FORM 10-Q.--QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 For the quarterly period
ended June 30, 1997
-------------
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 0-27650
CATSKILL FINANCIAL CORPORATION
------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 14-1788465
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
341 MAIN STREET, CATSKILL, NY 12414
----------------------------------------------------
(Address of principal executive offices) (Zip Code)
(518)943-3600
-------------
(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. Yes x No
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
Common Shares, $.01 par value 4,898,506
----------------------------- -----------------
(Title of class) (outstanding at July 31, 1997)
CATSKILL FINANCIAL CORPORATION
FORM 10-Q
JUNE 30, 1997
INDEX
PART I FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Statements of Financial Condition as of
June 30, 1997 (Unaudited) and September 30, 1996 1
Consolidated Statements of Income for the nine months ended
June 30, 1997 and 1996 (Unaudited) 2
Consolidated Statements of Income for the three months ended
June 30, 1997 and 1996 (Unaudited) 3
Consolidated Statements of Changes in Shareholders' Equity
for the nine months ended June 30, 1997 and 1996 (Unaudited) 4
Consolidated Statements of Cash Flows for the nine months
ended June 30, 1997 and 1996 (Unaudited) 5
Notes to Unaudited Consolidated Interim Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 20
Item 6. Exhibits and Reports on Form 8-K 20
Signatures 21
CATSKILL FINANCIAL CORPORATION
Consolidated Statements of Financial Condition
(In Thousands, Except Per Share Data)
Assets June 30, 1997 September 30, 1996
(Unaudited)
Cash and due from banks $ 2,734 $ 4,112
Federal funds sold --- 35,600
Cash and cash equivalents 2,734 39,712
Securities available for sale, at fair value 140,833 97,041
Investment securities, at amortized cost:
(Approximate fair value of $10,092 at June 30,
1997, and $19,090 at September 30, 1996) 10,059 19,077
Investment required by law, stock in Federal
Home Loan Bank of NY, at cost 1,762 1,159
Loans receivable, net 123,553 122,533
Accrued interest receivable 2,362 1,736
Premises and equipment, net 2,370 1,886
Real estate owned, net 370 357
Deposits held at Nationar, net --- 83
Prepaid expenses and other assets 195 175
Total Assets $284,238 $283,759
Liabilities and Shareholders' Equity
Liabilities:
Deposits:
Non-interest bearing $ 4,556 $ 3,714
Interest bearing 194,700 193,039
Total Deposits 199,256 196,753
Other short-term borrowings 9,415 ---
Advance payments by borrowers for property
taxes and insurance 2,313 1,632
Accrued interest on deposits 57 58
Official bank checks 1,173 2,598
Accrued expenses and other liabilities 855 337
Total Liabilities $213,069 $201,378
Shareholders' Equity
Preferred stock, $.01 par value; authorized
5,000,000 shares
Common stock, $.01 par value; authorized
15,000,000 shares; 5,686,750 shares issued
at June 30, 1997 and September 30, 1996 57 57
Additional paid-in-capital 54,745 54,864
Treasury stock at cost (788,244 shares at June (11,882) ---
30, 1997)
Retained earnings, substantially restricted 34,274 31,984
Common Stock acquired by ESOP (4,322) (4,436)
Unearned Management Recognition Plan (1,931) ---
Net unrealized gain (loss) on securities
available for sale, net of taxes 228 (88)
Total Shareholders' Equity 71,169 82,381
Total Liabilities and Shareholders' Equity $284,238 $283,759
See accompanying notes to unaudited consolidated interim financial statements.
CATSKILL FINANCIAL CORPORATION
Consolidated Statements of Income
(In Thousands, Except Per Share Data)
NINE MONTHS ENDED
June 30,
1997 1996
(Unaudited)
Interest and dividend income:
Loans $ 7,542 $ 7,333
Securities available for sale 6,332 1,011
Investment securities 555 1,951
Federal funds sold and other 539 2,682
Stock in Federal Home Loan Bank of NY 64 23
Total interest and dividend income 15,032 13,000
Interest Expense
Deposits 6,408 6,865
Short term borrowings 74 ---
Total interest expense 6,482 6,865
Net interest income 8,550 6,135
Provision for loan losses 225 120
Net interest income after provision for
loan losses 8,325 6,015
Noninterest income:
Recovery of Nationar loss contingency 100 560
Service fees on deposit accounts 177 163
Net securities gains 15 34
Other income 114 141
Total noninterest income 406 898
Noninterest expense:
Salaries and employee benefits 2,191 1,658
Advertising and business promotion 139 100
Net occupancy on premises 249 189
Federal deposit insurance assessments 14 22
Postage and supplies 185 116
Outside data processing fees 270 246
Equipment 140 111
Professional fees 213 157
Other real estate expenses, net (43) 205
Other 478 360
Total noninterest expense 3,836 3,164
Income before taxes 4,895 3,749
Income tax expense 1,937 1,496
Net income $ 2,958 $ 2,253
Earnings per common share $ .62 N/A
Weighted Average Common Shares 4,753,424 N/A
See accompanying notes to unaudited consolidated interim financial statements.
CATSKILL FINANCIAL CORPORATION
Consolidated Statements of Income
(In Thousands, Except Per Share Data)
THREE MONTHS ENDED
June 30,
1997 1996
(Unaudited)
Interest and dividend income:
Loans $ 2,496 $ 2,446
Securities available for sale 2,413 592
Investment securities 155 435
Federal funds sold and other 1 1,489
Stock in Federal Home Loan Bank of NY 27 23
Total interest and dividend income 5,092 4,985
Interest Expense
Deposits 2,172 2,461
Short term borrowings 72 ---
Total interest expense 2,244 2,461
Net interest income 2,848 2,524
Provision for loan losses 75 45
Net interest income after provision for
loan losses 2,773 2,479
Noninterest income:
Recovery of National loss contingency --- 560
Service fees on deposit accounts 62 55
Net securities gains 10 3
Other income 36 42
Total noninterest income 108 660
Noninterest expense:
Salaries and employee benefits 773 571
Advertising and business promotion 55 22
Net occupancy on premises 84 63
Federal deposit insurance assessments 7 1
Postage and supplies 53 33
Outside data processing fees 89 82
Equipment 49 41
Professional fees 81 109
Other real estate expenses, net (22) 150
Other 155 133
Total noninterest expense 1,324 1,205
Income before taxes 1,557 1,934
Income tax expense 608 795
Net income $ 949 $ 1,139
Earnings per common share $ .21 $ .18<F1>
Weighted Average Common Shares 4,455,098 5,231,810
<FN>
<F1> Earnings per common share were calculated using estimated post conversion
net income of $949,000.
