SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Fiscal Year Ended December 31, 2000
| | TRANSITIONAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________________________to _____________________
Commission File Number: 0-24353
THISTLE GROUP HOLDINGS, CO.
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(Exact name of registrant as specified in its charter)
Pennsylvania 23-2960768
- --------------------------------------------------- -------------------
(State or other jurisdiction of incorporation (IRS Employer
or organization) Identification No.)
6060 Ridge Avenue, Philadelphia, Pennsylvania 19128
- ------------------------------------------------------- ------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (215) 483-2800
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Securities registered pursuant to Section 12(b) of the Act: None
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.10 per share
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(Title of Class)
Indicate by check mark whether the company (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 company
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 10-K or any
amendment to this Form 10-K. [X]
Based on the closing sales price of $8.938 per share of the company's
common stock on March 5, 2001, as reported on the Nasdaq National Market, the
aggregate market value of voting and non-voting stock held by non- affiliates of
the company was approximately $51.2 million. On such date, 7,044,403 shares of
the company's Common Stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of 2000 Annual Report to Stockholders (Parts II and IV)
2. Portions of Proxy Statement for the 2001 Annual Meeting of Stockholders.
(Part III)
PART I
Forward-Looking Statements
Certain statements contained herein are forward-looking and may be
identified by the use of such words as "believe," "expect," "anticipate,"
"should," "planned," "estimated," and "potential." These forward-looking
statements are based on the current expectations of the Company (as defined
below), and the Company notes that a variety of factors could cause its actual
results and experience to differ materially from the anticipated results or
other expectations expressed in such forward-looking statements. The risks and
uncertainties that may affect the operations, performance, development, and
results of the Company's business include interest rate movements, competition
from both financial and non-financial institutions, changes in applicable laws
and regulations and interpretations thereof, the timing and occurrence (or non-
occurrence) of transactions and events that may be subject to circumstances
beyond the Company's control, and general economic conditions. The Company does
not undertake to update any forward-looking statement, whether written or oral,
that may be made from time to time by or on the Company's behalf.
Item 1. Business
- -----------------
Thistle Group Holdings, Co. (the "Company") is a unitary thrift holding
company incorporated in the Commonwealth of Pennsylvania and headquartered in
Philadelphia, Pennsylvania. The Company's business is conducted principally
through Roxborough Manayunk Bank (the "Bank"). Unless the context indicates
otherwise, all references to the Company refer collectively to the Company and
the Bank, including each of its subsidiaries. For a description of the Company's
other subsidiaries and the Bank's subsidiaries, see "-- - Subsidiaries."
The Company provides a full range of banking services through its
eleven branch offices located in the counties of Philadelphia, Chester and
Delaware in the Commonwealth of Pennsylvania and Wilmington, Delaware and its
transactional web site RMBgo.com. For the year ended December 31, 2000, the
Company had assets of $700.2 million, deposits of $406.7 million, and
stockholder's equity of $83.0 million.
During fiscal 2000, the Company completed the following branch
acquisitions, which were accounted for under the purchase method of accounting :
(1) On August 7, 2000, the Company opened four banking offices located in
Lionville, Media, West Chester, and Westtown, Pennsylvania ,which were acquired
from Wilmington Trust Company of Pennsylvania. The acquisition included real
property and the assumption of $54.5 million in deposit liabilities; and, (2) On
September 11, 2000, the Company opened its first banking office in Wilmington,
Delaware, which was acquired from Crown Bank, FSB. The acquisition included the
real property of the branch and the assumption of $41 million of deposit
liabilities.
Competition
The Company is one of many financial institutions serving its market
area of the counties of Philadelphia, Chester and Delaware in the Commonwealth
of Pennsylvania and Wilmington, Delaware. The competition for deposit products
comes from other insured financial institutions such as commercial banks, thrift
institutions and credit unions in the Company's market area. Deposit competition
also includes a number of insurance products sold by local agents and investment
products such as mutual funds and other securities sold by local and regional
brokers. Loan competition comes from other insured financial institutions such
as commercial banks, thrift institutions and credit unions.
