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
[FEE REQUIRED]
For the quarterly period ended March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
[NO FEE REQUIRED]
For the transition period from to
Commission file number 0-24040
PennFed Financial Services, Inc.
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(Exact name of registrant as specified in its charter)
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Delaware 22-3297339
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
622 Eagle Rock Avenue, West Orange, NJ 07052-2989
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (973) 669-7366
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(Former name, former address and former fiscal year, if changed since last
report)
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
requirements for the past 90 days.
YES [ X ] . NO [ ].
As of May 9, 2000, there were issued and outstanding 8,447,183 shares of
the Registrant's Common Stock.
PART I - Financial Information
Item 1. Financial Statements
PennFed Financial Services, Inc. and Subsidiaries
Consolidated Statements of Financial Condition
March 31, June 30,
2000 1999
----------- -----------
(Dollars in thousands)
ASSETS
Cash and cash equivalents .................................................. $ 13,596 $ 9,900
Investment securities held to maturity, at amortized cost, market value of
$279,905 and $281,880 at March 31, 2000 and June 30, 1999 ............. 303,045 293,282
Mortgage-backed securities held to maturity, at amortized cost, market value
of $95,941 and $128,617 at March 31, 2000 and June 30, 1999 ........... 96,823 127,983
Loans held for sale ........................................................ -- 5,180
Loans receivable, net of allowance for loan losses of $3,777 and $3,209
at March 31, 2000 and June 30, 1999 ................................... 1,193,358 1,061,431
Premises and equipment, net ................................................ 19,562 19,240
Real estate owned, net ..................................................... 345 936
Federal Home Loan Bank of New York stock, at cost .......................... 19,688 16,623
Accrued interest receivable, net ........................................... 11,828 9,680
Goodwill and other intangible assets ....................................... 9,512 11,118
Other assets ............................................................... 3,751 3,390
----------- -----------
$ 1,671,508 $ 1,558,763
=========== ===========
LIABILITIES & STOCKHOLDERS' EQUITY
Liabilities:
Deposits .............................................................. $ 1,065,915 $ 1,063,600
Federal Home Loan Bank of New York advances ........................... 344,465 244,465
Other borrowings ...................................................... 91,975 88,738
Mortgage escrow funds ................................................. 10,406 10,102
Due to banks .......................................................... 9,262 7,385
Accounts payable and other liabilities ................................ 4,719 4,230
----------- -----------
Total liabilities ..................................................... 1,526,742 1,418,520
----------- -----------
Guaranteed Preferred Beneficial Interests in the Company's
Junior Subordinated Debentures .................................... 34,500 34,500
Unamortized issuance expenses ......................................... (1,710) (1,757)
----------- -----------
Net Trust Preferred securities ........................................ 32,790 32,743
----------- -----------
PennFed Financial Services, Inc. and Subsidiaries
Consolidated Statements of Financial Condition (Continued)
March 31, June 30,
2000 1999
---------- -----------
(Dollars in thousands)
Stockholders' Equity:
Serial preferred stock, $.01 par value, 7,000,000 shares
authorized, no shares issued .......................................... -- --
Common stock, $.01 par value, 15,000,000 shares authorized, 11,900,000
and 11,897,858 shares issued and 8,467,183 and 8,813,416 shares
outstanding at March 31, 2000 and June 30, 1999 (excluding shares held
in treasury of 3,432,817 and 3,084,442 at
March 31, 2000 and June 30, 1999) ..................................... 60 59
Additional paid-in capital ................................................ 60,299 59,488
Employee Stock Ownership Plan Trust debt .................................. (2,441) (2,804)
Retained earnings, partially restricted ................................... 89,134 80,673
Treasury stock, at cost, 3,432,817 and 3,084,442 shares at
March 31, 2000 and June 30, 1999 ...................................... (35,076) (29,916)
----------- -----------
Total stockholders' equity ................................................ 111,976 107,500
----------- -----------
$ 1,671,508 $ 1,558,763
=========== ===========
See notes to consolidated financial statements.
2
PennFed Financial Services, Inc. and Subsidiaries
Consolidated Statements of Income
Three months ended Nine months ended
March 31, March 31,
------------------------ ------------------------
2000 1999 2000 1999
--------- --------- --------- ---------
(Dollars in thousands, except per share amounts)
Interest and Dividend Income:
Interest and fees on loans...................................... $20,862 $19,572 $59,972 $59,544
Interest on federal funds sold.................................. 2 33 16 59
Interest and dividends on investment securities................. 5,620 3,992 16,904 11,664
Interest on mortgage-backed securities.......................... 1,721 2,475 5,590 8,595
--------- --------- --------- ---------
28,205 26,072 82,482 79,862
-------- -------- -------- --------
Interest Expense:
Deposits........................................................ 11,684 11,857 34,573 37,011
Borrowed funds.................................................. 6,281 4,893 17,417 15,478
Trust Preferred securities...................................... 784 783 2,350 2,349
---------- ---------- --------- ---------
18,749 17,533 54,340 54,838
-------- -------- -------- --------
Net Interest and Dividend Income Before Provision
for Loan Losses................................................. 9,456 8,539 28,142 25,024
Provision for Loan Losses............................................ 210 210 630 570
---------- ---------- ---------- ----------
Net Interest and Dividend Income After Provision
for Loan Losses................................................. 9,246 8,329 27,512 24,454
--------- --------- -------- --------
Non-Interest Income:
Service charges................................................. 521 531 1,641 1,559
Net gain from real estate operations............................ 2 98 83 52
Net gain on sales of loans...................................... 3 201 36 963
Other........................................................... 155 165 496 348
---------- ---------- ----------- -----------
681 995 2,256 2,922
---------- ---------- ---------- ----------
PennFed Financial Services, Inc. and Subsidiaries
Consolidated Statements of Income (Continued)
Three months ended Nine months ended
March 31, March 31,
------------------------ ------------------------
2000 1999 2000 1999
--------- --------- --------- ---------
(Dollars in thousands, except per share amounts)
Non-Interest Expenses:
Compensation and employee benefits.............................. 2,476 2,357 7,374 6,709
Net occupancy expense........................................... 477 344 1,287 990
Equipment....................................................... 442 405 1,335 1,244
Advertising..................................................... 113 104 275 242
Amortization of intangibles..................................... 519 588 1,606 1,779
Federal deposit insurance premium............................... 56 166 374 477
Other........................................................... 843 826 2,573 2,565
---------- ---------- --------- ---------
4,926 4,790 14,824 14,006
--------- --------- -------- --------
Income Before Income Taxes........................................... 5,001 4,534 14,944 13,370
Income Tax Expense................................................... 1,777 1,626 5,315 4,793
--------- --------- --------- ---------
Net Income........................................................... $ 3,224 $ 2,908 $ 9,629 $ 8,577
======== ======== ======== ========
Weighted average number of common shares outstanding:
Basic........................................................... 8,032,585 8,210,536 8,191,001 8,462,521
========= ========= ========= =========
Diluted......................................................... 8,540,618 8,851,358 8,683,856 9,100,235
========= ========= ========= =========
Net income per common share:
Basic........................................................... $0.40 $0.35 $1.18 $1.01
===== ===== ===== =====
Diluted......................................................... $0.38 $0.33 $1.11 $0.94
===== ===== ===== =====
See notes to consolidated financial statements.