See accompanying notes to unaudited consolidated interim financial statements.
CATSKILL FINANCIAL CORPORATION
Consolidated Statements of Changes in Shareholders' Equity
(In Thousands except per share amounts) (Unaudited)
Common Unearned Net Unrealized
Additional Stock Management Treasury Gain (Loss)
Common Paid-in Retained Acquired by Recognition Shares, on Securities
Stock Capital Earnings ESOP Plan at Cost AFS Total
Balance at September 30, 1996 $ 57 $54,864 $31,984 $(4,436) $ (88) $ 82,381
Net Income 2,958 2,958
Dividends paid on common shares (668) (668)
Change in net unrealized gain (loss) on
securities AFS, net of taxes 316 316
Allocation of ESOP shares
(11,355 shares) 48 114 162
Grant of restricted shares under MRP
(178,732 shares) (167) (2,234) 2,401 ---
Amortization of MRP shares 303 303
Purchase of common shares
(966,976 shares) (14,283) (14,283)
Balance at June 30, 1997 $ 57 $54,745 $34,274 $(4,322) $(1,931) $(11,882) $ 228 $ 71,169
Balance at September 30, 1995 $28,667 $ 28,667
Net income 2,253 2,253
Common shares issued, net 57 54,852 54,909
Purchase of ESOP shares (4,549) (4,549)
Change in net unrealized gain (loss) on
securities AFS, net of taxes (589) (589)
Balance at June 30, 1996 $ 57 $54,852 $30,920 $(4,549) $(589) $ 80,691
See accompanying notes to unaudited consolidated interim financial statements.
CATSKILL FINANCIAL CORPORATION
Consolidated Statements of Cash Flows
(In Thousands)
Nine Months Ended
June 30,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES: (Unaudited)
Net Income $ 2,958 $ 2,253
Adjustments to reconcile net income to net cash provided (used) by
operating activities:
Depreciation 134 101
Net amortization (accretion) on securities (134) (140)
Provision for loan losses 225 120
MRP compensation expense 303 -
ESOP compensation expense 249 78
Recovery of Nationar loss contingency (100) (560)
Loss (gains) on sale of other real estate owned (108) 85
Writedown on other real estate owned 16 149
Gains on sales and redemption of securities (15) (34)
(Increase) decrease in other assets (646) 139
Collection of deposits held at Nationar 183 3,114
Decrease in accrued expense and other liabilities (1,206) (1,202)
Net cash provided (used) by operating activities 1,859 4,103
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturity/calls/paydown of investment securities 9,015 23,884
Purchases of investment securities - (6,015)
Net increase in loans receivable (1,697) (666)
Capital expenditures (618) (280)
Purchase of AFS securities (101,880) (80,131)
Purchase of Federal Home Loan Bank Stock (603) (1,159)
Proceeds from maturity/calls/paydown/sales of AFS securities 58,767 35,925
Proceeds from sale of other real estate owned 531 57
Net cash provided (used) by investing activities (36,485) (28,385)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from sale of common stock - 54,909
Common stock acquired by ESOP - (4,549)
Net increase in deposits 2,503 1,371
Net increase in advance payments by borrowers for
property taxes and insurance 681 1,356
Increase in other short-term borrowings 9,415 -
Cash dividends on common stock (668) -
Purchase of common stock for treasury (14,283) -
Net cash provided (used) by financing activities (2,352) 53,087
Net increase (decrease) in cash and cash equivalents (36,978) 28,805
Cash and cash equivalents at beginning of period 39,712 38,064
Cash and cash equivalents at end of period $ 2,734 $ 66,869
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 6,483 $ 6,862
Taxes 2,049 1,414
Transfer of loans to other real estate owned 452 151
Change in net unrealized gain (loss) on AFS net of tax
liability (benefit) of $211 and $(392) respectively 316 (589)
See accompanying notes to unaudited consolidated interim financial statements
CATSKILL FINANCIAL CORPORATION
Notes to Unaudited Consolidated
Interim Financial Statements
Note 1. Basis of Presentation
The unaudited consolidated interim financial statements include the
accounts of Catskill Financial Corporation ("Company") and its wholly
owned subsidiary, Catskill Savings Bank ("Bank"). All intercompany
accounts and transactions have been eliminated in consolidation.
Amounts in prior periods' unaudited consolidated interim financial
statements are reclassified whenever necessary to conform to the
current period's presentation. In Management's opinion, the
unaudited consolidated interim financial statements reflect all
adjustments of a normal recurring nature, and disclosures which are
necessary for a fair presentation of the results for the interim
periods presented and should be read in conjunction with the
consolidated financial statements and related notes included in
Catskill Financial's 1996 Annual Report to Shareholders. The results
of operations for the interim periods are not necessarily indicative
of the results of operations to be expected for the full fiscal year
ended September 30, 1997.
Note 2. Earnings Per Share
On April 18, 1996, Catskill Financial Corporation completed its
initial stock offering of 5,686,750 shares of common stock.
Concurrent with the offering, approximately 8% of the shares sold
(454,940) were purchased by the Catskill Financial Corporation
Employee Stock Ownership Plan ("ESOP"). On March 31, 1997, and
September 30, 1996, the Company released 11,355 and 11,374 shares,
respectively, to plan participants, consequently the remaining
432,211 shares have not been committed to be released and under AICPA
Statement of Position 93-6, these shares will not be considered
outstanding for purposes of calculating per share amounts. The effect
of outstanding stock option awards and restricted shares issued under
the MRP plan are not material to the calculation of earnings per
share. 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.
Note 3. Employee Benefits
Management Recognition Plan
On October 24, 1996, the shareholders approved a Management
Recognition Plan ("MRP") for the benefit of employees, officers and
directors of the Company. Under the MRP, 4% of the Company's common
stock, or 227,470 shares, are available for award in a manner
designed to encourage recipients to remain with the Company.