1
Lending Activities
Analysis of Loan Portfolio. The following table sets forth selected
data relating to the composition of the Company's loan portfolio by type of loan
and type of security on the dates indicated.
At December 31,
---------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
------------------ ------------------ ------------------- ------------------- -----------------
$ % $ % $ % $ % $ %
--- --- --- --- --- --- --- --- --- ---
(Dollars in Thousands)
Real Estate Loans:
Residential.................. $121,230 55.41 $110,032 68.95% $108,585 79.91% $71,397 72.68% $ 73,871 73.57%
Multi-family and commercial.. 54,763 25.03 29,867 18.72 17,542 12.91 16,647 16.95 17,615 17.54
Home equity.................. 10,349 4.73 7,914 4.96 8,068 5.94 8,133 8.28 7,011 6.98
Construction (net)........... 14,210 6.49 5,365 3.36 868 .64 1,260 1.28 675 .67
Home equity line of credit... 2,650 1.21 604 .38 202 .15 73 .07 -- --
Commercial loans............... 14,731 6.73 5,496 3.44 269 .20 329 .33 770 .76
Consumer loans:
Line of credit............... 2 -- 50 .03 76 .06 96 .10 92 .09
Secured demand note.......... -- -- 76 .05 50 .04 60 .06 -- --
Share loans.................. 726 .33 170 .11 218 .15 243 .25 384 .38
Home improvement............. -- -- -- -- 3 4 -- 8 .01
Other........................ 150 .07 -- -- -- -- -- -- -- --
-------- ------ -------- ------ -------- ------ ------- ------ -------- ------
Total loans.................... $218,811 100.00% $159,574 100.00% $135,881 100.00% $98,242 100.00% $100,426 100.00%
-------- ====== -------- ====== -------- ====== ------- ====== -------- ======
Less:
Net premiums................. $ 332 $ 345 $ 344 $ 54 $ 76
Deferred fees................ (1,629) (1,452) (1,281) (1,233) (1,299)
Allowance for loan losses.... (1,682) (1,234) (1,036) (783) (577)
--------- -------- -------- ------- --------
Total loans, net............. $ 215,832 $157,233 $133,908 $96,280 $ 98,626
========= ======== ======== ======= ========
Loans held for sale............ $ 3,528 $ 3,925 $ 2,558 $ 1,155 $ 2,147
========= ======== ======== ======= ========
2
Loan Maturity Schedules. The following table sets forth the estimated
maturity of the Company's loan portfolio at December 31, 2000. The table does
not include the effects of possible prepayments or scheduled repayments.
Prepayments and scheduled principal repayments of loans totaled $36.6 million
for the year ended December 31, 2000. All mortgage loans are shown as maturing
based on the date of the last payment required by the loan agreement.
Due Due after
within 1 through Due after
1 year 5 years 5 years Total
------ ------- ------- -----
Residential and home equity .... $ 440 $ 4,516 $129,273 $134,229
Multi-family and commercial
real estate .................. 2,946 6,090 45,727 54,763
Construction ................... 4,284 9,554 372 14,210
Commercial ..................... 1,074 8,371 5,286 14,731
Consumer ....................... 215 557 106 878
-------- -------- -------- --------
Total .......................... $ 8,959 $ 29,088 $180,764 $218,811
======== ======== ======== ========
The following table sets forth as of December 31, 2000 the dollar
amount of all loans due after December 31, 2001, which have fixed rates of
interest and which have floating or adjustable interest rates.
Floating or
Fixed Rates Adjustable Rates Total
----------- ---------------- -----
(In Thousands)
Residential and home equity ......... $124,415 $ 9,374 $133,789
Multi-family and commercial
real estate ....................... 21,358 30,459 51,817
Construction ........................ 5,373 4,553 9,926
Commercial .......................... 5,627 8,030 13,657
Consumer ............................ 341 322 663
-------- -------- --------
Total ............................. $157,114 $ 52,738 $209,852
======== ======== ========
Residential Mortgage Loans. The Company offers first mortgage loans
secured by one- to four-family residences in the Company's primary lending area.