3
PennFed Financial Services, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Nine months ended March 31,
--------------------------------
2000 1999
--------- ---------
(Dollars in thousands)
Cash Flows from Operating Activities:
Net income....................................................................... $ 9,629 $ 8,577
Adjustments to reconcile net income to net cash provided by
operating activities:
Net gain on sales of loans....................................................... (36) (963)
Proceeds from sales of loans held for sale....................................... 5,500 135,534
Net gain on sales of real estate owned........................................... (89) (123)
Amortization of investment and mortgage-backed securities
premium, net................................................................... 154 315
Depreciation and amortization.................................................... 1,059 1,022
Provision for losses on loans and real estate owned.............................. 630 615
Amortization of cost of stock plans.............................................. 1,174 1,644
Amortization of intangibles...................................................... 1,606 1,779
Amortization of premiums on loans and loan fees.................................. 1,045 1,757
Amortization of Trust Preferred securities issuance costs........................ 47 47
Increase in accrued interest receivable, net of accrued
interest payable............................................................... (3,735) (1,765)
(Increase) decrease in other assets.............................................. (361) 405
Increase in accounts payable and other liabilities............................... 489 572
Increase (decrease) in mortgage escrow funds..................................... 304 (359)
Increase (decrease) in due to banks.............................................. 1,877 (5,671)
Other, net....................................................................... (49) 26
--------- ---------
Net cash provided by operating activities........................................ 19,244 143,412
--------- ---------
Cash Flows from Investing Activities:
Proceeds from maturities of investment securities................................ 10,175 147,070
Purchases of investment securities held to maturity.............................. (19,991) (208,641)
Net outflow from loan originations net of principal repayments of loans.......... (64,340) (86,315)
Purchases of loans............................................................... (69,866) (27,618)
Proceeds from principal repayments of mortgage-backed securities................. 31,279 63,027
Purchases of mortgage-backed securities.......................................... (220) ---
Proceeds from sale of premises and equipment..................................... 250 ---
Purchases of premises and equipment.............................................. (1,633) (1,754)
Proceeds from sale of real estate owned.......................................... 1,051 1,140
Purchases of Federal Home Loan Bank of New York stock............................ (3,065) (1,558)
--------- ---------
Net cash used in investing activities............................................ (116,360) (114,649)
--------- ---------
PennFed Financial Services, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (Continued)
Nine months ended March 31,
--------------------------------
2000 1999
--------- ---------
(Dollars in thousands)
Cash Flows from Financing Activities:
Net increase in deposits......................................................... 3,902 64,090
Increase (decrease) in advances from the Federal Home Loan Bank
of New York and other borrowings............................................... 103,237 (37,762)
Cash dividends paid.............................................................. (1,014) (1,012)
Purchases of treasury stock, net of reissuance................................... (5,313) (8,604)
--------- ---------
Net cash provided by financing activities........................................ 100,812 16,712
--------- ---------
Net Increase in Cash and Cash Equivalents............................................. 3,696 45,475
Cash and Cash Equivalents, Beginning of Period........................................ 9,900 10,960
--------- ---------
Cash and Cash Equivalents, End of Period.............................................. $ 13,596 $ 56,435
========= =========
Supplemental Disclosures of Cash Flow Information:
Cash paid during period for:
Interest......................................................................... $ 55,374 $ 55,227
========= =========
Income taxes..................................................................... $ 5,628 $ 4,226
========= =========
Supplemental Schedule of Non-Cash Activities:
Transfer of loans receivable to real estate owned, net........................... $ 320 $ 413
========== ===========
Transfer of loans receivable to loans held for sale, at market................... $ 285 $ 140,317
========== ===========
Transfer of premises and equipment, net to real estate owned, net................ $ 50 $ ---
=========== ===========
See notes to consolidated financial statements.
4
PENNFED FINANCIAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The interim consolidated financial statements of PennFed Financial Services,
Inc. ("PennFed") and subsidiaries (with its subsidiaries, the "Company") include
the accounts of PennFed and its subsidiaries, Penn Federal Savings Bank (the
"Bank") and PennFed Capital Trust I. These interim consolidated financial
statements included herein should be read in conjunction with the Company's
Annual Report on Form 10-K for the year ended June 30, 1999. The interim
consolidated financial statements reflect all normal and recurring adjustments
which are, in the opinion of management, considered necessary for a fair
presentation of the financial condition and results of operations for the
periods presented. There were no adjustments of a non-recurring nature recorded
during the nine months ended March 31, 2000 and 1999. The interim results of
operations presented are not necessarily indicative of the results for the full
year.
When necessary, reclassifications have been made to conform to current period
presentation.
2. Computation of EPS
The computation of EPS is presented in the following table.
