UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1998
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 No. 0-27650
CATSKILL FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 14-1788465
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
341 MAIN STREET, CATSKILL, NY 12414
(Address of principal executive offices)
Registrant's telephone number, including area code: (518)943-3600
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10K or any amendments to this
Form 10K. [X]
As of December 18, 1998, the aggregate market value of the voting stock held by
non-affiliates (based upon reported beneficial ownership of all directors and
executive officers of the registrant; this determination does not however,
constitute an admission of affiliated status for any of these individual
stockholders) of the registrant, excluding unallocated ESOP shares, was
approximately $48.2 million.
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Common Shares, $.01 par value 4,358,334
(Title of class) (outstanding at December 18, 1998)
ANNUAL REPORT FOR 1998 ON FORM 10-K
TABLE OF CONTENTS
PART I
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II
Item 5. Market for Registrant's Common Equity
and Related Shareholder Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures about Market Risks
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
PART III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial
Owners and Management
Item 13. Certain Relationships and Related Transactions
PART IV
Item 14. Exhibits and Financial Statement Schedules and Reports on
Form 8-K
SIGNATURES
DOCUMENTS INCORPORATED BY REFERENCE
Documents Part of 10-K into which incorporated
--------- ------------------------------------
Portions of the Annual Report to
Shareholders for fiscal year
ended September 30, 1998. Parts II and IV
Definitive Proxy Statement of the
Registrant dated January 7, 1999,
in connection with the Annual
Meeting of Shareholders to be held
February 16, 1999, which is expected
to be filed on/or about January 7, 1999. Part III
PART I
ITEM 1. BUSINESS
General
Catskill Financial Corporation (the "Company" or "Catskill Financial")
was formed in December 1995 for the purpose of acquiring all of the common stock
of Catskill Savings Bank (the "Bank") upon the conversion of the Bank from the
mutual to the stock form of ownership. The Company is incorporated under the
laws of the state of Delaware, is qualified to do business in the state of New
York, and generally is authorized to engage in any activity that is permitted by
the Delaware General Corporation Law. On April 18, 1996, the Bank converted to
the stock form of ownership, the Company acquired all of the issued and
outstanding shares of stock of the Bank, and the Company completed its initial
public stock offering, issuing 5,686,750 shares of $.01 par value common stock
at $10.00 per share. Net proceeds to the Company were $54.9 million after
conversion and stock offering costs, and $50.4 million excluding the shares
acquired by the Company's newly formed Employee Stock Ownership Plan (the
"ESOP").
The consolidated financial condition and operating results of the
Company are primarily dependent upon its wholly owned subsidiary, the Bank, and
all references to the Company and its financial data prior to April 18, 1996,
except where otherwise indicated, refer to the Bank and its financial data.
The Bank was organized in 1868, as a state chartered mutual savings
bank. In January 1996, the Bank converted to a federally chartered stock savings
bank. The Bank is a member of the Bank Insurance Fund ("BIF"), which is
administered by the Federal Deposit Insurance Corporation ("FDIC"). Accordingly,
its deposits are insured up to applicable limits by the FDIC, which insurance is
backed by the full faith and credit of the United States. The Bank's primary
market area is comprised of Greene County and southern Albany County in New
York, serviced by the Bank's main office and four other banking offices. At
September 30, 1998, the Bank had total assets of $313.6 million, deposits of
$213.1 million and equity of $60.3 million, or 19.2% of total assets.
The Bank has been and intends to continue to be a community-oriented
financial institution offering financial services to meet the needs of the
communities it serves. The Bank attracts deposits from the general public and
uses such deposits, together with other funds, to originate one- to four-family
residential mortgage and, to a lesser extent, consumer (including home equity
lines of credit), commercial and multi-family real estate and other loans in the
Bank's primary market area. The Bank offers deposit accounts having a range of
interest rates and terms. The Bank only solicits deposits in its primary market
area and does not have brokered deposits. The Bank is a member of the Federal
Home Loan Bank of New York ("FHLBNY").
Regulation
The following is a summary of certain statutes and regulations
affecting the Company and the Bank. The Bank, as a federally chartered, FDIC
insured, savings bank, derives its powers principally from federal law and is
subject to comprehensive regulation of virtually every aspect of its business
operations. The following summary is selective and should not be considered to
be a complete discussion of all regulation affecting the Company or the Bank.
General Bank Regulation. The Bank's primary federal bank regulator is
the Office of Thrift Supervision ("OTS"). The Bank is also subject to regulation
by the FDIC as the insurer of its deposits. The Bank must file periodic reports
with the OTS and is regularly examined by the OTS and the FDIC. As a result of
these examinations, the Bank can be required to adjust its loan classifications
or allowance for loan losses, take other actions to correct deficiencies found
during the examinations, or cease engaging in certain activities. The Bank is
generally permitted to open deposit-taking branches throughout the United
States, regardless of local laws regarding branching.
The OTS may institute enforcement action against the Bank for
violations of law or for unsafe and unsound banking practices. Enforcement
actions can include the issuance of cease and desist orders, the commencement of
removal proceedings in which an employee, officer or director can be removed
from involvement with the Bank, the assessment of civil monetary penalties, and
injunctive relief. The FDIC may terminate the insurance of deposits, after
notice and hearing, upon a finding that an institution has engaged in unsafe and
unsound practices, cannot continue operations because it is in an unsafe and
unsound condition, or has violated any applicable law, regulation, rule, order
or condition imposed by the OTS or FDIC. The
1
FDIC may instead impose less severe sanctions. Neither the OTS nor the FDIC
(which was also the Bank's primary federal regulator before the Bank became a
federal savings bank in January 1996) have ever instituted any enforcement
action against the Bank.
Federal law and OTS regulations limit the percentage of the Bank's
assets that can be invested in certain investments. For example, commercial,
corporate and business loans, other than those secured by real estate
collateral, are limited in the aggregate to 10% of assets. The purchase of below
investment grade debt securities is prohibited. Loans secured by non-residential
real property cannot, in the aggregate, exceed 400% of capital. Consumer loans
not secured by residential real estate are generally limited, in the aggregate,
to 35% of total assets. Loans secured by residential real property, and many
other types of loans and investments, are not subject to any percentage of asset
limit. Generally, the Bank may not lend more than 15% of unimpaired capital and
surplus to one borrower, representing a lending limit of $9.4 million per
borrower, with an additional 10% of unimpaired capital and surplus being
permitted if secured by certain readily marketable collateral. The Bank is in
compliance with all these limits. The Bank's largest loan to one borrower at
September 30, 1998, was a $1.0 million participation loan secured by a motel in
Albany County.
The OTS also imposes a semi-annual assessment on all OTS regulated
institutions to defer the cost of OTS regulation. For the semi-annual period
ended December 31, 1998, the Bank's OTS assessment was $32,116.
The Company is a unitary savings and loan holding company, and its sole
FDIC-insured subsidiary, the Bank, is a qualified thrift lender ("QTL",
discussed in more detail below). Therefore, the Company generally has broad
authority to engage in all types of business activities. If the Company were to
acquire another insured institution as a separate subsidiary or if the Bank
fails to remain a QTL, the Company's activities will be limited to those
permitted of multiple savings and loan holding companies. In general, a multiple
savings and loan holding company (or subsidiary thereof that is not an insured
institution) may, subject to OTS approval in most cases, engage in activities
comparable to those permitted for bank holding companies, certain insurance
activities, and certain activities related to the operations of its FDIC-insured
subsidiaries.
Capital Requirements. The Bank is subject to minimum capital
requirements imposed by the OTS. The Bank must maintain (i) tangible capital of
1.5% of tangible assets, (ii) core capital of 4.0% of adjusted tangible assets,
and (iii) a risk-based capital requirement of 8.0% of risk-weighted assets.
Under current law and regulations, there are no capital requirements directly
applicable to the Company. The Bank substantially exceeds all minimum capital
standards imposed by the OTS. At September 30, 1998, the Bank had a tangible
capital ratio of 18.79%, a core capital ratio of 18.79% and a risk based capital
ratio of 49.86%. OTS regulations require that certain institutions with more
than normal interest rate risk must make a deduction from capital before
determining compliance with the minimum capital requirements. The Bank has
previously been exempt from the deduction requirement because it had total
assets less than $300 million and risk based capital in excess of 12%. However,
the Bank's capital ratios are high enough that even if the exemption is
withdrawn, the deduction would not have a material effect on the Bank's
compliance with OTS capital requirements.
The OTS has the authority to require that an institution take prompt
corrective action to solve problems if the institution is undercapitalized,
significantly undercapitalized or critically undercapitalized. Because of the
Bank's high capital ratios, the prompt corrective action regulations are not
expected to have an effect on the Bank.
Deposit Insurance Premiums. The FDIC's deposit insurance premiums are
assessed through a risk-based system under which all insured depository
institutions are placed into one of nine categories and assessed insurance
premiums based upon their level of capital and supervisory evaluation. Under the
system, institutions classified as well capitalized and considered healthy pay
the lowest premium. The Bank is in this category and currently pays no deposit
insurance premiums. If the Bank's capital ratios substantially deteriorate or if
the Bank is found to be otherwise unhealthy, the deposit insurance premiums
payable by the Bank could increase. The Bank must, however, pay a part of the
costs of the "FICO" bonds sold in the late 1980s to finance the savings and loan
bailout. The FICO bond assessment is approximately .012% of insured deposits.