Typically, such residences are single family homes that serve as the primary
residence of the owner. The Company offers fixed-rate mortgage loans with terms
of up to 30 years and adjustable-rate mortgage loans that generally adjust every
year based upon selected published indices. Owner occupied residential and
non-owner occupied mortgage loans are generally originated in amounts up to 80%
of the lesser of the appraised value or selling price of the property. Loans up
to 97% of the appraised value are available for owner occupied properties only.
Private mortgage insurance is required for the amount in excess of 80% of such
value. Mortgage loans originated and held by the Company in its portfolio
generally include due-on sale clauses which provide the Company with the
contractual right to deem the loan immediately due and payable in the event that
the borrower transfers ownership of the property without the Company's consent.
Adjustable-rate mortgage loans buffer the risks associated with changes
in interest rates, but involve other risks because as interest rates increase,
the underlying payments by the borrower increase, thus increasing the potential
for default. At the same time, the marketability of the underlying collateral
may be adversely affected by higher interest rates. The Company's
adjustable-rate loan underwriting policy
3
recognizes these inherent risks and the Company reviews a credit application
accordingly. These risks have not had an adverse effect on the Company to date.
Home Equity Loans and Home Equity Lines of Credit. The Company
originates home equity loans secured by 1- to 4-family residences. Home equity
loans are originated as fixed-rate loans with terms from 1 to 20 years. Home
equity lines are originated as variable rate loans with terms from 1 to 15
years. These loans reprice with The Wall Street Journal Prime Rate. These loans
are made on owner-occupied, 1- to 4-family residences or vacation homes. The
loans are generally subject to an 90% combined loan-to-value limitation,
including any other outstanding mortgages or liens. Private mortgage insurance
is obtained on loans greater than 80% of the combined loan-to-value. Home equity
loans are generally originated for retention in the Company's loan portfolio.
Multi-Family and Commercial Real Estate Loans. The Company originates
both fixed-rate and adjustable-rate multi-family and commercial real estate
loans within its primary market area. Multi-family loans are generally secured
by apartment buildings and commercial real estate loans are generally secured by
office buildings, retail stores, industrial facilities and other non-residential
buildings.
Adjustable-rate loans for both multi-family and commercial real estate
loans generally reprice every five years based on the daily average yield on
U.S. Treasury securities adjusted to a constant maturity of five years plus a
margin. Such loans may be amortized up to 25 to 30 years with a balloon payment
after 10 years. Fixed-rate loans are generally 15 year self amortizing loans, or
5 to 10 year balloons, with up to 25 to 30 year amortizations. Adjustable-rate
and fixed-rate loans are generally made in amounts up to 70% to 80% of the
appraised value of the mortgaged property. In making such loans, the Company
evaluates the mortgage primarily on the net operating income generated by the
real estate to support the debt service. Generally, the Company obtains personal
guarantees of the principals of the borrower as additional security. The Company
also considers the financial resources and income level of the borrower, the
borrower's experience in owning or managing similar property, the marketability
of the property and the Company's lending experience, if any, with the borrower.
An origination fee of 0% to 3% is usually charged on such loans. At December 31,
2000, multi-family loans totaled $40.3 million and commercial real estate loans
totaled $14.5 million of this total loan portfolio.
Commercial real estate lending is generally deemed to entail greater
risk than residential real estate lending. The repayment of commercial real
estate loans is generally dependent on the successful operation of the property
and the income it produces. During the year, the Company established a
Commercial Credit Administration Department to better manage these risks.
Construction Loans. The Company originates construction loans primarily
for the construction of single family residences and to a lesser extent for
commercial property. Construction loans for single family residences are either
made to individuals or to selected developers.
With respect to construction loans to individuals, such loans have a
maximum term of 12 to 18 months, have fixed or variable rates of interest based
upon the prime rate published in The Wall Street Journal plus a margin and have
loan to value ratios of 80% or less of the appraised value upon completion and
generally do not require the amortization of principal during the term. Upon
completion of construction, the loans convert to permanent residential mortgage
loans.