Three months ended Nine months ended
March 31, March 31,
---------------------------- ---------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
(Dollars in thousands, except per share amounts)
Net income ...................................... $ 3,224 $ 2,908 $ 9,629 $ 8,577
=========== =========== =========== ===========
Number of shares outstanding:
Weighted average shares issued ................ 11,900,000 11,900,000 11,899,790 11,900,000
Less: Weighted average shares held in treasury 3,379,164 3,106,278 3,196,297 2,831,653
Less: Average shares held by the ESOP ........ 952,000 952,000 952,000 952,000
Plus: ESOP shares released or committed to be
released during the fiscal year ...... 463,749 368,814 439,508 346,174
----------- ----------- ----------- -----------
Average basic shares ................... 8,032,585 8,210,536 8,191,001 8,462,521
Plus: Average common stock equivalents ....... 508,033 640,822 492,855 637,714
----------- ----------- ----------- -----------
Average diluted shares ................. 8,540,618 8,851,358 8,683,856 9,100,235
=========== =========== =========== ===========
Earnings per common share:
Basic .................................. $ 0.40 $ 0.35 $ 1.18 $ 1.01
=========== =========== =========== ===========
Diluted ................................ $ 0.38 $ 0.33 $ 1.11 $ 0.94
=========== =========== =========== ===========
5
3. Stockholders' Equity and Regulatory Capital
The Bank's capital amounts and ratios are presented in the following table.
To Be Well
For Minimum Capitalized Under
Capital Adequacy Prompt Corrective
Actual Purposes Action Provisions
------------------- --------------------- ----------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
(Dollars in thousands)
As of March 31, 2000
Tangible capital, and ratio to
adjusted total assets.................... $130,529 7.86% $24,919 1.50% N/A N/A
Tier I (core) capital, and ratio to
adjusted total assets.................... $130,529 7.86% $66,450 4.00% $83,062 5.00%
Tier I (core) capital, and ratio to
risk-weighted assets..................... $130,529 15.45% $33,801 4.00% $50,701 6.00%
Total risk-based capital, and ratio to
risk-weighted assets..................... $134,160 15.88% $67,602 8.00% $84,502 10.00%
As of June 30, 1999
Tangible capital, and ratio to
adjusted total assets.................... $121,910 7.88% $23,207 1.50% N/A N/A
Tier I (core) capital, and ratio to
adjusted total assets.................... $121,943 7.88% $61,888 4.00% $77,360 5.00%
Tier I (core) capital, and ratio to
risk-weighted assets..................... $121,943 15.90% $30,687 4.00% $46,030 6.00%
Total risk-based capital, and ratio to
risk-weighted assets..................... $124,976 16.29% $61,374 8.00% $76,717 10.00%
6
The above table reflects information for the Bank. Savings and loan holding
companies, such as PennFed, are not subject to capital requirements for capital
adequacy purposes or for prompt corrective action requirements. Bank holding
companies, however, are subject to capital requirements established by the Board
of Governors of the Federal Reserve System (the "FRB"). The following table
summarizes the Company's capital amounts and ratios under the FRB's capital
requirements for bank holding companies.
To Be Well
For Minimum Capitalized Under
Capital Adequacy Prompt Corrective
Actual Purposes Action Provisions
------------------- --------------------- ----------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
(Dollars in thousands)
As of March 31, 2000
Tangible capital, and ratio to
adjusted total assets.................... $135,254 8.14% $24,931 1.50% N/A N/A
Tier I (core) capital, and ratio to
adjusted total assets.................... $135,254 8.14% $66,484 4.00% $83,105 5.00%
Tier I (core) capital, and ratio to
risk-weighted assets..................... $135,254 16.20% $33,386 4.00% $50,079 6.00%
Total risk-based capital, and ratio to
risk-weighted assets..................... $138,885 16.64% $66,773 8.00% $83,466 10.00%
As of June 30, 1999
Tangible capital, and ratio to
adjusted total assets.................... $128,385 8.29% $23,217 1.50% N/A N/A
Tier I (core) capital, and ratio to
adjusted total assets.................... $128,419 8.30% $61,913 4.00% $77,391 5.00%
Tier I (core) capital, and ratio to
risk-weighted assets..................... $128,419 16.98% $30,253 4.00% $45,380 6.00%
Total risk-based capital, and ratio to
risk-weighted assets..................... $131,452 17.38% $60,507 8.00% $75,633 10.00%
7
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
General
The Company's results of operations are dependent primarily on net interest
income, which is the difference between the income earned on its loan,
securities and investment portfolios and its cost of funds, consisting of the
interest paid on deposits and borrowings. Results of operations are also
affected by the Company's provision for loan losses and operating expenses.
General economic and competitive conditions, particularly changes in interest
rates, government policies and actions of regulatory authorities also
significantly affect the Company's results of operations. Future changes in
applicable law, regulations or government policies may also have a material
impact on the Company.
Forward-Looking Statements
When used in this Form 10-Q and in future filings by the Company with the
Securities and Exchange Commission (the "SEC"), in the Company's press releases
or other public or shareholder communications, and in oral statements made with
the approval of an authorized executive officer, the words or phrases "will
likely result," "are expected to," "will continue," "is anticipated,"
"estimate," "project" or similar expressions are intended to identify
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such statements are subject to certain risks and
uncertainties, including, among other things, changes in economic conditions in
the Company's market area, changes in policies by regulatory agencies,
fluctuations in interest rates, demand for loans in the Company's market area
and competition, that could cause actual results to differ materially from
historical earnings and those presently anticipated or projected. The Company
cautions readers not to place undue reliance on any such forward-looking
statements, which speak only as of the date made. The Company advises readers
that the factors listed above could affect the Company's financial performance
and could cause the Company's actual results for future periods to differ
materially from any opinions or statements expressed with respect to future
periods in any current statements.
The Company will not undertake -- and specifically declines -- any obligation to
publicly release the result of any revisions which may be made to any
forward-looking statements to reflect events or circumstances after the date of
such statements or to reflect the occurrence of anticipated or unanticipated
events.
Financial Condition
Total assets increased $112.7 million to $1.672 billion at March 31, 2000 from
total assets of $1.559 billion at June 30, 1999. The increase was primarily due
to the originations and purchases of loans, primarily adjustable rate, offset by
principal payments on loans and mortgage-backed securities.