Concurrent with the approval of the plan, 178,732 common shares were
awarded and will vest at an annual rate of 20% over 5 years. The
fair market value of the shares awarded on the date of grant of $2.2
million, is being amortized to compensation expense as the plan's
participants become vested in those shares. For the nine months
ended June 30, 1997, the Company recognized MRP compensation expense
of approximately $303,000.
Stock Option and Incentive Plan
On October 24, 1996, the shareholders approved a Stock Option and
Incentive Plan ("Stock Option Plan"). Under the stock option plan,
options to purchase a number of shares equal to 10% of the Company's
common shares issued in its initial public offering, or 568,675
shares, became available for award to employees, officers and
directors of the Company. Concurrent with the approval of the plan,
416,333 stock options were granted at an exercise price of $12.50 per
share, representing the average of the high and low sales price on
the grant date. The options vest over a five year period, at an
annual rate of 20% on the anniversary of the grant date.
CATSKILL FINANCIAL CORPORATION
Notes to Unaudited Consolidated
Interim Financial Statements
Note 4. Recent Accounting Pronouncements and Developments
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 128, "Earnings per
Share" (SFAS No. 128). SFAS No. 128 establishes standards for
computing and presenting earnings per share (EPS). This Statement
simplifies the standards for computing EPS making them comparable to
international EPS standards and supersedes Accounting Principles
Board Opinion No. 15, "Earnings per Share" and related
interpretations. SFAS No. 128 replaces the presentation of primary
EPS with the presentation of basic EPS. It also requires dual
presentation of basic and diluted EPS on the face of the income
statement for all entities with complex capital structures and
requires a reconciliation of the numerator and denominator of the
basic EPS computation to the numerator and denominator of the diluted
EPS computation.
Basic EPS excludes dilution and is computed by dividing income
available to common stockholders by the weighted average number of
common shares outstanding for the period. Diluted EPS reflects the
potential dilution that could occur if securities or other contracts
to issue common stock were exercised or converted into common stock
or resulted in the issuance of common stock that then shared in the
earnings of the entity (such as the Company's stock options). This
Statement is effective for the financial statements issued for
periods ending after December 15, 1997, including interim periods.
Earlier adoption is not permitted. This Statement requires
restatement of all prior-period EPS data presented. Management does
not anticipate the effect of the adoption of SFAS No. 128 to be
material.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 129, "Disclosure of
Information about Capital Structure" (SFAS No. 129), which
establishes standards for disclosure about a company's capital
structure. In accordance with SFAS No. 129, companies will be
required to provide in the financial statements a complete
description of all aspects of their capital structure, including call
and put features, redemption requirements and conversion options. The
disclosures required by SFAS No. 129 are for financial statements for
periods ending after December 15, 1997. Management anticipates
providing the required information in the 1998 annual financial
statements.
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 130, "Reporting
Comprehensive Income" (SFAS No. 130). SFAS No. 130 establishes
standards for reporting and displaying comprehensive income. SFAS
No. 130 states that comprehensive income includes the reported net
income of a company adjusted for items that are currently accounted
for as direct entries to equity, such as the mark to market
adjustment on securities available for sale, foreign currency items
and minimum pension liability adjustments. This statement is
effective for fiscal years beginning after December 15, 1997.
Management anticipates developing the required information for
inclusion in the 1998 annual consolidated financial statements.
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 131, "Disclosure of
Segments of an Enterprise and Related Information" (SFAS No. 131).
SFAS No. 131 establishes standards for reporting by public companies
about operating segments of their business. SFAS No. 131 also
establishes standards for related disclosures about products and
services, geographic areas and major customers. This statement is
effective for periods ending after December 15, 1997. Management
anticipates developing the required information for inclusion in the
1998 annual consolidated financial statements.
CATSKILL FINANCIAL CORPORATION
FORM 10-Q
June 30, 1997
PART I - FINANCIAL INFORMATION (continued)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
GENERAL
Catskill Financial Corporation (the "Company" or "Catskill
Financial") was formed in December 1995 to acquire all of the common
stock of Catskill Savings Bank (the "Bank") upon its conversion from
a mutual savings bank to a stock savings bank. On April 18, 1996,
the Company completed its initial public stock offering, issuing
5,686,750 shares of $.01 par value common stock at $10.00 per share.
Net proceeds to the Company were $54.9 million after conversion
costs, and $50.4 million excluding the shares acquired by the
Company's Employee Stock Ownership Plan (the "ESOP"), which were
purchased with the proceeds of a loan from the Company.
The consolidated financial condition and operating results of the
Company are primarily dependent upon its wholly owned subsidiary, the
Bank, and all references to the Company prior to April 18, 1996,
except where otherwise indicated, are to the Bank.
The Bank has been and continues to be a community oriented financial
institution offering a variety of financial services. The Bank
attracts deposits from the general public and uses such deposits,
together with other funds, to originate one to four family
residential mortgages, and, to a lesser extent, consumer (including
home equity lines of credit), commercial, and multi-family real
estate and other loans in its primary market area. The Bank's
primary market is comprised of Greene County and southern Albany
County in New York, which are serviced through four banking offices,
the most recent having opened in December 1996. The Bank's deposit
accounts are insured by the Bank Insurance Fund ("BIF") of the
Federal Deposit Insurance Corporation ("FDIC"), and, as a federal
savings bank, the Bank is subject to regulation by the Office of
Thrift Supervision ("OTS").
The Bank's profitability, like many financial institutions, is
dependent to a large extent upon its net interest income, which is
the difference between the interest it receives on interest earning
assets, such as loans and investments, and the interest it pays on
interest bearing liabilities, principally deposits.
Results of operations are also affected by the Bank's provision for
loan losses, non-interest expenses such as salaries and employee
benefits, occupancy and other operating expenses and to a lesser
extent, non- interest income such as service charges on deposit
accounts.
Financial institutions in general, including the Company, are
significantly affected by economic conditions, competition and the
monetary and fiscal policies of the federal government. Lending
activities are influenced by the demand for and supply of housing,
competition among lenders, the interest rate conditions and funds
availability. Deposit balances and cost of funds are influenced by
prevailing market rates on competing investments, customer preference
and the levels of personal income and savings in the Bank's primary
market area.
