. Charge offs for the quarter
ended December 31, 1999 increased primarily as a result of an unexpected
$367,000 charge off on a loan associated with the Bank's investment in The
Commons, LLC discussed below.
Noninterest Income. Noninterest income for the quarter ended December
31, 1999 was a loss of $98,000, down from income of $797,000 for the quarter
ended December 31, 1998. This reduction is almost entirely due to the
$950,000 charge off of the Bank's investment in The Commons, LLC. This was an
equity investment in an economic development area of Albany that due to the
uncertain financial condition was charged off in December 1999. This
reduction was partially offset by a recovery on ORE properties of $140,000.
Service charges on deposits increased slightly to $230,000 for the quarter
ended December 31, 1999, from $204,000 for the quarter ended December 31,
1998. Loan servicing revenue declined $27,000 from $103,000 for the quarter
ended December 31, 1998 to $76,000 for the quarter ended December 31, 1999.
The decline relates to a reduction in the balance of loans serviced for
others. Other noninterest income was down $84,000 from $490,000 for the
quarter ending December 31, 1998 to $406,000 for the quarter ending December
31, 1999. During the quarter ended December 31, 1999, mortgage application
and assignment fees declined $44,000 due to an increase in mortgage rates and
fees collected on credit card programs declined $21,000 as a result of the
sale of the credit card portfolio in February 1999.
Noninterest Expense. Noninterest expense decreased $4.2 million to $4.4
million for the quarter ended December 31, 1999, down from $8.6 million for
the comparable period in 1998. The termination fee paid to SFS Bancorp, Inc.
of $2.0 million and the contribution of $2.8 million to the Cohoes Savings
Foundation, Inc. are the primary factors which occurred in 1998 that account
for this reduction. This reduction is partially offset by an increase in
compensation and benefits of $441,000 of which $210,000 is due to the
recognition and retention plan approved on July 2, 1999. The remaining
increase of $231,000 is primarily attributable to annual and merit increases
for employees, the additional staff cost of four new branches, and increases
in health and dental insurance costs. The increase in occupancy expense of
$133,000 from the quarter ended December 31, 1999 compared to the quarter
ended December 31, 1998 is primarily attributable to the opening of four new
branch locations during the calendar year of 1999.
Income Tax Expense. Income tax expense increased from a tax benefit of
$1.2 million for the quarter ended December 31, 1998 to a tax expense of
$567,000 for the comparable period in 1999. The increase is primarily the
result of increased income before income tax expense.
Comparison of Operating Results for the Six Months Ended December 31, 1999
and 1998
For the six months ended December 31, 1999 the Company realized net
income of $2.7 million, as compared to a net loss of $855,000 for the six
months ended December 31, 1998. Noninterest expense decreased $3.7 million
and net interest income increased $3.5 million for the six months ended
December 31, 1999 as compared to the same period last year. These increases
in net income were partially offset by a reduction in noninterest income of
$911,000 and an increase in income tax expense of $2.1 million for the six
months ended December 31, 1999 as compared to the six months ended December
31, 1998.
Net Interest Income. Net interest income for the six months ended
December 31, 1999 was $13.4 million, up $3.5 million from the same period
last year. The increase was primarily the result of the increase of $107.3
million in the balance of average earning assets from $545.5 million for the
six months ended December 31, 1998 to $652.8 million for the same period this
year. Interest-bearing liabilities also increased during the same period, up
$33.9 million. The net impact of these volume increases resulted in an
increase in the net interest income of $4.6 million. The volume increases
were offset by a reduction $1.1 million in net interest income due to rate.
The Company's net interest margin for the six months ended December 31, 1999
was 4.07%, up 46 basis points from 3.61% for the same period last year. The
yield on average earning assets decreased from 7.52% to 7.30%, while the rate
paid on average interest-bearing liabilities decreased from 4.21% to 3.90%.
Interest Income. Interest income for the six months ended December 31,
1999 was $24.0 million, up from $20.7 million for the comparable period in
1998. The largest component of interest income is interest on loans. Interest
on loans increased from $17.4 million for the six months ended December 31,
1998 to $20.9 million for the six months ended December 31, 1999. This
increase of $3.5 million is the result of an increase in the average balance
of loans offset by a decrease in the average yield earned. The average
balance of loans increased $115.5 million to $550.3 million, while the yield
on loans decreased 39 basis points from 7.93% to 7.54%. The increase in
interest on loans was supplemented by an increase in interest on investment
securities. Interest income on this category of earning assets increased
$276,000. The average balance of investment securities increased $9.9 million
in the six months ended December 31, 1998 to $57.6 million in the six months
ended December 31, 1999, resulting in a $328,000 increase in interest income
due to volume. The average balance of federal funds decreased from $19.3
million in the six months ended December 31, 1998 to $1.9 million in the six
months ended December 31, 1999. The decrease in the volume of federal funds
resulted in a $636,000 decrease in interest income in the six months ended
December 31, 1999 as compared to the six months ended December 31, 1998.
Interest Expense. Interest expense decreased during the six month period
ended December 31, 1999 to $10.6 million, down from $10.7 million for the
comparable period in 1998. The majority of the Company's interest expense is
from interest-bearing deposits. The largest category of interest-bearing
deposits is time deposits. Interest on time deposits for the six months ended
December 31, 1999 was $5.4 million, down $1.1 million from the $6.5 million
for the six months ended December 31, 1998. This decrease is the result of a
decrease in the average balance of time deposits, from $226.0 million for the
six months ended December 31, 1998 to $210.1 million for the six months ended
December 31, 1999 and a decrease of 58 basis points in the rates paid on
these deposits from 5.69% for the six months ended December 31, 1998 to 5.11%
for the same period in 1999. Interest on school savings accounts decreased
$110,000, from $469,000 for the six months ended December 31, 1998 to
$359,000 for the six months ended December 31, 1999, substantially all of
which was the result of a decrease in the rate on school savings accounts of
101 basis points. Interest on money market accounts increased $105,000, from
$337,000 for the six months ended December 31, 1998 to $442,000 for the six
months ended December 31, 1999. The increase is attributed to an increase in
the average balance of money market accounts of $5.1 million as well as an
increase of 15 basis points in the rates paid on these money market accounts,
from 3.35% to 3.50%. Interest on borrowings for the six months ended December
31, 1999 was $2.2 million, due to a $40.0 million increase in the average
balance of borrowings. Interest on escrow accounts decreased $205,000, from
$277,000 for the six months ended December 31, 1998 to $72,000 for the six
months ended December 31, 1999. The decrease is attributed to a decrease in
the average balance of escrow accounts of $13.5 million as well as an
decrease of 81 basis points in the rates paid on these escrow accounts, from
2.52% to 1.71%.
Provision for Loan Losses. The provision for loan losses increased from
$360,000 for the six months ended December 31, 1998 to $950,000 for the six
months ended December 31, 1999. The increase in the provision is attributed
to the increased level of net charge-offs from $198,000 for the six months
ended December 31, 1998 to $502,000 for the six months ended December 31,
1999 and the increase in the balance of loans outstanding. Charge offs for
the six months ended December 31, 1999 increased primarily as a result of an
unexpected $367,000 charge off on a loan associated with the Bank's
investment in The Commons LLC discussed earlier.
Noninterest Income. Noninterest income for the six month period ended
December 31, 1999 was $564,000, down from the $1.5 million for the six month
period ended December 31, 1999. This reduction is almost entirely due to the
$950,000 charge off of the Bank's investment in The Commons, LLC. This
reduction was partially offset by a recovery on ORE properties of $140,000.
Service charges on deposits increased slightly to $433,000 for the six months
ended December 31, 1999, from $402,000 for the six months ended December 31,
1998. Loan servicing revenue declined $56,000 from $208,000 for the six
months ended December 31, 1998 to $152,000 for the six months ended December
31, 1999. The decline relates to a reduction in the balance of loans serviced
for others. Other noninterest income has decreased $76,000 from $865,000 for
the six months ended December 31, 1998 to $789,000 for the six months ended
December 31, 1999. During the six months ended December 31, 1999, mortgage
assignment fees declined $17,000 due to an increase in mortgage rates and
fees collected on credit card programs declined $45,000 as a result of the
sale of the credit card portfolio in February 1999.
Noninterest Expense. Noninterest expense decreased $3.7 million to $8.7
million for the six months ended December 31, 1999, down from $12.4 million
for the comparable period in 1998. The termination fee paid to SFS Bancorp,
Inc. of $2.0 million and the contribution of $2.8 million to the Cohoes
Savings Foundation, Inc. account for the largest portion of the decrease in
noninterest expense for the six month period ending December 31, 1999
compared to the same period last year. This reduction is partially offset by
an increase in compensation and benefits of $1.0 million of which $420,000 is
due to the recognition and retention plan approved on July 2, 1999 and an
increase of $100,000 in the contribution to the Company's Employee Stock
Ownership Plan. The remaining increase in compensation and benefits of
$480,000 is primarily attributable to annual and merit increases for
employees, the additional staff cost of four new branches, and increases in
health and dental insurance costs. The increase in occupancy expense of
$101,000 for the six months ended December 31, 1999 compared to the same
period last year is primarily attributable to the opening of four new branch
locations during the calendar year of 1999.
Income Tax Expense. Income tax expense increased $2.1 million from a
$524,000 benefit for the six months ended December 31, 1998 to a $1.6 million
expense for the comparable period in 1999. The increase is primarily the
result of increased income before income tax expense.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
Liquidity is defined as the ability to generate sufficient cash flow to
meet all present and future funding commitments, depositor withdrawals and
operating expenses. Management monitors the Company's liquidity position on a
daily basis and evaluates its ability to meet depositor withdrawals or make
new loans or investments. The Company's liquid assets include cash and cash
equivalents, investment securities that mature within one year, and its
portfolio of securities available for sale.
The Company's cash inflows result primarily from loan repayments,
maturities, calls and pay downs of securities, new deposits, and to a lesser
extent, drawing upon the Bank's credit lines with the Federal Home Loan Bank
of New York. The Company's cash outflows are substantially new loan
originations, securities purchases, purchases of treasury shares and deposit
withdrawals. The timing of cash inflows and outflows are closely monitored by
management although changes in interest rates, economic conditions, and
competitive forces strongly impact the predictability of these cash flows.
The Company attempts to provide stable and flexible sources of funding
through the management of its liabilities, including core deposit products
offered through its branch network as well as with limited use of borrowings.
Management believes that the level of the Company's liquid assets combined
with daily monitoring of inflows and outflows provide adequate liquidity to
fund outstanding loan commitments, meet daily withdrawal requirements of our
depositors, and meet all other daily obligations of the Company.
During the six months ended December 31, 1999, the Company's primary
demand for funds was to make loans and repurchase outstanding shares. Net
loans increased by $51.2 million while the repurchase of shares required
$11.1 million. These activities were funded principally with a net increase
in borrowings of $39.6 million and net increase in deposits of $30.1 million.
In order to protect against excess cash demand around the end of the year
caused by real or imagined Y2K problem, the Company deliberately maintained a
high level of cash and cash equivalents at December 31, 1999 equal to $25.9
million. The Company promptly moved a substantial portion of those funds into
interest-earning assets after the change to the new millennium proved to be
uneventful.
Capital
Consistent with its goals to operate a sound and profitable financial
organization, the Bank actively seeks to remain a "well capitalized"
institution in accordance with regulatory standards. The Bank's total equity
was $95.2 million at December 31, 1999, 13.5% of total assets on that date.
As of December 31, 1999, the Bank exceeded all of the capital requirements of
the FDIC. The Bank's regulatory capital ratios at December 31, 1999 were as
follows: Tier I (leverage) capital, 13.9%; Tier I risk-based capital, 20.9%;
and Total risk-based capital, 21.9%. The regulatory capital minimum
requirements to be considered well capitalized are 5.0%, 6.0%, and 10.0%,
respectively.
The Company's total equity at December 31, 1999 was $130.0 million down
$9.4 million from June 30, 1999. This reduction in equity is reflective of
management's objective to leverage its capital through asset growth, a
dividend policy and a share repurchase program. The Company completed a 5%
repurchase program during September 1999 and is currently executing a 10%
share repurchase program.
Item 3. Quantitative And Qualitative Disclosures About Market Risk
Not applicable
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company and the Bank are from time to time parties to routine legal
actions arising in the normal course of business. Management believes that
there is no proceeding threatened or pending against the Company or the Bank
which, if determined adversely, would materially adversely affect the
consolidated financial position or operations of the Company.
Item 2. Changes in Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
The Company held an annual meeting of shareholders on October 26, 1999.
At the meeting, proposals to (i) Elect Directors Bowen, MacAffer, Robinson
and Speidel for three year terms and (ii) ratify the appointment of Arthur
Andersen, LLP as independent auditors for the Company for the fiscal year
ending June 30, 2000 were approved. The votes cast for and against these
proposals, and the number of abstentions with respect to each of these
proposals, were as follows:
Election of Directors
For Withheld
Bowen 7,291,008 69,134
Mac Affer 7,290,924 69,218
Robinson 7,313,300 46,842
Speidel 7,290,093 70,049
Ratification of Arthur Andersen, LLP as Independent Auditors
For Against Abstentions
7,228,483 48,250 83,408
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27. Financial Data Schedules (submitted only with filing in
electronic format)
(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.
Cohoes Bancorp, Inc.
(Registrant)
Date: February 11, 2000 By: /s/ Harry L. Robinson
---------------------
Harry L. Robinson
President and Chief Executive
Officer
Date: February 11, 2000 By: /s/ Richard A. Ahl
------------------
Richard A. Ahl
Executive Vice President,
Chief Financial Officer and
Secretary
Exhibit 27
Financial Data Schedule
This schedule contains summary financial information extracted from the
Form 10Q for the quarter ended December 31, 1999 of Cohoes Bancorp, Inc. and
subsidiary and is qualified in its entirety by reference to such financial
statements.