Deposits increased $2.3 million to $1.066 billion at March 31, 2000 from $1.064
billion at June 30, 1999. The increase was principally due to growth in demand
deposits. Federal Home Loan Bank ("FHLB") of New York advances increased $100.0
million from $244.5 million at June 30, 1999, reflecting growth in medium-term
borrowings.
Non-performing assets at March 31, 2000 totaled $3.7 million, representing 0.22%
of total assets, compared to $4.6 million, or 0.30% of total assets, at June 30,
1999. Non-accruing loans totaled $3.4 million, with a ratio of non-accruing
loans to total loans of 0.28% at March 31, 2000 as compared to $3.7 million, or
0.34% of total loans, at June 30, 1999. Real estate owned decreased to $345,000
at March 31, 2000 from $936,000 at June 30, 1999.
Stockholders' equity at March 31, 2000 totaled $112.0 million compared to $107.5
million at June 30, 1999. The increase primarily reflects the net income
recorded for the nine months ended March 31, 2000, partially offset by the
repurchase of 380,000 shares of the Company's outstanding common stock at an
average price of $14.39 per share and the declaration of dividends.
Results of Operations
General. For the three months ended March 31, 2000 net income was $3.2 million,
or $0.38 per diluted share, compared to net income of $2.9 million, or $0.33 per
diluted share, for the comparable prior year period. For the nine months ended
March 31, 2000 net income was $9.6 million, or $1.11 per diluted share. These
results compare to net income of $8.6 million, or $0.94 per diluted share, for
the nine months ended March 31, 1999.
Interest and Dividend Income. Interest and dividend income for the three and
nine months ended March 31, 2000
8
increased to $28.2 million and $82.5 million, respectively, from $26.1 million
and $79.9 million for the three and nine months ended March 31, 1999. The
increases in the current year periods were primarily due to increases in average
interest-earning assets. The increase in average interest-earning assets for the
nine months ended March 31, 2000 was partially offset by a decrease in the
average yield earned on interest-earning assets, when compared to the prior year
period. Average interest-earning assets were $1.596 billion and $1.559 billion
for the three and nine months ended March 31, 2000, respectively, compared to
$1.499 billion and $1.509 billion for the comparable prior year periods. The
average yield earned on interest-earning assets increased to 7.07% for the three
months ended March 31, 2000 from 6.97% for the three months ended March 31,
1999. For the nine months ended March 31, 2000 the average yield earned on
interest-earning assets decreased slightly to 7.04% from 7.05% for the
comparable prior year period.
Interest income on residential one- to four-family mortgage loans for the three
months ended March 31, 2000 increased $646,000, when compared to the prior year
period. For the nine months ended March 31, 2000, interest income on residential
one- to four-family mortgage loans decreased $1.2 million from the March 31,
1999 period. The increase in interest income on residential one- to four-family
mortgage loans for the current three month period was due to an increase of
$29.0 million in the average balance outstanding and an increase of five basis
points in the average yield earned on this portfolio, when compared to the prior
year period. For the nine months ended March 31, 2000, the decrease in interest
income on residential one- to four-family mortgage loans was partially
attributable to a decrease of $17.7 million in the average balance outstanding,
when compared to the prior year period. The average yield earned on this
portfolio for the nine months ended March 31, 2000 decreased four basis points
to 6.97% from 7.01% for the comparable prior year period.
Interest income on commercial and multi-family real estate loans increased
$252,000 and $560,000 for the three and nine months ended March 31, 2000,
respectively, when compared to the prior year periods. The increases in interest
income on the commercial and multi-family real estate portfolio were
attributable to increases of $12.3 million and $10.4 million in the average
outstanding balance for the three and nine months ended March 31, 2000,
respectively, when compared to the prior year periods. The growth in the
portfolio was partially offset by a decline in the average yield earned on
commercial and multi-family real estate loans. The average yield decreased to
8.45% and 8.38% for the current three and nine month periods, respectively,
compared to 8.58% and 8.69% for the three and nine months ended March 31, 1999,
respectively.
Growth in consumer loans contributed to increases of $393,000 and $1.0 million
in the interest income earned on this loan portfolio for the three and nine
months ended March 31, 2000, respectively, compared to the prior year periods.
Also contributing to increases in interest income on consumer loans were
increases in the average yields earned on the consumer loan portfolio to 7.37%
and 7.26% for the three and nine months ended March 31, 2000, respectively,
compared to 7.15% and 7.23% for the prior year periods.
Interest income on investment securities and other interest-earning assets
increased $1.6 million and $5.2 million for the three and nine months ended
March 31, 2000, respectively, from the comparable prior year periods. The
increase was primarily due to a $89.4 million and a $100.5 million increase in
the average balance outstanding for the three and nine months ended March 31,
2000, respectively, over the comparable prior year periods. The average yield
earned on investment securities and other interest-earning assets for the three
months ended March 31, 2000 increased to 6.97% from 6.84% for the comparable
prior year period. For the nine months ended March 31, 2000, the average yield
earned on these securities decreased slightly to 6.98% from 6.99% for the nine
months ended March 31, 1999.
Interest income on the mortgage-backed securities portfolio decreased $753,000
and $3.0 million for the three and nine months ended March 31, 2000,
respectively, compared to the prior year periods. The decreases in interest
income on mortgage-backed securities primarily reflect decreases of $50.1
million and $60.1 million in the average balance outstanding for the three and
nine months ended March 31, 2000, respectively, compared to the prior year
periods.
Interest Expense. Interest expense increased $1.2 million for the three months
ended March 31, 2000 from the comparable March 31, 1999 period. The increase in
the current year period was primarily due to an increase in the Company's
borrowings. Average deposits and borrowings increased $85.4 million for the
three months ended March 31, 2000 when compared to the prior year period, with
$79.6 million of the increase in the Company's borrowings. For the three months
ended March 31, 2000, a decrease in the average rate paid on deposits was offset
by an increase in the cost of borrowings, when compared to the prior year
period. For the nine months ended March 31, 2000, interest expense decreased
$498,000 from the prior year period. The decline was primarily attributable to
the average cost of deposits, which decreased to 4.33% for the nine months ended
March 31, 2000 from 4.66% for the comparable March 1999 period. The average cost
of deposits and borrowings decreased to 4.76% for the nine months ended March
31,
9
2000 from 4.96% for the prior year period.
