SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-24353
THISTLE GROUP HOLDINGS, CO.
---------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2960768
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(State or other jurisdiction of (IRS employer identification no.)
incorporation or organization)
6060 Ridge Avenue, Philadelphia, Pennsylvania 19128
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (215) 483-2800
N/A
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Former name, former address and former fiscal year,
if changed since last report.
Indicate by check 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
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APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date October 31, 2000.
Class Outstanding
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$.10 par value common stock 7,213,161
THISTLE GROUP HOLDINGS, CO. AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2000
INDEX
Page
Number
------
PART 1 - UNAUDITED CONSOLIDATED FINANCIAL INFORMATION OF
THISTLE GROUP HOLDINGS, CO. AND SUBSIDIARIES
Item 1. Financial Statements and Notes Thereto.........................3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................................9
Item 3. Quantitative and Qualitative Disclosures about Market Risk....13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.............................................14
Item 2. Changes in Securities.........................................14
Item 3. Defaults upon Senior Securities...............................14
Item 4. Submission of Matters to a Vote of Security Holders...........14
Item 5. Other Information.............................................14
Item 6. Exhibits and Reports on Form 8-K..............................14
SIGNATURES ...........................................................15
2
THISTLE GROUP HOLDINGS, CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(IN THOUSANDS)
September 30, 2000 December 31, 1999
(unaudited)
---------------- --------------
ASSETS
Cash on hand and in banks....................................................... $ 4,177 $ 19,494
Interest-bearing deposits....................................................... 22,953 17,703
------ ------
Total cash and cash equivalents............................... 27,130 37,197
Investments available for sale at fair value
(amortized cost of $132,029 and $128,729)..................... 121,284 115,463
Mortgage-backed securities available for sale at fair value
(amortized cost of $246,923 and $211,304).................... 243,962 204,706
Trading securities.............................................................. 4,059 -
Loans receivable (net of allowance for loan losses of
$1,562 and $1,234)............................................ 198,704 157,233
Loans held for sale............................................................. 3,770 3,925
Accrued interest receivable..................................................... 4,640 3,692
FHLB stock - at cost ........................................................... 7,344 8,844
Real estate acquired through foreclosure - net ................................. 74 104
Office properties and equipment - net .......................................... 7,055 2,853
Cash surrender value of life insurance.......................................... 11,961 11,590
Excess of cost over fair value of net assets acquired........................... 7,579 -
Prepaid expenses and other assets .............................................. 1,381 1,145
Deferred income taxes........................................................... 5,979 8,007
----------- -----------
TOTAL ASSETS.................................................. $ 644,922 $ 554,759
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits .............................................................. $ 405,269 $ 292,619
Accrued interest payable........................................................ 1,003 835
Advances from borrowers for taxes and insurance................................. 1,787 2,472
FHLB advances .............................................................. 146,884 176,884
Accounts payable and accrued expenses........................................... 8,184 3,790
Other borrowings .............................................................. 2,000 3,000
Dividends payable .............................................................. 515 467
Accrued income taxes ........................................................... 31 32
----------- -----------
TOTAL LIABILITIES ............................................ 565,673 480,099
----------- -----------
Commitments and Contingencies
Stockholders' Equity:
Preferred stock, no par value - 10,000,000 shares authorized,
none issued in 2000 and 1999.................................................... - -
Common stock - $.10 par, 40,000,000 shares authorized, 8,999,989
issued in 2000 and 1999; 7,360,161 outstanding September 30, 2000
and 7,780,432 outstanding December 31, 1999..................................... 900 900
Additional paid-in capital ..................................................... 93,344 93,400
Common stock acquired by stock benefit plans ................................... (7,473) (8,199)
Treasury stock at cost, 1,639,828 shares at September 30, 2000 and
1,219,557 shares at December 31, 1999 .......................................... (14,750) (11,787)
Accumulated other comprehensive loss ........................................... (9,044) (13,108)
Retained earnings - partially restricted ....................................... 16,272 13,454
----------- -----------
Total stockholders' equity ................................... 79,249 74,660
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY...................................... $ 644,922 $ 554,759
=========== ===========
See notes to unaudited consolidated financial statements.
3
Thistle Group Holdings, Co. and subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
(Unaudited)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
2000 1999 2000 1999
INTEREST INCOME:
Interest on loans..................................... $ 3,999 $ 2,882 $ 11,023 $ 8,413
Interest on mortgage-backed securities................ 4,206 3,443 11,338 10,217
Interest and dividends on investments................. 2,708 2,599 8,173 6,375
--------- --------- --------- ---------
Total interest income............................. 10,913 8,924 30,534 25,005
--------- --------- --------- ---------
INTEREST EXPENSE:
Interest on deposits.................................. 4,175 2,894 11,077 8,611
Interest on borrowed money............................ 2,594 2,273 7,567 5,544
--------- --------- --------- ---------
Total interest expense............................ 6,769 5,167 18,644 14,155
--------- --------- --------- ---------
NET INTEREST INCOME 4,144 3,757 11,890 10,850
PROVISION FOR LOAN LOSSES................................ 120 45 360 195
--------- --------- --------- ---------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES....................................... 4,024 3,712 11,530 10,655
--------- --------- --------- ---------
OTHER INCOME:
Service charges and other fees........................ 144 91 365 267
(Loss) gain on sale of real estate owned.............. -- (5) (34) 1
Gain (loss) on sale of mortgage-backed securities.... -- -- 173 (16)
Gain on sale of loans................................. -- -- 23 --
Gain (loss) on sale of investments.................... -- (10) 333 251
Rental income......................................... 40 35 113 119
Trading revenues from brokerage operations............ 351 -- 465 --
Miscellaneous other income............................ 142 35 192 72
--------- --------- --------- ---------
Total other income................................ 677 146 1,630 694
--------- --------- --------- ---------
OTHER EXPENSES:
Salaries and employee benefits........................ 1,552 1,186 4,140 3,239
Occupancy and equipment............................... 423 324 1,089 865
Federal insurance premium............................. 17 40 47 125
Professional fees..................................... 119 187 296 461
Advertising and promotion............................. 102 80 263 165
Amortization of excess of cost over fair value
of assets acquired.................................... 96 - 96 -
Other................................................. 722 459 1,864 1,409
--------- --------- --------- ---------
Total other expenses.............................. 3,031 2,276 7,795 6,264
--------- --------- --------- ---------
INCOME BEFORE INCOME TAXES............................... 1,670 1,582 5,365 5,085
--------- --------- --------- ---------
INCOME TAXES............................................. 329 292 1,139 1,181
-------- --------- --------- ---------
NET INCOME............................................... $ 1,341 $ 1,290 $ 4,226 $ 3,904
======== ========= ========= =========
BASIC EARNINGS PER SHARE................................. $.20 $.18 $.61 $.53
DILUTED EARNINGS PER SHARE............................... $.20 $.18 $.61 $.52
WEIGHTED AVERAGE SHARES
OUTSTANDING - BASIC................................... 6,838,169 7,164,407 6,929,044 7,374,802
WEIGHTED AVERAGE SHARES
OUTSTANDING - DILUTED................................. 6,875,715 7,211,456 6,962,550 7,473,618
See notes to unaudited consolidated financial statements.
4
THISTLE GROUP HOLDINGS, CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(Unaudited)
For the Nine Months
Ended September 30,
2000 1999
---- ----
OPERATING ACTIVITIES:
Net income.................................................................. $ 4,226 $ 3,904
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Provision for loan losses................................................ 360 195
Depreciation............................................................. 480 336
Amortization of stock benefit plans...................................... 633 397
Amortization of excess of cost over fair value of assets acquired........ 96 -
Amortization of net premiums (discounts) on:
Loans purchased.......................................................... 37 22
Investments.............................................................. (1,011) (967)
Mortgage-backed securities............................................... 629 1,186
Gain on sale of loans....................................................... (23) -
Gain on sale of investments................................................. (333) (250)
(Gain) loss on sale of mortgage-backed securities........................... (173) 16
Net increase in trading securities.......................................... (4,059) -
Loss (gain) on sale of real estate owned................................... 34 (1)
Increase in other assets.................................................... (9,068) (42)
Increase (decrease) in other liabilities.................................... 4,566 (585)
------- --------
Net cash (used in) provided by operating activities......................... (3,606) 4,211
INVESTING ACTIVITIES:
Principal collected on:
Mortgage-backed securities............................................... 16,108 40,141
Loans.................................................................... 26,381 22,308
Loans originated............................................................ (56,758) (31,129)
Loans acquired.............................................................. (11,024) (4,560)
Increase in loans resulting from branch acquisitions........................ (340) -
Purchases of:
Investments ............................................................. (2,788) (64,474)
Mortgage-backed securities............................................... (69,801) (59,279)
Office properties and equipment.......................................... (1,148) (435)
FHLB Stock............................................................... (149) (3,500)
Increase in office properties/equipment resulting from branch acquisitions.. (3,534) -
Proceeds from the sale of loans............................................. 23 -
Proceeds from sale of investments........................................... 833 5,164
Proceeds from the sale of mortgage-backed securities........................ 17,617 27,728
Proceeds from the sale of FHLB stock........................................ 1,500 -
Proceeds from sale of real estate owned..................................... 25 6
Maturities and calls of investments......................................... - 833
------- -------
Net cash used in investing activities....................................... (83,055) (67,197)
FINANCING ACTIVITIES:
Net increase in deposits.................................................... 17,673 2,671
Increase in deposits resulting from branch acquisitions..................... 94,977 ---
Net decrease in advances from borrowers for taxes and insurance............. (685) (584)
Net (decrease) increase in FHLB advances.................................... (30,000) 70,000
Net (decrease) increase in other borrowings................................. (1,000) 3,000
Purchase of treasury stock.................................................. (2,963) (13,149)
Purchase of restricted stock plan shares.................................... - (2,761)
Net proceeds from exercise of stock options................................. - 300
Cash dividends.............................................................. (1,408) (1,258)
-------- --------
Net cash provided by financing activities................................... 76,594 58,219
------- -------
Net decrease in cash and cash equivalents................................... (10,067) (4,767)
Cash and cash equivalents, beginning of period.............................. 37,197 26,136
------- -------
Cash and cash equivalents, end of period.................................... 27,130 21,369
======= =======
SUPPLEMENTAL DISCLOSURES
Interest paid on deposits and funds borrowed $18,476 $13,788
Income taxes paid 846 767
Noncash transfers from loans to real estate owned 85 89
Noncash transfer of investments held to maturity to investments available for - 54,129
sale
See notes to unaudited consolidated financial statements
5
THISTLE GROUP HOLDINGS, CO. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 1 - PRINCIPLES OF CONSOLIDATION
Thistle Group Holdings, Co., (the "Company") organized in March of 1998, has
three wholly owned subsidiaries; TGH Corp., TGH Securities, and Roxborough
Manayunk Bank (the "Bank"). The Bank has three wholly owned subsidiaries: Roxdel
Corp., Montgomery Service Corp. and Ridge Service Corp. The Company's business
is conducted principally through the Bank. All significant intercompany accounts
and transactions have been eliminated in consolidation.
NOTE 2 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements were prepared in
accordance with instructions for Form 10-Q and, therefore, do not include all
information necessary for a complete presentation of consolidated financial
condition, results of operations, and cash flows in conformity with generally
accepted accounting principles. However, all adjustments, consisting of normal
recurring accruals, which, in the opinion of management, are necessary for a
fair presentation of the consolidated financial statements have been included.
The results of operations for the three and nine-month periods ended September
30, 2000 are not necessarily indicative of the results which may be expected for
the entire fiscal year or any other future period.
These statements should be read in conjunction with the consolidated financial
statements and related notes which are included in the Company's Annual Report
to stockholders for the year ended December 31, 1999.
NOTE 3 - INVESTMENTS AVAILABLE FOR SALE
Investments at September 30, 2000 and December 31, 1999 consisted of the
following:
September 30, 2000 December 31, 1999
Amortized Approximate Amortized Approximate
Cost Fair Value Cost Fair Value
---- ---------- ---- ----------
U.S. Treasury securities and securities
of U.S. government agencies -
1 to 5 years....................................... $ 3,000 $ 2,834
5 to 10 years...................................... $ 6,012 $ 5,869 3,017 2,965
More than 10 years................................. 42,000 39,457 42,000 38,706
FHLB and FHLMC Bonds - more than 10 years.......... 18,561 15,384 17,622 13,661
Municipal bonds - 5 to 10 years.................... 153 153
Municipal bonds - more than 10 years............... 44,222 41,542 41,613 37,129
Mutual funds....................................... 1,410 1,410 1,345 1,345
Capital trust securities........................... 12,860 10,749 12,900 11,340
Equity investments................................. 5,345 5,254 5,795 6,046
Other.............................................. 1,466 1,466 1,437 1,437
---------- ----------- ---------- ----------
Total.............................................. $ 132,029 $ 121,284 $ 128,729 $ 115,463
========== =========== ========== ==========
NOTE 4 - MORTGAGE-BACKED SECURITIES AVAILABLE FOR SALE
Mortgage-backed securities at September 30, 2000 and December 31, 1999 consisted
of the following:
September 30, 2000 December 31, 1999
Amortized Approximate Amortized Approximate
Cost Fair Value Cost Fair Value
---- ---------- ---- ----------
GNMA pass-through certificates..................... $ 145,090 $ 144,101 $ 111,825 $ 108,963
FNMA pass-through certificates..................... 76,371 74,351 77,567 73,801
FHLMC pass-through certificates.................... 19,372 19,412 20,550 20,621
FHLMC real estate mortgage investment conduits..... 1,362 1,326 1,362 1,321
FHLMC collateralized mortgage obligations.......... 4,728 4,772
---------- ----------- ---------- ----------
Total.............................................. $ 246,923 $ 243,962 $ 211,304 $ 204,706
========== =========== ========== ==========
6
NOTE 5 - TRADING SECURITIES
Trading Securities are securities owned by TGH Securities, a wholly owned
broker/dealer subsidiary of the Company. Trading securities are carried at fair
value. These securities generally consist of short-term municipal notes and
bonds. Gains and losses both realized and unrealized are included in operating
income.
NOTE 6 - LOANS RECEIVABLE
Loans receivable at September 30, 2000 and December 31, 1999 consisted of the
following:
September 30, 2000 December 31, 1999
------------------ -----------------
Mortgage loans:
1-4 family residential............................... $ 116,910 $ 110,032
Commercial real estate............................... 54,978 29,867
Home equity lines of credit and improvement loans............. 10,090 8,518
Commercial non-mortgage loans................................. 14,256 5,496
Construction loans - net...................................... 4,528 5,365
Loans on savings accounts..................................... 622 170
Consumer loans ............................................ 131 126
---------- ----------
Total loans.......................................... 201,515 159,574
---------- ----------
Plus: unamortized premiums.................................... 333 373
Less:
Net discounts on loans purchased..................... (22) (28)
Deferred loan fees................................... (1,560) (1,452)
Allowance for loan losses............................ (1,562) (1,234)
----------- ----------
Total $ 198,704 $ 157,233
========== ==========
NOTE 7 - DEPOSITS
The major types of deposits by amounts and percentages were as follows:
September 30, 2000 December 31, 1999
Amount % of Total Amount % of Total
------ ---------- ------ ----------
NOW accounts and
transaction checking $ 38,726 9.6% $ 19,880 6.8%
Money Market Demand accounts 26,349 6.5% 8,963 3.1%
Passbook accounts 104,781 25.8% 99,018 33.8%
Certificate accounts 235,413 58.1% 164,758 56.3%
------- ----- ---------- -----
Total $ 405,269 100.0% $ 292,619 100.0%
========== ====== ========== ======
NOTE 8 - EARNINGS PER SHARE
Basic earnings per share excludes dilution and is computed by dividing income
available to common stockholders by the weighted-average number of common shares
outstanding for the period. Diluted earnings per share reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock or resulted in the issuance of
common stock that then shared in the earnings of the Company.
NOTE 9 - COMPREHENSIVE INCOME (LOSS)
For the three and nine months ended September 30, 2000, the Company reported
total other comprehensive income of approximately $2,600 and $4,100,
respectively. For the three and nine month periods of the prior year, the
Company reported total comprehensive loss of $2,800 and $7,700 respectively.
Other comprehensive income consisted of unrealized gains or (losses), net of
taxes, on available for sale securities and reclassification adjustments for
gains included in net income.
7
NOTE 10 - DIVIDENDS
On September 20, 2000 the Company declared a dividend of $.07 per share payable
October 13, 2000 to stockholders of record on September 30, 2000.
NOTE 11 - BRANCH ACQUISITIONS
On May 23, 2000, the Bank signed a definitive agreement with Crown Bank, FSB to
purchase its branch office located in Wilmington, Delaware including the real
property, approximately $20 million in certain loans, and the assumption of
approximately $52 million in deposit liabilities. The transaction closed on
September 9, 2000. No loans were purchased at closing.
On May 25, 2000, the Bank signed a definitive agreement with Wilmington Trust
Company of Pennsylvania to purchase four branch offices from Wilmington Trust
located in Lionville, Media, Westtown, and West Chester, Pennsylvania including
real property and the assumption of approximately $59 million in deposit
liabilities. The transaction closed on August 4, 2000.
The branch acquisitions have been accounted for under the purchase method of
accounting. The allocation of purchase price is preliminary pending final
valuation of the fair market value of the assets acquired and the liabilities
assumed.
8
THISTLE GROUP HOLDINGS, CO. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Private Securities Litigation Reform Act of 1995 contains safe harbor
provisions regarding forward-looking statements. When used in this discussion,
the words "believes", anticipates", "contemplates", "expects", and similar
expressions are intended to identify forward-looking statements. Such statements
are subject to certain risks and uncertainties which could cause actual results
to differ materially from those projected. Those risks and uncertainties include
changes in interest rates, risks associated with the effect of opening a new
branch, the ability to control costs and expenses, new legislation and
regulations, year 2000 issues, and general market conditions. Thistle Group
Holdings, Co. undertakes no obligation to publicly release the results of any
revisions to those forward-looking statements which may be made to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
General
- -------
Thistle Group Holdings, Co. (the "Company") is a Pennsylvania Corporation which
was organized in March 1998 to acquire all of the Capital Stock of
Roxborough-Manayunk Bank (the "Bank") in the Conversion and Reorganization. The
Company is a unitary thrift holding company which, under existing laws,
generally is not restricted in the types of business activities in which it may
engage provided that the Bank retains a specified amount of its assets in
housing-related investments.
The Bank is a federally chartered stock savings bank. The Bank serves the
counties of Philadelphia, Chester and Delaware in the Commonwealth of
Pennsylvania and Wilmington, Delaware through a network of eleven offices and
its transactional web site RMBgo.com, and provides a full range of retail
banking services, with emphasis on the origination of one-to-four family
residential mortgages.
The Bank is primarily engaged in attracting deposits from the general public
through its offices and using those and other available sources of funds to
originate and purchase loans secured by one to four-family residences, existing
multi-family residential and nonresidential real estate. In addition, the Bank
originates consumer loans, such as home equity loans and home equity lines of
credit. Such loans generally provide for higher interest rates and shorter terms
than single-family residential real estate loans.
On August 7, 2000, the Bank opened its four banking offices located in
Lionville, Media, West Chester, and Westtown which were acquired from Wilmington
Trust Company of Pennsylvania and on September 11, 2000 the Bank opened its
Wilmington, Delaware office which was purchased from Crown Bank, FSB.
Comparison of Financial Condition
- ---------------------------------
The Company had total assets of $644.9 million as of September 30, 2000,
representing an increase of $90.2 million from the balance of $554.8 million as
of December 31, 1999. The increase was due mainly to an increase in loans
receivable of $41.5 million and an increase in mortgage-backed securities of
$39.3 million primarily funded by increased deposits of $112.6 million through
internal growth and deposits acquired through branch acquisitions.
Cash and cash equivalents decreased $10.1 million or 27% from $37.2 million at
December 31, 1999 to $27.1 million at September 30, 2000 as it was no longer
necessary to keep the higher balance for year 2000 concerns.
Investments increased $5.8 million or 5% from $115.5 million at December 31,
1999 to $121.3 million at September 30, 2000 primarily due to purchases of $2.8
million and a decrease in the unrealized loss of $2.5 million
Trading securities were $4.1 million at September 30, 2000. Such securities were
the product of the activities of TGH Securities, which began operations during
the nine months, ended September 30, 2000.
Mortgage-backed securities increased $39.3 million or 19% from $204.7 million at
December 31, 1999 to $244.0 million at September 30, 2000. This increase was the
result of $69.8 million in purchases and a decrease in the unrealized loss of
$3.6 million offset by $16.1 million in repayments and sales of $17.6 million.
Loans increased $41.5 million or 26% from $157.2 million at December 31, 1999 to
$198.7 million at September 30, 2000. This increase was the result of $57.1
million of originations including $35.4 million of non-residential loans, and
$11.0 million in non-residential loan purchases, offset by principal repayments
of $26.4 million.
9
Office properties and equipment increased $4.2 million or 147% from $2.9 million
at December 31, 1999 to $7.1 million at September 30, 2000. The increase was due
mainly to the purchase of real estate and fixed assets related to the branch
acquisitions. In addition there was an increase in computer and other equipment
purchased in connection with the acquisitions.
Excess of cost over fair value of assets acquired recorded in connection with
the branch transactions totaled $7.7 million representing an aggregate deposit
premium of approximately 8.0%. Excess of cost over fair value of assets acquired
is being amortized on a straight-line basis over the period of expected benefit,
which approximates 12 years.
Deposits increased $112.7 million or 39% from $292.6 million at December 31,
1999 to $405.3 million at September 30, 2000. Certificates of deposit increased
$70.7 million; passbook accounts increased $5.8 million and NOW accounts,
transaction checking and money market accounts increased $36.2 million. These
increases were due primarily to the acquisitions.
FHLB Advances decreased $30 million or 17% from $176.9 million at December 31,
1999 to $146.9 million at September 30, 2000 as deposit monies acquired were
used to pay down higher costing overnight advances.
Accounts payable and accrued expenses increased $4.4 million or 116% from $3.8
million at December 31, 1999 to $8.2 million at September 30, 2000 due mainly to
activity at TGH Securities. Amounts represent monies due to brokers/dealers for
securities purchased.
Total stockholders' equity increased $4.6 million or 6% from $74.7 million at
December 31, 1999 to $79.2 million at September 30, 2000 primarily due to net
income for the nine months ended of $4.2 million and to a decrease in the
accumulated other comprehensive loss of $4.1 million due to improvement in the
mark to market adjustment on securities available for sale, as required by
Financial Accounting Standards Board Statement No. 115, offset by the repurchase
of 420,271 shares at an average cost of $7.05 per share and dividends declared
of $1.4 million. Any movement in general market conditions, including interest
rates, competition and credit quality could result in a material fluctuation on
the Company's available for sale portfolio, and thus its stockholders' equity.
Non-performing Assets
The following table sets forth information regarding non-performing loans and
real estate owned.
At At
September 30, 2000 December 31, 1999
------------------ -----------------
(Dollars in Thousands)
Total non-performing loans........................ $ 158 $ 223
Real estate owned................................. 74 104
-------- --------
Total non-performing assets....................... $ 232 $ 327
======== ========
Total non-performing loans to
total loans....................................... .08% .14%
Total non-performing assets to
total assets...................................... .04% .07%
Allowance for loan loss........................... $ 1,562 $ 1,234
Allowance for loan losses as a percentage
of total non-performing assets.................... 673% 377%
Allowance for loan losses as a percentage
of total non-performing loans..................... 989% 553%
Allowance for loan losses as a percentage
of total average loans............................ .88% .85%
10
Comparison of Operations for the Three and Nine Month Periods Ended September
30, 2000 and 1999
- --------------------------------------------------------------------------------
Net Income. Net income for the three and nine months ended September 30, 2000
increased $51,000 or 3.9% and $322,000 or 8.2%, respectively, over the same
periods in 1999. The increase for the three-month period is due to an increase
in net interest income of $387,000, and increase of $531,000 in other income
offset by an increase of $755,000 in non-interest expense. The increase for the
nine month period is due to an increase in net interest income of $875,000, and
an increase of $936,000 in other income, offset by an increase of $1.5 million
in non-interest expense.
Total Interest Income. Interest income for the three months ended September 30,
2000 increased $2.0 million or 22% over the quarter ended September 30, 1999 due
primarily to an increase of $84.2 million in the average balance of
interest-earning assets and an increase in the average yield of 35 basis points.
Interest income for the nine months ended September 30, 2000 increased $5.5
million or 22% over the quarter ended September 30, 1999 due to an increase of
$82.9 million in the average balance of interest-earning assets and an increase
in the average yield of 30 basis points.
Total Interest Expense. Interest expense for the three months ended September
30, 2000 increased $1.6 million or 31% over the quarter ended September 30, 1999
due primarily to an increase of $79.5 million in the average balance of
interest-bearing liabilities and an increase of 52 basis points in the average
cost of funds. Interest expense for the nine months ended September 30, 2000
increased $4.5 million or 32% over the same period of the prior year due to an
increase of $80.4 million in the average balance of interest-bearing liabilities
and to an increase of 48 basis points in the average cost of funds.
Net Interest Income. Net interest income for the three months ended September
30, 2000 increased $387,000 or 10% over the quarter ended September 30, 1999 due
to the reasons discussed above. The net interest spread, the difference between
the average rate earned and the average rate paid, decreased by 17 basis points
to 2.25% for the three months ended September 30, 2000 from 2.42% for the same
period in 1999. Net interest income for the nine months ended September 30, 2000
increased $1.0 million or 9% as compared to the same period of the prior year
due to the reasons discussed above. The net interest spread decreased by 18
basis points to 2.27% for the nine months ended September 30, 2000 from 2.45%
for the same period of 1999.
Provision for Losses on Loans. The provision for losses on loans for the three
and nine months ended September 30, 2000 totaled $120,000 and $360,000,
respectively, as compared to $45,000 and $195,000 for the same periods in 1999.
The increase is attributable to the increase in the loan portfolio as well as a
change in the composition of the portfolio. Provisions for losses included
charges to reduce the recorded balances of mortgage loans receivable and the
collateral real estate to their estimated net realizable value or fair value, as
applicable. Such provisions are based on management's estimate of net realizable
value or fair value of the collateral, as applicable, considering the current
operating or sales conditions, thereby causing these estimates to be
particularly susceptible to changes that could result in a material adjustment
to results of operations in the near term. Recovery of the carrying value of
such loans and its collateral is dependent to a great extent on economic,
operating and other conditions that may be beyond the Company's control.
Management will continue to review its loan portfolio to determine the extent,
if any, to which further additional loss provisions may be deemed necessary.
There can be no assurance that the allowance for losses will be adequate to
cover losses which may in fact be realized in the future and that additional
provisions for losses will not be required.
Other Income. Other income for quarter ended September 30, 2000 increased
$531,000 over the quarter ended September 30, 1999 due primarily to trading
revenues of $351,000 from TGH Securities death benefits received from bank owned
life insurance of $84,000, and an increase in service charges and fees of
$53,000. Non-interest income for the nine months ended September 30, 2000
increased $936,000 over the same period of the prior year due to trading
revenues of $465,000, a gain on the sale of mortgage-backed securities of
$173,000, a gain on the sale of a portion of the Company's equity securities of
$333,000 offset by a gain in the prior year of $251,000, an increase in service
charges and fees of $98,000, death benefits from bank owned life insurance of
$84,000, and a recovery of $42,000 on loans secured by commercial equipment
leases that had been written off in prior years.
Other Expenses. Other expenses increased $755,000 or 32% for the quarter ended
September 30, 2000 over the quarter ended September 30, 1999. Salaries and
employee benefits increased $366,000 due primarily to the addition of personnel
including branch personnel from recent acquisitions, commercial lending, and TGH
Securities, and salary increases offset somewhat by the termination of the
pension plan in December 1999. Occupancy and equipment costs increased $99,000
due to additional depreciation on current year purchases of office and computer
equipment related mainly to the recent branch acquisitions as well as rental
expense on three of the five new branches. Federal insurance premiums decreased
$23,000 due to a decrease in the assessment rate. Professional fees decreased
$68,000 as there were additional legal fees in the quarter ended September 1999
related to the adoption of the Restricted Stock and Option Plans and other
corporate actions. Advertising and promotion increased $22,000 due to costs
associated with the recent branch acquisitions. Goodwill
11
amortization related to the branch acquisitions was $96,000. Other expense
increased $263,000 due to increased costs for ATM service, telephone and
supplies related to the addition of five new branches, costs associated with
sales training for all employees, fees associated with the management of
investments at the Delaware holding companies, operating expenses for TGH
Securities, and an increase in capital stock tax.
Other expense increased $1.5 million or 24% for the nine months ended September
30, 2000 over the same period of the prior year. Salaries and employee benefits
increased $901,000 due mainly to the reasons discussed above as well as to
compensation expense related to the restricted stock plan for nine months of
2000 versus three months of 1999. Occupancy and equipment increased $224,000,
and federal insurance premiums decreased $78,000 and professional fees decreased
$165,000 due to the reasons discussed above. Advertising and promotion increased
$98,000 as the Company began a focused strategic marketing effort in the latter
half of 1999 which included among other things additional media costs for
creation and placement of new print ads to a larger geographic area as well as
costs associated with the recent branch acquisitions. Other expenses increased
$455,000 due to the reasons discussed above.
Income Tax Expense. Income tax expense for the quarter ended September 30, 2000
was $329,000 or 20% of pre-tax income as compared to $292,000 or 18% for the
quarter ended September 30, 1999. Income tax expense for the nine months ended
September 30, 2000 was $1.1 million or 21% of pre-tax income as compared to $1.2
million or 23% of pre-tax income for the same period of the prior year.
Liquidity and Capital Resources
- -------------------------------
On September 30, 2000, the Bank was in compliance with its three regulatory
capital requirements as follows:
Amount Percent
------ -------
(in Thousands)
Tangible capital................................ $ 51,723 8.30%
Tangible capital requirement.................... 9,343 1.50%
-------- -------
Excess over requirement......................... $ 42,380 6.80%
======== =======
Core capital.................................... $ 51,723 8.30%
Core capital requirement........................ 18,686 3.00%
-------- -------
Excess over requirement......................... $ 33,037 5.30%
======== =======
Risk based capital.............................. $ 53,285 23.92%
Risk based capital requirement.................. 17,822 8.00%
-------- -------
Excess over requirement......................... $ 35,463 15.92%
======== =======
The Company's primary sources of funds are deposits, borrowings, and proceeds
from principal and interest payments on loans, mortgage-backed securities and
other investments. While maturities and scheduled amortization of loans and
mortgage-backed securities are a predictable source of funds, deposit flows and
mortgage prepayments are greatly influenced by general interest rates, economic
conditions, competition and the consolidation of the financial institution
industry.
The primary investment activity of the Company is the origination and purchase
of mortgage loans, mortgage-backed securities and other investments. During the
nine months ended September 30, 2000, the Company originated $57.1 million of
mortgage loans. The Company also purchases loans and mortgage-backed securities
to reduce liquidity not otherwise required for local loan demand. Purchases of
mortgage loans and mortgage-backed securities totaled $80.8 million during the
nine-month period ended September 30, 2000. Other investment activities include
investment in U.S. government and federal agency obligations, municipal bonds,
debt and equity investments in financial services firms, FHLB of Pittsburgh
stock, commercial and consumer loans.
The Company has other sources of liquidity if a need for additional funds
arises. In 1999, the Company utilized FHLB advances to leverage its balance
sheet. In addition, other sources of liquidity can be found in the Company's
balance sheet, such as investment securities maturing within one year and
unencumbered mortgage-backed securities that are readily marketable.
12
The Bank is required to maintain minimum levels of liquid assets as defined by
OTS regulations. The requirement, which may be varied at the direction of the
OTS depending upon economic conditions and deposit flows, is based upon a
percentage of deposits and short-term borrowings. The required minimum ratio is
currently 4.0%. The Bank's liquidity ratio was 8.41% at September 30, 2000.
The Company's most liquid assets are cash and cash equivalents, which include
investments in highly liquid short-term investments. The level of these assets
is dependent on the Company's operating, financing and investing activities
during any given period. At September 30, 2000, cash and cash equivalents
totaled $27.1 million.
The Company anticipates that it will have sufficient funds available to meet its
current commitments. As of September 30, 2000, the Company had $9.8 million in
commitments to fund loans. Certificates of deposit which were scheduled to
mature in one year or less as of September 30, 2000 totaled $191.0 million.
Management believes that a significant portion of such deposits will remain with
the Company.
Additional Key Operating Ratios
For the For the
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2000(1) 1999(1) 2000(1) 1999(1)
Return on average assets .82% .95% .94% 1.01%
Return on average equity 6.84% 6.58% 7.50% 6.12%
Yield on average interest-earning assets 7.30% 6.95% 7.19% 6.89%
Cost of average interest-bearing liabilities 5.05% 4.53% 4.92% 4.44%
Interest rate spread (2) 2.25% 2.42% 2.27% 2.45%
Net interest margin 2.77% 2.93% 2.80% 2.99%
At September 30, 2000 At December 31, 1999
--------------------- --------------------
Tangible book value per share $10.77 $9.60
(1) The ratios for the three and nine month periods are annualized.
(2) Interest rate spread represents the difference between the average yield on
interest-earning assets and the average cost of interest-bearing
liabilities.
Quantitative and Qualitative Disclosures about Market Risk
- ----------------------------------------------------------
There were no significant changes for the nine months ended September 30, 2000
from the information presented in the Form 10K for December 31, 1999, under the
caption "Asset and Liability Management" and "Market Risk Analysis".
13
THISTLE GROUP HOLDINGS, CO. AND SUBSIDIARIES
PART II
ITEM 1. LEGAL PROCEEDINGS
Neither the Company nor the Bank was engaged in any legal proceeding of a
material nature at September 30, 2000. From time to time, the Company is a party
to routine legal proceedings in the ordinary course of business, such as claims
to enforce liens, condemnation proceedings on properties in which the Company
holds a security interest, claims involving the making and servicing of real
property loans, and other issues incident to the business of the Company. There
were no lawsuits pending or known to be contemplated against the Company at
September 30, 2000 that would have a material effect on the operations or income
of the Company or the Bank, taken as a whole.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
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) The following Exhibits are filed as part of this report:
27 Financial Data Schedule (electronic filing only)
(b) Reports on Form 8-K
On August 1, 2000, the Registrant filed a Form 8-K (Items 5 and 7)
announcing its plan to repurchase up to 5%, or 370,758 shares of its
outstanding common stock.
14
THISTLE GROUP HOLDINGS, CO. AND SUBSIDIARIES
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.
THISTLE GROUP HOLDINGS, CO.
Date: November 14, 2000 By: /s/ John F. McGill, Jr.
---------------------------------------
John F. McGill, Jr.
President and Chief Executive Officer
(Principal Executive Officer)
Date: November 14, 2000 By: /s/ Jerry Naessens
---------------------------------------
Jerry Naessens
Chief Financial Officer
(Principal Financial Officer)
15