Residential construction loans to developers and commercial
construction loans generally have terms of 12 to 30 months or less, have maximum
loan to value ratios between 75% and 80% or less of the appraised value upon
completion and generally do not require the amortization of the principal during
the
4
term. The loans are made with floating rates of interest based on the prime rate
(as published in the Wall Street Journal) plus a margin adjusted on a daily
basis. Commercial construction loans may convert to permanent commercial term
loans upon completion of construction. At December 31, 2000, residential
construction loans totaled $5.4 million or 38.0% of the total construction loan
portfolio, which primarily consisted of construction loans to developers and
commercial construction loans totaled $2.6 million or 18.4% of the total
construction loan portfolio.
The Company also originates ground or land loans, both to an individual
to purchase a building lot on which he intends to build his primary residence,
as well as to developers to purchase lots to build in phases homes at a later
date. Such loans have terms of 36 months or less with a maximum loan to value
ratio of 65% to 75% % of the lower of appraised value or sale price. The loans
are made with floating rates based on the prime rate plus a margin. At December
31, 2000, land loans (including loans to acquire and develop land) totaled $6.2
million, or 43.6%, of the total construction loan portfolio.
Construction financing generally has a higher degree of credit risk
than 1-4 family residential loans. The risk is dependent largely on the value of
the property when completed as compared to the estimated cost, including
interest, of building the property. If the estimated value is inaccurate, the
Company may have a completed project with a value too low to assure full
repayment of the loan. During the year the Company established a Commercial
Credit Administration Department to better manage these risks.
Commercial Business Loans. The Company grants commercial business loans
directly to business enterprises that are located in its market area. The
Company actively targets and markets to small and medium sized businesses. The
majority of the loans are for less than $1.0 million. Such loans generally have
personal guarantees of the borrower and consist of a limited number of
commercial lines of credit secured by real estate, some working capital
financing secured by accounts receivable and inventory and, to a limited extent,
unsecured lines of credit. Commercial business loans originated by the Company
generally have terms of five years or less and fixed rates or adjustable rates
tied to the prime rate plus a margin. As of December 31, 2000, commercial
business loans amounted to $14.7 million, of which $4.1 million, or 27.9%, were
backed by the full faith and credit of the U.S. Government.
Commercial business loans generally are deemed to entail significantly
greater risk than that which is involved with real estate lending. The repayment
of commercial business loans typically is dependent on the successful operations
and income stream of the borrower. Such risks can be significantly affected by
economic conditions. In addition, commercial lending generally requires
substantially greater oversight efforts compared to residential real estate
lending. During the year, in order to better manage these risks, the Company
established a Commercial Credit Administration Department.
Consumer Loans. Office of Thrift Supervision regulations permit the
Company to make secured and unsecured consumer loans up to 35% of the Company's
assets. During the fourth quarter, the Company established a consumer loan
department under the guidance of an individual with 20 years experience. The
Company now offers a full range of auto loans, unsecured personal loans and
unsecured personal lines of credit. This department also handles the origination
of home equity loans and lines of credit loans.
Purchase and Sale of Loans and Loan Servicing. The Company has been a
seller and purchaser of whole loans and participations in the secondary market.
Generally, the Company sells commercial, commercial real estate and construction
loans and retains servicing for the loans sold whenever possible. Loans
purchased in the secondary market by the Company are typically fixed-rate
residential mortgage
5
loans and purchased, in most cases, with servicing retained by the seller. The
Company also purchases commercial loans, commercial real estate loans, and
construction loans in its market area.
The following table sets forth total loans originated, purchased, sold,
and repaid during the periods indicated.