Dividend Restrictions. OTS regulations impose limits on dividends or
other capital distributions by savings institutions based on capital levels and
net income. An institution, such as the Bank, that meets or exceeds all of its
capital requirements (both before and after giving effect to the distribution)
and is not in need of more than normal supervision, may make capital
distributions during a calendar year of up to the greater of (i) 100% of net
income for the current calendar year plus 50% of its capital surplus (capital in
excess of regulatory requirements) or (ii) 75% of its net income over the most
recent four quarters. Any additional capital distributions require prior
regulatory approval.
2
The Bank's capital levels exceed regulatory minimums to such an extent
that the substantive restrictions on dividends are not expected to have a
material effect on the Company. However, OTS regulations also impose procedural
restrictions. The OTS must receive at least 30 days' written notice before
making any capital distributions. All such capital distributions are subject to
the OTS' right to object to a distribution on safety and soundness grounds. The
OTS has proposed regulations that would eliminate the notice requirement for the
highest rated institutions so that advance notice would not be required for most
normal dividends. The Bank expects that it will not be required to give notice
under normal circumstances if the new proposal is adopted in its current form.
Qualified Thrift Lenders. If the Bank fails to remain a QTL, as defined
below, it must either convert to a national bank charter or be subject to
restrictions on its activities specified by law and the OTS regulations, which
restrictions would generally limit activities to those permitted for national
banks. Also, three years after the savings institution ceases to be a QTL, it
would be prohibited from retaining any investment or engaging in any activity
not permissible for a national bank and would be required to repay any
outstanding borrowings from any Federal Home Loan Bank.
A savings institution will be a QTL if its qualified thrift investments
equal or exceed 65% of its portfolio assets on a monthly average basis in nine
of every 12 months. Qualified thrift investments include, among others, (i)
certain housing-related loans and investments (notably including residential one
to four family mortgage loans), (ii) certain federal government and agency
obligations, (iii) loans to purchase or construct churches, schools, nursing
homes and hospitals (subject to certain limitations), (iv) consumer loans
(subject to certain limitations), (v) shares of stock issued by any Federal Home
Loan Bank, and (vi) shares of stock issued by the FHLMC or the FNMA (subject to
certain limitations). The Bank satisfied the QTL test at September 30, 1998, as
well as for every month-end during fiscal 1998.
Community Reinvestment Act. Under the Community Reinvestment Act (the
"CRA"), as implemented by OTS regulations, the Bank has a continuing and
affirmative obligation consistent with its safe and sound operation to help meet
the credit needs of its entire community, including low and moderate income
neighborhoods. The Bank is periodically examined by the OTS for compliance with
the CRA. Subject to certain exceptions and elections, under recently adopted
rules the Bank's CRA performance will be evaluated based upon the lending,
investment and service activities of the Bank. The Bank received an
"outstanding" CRA rating from the OTS under prior evaluation rules and has not
yet been examined under the new rules.
Federal Reserve Regulation. Under Federal Reserve Board regulations,
the Bank must maintain reserves against its transaction accounts (primarily
interest-bearing checking accounts) and non-personal time deposits. The effect
of the reserve requirements is to compel the Bank to maintain certain
low-yielding reserve deposits which are not available for investment in higher
yielding assets. However, at the present time, in light of the Bank's current
cash and due from banks, the reserve requirements do not have a material adverse
effect on the Bank. The balances maintained to meet the reserve requirements may
be used to satisfy liquidity requirements imposed by the OTS. The Bank is in
compliance with its reserve requirements.
Taxation. The Company pays federal and New York State income taxes on
its income on terms substantially similar to other business corporations.
Special rules allowing the Bank a special deduction to create a tax bad debt
reserve have been abolished. Furthermore, the Bank must recapture, over a period
of six to eight years, any additions to its tax bad debt reserves since 1988.
The Bank had already provided, as a provision for deferred taxes in accordance
with SFAS No. 109, for the tax consequences of the Bank's post-1987 additions to
the tax bad debt reserve. Therefore, the recapture requirement will not have a
material financial statement impact.
Market Area
Catskill (population of 11,965 in the 1990 census) is located
approximately 30 miles south of Albany on the western banks of the Hudson River
and is the largest municipality in Greene County. Greene County extends from the
Hudson River west into the northern Catskill Mountains. The Bank's primary
market area is heavily dependent on tourism, does not have a substantial
commercial or industrial base and has shown only limited economic and
demographic growth.
Overall, the population of Albany County has remained relatively steady
in the last decade while the more rural Greene County benefited from a
population expansion. In 1995, Greene County registered a 48,000 population
count, a 10.1% increase from 1985.
The business sectors in Greene County which account for the largest
percentage of earnings are state and local government, the service industry and
wholesale and retail trade. Manufacturing also accounts for a noteworthy
percentage of
3
earnings in Greene County. The New York State Thruway, which runs through Greene
County, as well as the county's lower cost of living, are attractive features to
local employers, especially distributors such as United Stationers and
manufacturers such as Dynabil Industries. Major sources of employment in Greene
County include a state prison, the county government and various health care
facilities, as well as various manufacturing companies.
Based on the latest available data, there are a total of 19 deposit
taking offices of commercial banks and thrift institutions in Greene County and
117 in Albany County. The Bank's four offices in Greene County hold 29.3% of all
deposits and 56.6% of thrift institution deposits. In Albany County, with a much
larger deposit base, the Bank's share of all deposits was approximately 0.7%.
Lending Activities
General. The Bank's primary lending activity is the origination of
fixed- and adjustable rate, one- to four-family residential mortgage loans for
retention in its portfolio. The Bank also originates fixed-rate consumer loans
and adjustable-rate home equity line of credit consumer loans. Adjustable rate
mortgage ("ARM") and consumer loans increase the percentage of the Bank's loans
with more frequent terms to repricing or shorter maturities than fixed-rate,
one- to four-family mortgage loans. See "- Loan Portfolio Composition" and "-
One- to Four-Family Residential Real Estate Lending." In addition, the Bank
originates multi-family and commercial real estate loans. Loan originations are
generated by the Bank's marketing efforts, which include print and radio
advertising, lobby displays and direct contact with local civic organizations,
as well as by the Bank's present customers, walk-in customers and referrals from
real estate agents and builders. At September 30, 1998, the Bank's gross loan
portfolio totaled $140.0 million.
The approval of the Executive Committee of the Bank's Board of
Directors is required for all real estate loans in excess of $150,000, and
consumer loans in excess of $100,000. Bank employees with the authority to
approve such real estate loans of $150,000 or less, and consumer loans of
$100,000 or less are designated, and their lending authority is defined, by the
Executive Committee. The Executive Committee acts in accordance with policies
established not less frequently than annually by the Board of Directors.
The aggregate amount of loans that the Bank is permitted to make under
applicable federal regulations to any one borrower, including related entities,
is generally equal to 15% of unimpaired capital and surplus. At September 30,
1998, the maximum amount which the Bank could have loaned to any one borrower
and the borrower's related entities was approximately $9.4 million. At that
date, the Bank's largest lending relationship (representing less than 1% of the
Bank's total loan portfolio) was a $1.0 million commercial real estate loan
secured by a motel located in Albany County, New York. At September 30, 1998,
there were only eight other loans (or lending relationships) with outstanding
balances in excess of $250,000, representing $3.8 million, or less than 2.7% of
the Bank's total loan portfolio.
4
Loan Portfolio Composition. The following table presents information concerning
the composition of the Bank's loan portfolio in dollar amounts and in
percentages as of the dates indicated.
September 30,
-----------------------------------------------------------------------------
1998 1997 1996
-----------------------------------------------------------------------------
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
(Dollars in Thousands)
Real Estate Loans:
- ------------------
One- to four-family................... $113,423 81.02% $102,232 80.69% $100,383 80.34%
Multi-family and commercial........... 6,389 4.56 4,691 3.70 5,115 4.09
Construction.......................... 1,182 0.85 1,306 1.03 423 .34
-------- ------ -------- ------ -------- ------
Total real estate loans........... 120,994 86.43 108,229 85.42 105,921 84.77
------- ------ -------- ------ -------- ------
Commercial Loans ...................... 602 .43 63 .05 --- ---
- ---------------- -------- ------ -------- ------
Consumer Loans:
- ---------------
Automobile........................... 6,301 4.50 6,655 5.25 7,029 5.63
Home equity.......................... 3,490 2.49 3,709 2.93 4,368 3.50
Other secured........................ 2,912 2.08 3,385 2.67 2,965 2.37
Student.............................. 2,795 2.00 2,658 2.10 2,450 1.96
Other unsecured...................... 2,366 1.69 1,316 1.04 1,430 1.15
Mobile home.......................... 535 .38 687 .54 782 .62
-------- ------ -------- ------ ------- ------
Total consumer loans.............. 18,399 13.14 18,410 14.53 19,024 15.23
-------- ------ -------- ------ ------- ------
Total Loans............................ 139,995 100.00% 126,702 100.00% 124,945 100.00%
-------- ====== -------- ====== ------- ======
Less:
Net deferred fees..................... 260 476 579
Allowance for loan losses............. 1,950 1,889 1,833
-------- -------- --------
Total loans receivable, net........... $137,785 $124,337 $122,533
======== ======== ========
September 30,
------------------------------------------------
1995 1994
------------------------------------------------
Amount Percent Amount Percent
------ ------- ------ -------
(Dollars in Thousands)
Real Estate Loans:
- ------------------
One- to four-family................... $ 95,588 79.04% $ 96,570 79.37%
Multi-family and commercial........... 5,132 4.24 5,606 4.61
Construction.......................... 230 .19 743 .61
-------- ------ -------- ------
Total real estate loans........... 100,950 83.47 102,919 84.59
-------- ------ -------- ------
Commercial Loans ...................... --- --- --- ---
- ----------------
Consumer Loans:
- ---------------
Automobile........................... 6,652 5.50 5,220 4.29
Home equity.......................... 5,393 4.46 6,021 4.95
Other secured........................ 2,970 2.46 2,680 2.20
Student.............................. 2,373 1.96 2,195 1.80
Other unsecured...................... 1,415 1.17 1,078 .89
Mobile home.......................... 1,185 .98 1,562 1.28
-------- ------ -------- ------
Total consumer loans.............. 19,988 16.53 18,756 15.41
-------- ------ -------- ------
Total Loans............................ 120,938 100.00% 121,675 100.00%
-------- ====== -------- ======
Less:
Net deferred fees..................... 624 696
Allowance for loan losses............. 1,950 1,746
-------- --------
Total loans receivable, net........... $118,364 $119,233
======== --------
5
The following table presents the composition of the Bank's loan
portfolios by fixed- and adjustable-rate at the dates indicated.