For comparative purposes, net income for both the three month and
nine month periods ended June 30, 1996, was favorably impacted by the
Company's recovery of $560,000 of the reserve for probable losses in
connection with the takeover of Nationar. On February 6, 1995, the
New York Superintendent of Banks took possession of Nationar, a New
York chartered bank that provided correspondent banking and related
services for various banking institutions, including the Bank. At
the time Nationar was seized, the Bank had $3.3 million on deposit
with Nationar. As a result of uncertainty related to collectibility,
as of September 30, 1995, the Bank established a reserve of $660,000,
or 20% of the deposit. In June 1996, the Bank received payment of
approximately $3.1 million of its claim and estimated that only
$100,000 of the reserve was still necessary. During the first nine
months of fiscal 1997, the Bank received payment of the remainder of
the claim for which the reserve had been established, and the
$100,000 remaining in the reserve was recovered.
For the nine months ended June 30, 1997, the Company recorded net
income of $2,958,000, an increase of $705,000, or 31.3% over the
comparable period of 1996. Earnings per common share for the nine
months ended June 30, 1997, were $.62, based on weighted average
common shares outstanding of 4,753,424. No shares were outstanding
during the comparable period of last year as the Company completed
its initial public offering on April 18, 1996. Annualized return on
average assets for the nine months ended June 30, 1997 and 1996 was
1.42% and 1.16%, respectively, and return on average equity was 5.19%
and 7.02%, respectively.
FINANCIAL CONDITION
Total assets were $284.2 million at June 30, 1997, an increase of $.4
million, or .2% from the $283.8 million at September 30, 1996.
Cash and cash equivalents were $2.7 million, a decrease of $37.0
million, or 93.2% from the $39.7 million at September 30, 1996. The
decrease was principally a reduction in federal funds as the Company
used available cash to purchase 966,976 shares of its common stock at
a total cost of approximately $14.3 million, and continued to invest
the net proceeds of its initial public offering in securities
available for sale and, to a lesser extent, loans.
Total securities, which include securities held to maturity ("HTM")
and securities available for sale ("AFS"), excluding Federal Home
Loan Bank stock, were $150.9 million, an increase of $34.8 million,
or 30.0% over the $116.1 million as of September 30, 1996. The
change in securities consisted of a $43.8 million increase in AFS
securities, primarily due to the Company's purchase of mortgage
backed securities, and a $9.0 million decrease in HTM securities from
scheduled maturities. Consequently as of June 30, 1997, 93.3% of the
Company's investment portfolio excluding the Federal Home Loan Bank
Stock was classified as AFS, compared to 83.6% as of September 30,
1996.
Loans receivable were $125.4 million as of June 30, 1997, an increase
of $1.0 million or .8% over the $124.4 million as of September 30,
1996. The following table shows the loan portfolio composition as of
the respective balance sheet dates:
June 30, September 30,
1997 1996
(In thousands)
Real Estate Loans
One-to-four family $ 102,230 $ 100,383
Multi-family and commercial 4,867 5,115
Construction 674 423
Total real estate loans 107,771 105,921
Consumer Loans 18,157 19,024
Gross Loans 125,928 124,945
Less: Net deferred loan fees (513) (579)
Total loans receivable $ 125,415 $ 124,366
The decrease in consumer loans was principally a decrease in home
equity loans, as lower mortgage rates have encouraged customers to
refinance their underlying first mortgages and repay their home
equity loans.
Non-performing assets at June 30, 1997 were $1.3 million, or .47% of
total assets, compared to the $1.7 million or .61% of total assets at
September 30, 1996. The table below sets forth the amounts and
categories of the Company's non-performing assets.
June 30, September 30,
1997 1996
(In thousands)
Non-accruing loans:
One-to-four family $ 928 $ 1,008
Multi-family and commercial
real estate --- 78
Consumer 24 283
Total non-accruing loans 952 1,369
Foreclosed assets, net:
One-to-four family 300 334
Multi-family and commercial
real estate 70 23
Total foreclosed assets, net 370 357
Total non-performing assets $ 1,322 $ 1,726
Total non-performing loans as a
% of total loans .76% 1.10%
Total non-performing assets as a
% of total assets .47% .61%
Principally all of the decrease in non-accruing loans at June 30,
1997 as compared to September 30, 1996 was attributed to the Company
foreclosing on seven properties. The net realizable value of the
properties totalling $452,000, was transferred to other real estate,
and $145,000 representing the excess of the carrying value of the
related loans over the net realizable value of the properties, was
charged against the allowance for loan losses. These reductions were
partially offset by an increase of $180,000 in non- accruing loans.
In addition, during the nine months ended June 30, 1997, the Company
sold six parcels of other real estate realizing gains of $108,000.
The following table summarizes the activity in other real estate:
Nine Months Ended June 30,
1997 1996
(In thousands)
Other real estate beginning of
period $ 357 $ 484
Transfer of loans to other real
estate owned 452 151
Sales of other real estate (423) (142)
Write-downs (16) (149)
Other real estate end of period $ 370 $ 344
The allowance for loan losses was $1.9 million, or 1.48% of
period end loans at June 30, 1997, and provided coverage of
non-performing loans of 195.6% compared to coverage of 133.9% as of
September 30, 1996. The following summarizes the activity in the
allowance for loan losses:
Nine Months Ended June 30,
1997 1996
(In thousands)
Allowance at beginning of period $ 1,833 $ 1,950
Charge-offs (230) (237)
Recoveries 34 8
Net charge-offs (196) (229)
Provision for loan losses 225 120
Allowance at end of period $ 1,862 $ 1,841
Total deposits were $199.3 million, at June 30, 1997, an increase of
$2.5 million, or 1.3% from the $196.8 million at September 30, 1996.