Year Ended December 31,
-------------------------------------------------------------
2000 1999 1998 1997 1996
--------- --------- --------- ----------- ---------
(In Thousands)
Total gross loans receivable at
beginning of period ........ $ 159,574 $ 135,881 $ 98,675 $ 100,775 $ 102,077
========= ========= ========= ========= =========
Loans originated:
Construction loans .......... 16,886 7,512 $ 360 $ 1,570 $ 1,055
Residential and home equity . 29,007 21,959 26,973 14,795 13,546
Multi-family and commercial
real estate ............... 19,288 18,434 438 2,211 810
Consumer .................... 809 228 252 372 368
Commercial .................. 21,299 1,925 1,927 707 770
--------- --------- --------- --------- ---------
Total loans originated ........ $ 87,289 $ 50,058 $ 29,950 $ 19,655 $ 16,549
--------- --------- --------- --------- ---------
Loans purchased:
Residential ................. $ 2,450 $ 1,161 $ 36,098 $ 1,088 $ 2,360
Multi-family and commercial
real estate ............... 9,488 2,400 -- -- --
Consumer loans .............. 428 4,160 -- -- --
--------- --------- --------- --------- ---------
Total loans purchased ......... 12,366 7,721 36,098 1,088 2,360
--------- --------- --------- --------- ---------
Total loans sold .............. 4,371 5,237 -- 383 --
--------- --------- --------- --------- ---------
Loan principal repayments ..... 35,995 28,790 28,509 22,489 16,320
--------- --------- --------- --------- ---------
Other (debits less credits) ... (52) (59) (333) (29) (3,891)
--------- --------- --------- --------- ---------
Net loan activity ............. $ 59,237 $ 23,693 $ 37,206 $ (2,100) $ (1,302)
========= ========= ========= ========= =========
Total gross loans receivable at
end of period ............... $ 218,811 $ 159,574 $ 135,881 $ 98,675 $ 100,775
========= ========= ========= ========= =========
Loans Available For Sale. The Company holds as available for sale
certain residential mortgage loans that have an annual yield determined by
management to be at rates not compatible with its asset management strategy.
These loans conform to FHLMC and FNMA guidelines and are readily salable in the
secondary market.
Loan Commitments. The Company generally grants commitments to fund
fixed-rate single-family mortgage loans for periods of up to 90 days at a
specified term and interest rate. The Company also makes loan commitments for
non-conforming or commercial real estate loans for up to 90 days, which
generally carry additional requirements for funding. The total amount of the
Company's commitments to originate loans as of December 31, 2000 was $17.9
million.
6
Non-Performing Loans and Problem Assets
Loan Delinquencies. When a mortgage loan is 30 days or more delinquent,
the borrower is contacted by mail and telephone and payment is requested. If the
delinquency continues, subsequent efforts will be made to contact the delinquent
borrower. In certain instances, the Company may modify the loan or grant a
limited moratorium on loan payments to enable the borrower to reorganize his
financial affairs. If the loan continues in a delinquent status for 60 days, the
Company will initiate foreclosure proceedings. Any property acquired as the
result of foreclosure or by deed in lieu of foreclosure is classified as real
estate owned ("REO") until such time as it is sold or otherwise disposed of by
the Company. When REO is acquired, it is recorded at the lower of the unpaid
principal balance of the related loan or its fair market value less estimated
costs to sell the property. Any write-down of the property at the time that it
is transferred to REO is charged to the allowance for losses. Any subsequent
write-downs are charged to operations.
Loans are reviewed on a regular basis and are placed on a non-accrual
status when, in the opinion of management, the collection of additional interest
is doubtful. The Company continues to accrue for residential mortgage loans 90
days or more past due, however a reserve is set up for such loans, reversing
amounts previously credited to income. Consumer loans generally are charged off
when the loan becomes 90 days or more delinquent. Commercial business and real
estate loans are placed on non-accrual status when the loan is 90 days or more
past due. Interest accrued and unpaid at the time a loan is placed on
non-accrual status is charged against interest income. Subsequent payments are
either applied to the outstanding principal balance or recorded as interest
income, depending on the assessment of the ultimate collectibility of the loan.
During the year ended December 31, 2000 the Company also engaged a third party
for loan review and internal auditing purposes.
Non-Performing Assets. The following table sets forth information with
respect to the Company's non-performing assets for the periods indicated. The
Company has no loans categorized as troubled debt restructurings within the
meaning of the Statement of Financial Accounting Standards ("SFAS") 15.