September 30,
----------------------------------------------------------------------------
1998 1997 1996
----------------------------------------------------------------------------
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
(Dollars in Thousands)
Fixed-Rate Loans:
Real estate:
One- to four-family........................ $ 83,643 59.75% $ 67,782 53.50% $ 63,491 50.81%
Multi-family and commercial................ 3,395 2.43 1,850 1.46 2,142 1.71
Construction............................... 1,182 .84 1,306 1.03 423 0.34
-------- ------ -------- ------ -------- ------
Total real estate loans................. 88,220 63.02 70,938 55.99 66,056 52.86
-------- ----- -------- ------ -------- ------
Consumer.................................... 12,114 8.65 14,638 11.55 14,656 11.73
-------- ----- -------- ------ -------- ------
Total fixed-rate loans.................. 100,334 71.67 85,576 67.54 80,712 64.59
Adjustable-Rate Loans:
Real estate:
One- to four-family........................ 29,780 21.27 34,450 27.19 36,892 29.53
Multi-family and commercial................ 2,994 2.14 2,904 2.29 2,973 2.38
------- ----- -------- ------ -------- ------
Total real estate loans................. 32,774 23.41 37,354 29.48 39,865 31.91
------- ----- -------- ------ -------- ------
Consumer.................................... 6,285 4.49 3,709 2.93 4,368 3.50
------- ----- -------- ------ -------- ------
Commercial.................................. 602 --- 63 .05 --- ---
-------- ------ -------- ------ -------- ------
Total adjustable-rate loans............. 39,661 28.33 41,126 32.46 44,233 35.41
-------- ------ -------- ------ -------- ------
Total loans............................. 139,995 100.00% 126,702 100.00% 124,945 100.00%
-------- ====== -------- ====== -------- ======
Less:
Deferred fees............................... 260 476 579
Allowance for loan losses................... 1,950 1,889 1,833
-------- -------- --------
Total loans receivable, net.............. 137,785 124,337 $122,533
======== ======== ========
September 30,
------------------------------------------------
1995 1994
------------------------------------------------
Amount Percent Amount Percent
------ ------- ------ -------
(Dollars in Thousands)
Fixed-Rate Loans:
Real estate:
One- to four-family........................ $ 53,993 44.65% $ 51,163 42.05%
Multi-family and commercial................ 1,743 1.44 2,295 1.88
Construction............................... 230 .19 743 .61
-------- ------ -------- ------
Total real estate loans................. 55,966 46.28 54,201 44.54
-------- ------ -------- ------
Consumer.................................... 14,595 12.06 12,735 10.47
-------- ------ -------- ------
Total fixed-rate loans.................. 70,561 58.34 66,936 55.01
Adjustable-Rate Loans:
Real estate:
One- to four-family........................ 41,595 34.40 45,407 37.32
Multi-family and commercial................ 3,389 2.80 3,311 2.72
-------- ------ -------- ------
Total real estate loans................. 44,984 37.20 48,718 40.04
-------- ------ -------- ------
Consumer.................................... 5,393 4.46 6,021 4.95
-------- ------ -------- ------
Commercial.................................. --- --- --- ---
-------- ------ -------- ------
Total adjustable-rate loans............. 50,377 41.66 54,739 44.99
-------- ------ -------- ------
Total loans............................. 120,938 100.00% 121,675 100.00%
-------- ====== -------- ======
Less:
Deferred fees............................... 624 696
Allowance for loan losses................... 1,950 1,746
-------- --------
Total loans receivable, net.............. $118,364 $119,233
======== ========
6
The following table sets forth the contractual maturities of the Bank's loan
portfolio at September 30, 1998. Loans which have adjustable or renegotiable
interest rates are shown as maturing in the period during which the final loan
payment is due without regard to rate adjustments. The table does not reflect
the effects of loan amortization, possible prepayments or enforcement of
due-on-sale clauses.
Due During Years Ending September 30,
-------------------------------------
1999(1) 2000 2001 2002-2003 2004-2008
----------------- ----------------- ----------------- ------------------ ------------------
Weighted Weighted Weighted Weighted Weighted
Average Average Average Average Average
Amount Rate Amount Rate Amount Rate Amount Rate Amount Rate
------ ---- ------ ---- ------ ---- ------ ---- ------ ----
(Dollars in Thousands)
Real Estate
- ----------------------------
One- to Four-Family......... $ 6,604 7.59% $ 6,960 7.55% $ 7,299 7.53% $15,340 7.56% $37,715 7.48%
Multi-family and 6 231 0 519 1 1,953 3 600
Commercial.................. 1,953 8.4 9.1 9.3 8.9 9.11
Construction................ 1,132 7.21 --- --- --- --- --- --- --- ---
Commercial
- ----------------------------
Lines of credit............. 602 8.90 --- --- --- --- --- --- --- ---
Consumer
- ----------------------------
Consumer ................... 4,462 9.14 3,655 8.90 2,342 8.98 2,117 9.29 1,361 9.85
------- ------ ------- ------- -------
Total Loans............ $14,753 8.19% $10,846 8.04 $10,160 7.95 $19,410 7.88 $39,676 7.59
======= ======= ======= ======= =======
Due During Years Ending September 30,
-------------------------------------
2009-2013 2014 and following Total
----------------- ------------------- ------------------
Weighted Weighted Weighted
Average Average Average
Amount Rate Amount Rate Amount Rate
------ ---- ------ ---- ------ ----
(Dollars in Thousands)
Real Estate
- ----------------------------
One- to Four-Family......... $24,851 7.45% $14,654 7.50 $113,423 7.50%
Multi-family and 7 6,389 1
Commercial.................. 457 9.39 676 9.2 8.9
Construction................ --- --- 50 7.97 1,182 7.28
Commercial
- ----------------------------
Lines of credit............. --- --- --- --- 602 8.90
Consumer
- ----------------------------
Consumer ................... 2,178 8.56 2,284 8.80 18,399 9.03
------- ------- -------
Total Loans............ $27,486 7.57 $17,664 7.74 $139,995 7.77
======= ======= ========
(1) Includes demand loans, loans having no stated maturity and overdraft loans.
7
One- to Four-Family Residential Real Estate Lending
The Bank's residential mortgage loans consist of loans to purchase or
refinance one- to four-family, owner-occupied residences and, to a lesser
extent, secondary residences. At September 30, 1998, $113.4 million, or 81.0% of
the Bank's gross loans, consisted of one- to four-family residential mortgage
loans. Approximately 73.7% of the Bank's one-to four-family residential mortgage
loans provide for fixed rates of interest. The Bank's one- to four-family
mortgage loans typically provide for repayment of principal over a period not to
exceed 25 years. The Bank's one- to four-family residential mortgage loans are
priced competitively with the market. Accordingly, the Bank attempts to
distinguish itself from its competitors based on quality of service.
The Bank underwrites its one- to four-family residential mortgage loans
using Federal National Mortgage Association ("FNMA") secondary market standards.
The Bank holds in its portfolio all one- to four-family residential mortgage
loans it originates. While the Bank currently does not sell loans, and presently
has no intention to do so, management may consider selling loans in the future
depending on market conditions and the asset/liability management of the Bank.
In underwriting one- to four-family residential mortgage loans, the Bank
evaluates both the borrower's credit history and ability to make monthly
payments, and the value of the property securing the loan. Properties securing
ARM and all fixed-rate loans are appraised by independent fee appraisers. The
Bank requires borrowers to obtain title insurance and hazard insurance
(including flood insurance, where appropriate) naming the Bank as lienholder in
an amount not less than the amount of the loan, or the maximum insurable value
of the property.
The Bank currently offers residential ARM loans with interest rates
that adjust either annually, or every three years with adjustments based on the
change in the comparable Treasury index. ARM loans originated prior to 1990 were
adjusted based upon a Federal Home Loan Bank Board index, which has been
converted to a Federal Housing Finance Board index. One year ARM loans provide
for a 1.5% periodic cap and three year ARM loans provide for a 2.0% periodic cap
and both have lifetime caps of 6.0% over the initial rate. As a consequence of
using caps, the interest rates on these loans may not be as rate sensitive as is
the Bank's cost of funds. Borrowers of residential ARM loans are generally
qualified at the maximum increase in rate which could occur at the first
adjustment period, which may be lower than the fully indexed rate. The Bank's
residential ARM loans are not convertible into fixed-rate loans. ARM loans
generally pose greater credit risks than fixed-rate loans, primarily because as
interest rates rise, the required periodic payment by the borrower rises,
increasing the potential for default. As of September 30, 1998, however, the
Bank had not experienced default rates on these loans materially higher than on
similar fixed rate loans.
The Bank's one- to four-family mortgage loans do not contain prepayment
penalties and do not permit negative amortization of principal. Real estate
loans originated by the Bank generally contain a "due on sale" clause allowing
the Bank to declare the unpaid principal balance due and payable upon the sale
of the mortgaged property. The Bank may waive the due on sale clause on loans
held in its portfolio to permit assumptions of loans by qualified borrowers.
The Bank does not currently originate residential mortgage loans if the
ratio of the loan amount to the lower of appraised value, or the purchase price
of the property securing the loan (i.e., the "loan-to-value" ratio) exceeds 95%.
If the loan-to-value ratio exceeds 90%, the Bank requires that borrowers obtain
private mortgage insurance in amounts intended to reduce the Bank's exposure to
80% or less of the lower of the appraised value or the purchase price of the
real estate security.
The Bank also offers construction loans to individuals for the
construction of their residences. The Bank has occasionally made loans to
builders for the construction of homes including a limited amount of housing
construction loans to builders where the home has not been pre-sold. Generally,
no construction loan is approved unless there is evidence of a commitment for
permanent financing upon completion of the residence, whether through the Bank
or another financial institution. Construction loans generally require
construction stage inspections before funds may be released to the borrower. At
September 30, 1998, the Bank's construction loan portfolio totaled $1,182,000,
or less than 1.0% of its gross loan portfolio. Although no construction loans
were classified as non-performing as of September 30, 1998, these loans do
involve a higher level of risk than conventional one- to four-family residential
mortgage loans. For example, if construction is not completed and the borrower
defaults, the Bank may have to hire another contractor to complete the project
at a higher cost, or completion could be delayed.
8
Multi-Family and Commercial Real Estate Lending
The Company has engaged in multi-family and commercial real estate
lending secured primarily by small offices, retail establishments and apartment
buildings located in the Bank's primary market area. At September 30, 1998, the
Company had multi-family and commercial real estate loans totaling $6.4 million,
which represented 4.6% of the Bank's gross loan portfolio.
Multi-family and commercial real estate loans originated by the Bank
generally have a variety of rate adjustment features and other terms. The Bank's
multi-family and commercial real estate loans typically are for amounts less
than $250,000, and generally do not exceed 70% of the appraised value of the
property securing the loan. The term of such loans does not generally exceed 20
years. The Bank analyzes the financial condition of the borrower, the borrower's
credit history, the sufficiency and reliability of the net income generated by
the property securing the loan and the value of the property itself. The Bank
generally requires personal guarantees of the borrowers in addition to the
secured property as collateral for such loans. Appraisals on properties securing
multi-family and commercial real estate loans are performed by independent fee
appraisers.
Multi-family and commercial real estate loans generally present a
higher level of risk than loans secured by one- to four-family residences. This
greater risk is due to several factors, including the concentration of principal
in a limited number of loans and borrowers, the effect of general economic
conditions on income producing properties and the increased difficulty of
evaluating and monitoring these types of loans. Furthermore, the repayment of
loans secured by multi-family and commercial real estate is typically dependent
upon the successful operation of the related real estate project. If the cash
flow from the project is reduced (for example, if leases are not obtained or
renewed, or a bankruptcy court modifies a lease term, or a major tenant is
unable to fulfill its lease obligations), the borrower's ability to repay the
loan may be impaired and the value of the property may be reduced.
Consumer Lending
The Bank currently originates substantially all of its consumer loans
in its primary market area. Management believes that offering consumer loan
products helps expand the Bank's customer base and creates stronger ties to its
existing customer base. In addition, because consumer loans generally have
shorter terms to maturity or adjustable rates and may carry higher rates of
interest than do residential mortgage loans, they can be useful asset/liability
and interest rate spread management tools. The Bank originates consumer loans
principally on a direct basis, in which the Bank extends credit directly to the
borrower. At September 30, 1998, the Bank's consumer loan portfolio totaled
$18.4 million, or 13.1% of the gross loan portfolio. Of consumer loans at
September 30, 1998, 65.8% were fixed-rate loans and 34.2% were adjustable-rate
loans.
The Bank offers consumer loans for a variety of purposes. Consumer loan
terms vary according to the type and value of collateral, contractual maturity
and creditworthiness of the borrower. Terms to maturity range up to 20 years
with respect to home equity lines of credit and 15 years with respect to all
other types of consumer loans. Unsecured consumer lines of credit are extended
to borrowers through their checking account maintained at the Bank. These credit
lines currently bear interest at 18.0% and are generally limited to $50,000.
Underwriting standards for consumer loans include a determination of
the applicant's payment history on other debts and an assessment of ability to
meet existing obligations and payments on the proposed loan. Although
creditworthiness of the applicant is a primary consideration, the underwriting
process also includes a comparison of the value of the security, if any, in
relation to the proposed loan amount.
At September 30, 1998, automobile loans, the largest component of the
Bank's consumer loan portfolio, totalled $6.3 million, or 34.2% of the Bank's
total consumer loan portfolio and 4.5% of the Bank's gross loan portfolio. The
Bank originates loans to purchase both new and used automobiles at fixed rates
of interest and terms of up to six years. The Bank's maximum loan-to-value ratio
on new automobile loans is 100% of the borrower's cost, which includes such
items as dealer options.
Advances on home equity lines of credit represent the second largest
component of the Bank's consumer loan portfolio. The Bank's home equity lines of
credit are secured by a lien on the borrower's residence and are generally
originated in amounts which, together with all prior liens on such residence, do
not exceed 90.0% of the appraised value of the property securing the loan. The
interest rates for home equity lines of credit float at a stated margin over the
prime rate. Home equity lines of credit generally require interest only payments
on the outstanding balance for the first five years of the loan, after
9
which the outstanding balance may be converted into a fully amortizing,
adjustable-rate loan with a term not in excess of 15 years. As of September 30,
1998, the Bank had $3.5 million in outstanding advances on home equity lines of
credit, with an additional $1.6 million of unused home equity lines of credit.
Consumer loans may entail greater credit risk than do residential first
mortgage loans, particularly in the case of consumer loans which are unsecured
or are secured by rapidly depreciable assets, such as automobiles. In such
cases, any repossessed collateral for a defaulted consumer loan may not provide
an adequate source of repayment of the outstanding loan balance as a result of
high initial loan-to-value ratios, repossession, rehabilitation and carrying
costs, and the greater likelihood of damage, loss or depreciation of the
underlying collateral. Home equity line of credit loans are generally secured by
subordinate mortgages which present greater risks than first mortgage liens. At
September 30, 1998, $71,000, or .39% of the Bank's consumer loan portfolio was
non-performing, however, the majority were government guaranteed student loans.
There can be no assurances that additional delinquencies will not occur in the
future.
Commercial Business Lending
Federal regulations authorize federally-chartered savings banks, such
as the Bank, to make non-real estate secured or unsecured loans for commercial,
corporate, business and agricultural purposes, up to a maximum of 10% of total
assets. The Bank engages in such commercial business lending principally through
secured and unsecured lines of credit as well as through the New York Business
Development Corporation (the "NYBDC"), a privately owned corporation which
provides loans, management assistance, counseling and a variety of other
financial programs to small and medium sized businesses located in New York.
Loans made through the NYBDC may be to businesses located within or outside the
Bank's primary market area. The Bank is one of 119 participating commercial and
savings banks. At September 30, 1998, the Bank had approximately $602,000 in
commercial business loans outstanding, representing less than 1.0% of its loan
portfolio, with an additional $109,000 committed for loans through NYBDC. At
September 30, 1998, all of the Bank's commercial business loans were performing
in accordance with their terms.
Loan Originations
Loan originations are developed from continuing business with
depositors and borrowers, referrals from real estate agents, advertising and
walk-in customers. All of the Bank's loans are originated by its salaried
employees.
The Bank's ability to originate loans is dependent upon demand for
loans in its market. Demand is affected by the local economy and interest rate
environment. The Bank retains all new fixed-rate and adjustable-rate real estate
loans in its portfolio. The Bank does not sell loans and has not purchased any
loans since fiscal 1993.
During the year ended September 30, 1998, the Bank originated $38.9
million of loans, compared to $21.3 million and $26.8 million in fiscal 1997 and
1996, respectively. Management attributes the increase in originations during
fiscal 1998 to the low interest rate environment, in which interest rates on
fixed rate loans are at the lowest levels since 1993. Management attributes the
decline in originations during fiscal 1997 due to the increase in federal funds
rate in March 1997, which slowed down originations from a favorable refinancing
market in fiscal 1996.
In periods of economic uncertainty, the Bank's ability to originate
sufficient real estate loans with acceptable underwriting characteristics may be
substantially reduced or restricted with a resultant decrease in net interest
income as assets may have to be invested in lower-yielding securities or similar
investments. While the Bank currently does not sell loans, and presently has no
intention to do so, management may consider selling loans in the future
depending on market conditions and the asset/liability management requirements
of the Bank.
10
The following table shows the loan originations, purchases, sales, and
repayment activities of the Bank for the periods indicated. The Bank did not
sell any loans during the periods presented.
Year Ended September 30,
-----------------------------------
1998 1997 1996
-------- -------- --------
(In Thousands)
Originations by type:
One- to four-family and construction.............. $ 24,051 $ 12,588 $ 19,760
Multi-family and commercial........................ 5,184 110 150
Consumer........................................... 9,683 8,584 6,938
-------- -------- --------
Total loans originated...................... 38,918 21,282 26,848
-------- -------- --------
Purchases:
Total.............................................. --- --- ---
Sales:
Total.............................................. --- --- ---
Repayments:
Principal repayments............................... (25,225) (18,705) (22,312)
Increase (decrease) in other items, net............ (400) (820) (529)
-------- -------- --------
Net increase (decrease)..................... $ 13,293 $ 1,757 $ 4,007
======== ======== ========
Asset Quality
Generally, when a borrower fails to make a required payment on a loan
secured by residential real estate, the Bank initiates collection procedures by
mailing a delinquency notice after the account is 15 days delinquent. At 30 days
delinquent, the Bank attempts to contact the customer by telephone to
investigate the delinquency and a personal letter is sent to the customer
requesting him or her to make arrangements to bring the loan current. If the
delinquency is not cured by the 45th day, the Bank again attempts to contact the
customer by telephone and another personal letter is sent. After 60 days
delinquent, the Bank may commence foreclosure proceedings.
With respect to consumer loans, when a borrower fails to make a
required payment, the Bank initiates collection procedures by mailing a
delinquency notice after the account is 10-15 days delinquent, and again at 20
days delinquent. At 25 days delinquent, the Bank attempts to contact the
customer by telephone to investigate the delinquency. At 30 days delinquent, a
personal letter is sent to the customer requesting him or her to make
arrangements to bring the loan current. At 40 days delinquent, the Bank again
attempts to contact the customer by telephone to secure payment. If the
delinquency is not cured by the 60th day, the Bank refers the loan to its
attorney, who sends another personal letter notifying the customer that no
further payments will be accepted by the Bank absent a meeting between the
customer and a Bank loan officer. If no satisfactory arrangements have been made
by the last business day of the third month, repossession of collateral, if
possible, is undertaken and, if necessary, legal proceedings are generally
commenced to collect the loan.
The following table sets forth the Bank's loan delinquencies by type,
by amount and by percentage of type at September 30, 1998.
Loans Delinquent For:
------------------------------------------------------------------
60-89 Days 90 Days and Over Total Delinquent Loans
------------------------------ ------------------------------- -------------------------------
Percent Percent Percent
of Loan of Loan of Loan
Number Amount Category Number Amount Category Number Amount Category
------ ------ -------- ------ ------ -------- ------ ------ --------
(Dollars in Thousands)
One- to four-family real
estate.................... 3 $ 209 .18% 9 $ 520 .46% 12 $ 729 .64%
Multi-family and
commercial real estate.... 1 49 .77 -- -- -- 1 49 .77
Commercial................. -- -- -- -- -- -- -- -- --
Consumer................... 19 84 .46 10 71 .39 29 155 .84
--- ----- --- --- ----- --- -----
Total................. 23 $ 342 .24 19 $ 591 .42 42 $ 933 .67
=== ===== === ===== === =====
11
Non-Performing Assets. The table below sets forth the amounts and
categories of the Bank's non-performing assets. Loans are placed on non-accrual
status when the loan is more than 90 days delinquent (except for FHA insured, VA
guaranteed loans and government guaranteed student loans) or when the collection
of principal and/or interest in full becomes doubtful. When loans are designated
as non-accrual, all accrued but unpaid interest is reversed against current
period income and subsequent cash receipts generally are applied to reduce the
unpaid principal balance. Foreclosed assets include assets acquired in
settlement of loans.
September 30,
-----------------------------------------------
1998 1997 1996 1995 1994
------ ------ ------ ------ ------
(Dollars in Thousands)
Non-performing loans:
One- to four-family real estate ....... $ 520 $ 780 $1,008 $ 784 $ 650
Multi-family and commercial real estate -- -- 78 -- --
Consumer .............................. 71 137 283 251 --
------ ------ ------ ------ ------
Total .............................. 591 917 1,369 1,035 650
------ ------ ------ ------ ------
Troubled debt restructured loans:
Multi-family and commercial real estate -- -- -- -- --
------ ------ ------ ------ ------
Total .............................. -- -- -- -- --
------ ------ ------ ------ ------
Foreclosed assets, net:
One- to four-family real estate ....... 53 225 334 326 220
Multi-family and commercial real estate -- 23 23 158 158
------ ------ ------ ------ ------
Total .............................. 53 248 357 484 378
------ ------ ------ ------ ------
Total non-performing assets ............. $ 644 $1,165 $1,726 $1,519 $1,028
====== ====== ====== ====== ======
Total as a percentage of total assets ... .20% .40% .61% .66% .45%
====== ====== ====== ====== ======
For the years ended September 30, 1998, 1997 and 1996, gross interest
income which would have been recorded had the non-accruing loans been current in
accordance with their original terms amounted to $28,053, $49,948 and $77,337,
respectively.
Non-Accruing Loans. At September 30, 1998, the Bank had $520,000 in
non-accruing loans, which consisted of 9 one- to four-family residential
mortgage loans and represented .37% of the Bank's gross loan portfolio.
Foreclosed Assets. As of September 30, 1998, the Bank had $53,000 in
carrying value of foreclosed assets consisting of two one- to four-family
properties.
Other Loans of Concern. As of September 30, 1998, there were $311
thousand of other loans (consisting of a restaurant/personal residence
aggregating $194,000, and two one to four family real estate loans totalling
$117,000) not included in the table or discussed above where known information
about the possible credit problems of borrowers caused management to have doubts
as to the ability of the borrower to comply with present loan repayment terms.
These loans have been considered by management in conjunction with the analysis
of the adequacy of the allowance for loan losses.
Classified Assets. Federal regulations provide for the classification
of loans and other assets, such as debt and equity securities considered to be
of lesser quality, as "substandard," "doubtful" or "loss." An asset is
considered "substandard" if it is inadequately protected by the current net
worth and paying capacity of the obligor or of the collateral pledged, if any.
"Substandard" assets include those characterized by the "distinct possibility"
that the insured institution will sustain "some loss" if the deficiencies are
not corrected. Assets classified as "doubtful" have all of the weaknesses
inherent in those classified "substandard," with the added characteristic that
the weaknesses present make "collection or liquidation in full," on the basis of
currently existing facts, conditions, and values, "highly questionable and
improbable." Assets classified as "loss" are those considered "uncollectible"
and of such little value that their continuance as assets without the
establishment of a specific loss reserve is not warranted.
12
When an insured institution classifies problem assets as either
substandard or doubtful, it may increase general allowances for loan losses in
an amount deemed prudent by management to address the increased risk of loss on
such assets. General allowances represent loss allowances which have been
established to recognize the inherent risk associated with lending activities,
but which, unlike specific allowances, have not been allocated to particular
problem assets. When an insured institution classifies problem assets as "loss,"
it is required either to establish a specific allowance for losses equal to 100%
of that portion of the asset so classified or to charge off such amount. An
institution's determination as to the classification of its assets and the
amount of its valuation allowances is subject to review and adjustment by the
OTS and the FDIC, which may order increases in general or specific loss
allowances.
In accordance with its classification of assets policy, the Bank
regularly reviews the problem assets in its portfolio to determine whether any
assets require classification in accordance with applicable regulations. On the
basis of management's review of its assets, at September 30, 1998, the Bank had
classified $844,000 as substandard and none as doubtful or loss.
Allowance for Loan Losses. At September 30, 1998, the Bank had a total
allowance for loan losses of $1,950,000, representing 329.9% of total
non-performing loans. The allowance for loan losses is established through a
provision for loan losses based on management's evaluation of the risk inherent
in its loan portfolio and changes in the nature and volume of its loan activity,
including those loans which are being specifically monitored by management. Such
evaluation, which includes a review of loans for which full collectibility may
not be reasonably assured, considers among other matters, the loan
classifications discussed above, 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
fair value, less estimated selling costs. If fair value, less selling costs, at
the date of foreclosure is lower than the book balance of the related loan, the
difference will be charged to the allowance for loan losses at the time of
transfer. Valuations of the property are periodically updated by management and
if the value declines, a specific provision for losses on such property is
established by a charge to operations.
The determination of the adequacy of the allowance is necessarily
speculative, based upon future loan performance outside the control of the Bank.
Adverse local, regional or national economic conditions, changes in interest
rates, population, products and other factors can all adversely affect future
loan delinquency rates. Unforeseen conditions could require adjustments to the
allowance through additional loan loss provisions. Net earnings could be
significantly affected if circumstances differ substantially from the
assumptions used in determining the level of the allowance. In addition, federal
regulatory agencies, as an integral part of the examination process,
periodically review the Bank's allowance for loan losses. Such agencies may
require the Bank to increase the allowance based upon their judgment of the
information available to them at the time of their examination.
13
The following table sets forth an analysis of the Bank's
allowance for loan losses.
Year Ended September 30,
-------------------------------------------------------
1998 1997 1996 1995 1994
------- ------- ------- ------- -------
(Dollars in Thousands)
Balance at beginning of period .............. $ 1,889 $ 1,833 $ 1,950 $ 1,746 $ 1,294
Charge-offs:
One- to four-family real estate ........... (58) (162) (237) (12) (3)
Multi-family and commercial real estate ... -- (30) -- -- --
Consumer .................................. (90) (90) (86) (50) (29)
------- ------- ------- ------- -------
Total charge-offs .................. (148) (282) (323) (62) (32)
------- ------- ------- ------- -------
Recoveries:
One- to four-family real estate ........... -- 4 -- 1 14
Consumer .................................. 20 34 11 10 5
------- ------- ------- ------- -------
Total recoveries ................... 20 38 11 11 19
------- ------- ------- ------- -------
Net charge-offs ............................. (128) (244) (312) (51) (13)
Provisions charged to operations ............ 189 300 195 255 465
------- ------- ------- ------- -------
Balance at end of period .................... $ 1,950 $ 1,889 $ 1,833 $ 1,950 $ 1,746
======= ======= ======= ======= =======
Ratio of net charge-offs during the period to
average loans outstanding during the period .10% .19% .26% .04% .02%
======= ======= ======= ======= =======
Ratio of net charge-offs during the period to
average non-performing assets .............. 21.39% 17.73% 18.60% 4.46% 1.01%
======= ======= ======= ======= =======
14
The distribution of the Bank's allowance for losses on loans at the
dates indicated is summarized as follows:
September 30,
--------------------------------------------------------------------------------------------------------
1998 1997 1996
-------------------------------- -------------------------------- --------------------------------
Percent Percent Percent
of Loans of Loans of Loans
Loan in Each Loan in Each Loan in Each
Amount of Amounts Category Amount of Amounts Category Amount of Amounts Category
Loan Loss by to Total Loan Loss by to Total Loan Loss by to Total
Allowance Category Loans Allowance Category Loans Allowance Category Loans
-------------------------------- -------------------------------- --------------------------------
(Dollars in Thousands)
One- to four-family
real estate......... $ 947 $113,423 81.02% $ 573 $102,232 80.69% $ 496 $100,383 80.34%
Multi-family and
commercial real
estate............. 196 6,389 4.56 470 4,691 3.70 528 5,115 4.09
Construction......... 24 1,182 .85 -- 1,306 1.03 -- 423 .34
Commercial........... 12 602 .43 -- 63 .05 -- -- --
Consumer............. 293 18,399 13.14 288 18,410 14.53 250 19,024 15.23
Unallocated.......... 478 -- -- 558 -- -- 559 -- --
------ -------- ------ ------ -------- ------ ------ -------- ------
Total........... $1,950 $139,995 100.00% $1,889 $126,702 100.00% $1,833 $124,945 100.00%
====== ======== ====== ====== ======== ====== ====== ======== ======
September 30,
--------------------------------------------------------------------
1995 1994
-------------------------------- --------------------------------
Percent Percent
of Loans of Loans
Loan in Each Loan in Each
Amount of Amounts Category Amount of Amounts Category
Loan Loss by to Total Loan Loss by to Total
Allowance Category Loans Allowance Category Loans
-------------------------------- --------------------------------
(Dollars in Thousands)
One- to four-family
real estate......... $ 737 $ 95,588 79.04% $ 670 $ 96,570 79.37%
Multi-family and
commercial real
estate............. 443 5,132 4.24 419 5,606 4.61
Construction......... -- 230 .19 -- 743 .61
Commercial........... -- -- -- -- -- --
Consumer............. 220 19,988 16.53 134 18,756 15.41
Unallocated.......... 550 -- -- 523 -- --
------ -------- ------ ------ -------- ------
Total........... $1,950 $120,938 100.00% $1,746 $121,675 100.00%
====== ======== ====== ====== ======== ======
15
Investment Activities
General. The Bank must maintain minimum levels of investments that
qualify as liquid assets under OTS regulations. Liquidity may increase or
decrease depending upon the availability of funds and comparative yields on
investments in relation to the return on loans. Historically, the Bank has
maintained liquid assets at levels above the minimum requirements imposed by the
OTS regulations and above levels believed adequate to meet the requirements of
normal operations, including potential deposit outflows. For September 1998, the
Bank's average regulatory liquidity ratio (liquid assets as a percentage of net
withdrawable savings deposits and current borrowings) was 10.52%.
Securities. Federally chartered savings institutions have the authority
to invest in various types of liquid assets, including United States Treasury
obligations, securities of various federal agencies, obligations of states and
political subdivisions, certain certificates of deposit of insured banks and
savings institutions, certain bankers' acceptances, repurchase agreements and
federal funds. Subject to various restrictions, federally chartered savings
institutions also may invest their assets in investment grade commercial paper
and corporate debt securities and mutual funds whose assets conform to the
investments that a federally chartered savings institution is otherwise
authorized to make directly. At September 30, 1998, the Company's securities
portfolio at amortized cost totaled $74.8 million, or 23.8% of total assets,
$72.8 million of which are classified as "available for sale" and the balance of
$2.0 million as "held to maturity."
Generally, the investment policy of the Company is to invest funds not
needed to fund loans, among various categories of investments and maturities
based upon the Company's need for liquidity, to achieve the proper balance
between its desire to minimize risk and maximize yield, to provide collateral
for borrowings and to fulfill the Company's asset/liability management policies.
Prior to the Company's initial public offering and the Bank's conversion to a
stock institution, the Bank's investment strategy had been directed toward
high-quality assets (primarily U.S. Government securities and federal agency
obligations and high grade corporate debt securities) with short and
intermediate terms (five years or less) to maturity. After the conversion, the
Company has extended the duration of its portfolio by purchasing longer term
municipal and corporate debt securities with maturities up to twenty years to
decrease its asset sensitivity, leverage its capital and increase interest
income. Corporate debt securities generally are considered of higher risk than
U.S. Government securities and federal agency obligations. At September 30,
1998, the weighted average term to maturity of the security portfolio, excluding
other marketable equity securities, was 15.45 years. See Note 5 of the Notes to
Consolidated Financial Statements for information regarding the maturities of
the Company's securities available for sale portfolio and Note 6 for information
on the Company's securities held to maturity portfolio.
Mortgage-Backed Securities. In order to supplement loan production and
achieve its asset/liability management goals, the Company invests in
mortgage-backed securities. All of the mortgage-backed securities owned by the
Company are issued, insured or guaranteed either directly or indirectly by a
federal agency. At September 30, 1998, the Company had $88.8 million in
mortgage-backed securities, or 28.2% of total assets, the majority of which, are
classified as available for sale. See Note 5 of the Notes to Consolidated
Financial Statements for information regarding the maturities of the Company's
mortgage-backed securities portfolio.
16
The following table sets forth the composition of the Company's
investment securities, mortgage-backed securities and other interest-earning
assets at the dates indicated.
September 30,
--------------------------------------------------------------------
1998 1997 1996
------------------ ----------------- ------------------
Amortized % of Amortized % of Amortized % of
Cost Total Cost Total Cost Total
--------- ------ --------- ------ --------- ------
(Dollars in Thousands)
Investment securities:
U.S. government and federal
agency obligations............... $21,954 29.33 $61,833 87.39% $70,807 87.41
Corporate bonds..................... 16,230 21.69 6,042 8.54 9,999 12.34
State and municipal obligations..... 34,414 45.98 194 .28 206 .25
Other............................... 2,242 3.00 2,682 3.79 3 --
------- ------ ------- ------ ------- ------
Total investment securities...... $74,840 100.00% $70,751 100.00% $81,015 100.00%
======= ====== ======= ====== ======= ======
Average remaining contractual
life of securities................... 15.45 years 5.80 years 3.83 years
Federal Home Loan Bank of New
York stock, required by law........... $ 1,954 100.00% $ 1,762 100.00% $ 1,159 100.00%
======= ====== ======= ====== ======= ======
Other interest-earning assets:
Federal funds sold.................. -- -- -- -- $35,600 100.0%
======= =====
Mortgage-backed securities:
GNMA................................ $41,828 47.12% $41,450 49.41% $17,169 48.71%
FNMA................................ 31,151 35.09 29,920 35.67 13,971 39.63
FHLMC............................... 15,691 17.68 12,416 14.80 4,011 11.38
Other............................... 96 .11 97 .12 98 .28
------- ------ ------- ------ ------- ------
Total mortgage-backed
securities...................... $88,766 100.00% $83,883 100.00% $35,249 100.00%
======= ====== ======= ====== ======= ======
The composition and maturities of the investment securities portfolio by
contractual maturity are indicated in the following table.
September 30, 1998
----------------------------------------------------------------------------------
Less Than 1 to 5 5 to 10 Over Total
1 Year Years Years 10 Years Investment Securities
--------- --------- --------- --------- ----------------------
Amortized Amortized Amortized Amortized Amortized Fair
Cost Cost Cost Cost Cost Value
--------- --------- --------- --------- --------- -------
(Dollars in Thousands)
U.S. government securities and
federal agency obligations........ $ 4,002 $ 2,991 $14,961 $ --- $21,954 $22,479
Corporate bonds..................... --- --- 4,480 11,750 16,230 16,226
State and municipal obligations..... --- 93 105 34,216 34,414 34,915
Other............................... --- --- --- 2,242 2,242 2,444
------- ------- ------- ------- ------- -------
Total investment securities....... $ 4,002 $ 3,084 $19,546 $48,208 $74,840 $76,064
======= ======= ======= ======= ======= =======
Weighted average tax equivalent
yield............................. 6.16% 7.20% 7.27% 7.60% 7.42%
The Company's securities portfolio at September 30, 1998, did not
contain securities of any issuer with an aggregate book value in excess of 10%
of the Company's equity, excluding those issued by the United States Government
or its agencies.
17
The following table sets forth the final contractual maturities of the
Company's mortgage-backed securities at September 30, 1998.
September 30,
Due in 1998
3 Years 3 to 5 5 to 10 10 to 20 Over 20 Amortized
or Less Years Years Years Years Cost
------- ------- ------- ------- ------- -------
(In Thousands)
GNMA ..... $ -- $ 12 $ 184 $ 4,226 $37,405 $41,827
FNMA ..... 3,970 1,165 -- 4,945 21,071 31,151
FHLMC .... -- -- 23 7,100 8,569 15,692
Other .... -- -- -- -- 96 96
------- ------- ------- ------- ------- -------
Total $ 3,970 $ 1,177 $ 207 $16,271 $67,141 $88,766
======= ======= ======= ======= ======= =======
Sources of Funds
General. The Bank's primary sources of funds are deposits and
borrowings, amortization and prepayment of loan principal, maturities and
prepayments of securities, short-term investments, and funds provided from
operations.
Deposits. The Bank offers deposit accounts having a range of interest
rates and terms. The Bank offers passbook and statement savings accounts, money
market savings accounts, transaction accounts, and certificate of deposit
accounts currently ranging in terms from six months to six years. The Bank only
solicits deposits from its primary market area and does not have brokered
deposits. The Bank relies primarily on competitive pricing policies, advertising
and customer service to attract and retain these deposits. The Bank generally
does not utilize premiums or promotional gifts for new accounts, although one
existing program for senior citizens does provide certain enumerated benefits,
such as discounts on loans and safe deposit boxes, free travelers checks, money
orders and a variety of other services.
The flow of deposits is influenced significantly by general economic
conditions, changes in money market and prevailing interest rates, and
competition. The variety of deposit accounts offered by the Bank has allowed it
to be competitive in obtaining funds and to respond with flexibility to changes
in consumer demand. In recent years, the Bank has become more susceptible to
short-term fluctuations in deposit flows, as customers have become more interest
rate conscious. The Bank manages the pricing of its deposits in keeping with its
asset/liability management, liquidity and profitability objectives. Based on its
experience, the Bank believes that its passbook, statement savings accounts,
money market savings accounts and transaction accounts are relatively stable
sources of deposits. However, the ability of the Bank to attract and maintain
certificates of deposit and the rates paid on those deposits has been and will
continue to be significantly affected by market conditions.
The following table sets forth the deposit flows at the Bank during the
periods indicated.
Year Ended September 30,
-------------------------------------------
1998 1997 1996
--------- --------- ---------
(Dollars in Thousands)
Opening balance ............... $ 200,912 $ 196,753 $ 197,230
Deposits ...................... 310,108 254,977 235,800
Withdrawals ................... (309,896) (259,424) (244,962)
Interest credited ............. 8,853 8,606 8,685
--------- --------- ---------
Ending balance ................ $ 209,977 $ 200,912 $ 196,753
========= ========= =========
Net increase (decrease) ....... $ 9,065 $ 4,159 $ (477)
========= ========= =========
Percent increase (decrease) ... 4.51% 2.11% (.24)%
========= ========= =========
18
The following table sets forth the dollar amount of deposits in the various
types of deposit programs offered by the Bank for the periods indicated.
Year Ended September 30,
-----------------------------------------------------------------
1998 1997 1996
------------------- ------------------- -----------------
Percent Percent Percent
Amount of Total Amount of Total Amount of Total
------ -------- ------ -------- ------ --------
(Dollars in Thousands)
Non-Certificate Deposits(1):
Statement savings accounts 3.54%....... $11,867 5.65% $8,388 4.17% $ 7,881 4.01%
Non-interest bearing demand
accounts............................. 6,009 2.86 4,370 2.18 3,714 1.89
Passbook savings accounts 3.20%........ 66,208 31.53 71,060 35.37 75,477 38.36
NOW accounts 1.98%..................... 12,396 5.91 10,438 5.20 9,070 4.61
Money market accounts 2.96%............ 5,949 2.83 7,115 3.54 7,752 3.94
-------- ------ -------- ------ -------- ------
Total non-certificates................. 102,429 48.78 101,371 50.46 103,894 52.81
-------- ------ -------- ------ -------- ------
Certificates of Deposit:
2.00 - 3.99%......................... --- --- 20 .01 30 .01
4.00 - 5.99%......................... 106,990 50.95 88,416 44.00 75,293 38.27
6.00 - 7.99%......................... 558 .27 11,105 5.53 17,536 8.91
-------- ------ -------- ------ -------- ------
Total certificates..................... 107,548 51.22 99,541 49.54 92,859 47.19
-------- ------ -------- ------ -------- ------
Total deposits......................... $209,977 100.00% $200,912 100.00% $196,753 100.00%
======== ====== ======== ====== ======== ======
- ------------------
(1) Interest rates shown are as of September 30, 1998.
19
The following table shows rate and maturity information for the Bank's
certificates of deposit as of September 30, 1998.
4.00- 6.00- Percent
5.99% 7.99% Total of Total
-------- -------- -------- --------
(Dollars in Thousands)
Certificate accounts maturing
in quarter ending:
- ------------------------------
December 31, 1998.............. $ 27,973 $ --- $ 27,973 26.01%
March 31, 1999................. 23,233 36 23,269 21.64
June 30, 1999.................. 15,399 --- 15,399 14.32
September 30, 1999............. 12,005 --- 12,005 11.16
December 31, 1999.............. 5,036 --- 5,036 4.68
March 31, 2000................. 4,209 --- 4,209 3.91
June 30, 2000.................. 3,749 51 3,800 3.53
September 30, 2000............. 2,499 --- 2,499 2.32
December 31, 2000.............. 2,560 --- 2,560 2.38
March 31, 2001................. 2,946 --- 2,946 2.74
June 30, 2001.................. 1,259 26 1,285 1.20
September 30, 2001............. 1,947 --- 1,947 1.81
Thereafter..................... 4,175 445 4,620 4.30
-------- -------- -------- ------
Total....................... $106,990 $ 558 $107,548 100.00%
======== ======== ======== ======
Percent of total............ 99.48% .52%
======== ========
The following table indicates the amount of the Bank's certificates of
deposit by time remaining until maturity as of September 30, 1998.
Maturity
----------------------------------------------------
Over Over
3 Months 3 to 6 6 to 12 Over
or Less Months Months 12 months Total
-------- -------- -------- --------- -------
(In Thousands)
Certificates of deposit less than $100,000....... $24,313 $21,423 $24,819 $24,706 $95,261
Certificates of deposit of $100,000 or more...... 3,661 1,846 2,584 4,196 12,287
-------- -------- -------- -------- -------
Total certificates of deposit.................... $27,974 $23,269 $27,403 $28,902 $107,548
======= ======= ======= ======= ========
Borrowings. Although deposits are the Bank's primary source of funds,
the Bank may utilize borrowings as a funding source. As a member of the FHLB,
the Bank has access to overnight funds of approximately $14.3 million, along
with an additional line of $14.3 million for one month advances. At September
30, 1998, the Bank had borrowings of $6.8 million under its overnight line.
In January 1998, the Bank began converting a portion of its short-term
borrowings to long-term borrowings principally through convertible (callable)
advances with the FHLB. The borrowings are secured by mortgage-backed
securities, and have contractual maturities of ten years, however, they include
options which give the lender the right to call the debt after a specified
lock-out period. The Company had $25 million of such borrowings at September 30,
1998, which had lock-out periods ranging from one to five years. For further
detail, see Note #16 to the Consolidated Financial Statements.
20
Subsidiary and Other Activities
As a federally chartered savings association, the Bank is permitted by
OTS regulations to invest up to 2% of its assets, or $6.3 million at September
30, 1998, in the stock of, or loans to, service corporation subsidiaries. The
Bank may invest an additional 1% of its assets in service corporations where
such additional funds are used for inner-city or community development purposes
and up to 50% of its total capital in conforming loans to service corporations
in which it owns more than 10% of the capital stock. Federal associations also
are permitted to invest an unlimited amount in operating subsidiaries engaged
solely in activities which a federal association may engage in directly. As of
September 30, 1998, the Bank had one subsidiary, Catskill Financial Services,
Inc., which commenced operations in January 1998, principally to issue Savings
Bank Life Insurance.
The Company, as a unitary savings and loan holding company, is
generally permitted under federal law to engage, through non-banking
subsidiaries, in whatever business activities it may choose to pursue. The
Company currently has no such subsidiaries.
Competition
The Company faces strong competition, both in originating real estate
and other loans and in attracting deposits. Competition in originating real
estate loans comes primarily from other savings institutions, commercial banks,
credit unions and mortgage bankers making loans secured by real estate located
in the Company's primary market area. Other savings institutions, commercial
banks, credit unions and finance companies provide vigorous competition in
consumer lending.
The Bank attracts all of its deposits through its branch offices,
primarily from the communities in which those branch offices are located;
therefore, competition for those deposits is principally from mutual funds and
other savings institutions, commercial banks and credit unions located in the
same communities. The Bank competes for these deposits by offering a variety of
deposit accounts at competitive rates, convenient business hours, and convenient
branch locations with interbranch deposit and withdrawal privileges. Automated
teller machine facilities are also available at four of the Bank's offices. At
September 30, 1998, the Bank held approximately 30% of total financial
institution deposits and 57% of total thrift deposits in Greene County, New
York, and approximately .09% of total financial institution deposits in Albany
County, New York.
Employees
At September 30, 1998, the Company had a total of 70 employees,
including four part-time employees. The Company's employees are not represented
by any collective bargaining group. Management considers its employee relations
to be good.
ITEM 2. PROPERTIES
The Bank conducts its business at its main office and four other
banking offices in its primary market area. The Company does not own or lease
any other premises and operates principally from the Bank's main office. The
following table sets forth information relating to each of the Bank's offices as
of September 30, 1998. The Bank also owns a parking lot located at 313-317 Main
Street, Catskill, New York, which is used to service the main office. The net
book value of the Bank's premises and equipment (including land, building and
leasehold improvements and furniture, fixtures and equipment) at September 30,
1998 was $2.5 million. See Note 9 of Notes to Consolidated Financial Statements.
The Bank believes that its current facilities are adequate to meet the present
and foreseeable needs of the Bank and the Company, subject to possible future
expansion.
21
Total Net Book
Owned Approximate Value or Leasehold
Date or Square Improvement at
Location Acquired Leased Footage September 30, 1998
- -------------------------------- ---------------------- --------------- --------------------- -------------------
(In thousands)
Main Office:
341 Main Street
Catskill, New York Prior to 1950 Owned 11,750 $ 609
Branch Offices:
Route 9-W
Ravena, New York 1972 Owned 2,822 267
Route 9-W
Corner Boulevard Avenue
Catskill, New York 1978 Owned 2,900 709
Route 296
Windham, New York 1996 Owned 3,620 736
Supermarket Branch:
Bryant's Supermarket(1)
Route 32
Greenville, New York 1998 Leased 650 201
------
$2,522
======
(1) Branch opened April 1998 and lease term expires in April 2013
ITEM 3. LEGAL PROCEEDINGS
The Company is involved as plaintiff or defendant in various other
legal actions arising in the normal course of its business. While the ultimate
outcome of these proceedings cannot be predicted with certainty, it is the
opinion of management, after consultation with counsel representing the Company
in the proceedings, that the resolution of these proceedings should not have a
material effect on the Company's financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of fiscal 1998, there were no matters
submitted to a vote of shareholders of Catskill Financial Corporation.
22
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The following information included in the Annual Report to Shareholders
for the fiscal year ended September 30, 1998, (the "Annual Report"), is
incorporated herein by reference: "SHAREHOLDER INFORMATION", which appears on
page 65 of the Annual Report.
ITEM 6. SELECTED FINANCIAL DATA
The following information included in the Annual Report is incorporated
herein by reference: "SELECTED CONSOLIDATED FINANCIAL INFORMATION" which appears
on pages 4 and 5 of the Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following information included in the Annual Report is incorporated
herein by reference: "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS", which appears on pages 7 through 27 of the
Annual Report.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
The following information included in the Annual Report is incorporated
herein by reference: "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Asset/Liability Management", which appears
on pages 11 through 14 of the Annual Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following information included in the Annual Report is incorporated
herein by reference: The consolidated statements of financial condition of
Catskill Financial Corporation and Subsidiary as of September 30, 1998 and 1997,
and the related consolidated statements of income, shareholders' equity and cash
flows for each of the years in the three-year period ended September 30, 1998,
together with the related notes and the independent auditors' report thereon,
all of which appears on pages 28 through 64 of the Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following information included in the Proxy Statement is
incorporated herein by reference a copy of which is expected to be filed within
120 days of September 30, 1998 ("the Proxy Statement"): "ELECTION OF DIRECTORS",
and "INFORMATION CONCERNING THE BOARD OF DIRECTORS AND EXECUTIVE OFFICERS",
which appears on pages 2 through 5 of the Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
The information included on pages 7 through 13 of the Proxy Statement
is incorporated herein by reference.
23
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following information included in the Proxy Statement is
incorporated herein by reference: "VOTING SECURITIES AND CERTAIN HOLDERS
THEREOF" which appears on pages 5 THROUGH 7 of the Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information included on page 15 of the Proxy Statement is
incorporated herein by reference: "TRANSACTIONS WITH DIRECTORS AND OFFICERS."
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Listed below are all financial statements and exhibits filed as
part of this report:
(1) The consolidated statements of financial condition of Catskill
Financial Corporation and subsidiary as of September 30, 1998 and 1997, and the
related consolidated statements of income, shareholders' equity and cash flows
for each of the years in the three-year period ended September 30, 1998,
together with the related notes and the independent auditors' report thereon,
appearing in the Annual Report on pages 28 through 64 are incorporated herein by
reference.
(2) Schedules omitted as they are not applicable
(3) Exhibits
The following exhibits are either filed as part of this report or are
incorporated herein by reference:
Regulation S - K Exhibit
Reference Number Description
- ------------------------ -----------
3.1 Certificate of Incorporation of Catskill
Financial Corporation (incorporated by reference
to Exhibit 3.1 to the Registration Statement on
Form S-1 No. #33-81019, of Catskill Financial
Corporation, filed on February 5, 1996,
(hereinafter "Form S-1")
3.2 By laws of Catskill Financial Corporation
(incorporated by reference to Exhibit 3.2 to
Form S-1)
4 Specimen Stock Certificate (incorporated by
reference to Exhibit 4 to Form S-1.)
10.1 Catskill Financial Corporation 1996 Stock Option
and Incentive Compensation Plan (incorporated by
reference to Proxy Statement for Special Meeting
of Stockholders of Catskill Financial
Corporation held on October 24, 1996.)
10.2 Employment agreement dated April 1, 1998, by and
between Catskill Savings Bank and Wilbur J.
Cross. (incorporated by reference to Exhibit
10.2 to Form 10Q for the nine month period ended
June 30, 1998.)
10.3 Catskill Financial Corporation Employee Stock
ownership Plan (incorporated by reference to
Exhibit 10.3 to Form S-1.)
24
Regulation S - K Exhibit
Reference Number Description
- ------------------------ -----------
10.4 Catskill Financial Corporation Management
Recognition Plan (incorporated by reference to
Proxy Statement for Special Meeting of
Stockholders of Catskill Financial Corporation
held on October 24, 1996.)
10.5 Trustees Deferred Compensation Plan of Catskill
Savings Bank (incorporated by reference to
Exhibit 10.7 to Form S- 1.)
10.6 Employment agreement dated April 1, 1998, by and
between Catskill Financial Corporation and
Wilbur J. Cross. (Incorporated by reference to
Exhibit 10.1 to Form 10Q for the nine month
period ended June 30, 1998.)
10.7 Catskill Financial Corporation Supplemental
Executive Retirement Plan. (Incorporated by
reference to Exhibit 10.3 to Form 10Q for the
nine month period ended June 30, 1998.)
10.8 Catskill Financial Corporation Supplemental
Executive Retirement Plan Trust (incorporated by
reference to Exhibit 10.4 to Form 10Q for the
nine month period ended June 30, 1998.)
10.9 Employment Agreement dated August 1, 1998, by
and between Catskill Savings Bank and David J.
DeLuca.
10.10 Schedule pursuant to instruction #2 of Item 601
of Regulation SK. There is an employment
agreement with Keith Lampman, an executive
officer of the registrant, which is
substantially identical to the agreement
included as Exhibit 10.9. The only differences
are that the agreement is with Mr. Lampman,
contains his residence address, refers to his
title as "Vice President" and does not contain
section 1(e)(3) as contained in the agreement
included as Exhibit 10.9.
11 Computation of Net Income per Common Share
13 1998 Annual Report to security holders
21 Subsidiaries of the registrant
23 Consent of KPMG Peat Marwick LLP
27 Financial Data Schedule
25
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
and Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
CATSKILL FINANCIAL CORPORATION
(Registrant)
By: /s/ Wilbur J. Cross
------------------------------
Wilbur J. Cross
Director & Chairman of the Board,
President & Chief Executive Officer
Date: December 18, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Wilbur J. Cross Director & Chairman of the Board,
- --------------------------------- President and Chief December 18, 1998
Wilbur J. Cross Executive Officer
/s/ David J. DeLuca Chief Financial Officer
- --------------------------------- (Principal Financial Officer & December 18, 1998
David J. DeLuca Principal Accounting Officer)
/s/ George P. Jones Director December 18, 1998
- ---------------------------------
George P. Jones
/s/ Richard A. Marshall Director December 18, 1998
- --------------------------------
Richard A. Marshall
/s/ Allan D. Oren Director December 18, 1998
- -----------------------------------
Allan D. Oren
/s/ Hugh J. Quigley Director December 18, 1998
- -----------------------------------
Hugh J. Quigley
/s/ Edward P. Stiefel Director December 18, 1998
- -----------------------------------
Edward P. Stiefel, Esq.
26