The following table shows the deposit composition as of the
respective balance sheet dates:
June 30, 1997 September 30 1996
(In thousands) % of Deposits (In thousands) % of Deposits
Savings $ 80,510 40.4 $ 83,358 42.4
Money market 7,133 3.6 7,752 3.9
NOW 9,868 4.9 9,070 4.6
Non-interest demand 4,556 2.3 3,714 1.9
Certificates of deposits 97,189 48.8 92,859 47.2
$199,256 100.0% $196,753 100.0%
The growth in deposits was principally related to the opening of our
fourth full service branch in late December 1996, and had the Company
not opened the branch, deposits would have decreased $1.0 million, or
.5%. Although the Company experienced deposit growth, savings
deposits decreased $2.8 million or 3.4%, and now represent 40.4% of
deposits compared to 42.4% as of September 30, 1996. The composition
of deposits continues to shift to higher costing certificates of
deposits as the decrease in savings deposits was more than offset by
a $4.3 million increase in certificates of deposits which now
represent 48.8% of deposits compared to 47.2% as of September 30,
1996. Management believes that this change in mix, which is
consistent with what other financial institutions are experiencing,
will continue to occur as customers seek to maximize their returns
and the Company has to compete with other investment vehicles such as
mutual funds.
In March 1997, the Company activated its line of credit program with
the Federal Home Loan Bank of New York ("FHLB"). Under the program,
the Company has access to overnight funds of approximately $13.1
million, along with a companion line for one month advances. The
Company has only used its overnight line and had borrowings
outstanding of $9.4 million as of June 30, 1997. Borrowings for the
three months ended June 30, 1997, averaged $5.0 million, and
management expects to actively use its borrowing lines to leverage
the Company's capital by increasing assets.
Shareholders' equity at June 30, 1997 was $71.2 million, a decrease
of $11.2 million, or 13.6% from the $82.4 million at September 30,
1996. The decrease was principally caused by the Company's
repurchase of 966,976 common shares at a cost of $14.3 million,
somewhat offset by net income for the nine months ended June 30,
1997.
Shareholders' equity as a percent of total assets was 25.0% at June
30, 1997 compared to 29.0% at September 30, 1996. Book value per
common share was $15.08 excluding unvested shares of the Company's
MRP, and was $16.60 excluding unallocated ESOP shares and unvested
MRP shares.
COMPARISON OF OPERATING RESULTS FOR THE NINE MONTHS ENDED JUNE 30, 1997
AND 1996
Net Interest Income
Net interest income for the nine months ended June 30, 1997 was $8.6
million, an increase of $2.4 million, or 39.4% over the comparable
period of 1996. The change was primarily volume related as average
earning assets were $20.8 million, or 8.2% higher than the comparable
period in the prior year.
Interest income for the nine months ended June 30, 1997 was $15.0
million, an increase of $2.0 million, or 15.6%, over the comparable
period in fiscal 1996. The primary cause of the improvement was a
deliberate shift in the mix of the Company's investments away from
lower yielding federal funds sold and towards higher yielding
mortgage-backed securities in order to improve average yields and
increase interest income. The average balance of federal funds sold
decreased $53.9 million from $67.4 million for the nine months ended
June 30, 1996 to $13.5 million for the nine months ended June 30,
1997. In contrast, the average balance of mortgage-backed securities
increased by $56.9 million from $15.3 million to $72.2 milion between
the periods. Although the average yield on mortgage-backed
securities declined from 7.45% for the nine months ended June 30,
1996 to 7.07% for the nine months ended June 30, 1997, the yield
still far exceeded the average yield on federal funds sold, which was
5.31% for the 1996 period and 5.34% for the 1997 period. In addition
to increasing yields, the shift in the asset mix also had the effect
of decreasing the sensitivity of the Company's assets to interest
rate changes.
Interest expense for the nine months ended June 30, 1997 was $6.5
million, a decrease of $383,000, or 5.6%. Approximately 73% was
attributed to a decrease in volume with the remainder attributable to
a decline in rates paid on certain types of deposits. Average
interest bearing liabilities were $195.3 million, a decrease of $13.7
million or 6.5% from the comparable period of 1996. The decrease in
volume was principally in common stock subscriptions as the Company
in the nine months ended June 30, 1996, held in escrow, deposits
averaging approximately $12.2 million for its initial public
offering. There were no such deposits in 1997. The decline in
certain rates paid was principally caused by a reduction in the cost
of certificates of deposits which decreased from 5.67% to 5.56%, or
11 basis points, primarily from the decrease in market rates since
the Federal Reserve lowered the discount rate in January 1996.
The Company's net yield on average earning assets was 4.19%, compared
to 3.25% for the comparable period of 1996. The improvement was
primarily the investment of the company's net offering proceeds which
caused an increase in average earning assets with no corresponding
funding costs, although the Company also improved its net interest
spread to 2.90%, a 42 basis point improvement over the comparable
period of 1996.
For more information on average balances, interest, yield and rate, please
refer to Table #1.
Provision for Loan Losses
The Company establishes an allowance for loan losses based on an
analysis of risk factors in the loan portfolio. This analysis
includes concentrations of credit, past loan loss experience, current
economic conditions, amount and composition of loan portfolio,
estimated fair market value of underlying collateral, delinquencies
and other factors. Accordingly, the calculation of the adequacy of
the allowance for loan losses is not based solely on the level of
non-performing loans. The provision for loan losses was $225,000 for
the nine months ended June 30, 1997, an increase of $105,000 from the
comparable period of 1996. The increase in the provision over 1996
was principally to cover net charge-offs in 1997, as well as to
provide for loan growth so that the allowance as a percentage of
loans remained relatively stable. The allowance for loan losses at
June 30, 1997 was $1.9 million, or 1.48% of total loans and provided
coverage of non-performing loans of 195.6%.
Non-Interest Income
Non-interest income was $406,000 for the nine months ended June 30,
1997, a decrease of $492,000 or 54.8% over the comparable period of
1996. The decrease was principally the $460,000 net change in the
Company's recovery of its Nationar loss reserve. In the nine months
ended June 30, 1996, the Company recovered $560,000 of its original
loss reserve of $660,000, and recovered the remaining $100,000 in the
comparable period of 1997, as the Company received substantially all
of its claims.
Non-Interest Expense
Non-interest expense for the nine months ended June 30, 1997 was
$3,836,000 an increase of $672,000, or 21.2% over 1996. Increases in
personnel costs, net occupancy, supplies, professional fees and other
expenses, were offset somewhat by reductions in other real estate
expenses.