At December 31,
--------------------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- ----------
(In Thousands)
Loans accounted for on a non-accrual basis...... $ -- $ -- $ -- $ -- $ --
Accruing loans which are contractually past
due 90 days or more:
Residential and home equity................... $170 $223 $393 $716 $1,357
Construction loans............................ -- -- - - 109
Multi-family and commercial real estate....... -- -- - - 1,533
Consumer...................................... -- -- - - -
---- ---- ---- ---- ------
Total........................................... $170 $223 $393 $716 $2,999
==== ==== ==== ==== ======
Real estate owned............................... $ 47 $104 $ 82 $116 $ 186
==== ==== ==== ==== ======
Total non-performing assets..................... $217 $327 $475 $832 $3,185
==== ==== ==== ==== ======
Total non-accrual and accrual loans to
net loans.................................... .08% .14% .28% .74% 3.04%
==== ==== ==== ==== ====
Total non-performing assets to total assets..... .03% .07% .09% .30% 1.08%
==== ==== ==== ==== ====
Classified Assets. Management, in compliance with regulatory
guidelines, has instituted an internal loan review program, whereby loans are
classified as special mention, substandard, doubtful or
7
loss. When a loan is classified as substandard or doubtful, management is
required to establish a general valuation reserve for loan losses in an amount
that is deemed prudent. General allowances represent loss allowances which have
been established to recognize inherent risk associated with lending activities,
but which, unlike specific allowances, have not been allocated to particular
problem assets. When management classifies a loan as a loss asset, a reserve
equal to 100% of the loan balance is required to be established or the loan is
to be charged-off.
An asset is considered "substandard" if it is inadequately protected by
the paying capacity and net worth of the obligor or 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," "highly questionable and improbable," on the basis of currently existing
facts, conditions, and values. 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. Assets
which do not currently expose the insured institution to a sufficient degree of
risk to warrant classification in one of the aforementioned categories but
possess credit deficiencies or potential weaknesses are required to be
designated "special mention" by management.
The following table sets forth the Company's classified assets in
accordance with its classification system.
At December 31, 2000
--------------------
(Dollars in thousands)
Special Mention.............. $1,317
Substandard.................. 193
Doubtful .................... --
Loss ........................ --
------
$1,510
======
Allowance for Losses on Loans. The Company's management evaluates the
need to establish reserves against losses on loans and other assets each year
based on estimated losses on specific loans and on any real estate held for sale
or investment when a finding is made that a loss is estimable and probable. Such
evaluation includes a review of all loans for which full collectibility may not
be reasonably assured and considers, among other matters, the estimated market
value of the underlying collateral of problem loans, prior loss experience,
economic conditions and overall portfolio quality. These provisions for losses
are charged against earnings in the year they are established.
While the Company believes it has established its existing allowance
for loan losses in accordance with generally accepted accounting principles
("GAAP") and the Interagency Policy Statement on the Allowance for Loan and
Lease Losses issued by the OTS, in conjunction with the Office of the
Comptroller of the Currency (the "OCC"), FDIC and the Board of Governors of the
Federal Reserve System (the "Board"), there can be no assurance that the
applicable regulators, in reviewing the Company's loan portfolio, will not
request the Company to significantly increase its allowance for loan losses, or
that changes in the real estate market or local or national economy will not
cause the Company to significantly increase its allowance for loan losses,
thereby negatively affecting the Company's financial condition and earnings.
8
In making loans, the Company recognizes that credit losses will be
experienced and that the risk of loss will vary with, among other things, the
type of loan being made, the creditworthiness of the borrower over the term of
the loan and, in the case of a secured loan, the quality of the security for the
loan. It is the Company's policy to review its loan portfolio, in accordance
with regulatory classification procedures, on a quarterly basis. Additionally,
the Company maintains a program of reviewing loan applications prior to making
the loan and immediately after loans are made in an effort to maintain loan
quality.
The following table sets forth information with respect to the
Company's allowance for loan losses at the dates indicated:
At December 31,
------------------------------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- --------- ---------
(Dollars in Thousands)
Total loans outstanding, net(1).............. $215,832 $157,233 $133,908 $ 96,280 $ 98,626
======= ======= ======= ========= =========
Average loans outstanding, net(1)............ $184,915 $144,808 $110,059 $ 101,472 $ 101,726
======= ======= ======= ========= =========
Allowance balances
(at beginning of period).................. $ 1,234 $ 1,036 $ 783 $ 577 $ 455
Provision:
Residential................................ 37 25 270 37 -
Commercial................................. 92 55
Multi-family and commercial real estate.... 351 160 - 83 139
Consumer................................... - - - -
Net Charge-offs (recoveries):
Residential................................ (32) (42) (17) (86) 17
Multi-family and commercial real estate.... - - - - -
Consumer................................... - - - - -
-------- -------- -------- ---------- ---------
Allowance balance (at end of period)......... $ 1,682 $ 1,234 $ 1,036 $ 783 $ 577
======== ======== ======== ========= =========
Allowance for loan losses as a percent
of total loans outstanding................. .78% .78% .77% .81% .59%
=== === === === ===
Net loans charged off (recovery) as
a percent of average loans outstanding..... .02% .03% .01% (.08)% .02%
=== === === ==== ===
- ------------
(1) Does not include loans available for sale.
9
Analysis of the Allowance for Loan Losses. The following table sets
forth the breakdown of the allowance for loan losses by loan category and the
percent of loans in each category to total loans receivable for the periods
indicated. The allocation of the allowance to each category is not necessarily
indicative of future losses and does not restrict the use of the allowances to
absorb losses in any category.
At December 31,
-------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
--------------------- ----------------- ---------------- ------------------ -----------------
Percent of Percent of Percent of Percent of Percent of
Loans to Loans to Loans to Loans to Loans to
Total Total Total Total Total
Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans
------ ------- ------ ------- ------ ---------- ------ ---------- ------ ----------
(Dollars in Thousands)
Residential
and home
equity(1).......... $ 475 67.84% $ 470 77.65% $ 487 86.64% $234 82.39% $197 81.22%
Multi-family
and commercial
real estate........ 1,060 25.03 709 18.72 549 12.91 549 16.87 380 17.54
Consumer loans....... - .40 - .19 - .25 - .41 - .48
Commercial loans..... 147 6.73 55 3.44 - .20 - .33 - .76
------ ------ ------ ------ ------ ------ ------ ------ ---- ------
Total allowance.... $1,682 100.00% $1,234 100.00% $1,036 100.00% $783 100.00% $577 100.00%
====== ====== ====== ====== ===== ====== === ====== === ======
- --------------
(1) Includes construction loans.
10
Investment Activities
The Company maintains a level of liquid assets, including short-term
securities and certain other investments, which varies depending upon several
factors, including: (i) the yields on investment alternatives, (ii) management's
judgment as to the attractiveness of the yields then available in relation to
other opportunities, (iii) expectation of future yield levels, and (iv)
management's projections as to the short-term demand for funds to be used in
loan origination and other activities. Investment securities, including
mortgage-backed securities, are classified at the time of purchase, based upon
management's intentions and abilities, as securities held to maturity or
securities available for sale. Debt securities acquired with the intent and
ability to hold to maturity are classified as held to maturity and are stated at
cost and adjusted for amortization of premium and accretion of discount, which
are computed using the level yield method and recognized as adjustments of
interest income. Other debt securities are classified as available for sale to
serve principally as a source of liquidity. Securities classified as trading are
securities owned by TGH Securities, the Company's wholly owned broker dealer
subsidiary.
Current regulatory and accounting guidelines regarding investment
securities (including mortgage backed securities) require the Company to
categorize securities as "held to maturity," "available for sale" or "trading."
As of December 31, 2000, the Company had securities classified as "available for
sale" in the amount of $387.1 million and securities classified as "trading" in
the amount of $28.0 million. Securities classified as "available for sale" are
reported for financial reporting purposes at the fair market value with net
changes in the market value from period to period included as a separate
component of stockholders' equity, net of income taxes. