UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON DC 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 quarter ended ................................. September 30, 1996
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: 0-24358
ML BANCORP, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2752439
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
Two Aldwyn Center
Villanova, Pennsylvania 19085
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code:)
(610) 526-6460
Indicate by check mark whether the registrant (1) has filed all reports
required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or 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
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
As of November 1, 1996, there were 14,547,600 shares issued and
11,663,510 shares outstanding of the Registrant's Common Stock.
ML BANCORP, INC.
TABLE OF CONTENTS
Item
No.
PART I - CONSOLIDATED FINANCIAL INFORMATION
1 CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of Financial Condition
September 30, (unaudited) and March 31, 1996........................... 1
Consolidated Statements of Operations for the Three and Six Months
Ended September 30, 1996 and 1995 (unaudited) ......................... 2
Consolidated Statements of Cash Flows for the Three and Six Months
Ended September 30, 1996 and 1995 (unaudited) ......................... 3
Notes to Consolidated Financial Statements (unaudited)................. 5
2 Management's Discussion and Analysis of Financial
Condition and Results of Operations.................................... 8
PART II - OTHER INFORMATION
1 Legal Proceedings...................................................... 13
2 Changes in Securities................................................... 13
3 Defaults Upon Senior Securities......................................... 13
4 Submission of Matters to a Vote of Security Holders..................... 13
5 Other Information...................................................... 13
6 Exhibits and Reports on Form 8-K....................................... 13
ML BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Financial Condition
September 30 and March 31, 1996
(in thousands, except share and per share data)
- ------------------------------------------------------------------------------------
(UNAUDITED)
SEPTEMBER 30, MARCH 31,
------------- ---------
ASSETS 1996 1996
- ------------------------------------------------------------------------------------
Cash (including interest-bearing deposits of $5,844
and $11,283 at September 30 and March 31, 1996,
respectively) $ 17,315 23,323
Assets available for sale:
Securities 553,737 469,321
Loans 78,238 95,033
Investments (market value $31,016 and $24,946
at September 30 and March 31, 1996, respectively) 31,225 24,942
Mortgage-related securities (market value $385,518
and $401,231 at September 30 and March 31, 1996,
respectively) 390,316 404,150
Loans receivable, net of allowance for loan loss
($14,981 and $13,124 at September 30 and
March 31, 1996, respectively) 733,243 691,791
Accrued income receivable 12,138 12,085
Other real estate owned, net 912 2,043
Premises and equipment, at cost less accumulated
depreciation ($15,206 and $13,774 at September 30
and March 31, 1996, respectively) 15,024 14,343
Mortgage servicing rights 43,554 21,865
Goodwill and other intangible assets 4,453 3,499
Other assets 8,692 3,417
- ------------------------------------------------------------------------------------
Total assets $1,888,847 1,765,812
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LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------------------------------------------------------
Deposits $ 807,477 830,997
Advances from Federal Home Loan Bank 395,271 376,013
Securities sold under agreements to repurchase 532,527 402,212
Advance payments by borrowers for taxes and
insurance 1,197 3,533
Other liabilities 14,308 12,720
- ------------------------------------------------------------------------------------
Total liabilities 1,750,780 1,625,475
Commitments and contingencies
Stockholders' Equity:
Preferred stock, no par value, authorized
5,000,000 shares; no shares issued and
outstanding -- --
Common stock, $.01 par value, authorized
30,000,000 shares; 14,547,600 shares issued 73 73
Additional paid-in capital 96,483 95,977
Common stock acquired by stock benefit plans (8,059) (8,888)
Treasury stock, at cost; 2,678,390 and 2,053,800
shares at September 30 and March 31, 1996,
respectively (28,197) (20,531)
Unrealized (loss) gain on securities available
for sale (1,051) 120
Retained earnings 78,818 73,586
- ------------------------------------------------------------------------------------
Total stockholders' equity 138,067 140,337
- ------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 1,888,847 1,765,812
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1
ML BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
- ------------------------------------------------------------------------------
Three and six months ended September 30, 1996 and 1995
(in thousands, except share and per share data)
- ---------------------------------------------------------------------------------------------------
(UNAUDITED)
THREE MONTHS SIX MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
------------------ -------------------
1996 1995 1996 1995
- ----------------------------------------------------------------------------------------------------------
Interest income:
Loans $ 15,736 13,074 31,952 24,924
Mortgage-related and investment securities 7,247 8,793 14,653 17,871
Assets available for sale 11,476 7,869 21,251 15,819
Interest-bearing deposits 147 162 276 268
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Total interest income 34,606 29,898 68,132 58,882
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Interest expense:
Deposits 8,063 7,943 16,345 15,212
FHLB advances 7,047 5,858 13,467 10,967
Other borrowings 6,231 5,487 11,985 11,565
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Total interest expense 21,341 19,288 41,797 37,744
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Net interest income 13,265 10,610 26,335 21,138
Provision for loan losses 1,010 1,000 2,010 2,000
- ----------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 12,255 9,610 24,325 19,138
Non-interest income:
Retail fees and charges 434 481 847 830
Mortgage banking operations 3,525 1,073 6,697 1,800
Net gain (loss) on:
Sales of securities available for sale 14 0 14 (3)
Other real estate activities 17 145 326 3
Rental income 137 152 308 304
Other 59 63 158 144
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Total non-interest income 4,186 1,914 8,350 3,078
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Non-interest expenses:
Compensation and employee benefits $ 5,599 3,291 11,073 6,362
Advertising 690 433 1,225 895
Data processing 439 332 854 658
Federal insurance premiums 5,249 242 5,711 698
Amortization of goodwill and other intangible assets 1,177 297 2,796 457
Net occupancy costs 1,406 916 2,828 1,788
Professional fees 191 180 390 387
Other 1,228 799 2,661 1,668
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Total non-interest expenses 15,979 6,490 27,538 12,913
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Income before income taxes 462 5,034 5,137 9,303
Income taxes (3,638) 1,964 (2,208) 3,512
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Net income $ 4,100 3,070 7,345 5,791
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Primary earnings per share $ 0.35 0.23 0.62 0.44
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Fully diluted earnings per share $ 0.35 0.23 0.62 0.44
- ----------------------------------------------------------------------------------------------------------
Weighted average number of shares-primary 11,798,856 13,092,476 11,833,625 13,110,092
- ----------------------------------------------------------------------------------------------------------
Weighted average number of shares-fully diluted 11,874,359 13,144,730 11,932,612 13,162,346
- ----------------------------------------------------------------------------------------------------------
2
ML BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Six months ended September 30, 1996 and 1995
(in thousands)
- ------------------------------------------------------------------------------
(UNAUDITED)
SIX MONTHS
ENDED SEPTEMBER 30,
-------------------
1996 1995
- ------------------------------------------------------------------------------
Net cash flows from operating activities:
Net income $ 7,345 5,791
- ------------------------------------------------------------------------------
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Amortization of:
Goodwill and other intangible assets $ 2,796 457
Deferred loan origination fees (1,343) (828)
Premiums and discounts 1,514 216
Common stock acquired by stock benefit plans 1,335 1,087
Mortgage servicing rights 3,995 1,503
Provision for loan losses 2,010 2,000
Net (gain) loss on sale of assets
available for sale:
Securities (14) 3
Loans (4,488) (546)
Net gain on other real estate activities (326) (3)
Depreciation and amortization 1,278 889
Increase/decrease in:
Loans available for sale 21,283 (36,034)
Accrued income receivable (53) (1,033)
Deferred federal income taxes (562) (2,363)
Other assets (5,275) (1,666)
Other liabilities 2,868 (3,780)
- ------------------------------------------------------------------------------
Total adjustments 25,018 (40,098)
- ------------------------------------------------------------------------------
Net cash provided (used) by operating activities 32,363 (34,307)
- ------------------------------------------------------------------------------
Cash flows from investing activities:
Net increase in loans receivable (42,222) (61,508)
Proceeds from sales of:
FHLB Stock 6,513 3,151
Securities available for sale 38,043 31,051
Proceeds from maturities or repayments of:
Mortgage-related securities 32,377 25,457
Securities available for sale 62,383 33,475
Investments 6,000 5,000
Purchases of:
Mortgage-related securities (19,485) --
Securities available for sale (187,291) (41,055)
Investments (18,794) (9,569)
Mortgage servicing rights (25,684) (7,170)
Net decrease in other real estate owned 159 1,174
Proceeds from other real estate activities 1,401 206
Excess of liabilities assumed over assets acquired (3,750) --
Purchases of premises and equipment (1,959) (725)
- ------------------------------------------------------------------------------
Net cash used by investing activities (152,309) (20,513)
- ------------------------------------------------------------------------------
3
ML BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
(in thousands)
- --------------------------------------------------------------------------------
(UNAUDITED)
SIX MONTHS
ENDED SEPTEMBER 30,
-------------------
1996 1995
- --------------------------------------------------------------------------------
Cash flows from financing activities:
Net (decrease) increase in deposits $ (23,520) 12,712
Proceeds from deposits purchased -- 28,925
Dividends paid (2,113) (1,410)
Proceeds from securities sold under agreements
to repurchase 186,798 111,000
Payments of securities sold under agreements
to repurchase (56,483) (136,915)
Proceeds from FHLB advances 76,258 128,495
Payments of FHLB advances (57,000) (80,080)
Net decrease in advance payments by borrowers for
taxes and insurance (2,336) (1,653)
Purchase of treasury stock (7,666) (2,546)
- --------------------------------------------------------------------------------
Net cash provided by financing activities 113,938 58,528
- --------------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents (6,008) 3,708
Cash and cash equivalents:
Beginning of period 23,323 20,007
- --------------------------------------------------------------------------------
End of period $ 17,315 23,715
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Supplemental disclosure:
Cash payments for interest $ 41,570 37,065
Cash payments for income taxes 500 11,248
Transfer of loans receivable into other
real estate owned 103 684
Deposits acquired in excess of cash received -- 1,093
Net unrealized (loss) gain on securities available
for sale (1,889) 5,731
Tax effect on securities available for sale (718) 2,315
- --------------------------------------------------------------------------------
4
ML BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
- --------------------------------------------------------------------------------
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying consolidated financial statements were prepared in
accordance with instructions to Form 10-Q, and therefore, do not include
information or footnotes necessary for a complete presentation of
financial position, results of operations and cash flows in conformity
with generally accepted accounting principles. However, all normal,
recurring adjustments which, in the opinion of management, are necessary
for a fair presentation of the financial statements, have been included.
These financial statements should be read in conjunction with the audited
financial statements and the notes thereto included in the ML Bancorp,
Inc. ("Company") Annual Report for the period ended March 31, 1996. The
results for the six months ended September 30, 1996 are not necessarily
indicative of the results that may be expected for the fiscal year ended
March 31, 1997.
In July 1996, the Company declared a two-for-one stock split of its
common stock. One share for each share held by shareholders of record on
August 9, 1996 was distributed on September 6, 1996. All share and per
share data have been adjusted for the two-for-one stock split.
(2) RECENT ACCOUNTING PRONOUNCEMENTS
In October 1995, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 123, "ACCOUNTING FOR STOCK-BASED COMPENSATION" ("SFAS 123").
This statement encourages the adoption of fair value accounting for
stock-based compensation to employees. Further, in the event that fair
value accounting is not adopted, SFAS 123 requires proforma disclosure of
net income and earnings per share as if fair value accounting had been
adopted. SFAS 123 became effective for the Company on April 1, 1996.
The Company has elected not to adopt the fair value accounting provisions
of SFAS 123, and will instead provide the required proforma disclosures,
as permitted.
In June 1996, the FASB issued SFAS No. 125, "ACCOUNTING FOR TRANSFERS AND
SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENTS OF LIABILITIES" ("SFAS
125"). This statement provides accounting and reporting standards for
transfers and servicing of financial assets and extinguishments of
liabilities based on consistent application of a financial-components
approach that focuses on control. It distinguishes transfers of
financial assets that are sales from transfers that are secured
borrowings. Under the financial-components approach, after a transfer of
financial assets, an entity recognizes all financial and servicing assets
it controls and liabilities it has incurred and derecognizes financial
assets it no longer controls and liabilities that have been extinguished.
The approach focuses on the assets and liabilities that exist after the
transfer. If a transfer does not meet the criteria for a sale, the
transfer is accounted for as a secured borrowing with pledge of
collateral. The Company has not yet determined the effect, if any, that
SFAS 125
5
ML BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
- --------------------------------------------------------------------------------
will have on its financial statements and will adopt SFAS 125
prospectively, effective January 1, 1997, the required date of adoption.
(3) LOANS RECEIVABLE
Loans receivable at September 30 and March 31, 1996 consisted of the
following (in thousands):
SEPTEMBER 30, MARCH 31,
1996 1996
- -----------------------------------------------------------------------------------------------
Real estate loans:
One- to four-family $ 333,978 344,713
Construction and land:
Residential 94,951 91,217
Commercial 24,076 34,101
Commercial real estate 136,590 109,135
Multi-family 11,327 11,348
- -----------------------------------------------------------------------------------------------
Total real estate loans 600,922 590,514
- -----------------------------------------------------------------------------------------------
Other loans:
Consumer:
Home equity and equity lines of credit 123,348 98,096
Unsecured lines of credit 3,125 3,224
Other 8,265 8,934
Commercial 71,467 69,647
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Total other loans 206,205 179,901
- -----------------------------------------------------------------------------------------------
807,127 770,415
Loans in process (construction loans) (54,873) (61,389)
Deferred loan fees (4,030) (4,111)
Allowance for loan losses (14,981) (13,124)
- -----------------------------------------------------------------------------------------------
$ 733,243 691,791
- -----------------------------------------------------------------------------------------------
Activity in the allowance for loan losses for the three and six months
ended September 30, 1996 and 1995 consisted of the following (in
thousands):
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------- ----------------
1996 1995 1996 1995
- --------------------------------------------------------------------------------
Balance, beginning of period $ 14,053 10,207 13,124 9,111
Provision for loan losses 1,010 1,000 2,010 2,000
Charge-offs (91) (22) (199) (63)
Recoveries 9 6 46 143
- --------------------------------------------------------------------------------
Balance, end of period $ 14,981 11,191 14,981 11,191
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6
ML BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
- --------------------------------------------------------------------------------
(4) DEPOSITS
The major types of savings deposits by amounts and the percentages of
such types to total savings deposits are as follows (in thousands):
SEPTEMBER 30, 1996 MARCH 31, 1996
------------------ --------------
% OF % OF
AMOUNT TOTAL AMOUNT TOTAL
- ----------------------------------------------------------------------------
Noninterest-bearing deposits $ 88,520 10.12% $ 81,767 9.84%
Money market and NOW accounts 151,190 18.72 155,115 18.67
Passbook and statement
savings accounts 81,744 10.96 88,011 10.59
- ----------------------------------------------------------------------------
321,454 39.81 324,893 39.10
- ----------------------------------------------------------------------------
Certificates of deposit 486,023 60.19 506,104 60.90
- ----------------------------------------------------------------------------
$807,477 100.00% $830,997 100.00%
(5) EARNINGS PER SHARE
Primary and fully-diluted earnings per share ("EPS") were $0.35 and $0.62
for the three and six month periods ended September 30, 1996,
respectively, and $0.23 and $0.44 for the comparable periods ended
September 30, 1995. Per share amounts have been adjusted for the
Company's two-for-one stock split. Unless anti-dilutive, stock options
are considered common stock equivalents and are included in the
computation of the weighted average number of shares outstanding using
the treasury stock method. The options granted under the Company's 1994
Stock Option Plan were dilutive during the three and six months ended
September 30, 1996 and 1995.
7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
- --------
The Company's net income for the quarter ended September 30, 1996, was $4.1
million or $0.35 per share, compared to net income of $3.1 million or $0.23
per share for the same quarter in 1995. Net income for the six month period
ended September 30, 1996, was $7.3 million or $0.62 per share, compared to
$5.8 million or $0.44 per share for the same six months in 1995. Per share
amounts have been adjusted for the Company's two-for-one stock split, which
was distributed on September 6, 1996, to shareholders of record on August 9,
1996.
The Company's results of operations for the three and six month periods ended
September 30, 1996 were impacted by $3.8 million of income related to new
legislation which eliminated the need to recapture tax bad debt reserves,
offset by a pre-tax charge of $4.8 million ($3.1 million net of tax) for a
one-time Savings Association Insurance Fund ("SAIF") special assessment as
part of legislation adopted to recapitalize the SAIF. The net effect of this
recently enacted legislation on earnings was an increase of $0.06 per share
for both periods. As a result of the special assessment, it is anticipated
that the Company's SAIF-insurance premiums will decrease from the current
rate of $0.23 per $100 of deposits to approximately $0.06 per $100 of
deposits.
FINANCIAL CONDITION
- -------------------
CASH AND INVESTMENTS. Cash and investments totaled $48.5 million at
September 30, 1996, compared to $48.3 million at March 31, 1996. The slight
increase was due to investment purchases of $18.8 million, which were offset
by securities repayments, sales and maturities of $12.5 million during the
period and a $6.0 million decrease in cash.
MORTGAGE-RELATED SECURITIES AND SECURITIES AVAILABLE FOR SALE.
Mortgage-related securities and securities available for sale increased by
$70.6 million or 8.1% at September 30, 1996, to $944.1 million from $873.5
million at March 31, 1996. The increase was principally due to $206.8 million
in purchases of securities (primarily adjustable rate mortgage-backed
securities available for sale), which was partially offset by repayments and
securities maturities of $94.8 million and securities sales of $38.0 million.
LOANS AVAILABLE-FOR-SALE AND LOANS RECEIVABLE, NET. Aggregate loans
receivable (loans receivable, net and loans available for sale) totaled
$811.5 million at September 30, 1996, an increase of $24.7 million or 3.1%
from $786.8 million at March 31, 1996, due primarily to a $41.5 million or
6.0% increase in loans receivable, net, which was partially offset by a $16.8
million or 17.7% decrease in loans available for sale. Contributing to the
loans receivable increase was a $27.5 million or 25.2% increase in commercial
real estate loans ($11.2 million of which was a commercial construction loan
that rolled into a permanent loan), and a $24.5 million or 22.2% increase in
consumer loans (primarily home equity loans and equity lines of credit).
The decrease in loans available for sale was due primarily to a decrease in
residential mortgage originations.
NON-PERFORMING ASSETS. The Company's total non-performing assets increased
by $1.1 million or 10.4% from $10.4 million or 0.59% of total assets at March
31, 1996, to $11.5 million or
8
0.61% of total assets at September 30, 1996. At September 30, 1996, the
Company's non-accrual loans were $10.6 million, an increase of $2.2 million
or 26.4% from March 31, 1996. The increase in the Company's non-performing
assets was due primarily to the addition of a commercial business loan
(classified as substandard at March 31, 1996), which was partially offset by
a $1.1 million or 55.4% decrease in other real estate owned. At September
30, 1996, other real estate owned totaled $912,000 as compared to $2.0
million at March 31, 1996.
At September 30, 1996, the Company's allowance for loan losses amounted to
$15.0 million (which includes $1.3 million of specific allowances on two
commercial construction project loans, one commercial business loan and one
residential construction project loan) or 141.0% of non-performing loans and
1.8% of gross loans receivable. At March 31, 1996, the Company's allowance
for loan losses was $13.1 million (which included an $754,000 specific
allowance on the above referenced commercial construction and residential
construction project loans) or 156.2% of non-performing loans and 1.64% of
gross loans receivable.
MORTGAGE SERVICING RIGHTS. Mortgage servicing rights, both purchased and
originated ("MSRs") increased $21.7 million or 99.2% from $21.9 million at
March 31, 1996 to $43.6 million at September 30, 1996. The increase was
primarily due to the acquisition of $19.4 million of MSRs from the
acquisition of Philadelphia Mortgage Corporation ("PMC") in the first quarter
of fiscal 1997, as well as the purchase of $4.7 million of MSRs and $1.6
million of originated MSRs during the quarter. Offsetting those increases
was $4.0 million of amortization of MSRs for the six months ended September
30, 1996.
DEPOSITS. Deposits decreased $23.5 million or 2.8% from $831.0 million at
March 31, 1996, to $807.5 million at September 30, 1996. The decline was
primarily attributable to a $20.1 million or 4.0% decrease in certificates of
deposit.
BORROWINGS. Total borrowings increased $149.6 million or 19.2% to $927.8
million at September 30, 1996, compared to $778.2 million at March 31, 1996.
The Company's borrowings are primarily comprised of advances from the Federal
Home Loan Bank ("FHLB") and repurchase agreements. Repurchase agreements are
commitments the Company enters into to sell securities under terms that
require it to repurchase the same securities by a specified date. Such
agreements represent a competitive cost funding source for the Company;
however, the Company is subject to the risk that the lender may default at
maturity and not return the collateral. The repurchase agreements are
primarily comprised of various Federal Home Loan Mortgage Corporation
("FHLMC") and large, established investment brokerage institution repurchase
agreements. At September 30, 1996, the Company had repurchase agreements
totaling $532.5 million with a weighted average maturity of approximately 10
months and a weighted average interest rate of 5.60%.
FHLB advances totaled $395.3 million with a weighted average maturity of
approximately 19 months and a weighted average interest rate of 5.99% at
September 30, 1996.
EQUITY. At September 30, 1996, total stockholders' equity was $138.1 million
or 7.3% of total assets, compared to $140.3 million or 7.9% of total assets
at March 31, 1996. Total stockholders' equity decreased $2.3 million or 1.6%
during the six months ended September 30,
9
1996, primarily due to the purchase of $7.7 million in treasury stock, $2.1
million of dividends paid during the period and a $1.2 million net of tax
increase in the unrealized loss related to securities available for sale.
Partially offsetting these reductions to capital were net income of $7.3
million and amortization related to the stock benefit plans of $1.3 million.
RESULTS OF OPERATIONS
- ---------------------
NET INCOME. The Company's net income for the three months ended September
30, 1996, was $4.1 million or $0.35 per share, an increase of $1.0 million or
33.6% over the $3.1 million recorded in the comparable prior period. For the
six month period ended September 30, 1996, net income totaled $7.3 million or
$0.62 per share, an increase of $1.6 million or 26.8% over the prior
comparable period. Core earnings continued to improve as net interest income
after provision for loan losses increased by $2.6 million or 27.5%, and $5.2
million or 27.1% for the three and six months ended September 30, 1996,
respectively.
NET INTEREST INCOME. Net interest income before provision for loan losses
amounted to $13.3 million for the three month period ended September 30,
1996, a $2.7 million or 25.0% increase from the $10.6 million recorded in the
comparable prior period. For the six months ended September 30, 1996, net
interest income before provision for loan losses amounted to $26.3 million,
which represented a $5.2 million or 24.6% increase from the $21.1 million
recorded in the comparable 1995 period.
Interest income for the three months ended September 30, 1996, totaled $34.6
million as compared to $29.9 million for the same period in 1995, an increase
of $4.7 million or 15.7%. For the six months ended September 30, 1996,
interest income increased $9.3 million or 15.7% from $58.9 million for the
comparable period in 1995. The increases were primarily the result of an
increase in average interest-earning assets of $231.0 million or 14.7% and
$219.5 million or 14.2% for the three and six months ended September 30, 1996
compared to the three and six months ended September 30, 1995, respectively.
Additionally, the yield earned on average interest-earning assets increased
by 6 and 10 basis points during the same three and six month periods,
respectively.
Interest expense for the three and six months ended September 30, 1996,
totaled $21.3 million and $41.8 million, respectively, an increase of $2.1
million or 10.6% and $4.1 million or 10.7% over the comparable 1995 periods.
The increases in interest expense were attributable to higher average
interest-bearing liabilities at September 30, 1996, relative to the
comparable periods in 1995, which more than offset the reduction in the
Company's cost of funds for the three and six month periods. The increase in
average interest-bearing liabilities was $291.6 million or 20.0% and $277.8
million or 19.4% for the three and six months ended September 30, 1996,
respectively, over the comparable 1995 periods. The average interest rate
paid thereon declined 41 and 39 basis points over the respective three and
six month periods.
PROVISION FOR LOAN LOSSES. The Company establishes a provision for loan
losses, which is charged to operations, in order to maintain the allowance
for loan losses at a level which is deemed to be appropriate based upon an
assessment of prior loss experience, the volume and type of lending presently
being conducted by the Company, industry standards, past due loans, economic
conditions in the Company's market area generally and other factors related
to the
10
collectability of the Company's loan portfolio. For the three and six months
ended September 30, 1996, the provision for loan losses amounted to $1.0
million and $2.0 million, respectively, an increase of $10,000 over the same
periods in 1995.
Consistent with its long-term goals, the Company intends to continue to
increase its originations and/or participations of commercial (commercial
real estate and commercial business) loans. Commercial loans, while
typically having a higher yield, entail different risks when compared to
residential lending because such loans typically involve larger loan balances
to single borrowers and because the payment experience on such loans is
dependent on the successful operation of the project or the borrower's
business. The Company attempts to mitigate its risk exposure by limiting
such lending to proven developers/owners, only considering properties with
existing operating performance that can be analyzed, requiring conservative
debt coverage ratios and continually monitoring the operation and physical
condition of the collateral.
Although management utilizes its best judgment in providing for possible
losses, there can be no assurance that the Company will not have to increase
its provisions for loan losses in the future as a result of future increases
in non-performing loans or for other reasons which could adversely affect the
Company's results of operations. In addition, various regulatory agencies as
an integral part of their examination process, periodically review the
allowance for loan losses. Such agencies may require the Company to
recognize additions to the allowance for loan losses based on their judgments
of information that is available to them at the time of their examination.
NON-INTEREST INCOME. Total non-interest income amounted to $4.2 million and
$8.4 million for the three and six months ended September 30, 1996, an
increase of $2.3 million and $5.3 million over the comparable 1995 periods,
respectively. The increases during both periods were primarily due to the
additional mortgage banking income earned in 1996 that was attributable to
the previously announced mortgage banking acquisitions. Mortgage banking
income more than tripled to $3.5 million and $6.7 million for the three and
six month periods ended September 30, 1996, from the prior comparable periods.
NON-INTEREST EXPENSES. Non-interest expenses totaled $16.0 million and $27.5
million for the three and six months ended September 30, 1996, as compared to
$6.5 million and $12.9 million for the same periods in 1995. Included in the
current year amounts is the $4.8 million one time SAIF special assessment.
Exclusive of the special assessment, non-interest expenses increased by $4.7
million or 72.2% and $9.8 million or 76.1% over the same periods in 1995.
The primary reason for the Company's increased non-interest expenses in 1996
was the additional costs incurred from the Company's three acquisitions and
the opening of three new business centers. Compensation and employee
benefits increases by $2.3 million or 70.1% and $4.7 million or 74.0% for the
three and six months ended September 30, 1996, due to the addition of
approximately 200 acquisition related and new business center full time
equivalent personnel, additional employee benefit plan expenses and general
salary increases. Amortization of goodwill related to the acquisitions
generated an additional $900,000 and $1.6 million of expense for the three
and six months ended September 30, 1996, respectively. Other operating
expenses increased primarily due to the acquisitions, and costs associated
with new products and business center openings.
11
INCOME TAXES. For the three and six months ended September 30, 1996, the
Company recorded tax benefits of $3.6 million and $2.2 million. The tax
benefits were attributable to new legislation which eliminated the need for
$3.8 million of tax bad debt reserves and the $1.7 million tax effect of the
aforementioned SAIF premium. Exclusive of the tax bad debt recapture and
SAIF premium, income tax expense would have totaled $1.9 million and $3.3
million for the three and six months ended September 30, 1996, respectively,
with the effective tax rates calculated at 35.0% and 33.1%, respectively.
For the three and six months ended September 30, 1995, income tax expense
amounted to $2.0 million and $3.5 million, respectively, with the effective
tax rates calculated at 39.0% and 37.8%, respectively. Differences between
the effective and statutory rates for the periods ended September 30, 1996
and 1995 are due to items that are either non-taxable or non-deductible.
CAPITAL RESOURCES. The Office of Thrift Supervision ("OTS") regulations
require that the Company's subsidiary, Main Line Bank ("Bank") meet minimum
regulatory tangible, core and risk-based capital requirements. At September
30, 1996, the Bank exceeded all regulatory capital requirements.
The following table sets forth the Bank's compliance with each of the
regulatory capital requirements at September 30, 1996.
TANGIBLE CORE RISK-BASED
CAPITAL CAPITAL CAPITAL
--------- ------- ----------
Total Regulatory Capital $124,432 $124,432 $136,100
Minimum Required Regulatory Capital 28,553 57,106 71,146
--------- -------- ----------
Excess Regulatory Capital $ 95,879 $ 67,326 $64,450
========= ======== ==========
Regulatory Capital as a
Percentage of Assets (1) 6.54% 6.54% 15.25%
Minimum Capital Required as a
Percentage of Assets 1.50 3.00 8.00
Excess Regulatory Capital as a
Percentage of Assets 5.04% 3.54% 7.25%
(1) Tangible and core capital are computed as a percentage of adjusted total
assets of $1.9 billion. Risk-based capital is computed as a percentage of
total risk-weighted assets of $889 million.
LIQUIDITY. The Company is required by the OTS to maintain average daily
balances of liquid assets and short-term liquid assets (as defined) in
amounts equal to 5% and 1%, respectively, of net withdrawable deposits and
borrowings payable in one year or less to assure its ability to meet demand
for withdrawals and repayment of short-term borrowings. The liquidity
requirements may vary from time to time at the direction of the OTS depending
upon economic conditions and deposit flows. The Company's liquidity ratio
and short-term liquid asset ratio as of September 30, 1996, was 6.0% and
3.8%, respectively.
12
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no material legal proceedings to which the
Registrant or any of its subsidiaries is a part or to
which any of their property is subject.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Not Applicable
(b) A report on Form 8-K was filed on July 31, 1996 to
announce that the Company's Board of Directors had
declared a two-for-one stock split on the
Company's common stock, to be effective on
September 6, 1996 to shareholders of record at the
close of business on August 9, 1996.
A report on Form 8-K was filed on August 21, 1996,
to announce that the Company had changed its name
to ML Bancorp, Inc., effective August 21, 1996.
13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed in
its behalf by the undersigned, thereunto duly authorized.
ML BANCORP, INC.
Date: November 4, 1996
/s/ Brian M. Hartline
- ----------------------
Brian M. Hartline
Senior Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)