Salaries and employee benefits increased $533,000, or 32.1% over
1996, principally from ESOP and MRP compensation expenses, both new
plans since the Company went public. ESOP and MRP expenses for the
nine months ended June 30, 1997, were $249,000 and $303,000,
respectively, compared to ESOP expense of only $78,000 and no MRP
expense during the comparable period in 1996. In addition, the
Company experienced increased personnel costs of approximately
$90,000 due to opening its fourth full service branch in late
December 1996. The impact of the combined increases were somewhat
offset by lower medical insurance costs, as the Company changed
insurance carriers and received refunds of excess reserves due to
favorable claims experience. Net occupancy costs were $249,000, an
increase of $60,000, or 31.7% over 1996, as the Company experienced
increased costs relating to its new branch, as well as amortization
of renovations at another branch office. Postage and supplies
increased $69,000, or 59.5% over 1996, principally from the new
branch and shareholder related costs such as annual reports and
special and annual meeting proxy costs. Professional fees were
$213,000, an increase of $56,000, or 35.7%, as the Company
experienced increased legal and accounting costs of operating a
public company. Other expenses increased $118,000, or 32.8% over the
comparable period of 1996. The increases included $59,000 in OTS
assessments due to the Bank's change to a federal charter, higher
director and officer insurance costs, transfer agent, franchise tax
and other costs relating to operating a public company.
Other real estate expenses decreased $248,000, as the Company
realized $108,000 in gains on the sale of other real estate during
the nine months ended June 30, 1997; there were no gains during the
comparable period of 1996. In addition, in the nine months ended
June 30, 1996, the Company, as part of its periodic valuations of
real estate owned, recorded write-downs on certain properties and
increased its estimated cost of the future disposition of property
owned by approximately $149,000, compared to only $16,000 in the
comparable period of 1997.
Income Tax Expense
Income tax expense for the nine months ended June 30, 1997 was
$1,937,000 an increase of $441,000, or 29.5% over the comparable
period of 1996. The change was principally the 30.6% improvement in
income before income taxes. The Company's effective tax rates for
the nine months ended June 30, 1997 and 1996, were 39.57% and 39.90%,
respectively.
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED JUNE 30,
1997 AND 1996
Net Interest Income
Net interest income for the three months ended June 30, 1997 was $2.8
million, an increase of $324,000, or 12.8% over the comparable
quarter of 1996. The increase was all rate related as the net yield
on average earning assets increased 77 basis points to 4.16%,
partially offset by a $25.4 million or 8.5% decrease in average
earning assets.
Interest income for the three months ended June 30, 1997 was $5.1
million, an increase of $107,000, or 2.1%. The increase was all rate
related, as the yield on average earning assets was 7.42% an increase
of 77 basis points over 1996. The increase in the yield was
principally caused by a 94 basis point increase in the average yield
on securities to 6.93%, as the Company purchased investments with
longer durations to increase yields. In addition, the Company
substantially changed its asset mix, with securities representing
54.6% of total average earning assets for the three months ended June
30, 1997 as compared to 23.4% in 1996, and average federal funds sold
and other short-term investments representing less than 1% of average
earning assets for the 1997 period compared to 36.7% in 1996. Average
earning assets were $274.5 million in the three months ended June 30,
1997, down $25.4 million, or 8.5%, from 1996, principally due to
common stock subscriptions. During the three months ended June 30,
1996, the Company held an average balance of $27.4 million of common
stock subscriptions representing subscriptions received but not
refunded or used to purchase stock until the Company's initial public
offering was completed on April 18, 1996. The common stock
subscriptions were primarily invested in federal funds.
Interest expense for the three months ended June 30, 1997 was $2.2
million, a decrease of $217,000, or 8.8%. The decrease was
principally volume related as average interest bearing liabilities
decreased $24.8 million, or 11.0%. The decrease was also due to
common stock subscriptions held in the 1996 period, somewhat offset
by an increase in short-term borrowings. The subscriptions averaged
$27.4 million for the three months ended June 30, 1996, and the
Company paid its savings deposit rate of 3.5% on those deposits from
the date they were received up to but excluding the completion date.
In addition, in the three months ended June 30, 1997, the Company
began to actively use its overnight borrowing line at the Federal
Home Loan Bank of New York, with borrowings averaging $5.0 million at
an average cost of 5.75%. Management expects to continue to use its
borrowing lines to fund balance sheet growth, which may increase the
Company's overall cost of funds.
The Company's net yield on average earning assets was 4.16%, compared
to 3.39% for the comparable period of 1996. The increase was
principally the improvement in the Company's net interest spread
which increased 68 basis points to 2.94%, as the Company invested its
net offering proceeds in higher yielding securities and reduced its
short-term investments.
For more information on average balances, interest, yield and rate,
please refer to Table #2, included in this report.
Provision for Loan Losses
The provision for loan losses was $75,000 for the three months ended
June 30, 1997, an increase of $30,000 from the comparable period of
1996. The reasons for the increase are as set forth above with the
respect to the nine month comparisons.
Non-Interest Income
Non-interest income was $108,000 for the three months ended June 30,
1997, a decrease of $552,000 or 83.6% over the comparable period of
1996. The decrease was principally the recovery of $560,000 of the
Nationar loss reserve as the Company received substantially all of
its claim in the three months ended June 30, 1996.
Non-Interest Expense
Non-interest expense for the three months ended June 30, 1997 was
$1,324,000, an increase of $119,000, or 9.9%, over 1996. Increases
in personnel costs, net occupancy expense, supplies, and other
expenses were partially offset by reductions in other real estate
expenses.
Salaries and employee benefits increased $202,000, or 35.4%, over
1996, principally from MRP compensation expenses and the opening of a
new full service branch. MRP expenses for the three months ended
June 30, 1997 were $112,000, with the balance of the increase
principally representing staffing costs for the new branch. Net
occupancy expense was $84,000, an increase of $21,000, or 33.3% over
1996, as the Company experienced increased costs relating to opening
its new branch, as well as the amortization of renovations at another
branch office. Postage and supplies increased $20,000, or 60.6% over
1996, principally from the new branch and shareholder related costs
such as annual reports. Other expenses were $155,000, an increase of
$22,000, or 16.5% over 1996. The increases were principally higher
transfer agent, franchise tax and other costs relating to operating a
public company.
Other real estate expenses decreased $172,000 as the Company realized
$39,000 in gains on other real estate sales during the three months
ended June 30, 1997; there were no gains during the comparable period
of 1996. In addition, in the three months ended June 30, 1996, the
Company, as part of its periodic valuations of other real estate
owned, recorded writedowns on certain properties and increased its
estimated cost of future disposition of properties owned by
approximately $134,000, as compared to only $16,000 in the comparable
period of 1997.
Income Tax Expense
Income tax expense for the three months ended June 30, 1997, was
$608,000 a decrease of $187,000, or 23.5% from the comparable period
of 1996. The change was principally due to the 19.5% decrease in
income before taxes. The Company's effective tax rates for the three
months ended June 30, 1997 and 1996, were 39.05% and 41.11%,
respectively.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity is the ability to generate cash flows to meet present, and
expected future funding needs. Management monitors the Company's
liquidity position, principally its federal funds and short-term
borrowings, on a daily basis and evaluates its ability to meet
expected and unexpected depositor withdrawals and to make new loans
and or investments. The Company has historically maintained high
levels of liquidity, and manages its balance sheet so there has been
no need for unanticipated sales of assets.
The primary sources of funds for operations are deposits, short-term
borrowings, principal and interest payments on loans, mortgage backed
securities, and other securities available for sale.
Net cash provided by operating activities was $1.9 million for the
nine months ended June 30, 1997, a decrease of $2.2 million over the
comparable period of 1996. The decrease from 1996, was principally
the collection of the Company's claim against Nationar, partially
offset by an increase in net income. In June 1996, the Company
received approximately $3.1 million of its claim against Nationar
with the remaining balance of $.2 million collected in the nine
months ended June 30, 1997, or a net change of $2.9 million.
Investing activities used $36.5 million in 1997, as the Company
invested more of its initial net offering proceeds in securities
available for sale, principally mortgage backed securities and, to a
lesser extent, loans and capital expenditures related to its new
branch office. Financing activities used $2.4 million, as the
Company repurchased 966,976 shares of its common stock at a cost of
approximately $14.3 million, offset somewhat by a $9.4 million
increase in the Company's short-term borrowings and $2.5 million
increase in deposits. For more details concerning the Company's cash
flows, see "Consolidated Statements of Cash Flows."
An important source of the Company's funds is the Bank's core
deposits. Management believes that a substantial portion of the
Bank's $199.3 million of deposits are a dependable source of funds
due to long term customer relationships. The Company does not
currently use brokered deposits as a source of funds, and deposit
accounts having balances in excess of $100,000 total only $14.8
million or less than 7.4% of total deposits. The Bank is required to
maintain minimum levels of liquid assets as defined by the OTS
regulations. The requirement, which maybe varied by the OTS
depending upon economic conditions and deposit flows, is based upon a
percentage of deposits and short-term borrowings. The OTS required
minimum liquidity ratio is currently 5% and for the month of June
1997, the Bank exceeded that, maintaining an average liquidity ratio
of 30.1%.
The Company anticipates that it will have sufficient funds to meet
its current commitments. At June 30, 1997, the Company had
commitments to originate loans of $2.0 million. In addition, the
Company had undrawn commitments of $1.9 million on home equity and
other lines of credit. Certificates of deposits which are scheduled
to mature in one year or less at June 30, 1997, totaled $69.7
million, and management believes that a significant portion of such
deposits will remain with the Company.
Catskill Financial is regulated by the OTS and although there are no
minimum capital requirements for the holding company itself, the Bank
is required to maintain minimum regulatory capital ratios. The
following is a summary of the Bank's actual capital amounts and
ratios as of June 30, 1997, compared to the OTS minimum capital
requirements:
Actual Minimum
Amount % Amount %
(Dollars in Thousands)
Tangible Capital $58,074 20.7% $4,203 1.5%
Core Capital 58,074 20.7 8,406 3.0
Risk Based Capital 59,280 61.4 7,729 8.0
In October 1996, the Board of Directors authorized the Company to
repurchase 4% of its outstanding shares to fund its Management
Recognition Plan which was approved at a special meeting of
shareholders on October 24, 1996. By December 4, 1996, the Company
had completed the repurchase of 227,470 shares of its common stock to
fund the MRP at a cost of $3.1 million, or an average of $13.59 per
share. In addition, after Board approval, the Company received OTS
approval on November 26, 1996, to repurchase up to 10% of its shares
over the period ending April 18, 1997. Such shares are available for
general corporate purposes including funding the Company's stock
option plan which was also approved at the special meeting of
shareholders. By April 17, 1997, the Company had completed the
repurchase of 564,506 shares under the 10% repurchase program at a
cost of $8.5 million or $15.06 per share. Lastly on May 15, 1997,
the Company filed notice with the OTS of its intention to repurchase
up to 5% of its outstanding stock, or 253,675 shares. The OTS had no
objection to the proposal, provided the purchases are completed by
April 18, 1998, and by June 30, 1997, the Company had already
repurchased 175,000 shares at a cost of $2.7 million or $15.50 per
share. The Holding Company itself has adequate resources to
repurchase the remaining 78,675 shares under the existing 5%
repurchase program without dividends from the Bank. In addition, at
June 30, 1997, the Bank could, after notifying the OTS in writing,
pay to the holding company dividends of approximately $25.8 million.
TABLE #1 AVERAGE BALANCES, INTEREST, YIELD AND RATE
The following table presents for the periods indicated the total
dollar amount of interest income from average interest-earning assets
and the resultant yields, as well as the interest expense on average
interest-bearing liabilities, expressed both in dollars and rates.
All average balances are daily average balances. Non-accruing loans
have been included in the table as loans receivable with interest
earned recognized on a cash basis only. Securities include both the
securities available for sale portfolio and the held to maturity
portfolio, other than mortgage backed securities which are shown
separately. Mortgage backed securities are primarily classified as
available for sale. Securities available for sale are shown at
amortized cost.
NINE MONTH PERIODS ENDED
June 30, 1997 June 30, 1996
Average Average
Balance Interest Yield/Rate Balance Interest Yield/Rate
(Dollars in Thousands)
Interest-Earning Assets
Loans receivable, net $125,090 $ 7,542 8.04% $120,610 $ 7,333 8.11%
Mortgage-backed securities 72,180 3,828 7.07% 15,251 852 7.45%
Other securities 62,255 3,123 6.69% 48,930 2,133 5.81%
Federal funds sold and other 13,491 539 5.34% 67,441 2,682 5.31%
Total interest-earning assets 273,016 15,032 7.34% 252,232 13,000 6.87%
Allowance for loan losses (1,837) (1,931)
Other assets, net 6,436 9,230
Total Assets $277,615 $259,531
Interest-Bearing Liabilities
Savings deposits $ 80,940 $ 2,116 3.50% $ 84,731 $ 2,220 3.50%
Money market 7,495 184 3.28% 8,563 220 3.43%
Now deposits 9,320 171 2.45% 8,582 158 2.46%
Certificates of deposit 94,072 3,909 5.56% 92,852 3,939 5.67%
Other borrowings 1,715 74 5.77%
Common stock subscriptions 12,209 296 3.24%
Escrow and other 1,760 28 2.13% 2,053 32 2.08%
Total interest-bearing
liabilities 195,302 6,482 4.44% 208,990 6,865 4.39%
Non-interest bearing 3,794 3,576
Other liabilities 2,273 4,102
Shareholders' equity 76,246 42,863
Total Equity and Liabilities $277,615 $259,531
Net interest income $ 8,550 $ 6,135
Net interest rate spread 2.90% 2.48%
Net yield on average
interest-earning assets 4.19% 3.25%
Average interest earning
assets to average interest
bearing liabilities 139.79% 120.69%
Earning Assets/Total Assets 98.34% 97.19%
TABLE #2 AVERAGE BALANCES, INTEREST, YIELD AND RATE
The following table presents for the periods indicated the total
dollar amount of interest income from average interest-earning assets
and the resultant yields, as well as the interest expense on average
interest-bearing liabilities, expressed both in dollars and rates.
All average balances are daily average balances. Non-accruing loans
have been included in the table as loans receivable with interest
earned recognized on a cash basis only. Securities include both the
securities available for sale portfolio and the held to maturity
portfolio, other than mortgage backed securities which are shown
separately. Mortgage backed securities are primarily classified as
available for sale. Securities available for sale are shown at
amortized cost.
THREE MONTH PERIODS ENDED
June 30, 1997 June 30, 1996
Average Average
Balance Interest Yield/Rate Balance Interest Yield/Rate
(Dollars in Thousands)
Interest-Earning Assets
Loans receivable, net $124,578 $ 2,496 8.01% $119,861 $2,446 8.16%
Mortgage-backed securities 84,819 1,507 7.11% 18,877 350 7.42%
Other securities 65,004 1,088 6.70% 51,242 700 5.46%
Federal funds sold and other 112 1 3.58% 109,912 1,489 5.45%
Total interest-earning assets 274,513 5,092 7.42% 299,892 4,985 6.65%
Allowance for loan losses (1,854) (1,874)
Other assets, net 5,832 10,644
Total Assets $278,491 $308,662
Interest-Bearing Liabilities
Savings deposits $ 79,910 $ 697 3.50% $ 85,291 $ 742 3.50%
Money market 7,202 57 3.17% 8,473 72 3.42%
Now deposits 9,625 59 2.46% 9,166 56 2.46%
Certificates of deposit 96,729 1,346 5.58% 92,742 1,283 5.56%
Other borrowings 5,024 72 5.75%
Common stock subscriptions 27,443 296 4.34%
Escrow and other 2,290 13 2.28% 2,448 12 1.97%
Total interest-bearing
liabilities 200,780 2,244 4.48% 225,563 2,461 4.39%
Non-interest bearing 4,157 3,557
Other liabilities 1,621 8,886
Shareholders' equity 71,933 70,656
Total Equity and Liabilities $278,491 $308,662
Net interest income $ 2,848 $2,524
Net interest rate spread 2.94% 2.26%
Net yield on average
interest-earning assets 4.16% 3.39%
Average interest earning
assets to average interest
bearing liabilities 136.72% 132.95%
Earning Assets/Total Assets 98.57% 97.16%
CATSKILL FINANCIAL CORPORATION
FORM 10-Q
JUNE 30, 1997
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
In the ordinary course of business, the Company and the Bank are
subject to legal actions which involve claims for monetary relief.
Management, based on advice of counsel, does not believe that any
currently known legal actions, individually or in the aggregate will
have a material effect on its consolidated financial condition or
results of operation.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(11) Computation of Net Income per Common Share
(27) Financial Data Schedule
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.
CATSKILL FINANCIAL CORPORATION
Date: August 13, 1997 /s/ Wilbur J. Cross
Wilbur J. Cross
Chairman of the Board, President
and Chief Executive Officer
(Principal Executive Officer)
Date: August 13, 1997 /s/ David J. DeLuca
David J. DeLuca
Chief Financial Officer
(Principal Financial and
Accounting Officer)
Exhibit 11
CATSKILL FINANCIAL CORPORATION
COMPUTATION OF NET INCOME PER COMMON SHARE
(dollars in thousands, except per share amounts)
Three Months Ended June 30, Nine Months Ended June 30,
1997 1996 1997 1996
Net income applicable to common shares $ 949 $ 1,139 $ 2,958 $ 2,253
Weighted average common shares outstanding 4,455,098 5,231,810 4,753,424 N/A<F1>
Net income per common share $ .21 $ .18<F1><F2> $ .62
Net income per common share - primary
Weighted average common shares
outstanding 4,455,098 4,753,424
Dilutive common stock options<F3> 114,143 82,824
Weighted average common shares and
common share equivalents outstanding 4,569,241 4,836,248
Net income per common share - primary $ .21 $ .61
Net income per common share - fully diluted
Weighted average common shares
outstanding 4,455,098 4,753,424
Dilutive common stock options<F3> 120,916 110,729
Weighted average common shares and
common share equivalents outstanding 4,576,014 4,864,153
Net income per common share - fully diluted $ .21 $ .61
<FN>
<F1> Company completed its initial public offering on April 18, 1996.
<F2> Earnings per common share were calculated using post conversion
(after April 18, 1996) net income estimated to be $949,000.
<F3> Dilutive common stock options (includes restricted stock under
the Company's MRP plan and options under its stock option plan) are
based on the treasury stock method using average market price in
computing net income per share - primary, and the higher of
period-end market price or average market price in computing net
income per common share - fully diluted.