Net Interest and Dividend Income. Net interest and dividend income for the three
and nine months ended March 31, 2000 was $9.5 million and $28.1 million,
respectively, reflecting a $917,000 and $3.1 million increase from $8.5 million
and $25.0 million recorded in the comparable prior year periods. The increase
primarily reflects the Company's improvement in net interest rate spread coupled
with growth in the Company's average interest-earning assets. The net interest
rate spread and net interest margin for the three months ended March 31, 2000
were 2.13% and 2.37%, respectively, an increase from 2.02% and 2.24%,
respectively, for the comparable prior year period. The net interest rate spread
and net interest margin for the nine months ended March 31, 2000 were 2.17% and
2.42%, respectively, an increase from 1.98% and 2.21%, respectively, for the
nine months ended March 31, 1999. The current year increases in the net interest
rate spread and net interest margin were primarily attributable to the decreases
in the average rate paid on deposits and, to a lesser extent, growth in the
commercial and multi-family real estate and consumer loan portfolios.
Provision for Loan Losses. The provision for loan losses for the three and nine
months ended March 31, 2000 was $210,000 and $630,000, respectively, compared to
$210,000 and $570,000 for the comparable prior year periods. The allowance for
loan losses at March 31, 2000 of $3.8 million reflects a $568,000 increase from
the June 30, 1999 level. The allowance for loan losses as a percentage of
non-accruing loans was 112.61% at March 31, 2000, compared to 87.44% at June 30,
1999. The allowance for loan losses was 0.32% of total loans at March 31, 2000,
compared to 0.30% at June 30, 1999.
Non-Interest Income. For the three and nine months ended March 31, 2000
non-interest income was $681,000 and $2.3 million, respectively, compared to
$995,000 and $2.9 million for the prior year periods. The decreases were
primarily attributable to a $198,000 and $927,000 reduction in the net gain on
sales of loans during the three and nine months ended March 31, 2000,
respectively, as compared to the same 1999 periods. The $201,000 net gain on
sales of loans for the three months ended March 31, 1999 represents
approximately $60 million of one- to four-family residential mortgage loans
which were sold in the secondary market. For the nine months ended March 31,
2000, $5.5 million of one- to four-family residential mortgage loans were sold
in the secondary market early in the fiscal year for a net gain of $36,000. For
the nine months ended March 31, 1999, approximately $135 million of one- to
four-family residential mortgage loans were sold for a net gain of $963,000. Due
to the majority of one- to four-family residential mortgage loan production
being adjustable rate and due to the higher interest rate environment in the
current periods, loan sale activity was reduced from the fiscal 1999 levels, as
the majority of new production was retained in portfolio. The level of such
activity will continue to be evaluated with primary consideration given to
interest rate risk, long-term profitability and liquidity objectives. Service
charge income for the three and nine months ended March 31, 2000 was $521,000
and $1.6 million, respectively, compared to $531,000 and $1.6 million for the
prior year periods. The net gain from real estate operations was $2,000 and
$83,000 for the three and nine months ended March 31, 2000. This compares to
$98,000 and $52,000 for the three and nine months ended March 31, 1999. Other
non-interest income for the three months ended March 31, 2000 of $155,000
reflects a $10,000 decline from $165,000 for the comparable prior year period.
For the nine months ended March 31, 2000, other non-interest income reflects a
$148,000 increase from the nine months ended March 31, 1999. For the nine months
ended March 31, 2000 and 1999, other non-interest income included $205,000 and
$121,000 in earnings from the Investment Services at Penn Federal program,
respectively. Through this program, customers have convenient access to
financial consulting/advisory services and related non-deposit investment and
insurance products. In addition, other non-interest income for the nine months
ended March 31, 2000 included a $48,000 gain on the sale of a former branch
location.
Non-Interest Expenses. The Company's non-interest expenses were $4.9 million and
$14.8 million for the three and nine months ended March 31, 2000, respectively,
compared to $4.8 million and $14.0 million for the comparable prior year
periods. In February 1999 and June 1999, the Company opened new branches in Toms
River and Livingston, NJ, respectively. Growth in retail branches has resulted
in an increase in non-interest expenses in the current year periods when
compared to the prior year periods. The Company's non-interest expenses as a
percent of average assets were 1.19% and 1.22% for the three and nine months
ended March 31, 2000, respectively, compared to 1.23% and 1.19% for the prior
year periods.
Income Tax Expense. Income tax expense for the three and nine months ended March
31, 2000 was $1.8 million and $5.3 million, respectively, compared to $1.6
million and $4.8 million for the three and nine months ended March 31, 1999. The
effective tax rate for the three and nine months ended March 31, 2000 was 35.5%
and 35.6%, respectively. The effective tax rate was 35.9% and 35.8% for the
three and nine months ended March 31, 1999, respectively.
10
Analysis of Net Interest Income
The following table sets forth certain information relating to the Company's
consolidated statements of financial condition and the consolidated statements
of income for the three and nine months ended March 31, 2000 and 1999, and
reflects the average yield on assets and average cost of liabilities for the
periods indicated. Such yields and costs are derived from average daily
balances. The average balance of loans receivable includes non-accruing loans.
The yields and costs include fees which are considered adjustments to yields.
11
Three Months Ended March 31,
-----------------------------------------------------------------------------
2000 1999
------------------------------------ -----------------------------------
Average Interest Average Interest
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Balance Paid Rate (1) Balance Paid Rate (1)
------- ---- -------- ------- ---- --------
(Dollars in thousands)
Interest-earning assets:
One- to four-family mortgage
loans................................... $1,005,330 $17,556 6.99% $ 976,312 $16,911 6.94%
Commercial and multi-family real
estate loans............................ 82,226 1,753 8.45 69,973 1,501 8.58
Consumer loans............................. 84,556 1,553 7.37 65,797 1,160 7.15
---------- ------- ----------- -------
Total loans receivable.................. 1,172,112 20,862 7.12 1,112,082 19,572 7.06
Federal funds sold......................... 138 2 5.73 2,725 33 4.84
Investment securities and other............ 322,737 5,620 6.97 233,307 3,992 6.84
Mortgage-backed securities................. 100,871 1,721 6.82 150,993 2,475 6.56
---------- ------- ----------- -------
Total interest-earning assets........... 1,595,858 $28,205 7.07 1,499,107 $26,072 6.97
======= =======
Non-interest earning assets................ 54,972 56,169
---------- ----------
Total assets ........................... $1,650,830 $1,555,276
========== ==========
Deposits, borrowings and Trust
Preferred securities:
Money market and demand deposits........... $ 114,103 $ 309 1.09% $ 104,560 $ 287 1.11%
Savings deposits........................... 161,132 670 1.67 162,093 659 1.65
Certificates of deposit.................... 792,442 10,705 5.42 795,169 10,911 5.56
---------- ------- ----------- -------
Total deposits.......................... 1,067,677 11,684 4.39 1,061,822 11,857 4.53
FHLB of New York advances.................. 331,881 5,025 6.02 267,046 3,961 5.97
Other borrowings........................... 84,626 1,256 5.87 69,896 932 5.33
---------- ------- ----------- -------
Total deposits and borrowings........... 1,484,184 17,965 4.84 1,398,764 16,750 4.84
Trust Preferred securities................. 32,782 784 9.57 32,720 783 9.57
---------- ------- ----------- -------
Total deposits, borrowings and
Trust Preferred securities.......... 1,516,966 $18,749 4.94 1,431,484 $17,533 4.95
======= =======
Other liabilities.............................. 22,882 21,741
---------- ----------
Total liabilities....................... 1,539,848 1,453,225
Stockholders' equity........................... 110,982 102,051
---------- ----------
Total liabilities and stockholders'
equity.............................. $1,650,830 $1,555,276
========== ==========
Three Months Ended March 31,
-----------------------------------------------------------------------------
2000 1999
------------------------------------ -----------------------------------
Average Interest Average Interest
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Balance Paid Rate (1) Balance Paid Rate (1)
------- ---- -------- ------- ---- --------
(Dollars in thousands)
Net interest income and net
interest rate spread....................... $ 9,456 2.13% $ 8,539 2.02%
======== ==== ======== ====
Net interest-earning assets and
interest margin............................ $ 78,892 2.37% $ 67,623 2.24%
========== ==== ============ ====
Ratio of interest-earning assets to
deposits, borrowings and Trust
Preferred securities..................... 105.20% 104.72%
====== ======
(1) Annualized.
12
Nine Months Ended March 31,
-----------------------------------------------------------------------------
2000 1999
------------------------------------ -----------------------------------
Average Interest Average Interest
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Balance Paid Rate (1) Balance Paid Rate (1)
------- ---- -------- ------- ---- --------
(Dollars in thousands)
Interest-earning assets:
One- to four-family mortgage
loans................................... $ 968,246 $50,649 6.97% $ 985,959 $51,822 7.01%
Commercial and multi-family real
estate loans............................ 77,631 4,956 8.38 67,278 4,396 8.69
Consumer loans............................. 79,810 4,367 7.26 61,255 3,326 7.23
---------- ------- ---------- -------
Total loans receivable.................. 1,125,687 59,972 7.09 1,114,492 59,544 7.12
Federal funds sold......................... 387 16 5.36 1,589 59 4.93
Investment securities and other............ 322,822 16,904 6.98 222,344 11,664 6.99
Mortgage-backed securities................. 110,487 5,590 6.75 170,618 8,595 6.72
---------- ------- ---------- -------
Total interest-earning assets........... 1,559,383 $82,482 7.04 1,509,043 $79,862 7.05
======= =======
Non-interest earning assets.................... 55,010 57,520
------------- -------------
Total assets ........................... $1,614,393 $1,566,563
========== ==========
Deposits, borrowings and Trust
Preferred securities:
Money market and demand deposits........... $ 112,841 $ 905 1.06% $ 100,301 $ 904 1.20%
Savings deposits........................... 163,548 2,053 1.67 163,619 2,206 1.80
Certificates of deposit.................... 784,700 31,615 5.36 796,186 33,901 5.69
---------- ------- ---------- -------
Total deposits.......................... 1,061,089 34,573 4.33 1,060,106 37,011 4.66
FHLB of New York advances.................. 313,516 14,227 5.97 270,350 12,212 5.98
Other borrowings........................... 72,853 3,190 5.73 78,078 3,266 5.50
---------- ------- ---------- -------
Total deposits and borrowings........... 1,447,458 51,990 4.76 1,408,534 52,489 4.96
Trust Preferred securities................. 32,766 2,350 9.56 32,704 2,349 9.58
---------- ------- ---------- -------
Total deposits, borrowings and
Trust Preferred securities.......... 1,480,224 $54,340 4.87 1,441,238 $54,838 5.07
======= =======
Other liabilities.............................. 23,980 22,086
---------- ----------
Total liabilities....................... 1,504,204 1,463,324
Stockholders' equity........................... 110,189 103,239
---------- ----------
Total liabilities and stockholders'
equity.............................. $1,614,393 $1,566,563
========== ==========
Nine Months Ended March 31,
-----------------------------------------------------------------------------
2000 1999
------------------------------------ -----------------------------------
Average Interest Average Interest
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Balance Paid Rate (1) Balance Paid Rate (1)
------- ---- -------- ------- ---- --------
(Dollars in thousands)
Net interest income and net
interest rate spread....................... $28,142 2.17% $25,024 1.98%
======= ==== ======= ====
Net interest-earning assets and
interest margin............................ $ 79,159 2.42% $ 67,805 2.21%
========== ==== ========== ====
Ratio of interest-earning assets to
deposits, borrowings and Trust
Preferred securities..................... 105.35% 104.70%
====== ======
(1) Annualized.
13
Non-Performing Assets
The table below sets forth the Company's amounts and categories of
non-performing assets. Loans are placed on non-accrual status when the
collection of principal or interest becomes delinquent more than 90 days. There
are no loans delinquent more than 90 days which are still accruing. Real estate
owned represents assets acquired in settlement of loans and is shown net of
valuation allowances.
March 31, June 30,
2000 1999
-------- --------
(Dollars in thousands)
Non-accruing loans:
One- to four-family.................................. $2,785 $2,937
Commercial and multi-family.......................... 95 46
Consumer............................................. 474 687
-------- --------
Total non-accruing loans......................... 3,354 3,670
Real estate owned, net.................................... 345 936
-------- --------
Total non-performing assets...................... 3,699 4,606
------- -------
Total risk elements.............................. $3,699 $4,606
====== ======
Non-accruing loans as a percentage of total loans......... 0.28% 0.34%
========= =========
Non-performing assets as a percentage of total assets..... 0.22% 0.30%
========= =========
Total risk elements as a percentage of total assets....... 0.22% 0.30%
========= =========
Allowance for Loan Losses. The allowance for loan losses is established through
a provision for loan losses based upon management's evaluation of the risk
inherent in its loan portfolio and changes in the nature and volume of its loan
activity. Such evaluation, which includes a review of loans for which full
collectibility may not be reasonably assured, considers among other matters,
loan classifications, the estimated fair value of the underlying collateral,
economic conditions, historical loan loss experience, and other factors that
warrant recognition in providing for an adequate loan loss allowance.
Real estate properties acquired through foreclosure are recorded at the lower of
cost or estimated fair value less costs to dispose of such properties. If fair
value at the date of foreclosure is lower than the balance of the related loan,
the difference will be charged-off to the allowance for loan losses at the time
of transfer. Valuations are periodically updated by management and if the value
declines, a specific provision for losses on real estate owned is established by
a charge to operations.
Although management believes that it uses the best information available to
determine the allowances, unforeseen market conditions could result in
adjustments and net earnings could be significantly affected if circumstances
differ substantially from the assumptions used in making the final
determination. Future additions to the Company's allowances will be the result
of periodic loan, property and collateral reviews and thus cannot be predicted
in advance. In addition, federal regulatory agencies, as an integral part of the
examination process, periodically review the Company's allowance for loan
losses. Such agencies may require the Company to record additions to the
allowance level based upon their assessment of the information available to them
at the time of their examination. At March 31, 2000, the Company had a total
allowance for loan losses of $3.8 million representing 112.61% of total
non-accruing loans and 0.32% of total loans.
Interest Rate Sensitivity
Interest Rate Gap. The interest rate risk inherent in assets and liabilities may
be determined by analyzing the extent to which such assets and liabilities are
"interest rate sensitive" and by measuring an institution's interest rate
sensitivity "gap." An asset or liability is said to be interest rate sensitive
within a defined time period if it matures or reprices within that period. The
difference or mismatch between the amount of interest-earning assets maturing or
repricing within a defined period and the amount of interest-bearing liabilities
maturing or repricing within the same period is defined as the interest rate
sensitivity gap. An institution is considered to have a negative gap if the
amount of interest-bearing
14
liabilities maturing or repricing within a specified time period exceeds the
amount of interest-earning assets maturing or repricing within the same period.
If more interest-earning assets than interest-bearing liabilities mature or
reprice within a specified period, then the institution is considered to have a
positive gap. Accordingly, in a rising interest rate environment, in an
institution with a negative gap, the cost of its rate sensitive liabilities
would theoretically rise at a faster pace than the yield on its rate sensitive
assets, thereby diminishing future net interest income. In a falling interest
rate environment, a negative gap would indicate that the cost of rate sensitive
liabilities would decline at a faster pace than the yield on rate sensitive
assets and may improve net interest income. For an institution with a positive
gap, the reverse would be expected.
At March 31, 2000, the Company's total deposits, borrowings and Trust Preferred
securities maturing or repricing within one year exceeded its total
interest-earning assets maturing or repricing within one year by $334.4 million,
representing a one year negative gap of 20.00% of total assets. At June 30,
1999, the one year negative gap was 13.61% of total assets. The Company's
negative gap position widened from June 30, 1999 as interest rates have
increased. Results included declining prepayments of loans and securities and
lengthening of asset cash flows. Under the current interest rate environment, it
is assumed that certain callable investment securities will not be called at
their call date, thereby extending the life of these securities. Also
contributing to the increase in the negative gap position was the termination of
$70 million notional amount of interest rate swap contracts. Partially
offsetting the increase in the negative gap position was an increase in core
deposits and medium-term certificates of deposit, as well as the addition of
medium-term borrowings.
In evaluating the Company's exposure to interest rate risk, certain limitations
inherent in the method of interest rate gap analysis must be considered. For
example, although certain assets and liabilities may have similar maturities or
periods to repricing, they may react in different degrees to changes in market
interest rates. Also, the interest rates on certain types of assets and
liabilities may fluctuate in advance of changes in market interest rates, while
interest rates on other types may lag behind changes in market rates.
Additionally, certain assets, such as adjustable rate mortgages, have features
which restrict changes in interest rates in the short-term and over the life of
the asset. Further, in the event of a change in interest rates, prepayment and
early withdrawal levels may deviate significantly from those assumed in
calculating the gap position. Finally, the ability of many borrowers to service
their debt may decrease in the event of an interest rate increase. The Company
considers all of these factors in monitoring its exposure to interest rate risk.
Net Portfolio Value. The Company's interest rate sensitivity is regularly
monitored by management through selected interest rate risk ("IRR") measures set
forth by the Office of Thrift Supervision ("OTS"). The IRR measures used by the
OTS include an IRR "Exposure Measure" or "Post-Shock" net portfolio value
("NPV") ratio and a "Sensitivity Measure." A low Post-Shock NPV ratio indicates
greater exposure to IRR. Greater exposure can result from a low initial NPV
ratio or high sensitivity to changes in interest rates. The Sensitivity Measure
is the change in the NPV ratio, in basis points, caused by a 2% increase or
decrease in rates, whichever produces a larger decline. At least quarterly, and
generally monthly, management models the change in NPV over a variety of
interest rate scenarios. NPV is the present value of expected cash flows from
assets, liabilities and off-balance sheet contracts. An NPV ratio, in any
interest rate scenario, is defined as the NPV in that rate scenario divided by
the market value of assets in the same scenario.
As of March 31, 2000, the Bank's internally generated initial NPV ratio was
9.74%. Following a 2% increase in interest rates, the Bank's Post-Shock NPV
ratio was 6.94%. The change in the NPV ratio, or the Bank's Sensitivity Measure,
was 2.80%. NPV is also measured internally on a consolidated basis. As of March
31, 2000, the Company's initial NPV ratio was 10.02%, the Post-Shock ratio was
7.15%, and the Sensitivity Measure was 2.87%. Variances between the Bank's and
the Company's NPV ratios are attributable to balance sheet items which are
adjusted during consolidation, such as investments, intercompany borrowings and
capital.
Internally generated NPV measurements are based on simulations which utilize
institution specific assumptions and, as such, generally result in lower levels
of presumed interest rate risk (i.e., higher Post-Shock NPV ratio and lower
Sensitivity Measure) than OTS measurements indicate.
The OTS measures the Bank's (unconsolidated) IRR on a quarterly basis using data
from the quarterly Thrift Financial Reports filed by the Bank with the OTS,
coupled with non-institution specific assumptions which are based on national
averages. As of December 31, 1999 (the latest date for which information is
available), the Bank's initial NPV ratio, as measured by the OTS, was 7.22%, the
Bank's Post-Shock ratio was 3.75% and the Sensitivity Measure was 3.47%.
In addition to monitoring NPV and gap, management also monitors the duration of
assets and liabilities and the effects on net interest income resulting from
parallel and non-parallel increases or decreases in rates.
15
At March 31, 2000, based on its internally generated simulation models, the
Company's consolidated net interest income projected for one year forward would
decrease 16% from the base case, or current market, as a result of an immediate
and sustained 2% increase in interest rates.
Year 2000
By following a carefully prescribed Year 2000 Project Plan, all mission-critical
systems, including interfaces to the main systems, were completely renovated and
tested. To date, the Company has not experienced any problems with respect to
the century rollover. The Company will continue to monitor for any Year 2000
problems, as appropriate, through the end of the calendar year. The Board of
Directors has been updated on a monthly basis through the completion of the
March 2000 quarterly period with respect to any problems encountered.
The cost for the Year 2000 effort incurred in fiscal 1999 was $45,000. As of
March 31, 2000, no additional costs had been incurred in fiscal 2000. No
additional expenditures are currently anticipated. The actual expenditures do
not include manpower costs of Company personnel associated with this effort, who
retained their individual operational responsibilities in addition to Year 2000
duties. No assurance can be given that any remaining issues relating to the Year
2000 will not have a material adverse effect on the Company's financial
condition or results of operations.
Liquidity and Capital Resources
The Company's primary sources of funds are deposits, principal and interest
payments on loans and mortgage-backed securities, and borrowings from the FHLB
of New York. While scheduled loan repayments and maturing investments are
relatively predictable, deposit flows and early loan repayments are more
influenced by interest rates, general economic conditions and competition. The
Company has competitively set rates on deposit products for selected terms and,
when necessary, has supplemented deposits with longer-term or less expensive
alternative sources of funds.
Federal regulations require the Bank to maintain minimum levels of liquid
assets. The required percentage has varied from time to time based upon economic
conditions and savings flows. The current required percentage is 4% of net
withdrawable deposits payable on demand or in one year or less and borrowings
payable on demand or in one year or less, both as of the end of the preceding
calendar quarter. Liquid assets for purposes of this ratio generally include
cash, accrued interest receivable and U.S. government or federal agency
securities, including mortgage-backed securities. The Company's most liquid
assets are cash and cash equivalents, U.S. government agency securities and
mortgage-backed securities. The levels of these assets are dependent on the
Bank's operating, financing, lending and investing activities during any given
period. At March 31, 2000 and June 30, 1999, the Bank's liquidity ratios were
10.54% and 21.30%, respectively.
The Company uses its liquid resources principally to fund maturing certificates
of deposit and deposit withdrawals, to purchase loans and securities, to fund
existing and future loan commitments, and to meet operating expenses. Management
believes that loan repayments and other sources of funds will be adequate to
meet the Company's foreseeable liquidity needs.
The Company's cash needs for the nine months ended March 31, 2000 were provided
by operating activities, proceeds from maturities of investment securities, an
increase in advances from the FHLB of New York and principal repayments on loans
and mortgage-backed securities. During this period, the cash provided was
primarily used to fund investing activities, which included the origination and
purchase of loans and the purchase of investment securities. During the nine
months ended March 31, 1999, the cash needs of the Company were principally
provided by proceeds from sales of loans held for sale, proceeds from maturities
of investment securities, principal repayments on loans and mortgage-backed
securities and an increase in deposits. The cash provided was used for investing
activities, which included the origination and purchase of loans and the
purchase of investment securities.
Current regulatory standards impose the following capital requirements: a
risk-based capital standard expressed as a percentage of risk-adjusted assets; a
ratio of core capital to risk-adjusted assets; a leverage ratio of core capital
to total adjusted assets; and a tangible capital ratio expressed as a percentage
of total adjusted assets. As of March 31, 2000, the Bank exceeded all regulatory
capital requirements and qualified as a "well-capitalized" institution (see Note
3. - Stockholders' Equity and Regulatory Capital, in the Notes to Consolidated
Financial Statements).
16
PART II - Other Information
Item 1. Legal Proceedings
None.
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) Exhibits
Exhibit 11: Statement Regarding Computation of Per Share
Earnings.
Exhibit 27: Financial Data Schedule.
(b) Reports on Form 8-K
None.
17
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.
PENNFED FINANCIAL SERVICES, INC.
Date: May 11, 2000 By: /s/ Joseph L. LaMonica
----------------------
Joseph L. LaMonica
President and Chief
Executive Officer
Date: May 11, 2000 By: /s/ Lucy T. Tinker
------------------
Lucy T. Tinker
Senior Executive Vice President and
Chief Operating Officer
(Principal Financial Officer)
Date: May 11, 2000 By: /s/ Jeffrey J. Carfora
----------------------
Jeffrey J. Carfora
Executive Vice President and
Chief Financial Officer
(Principal Accounting Officer)
17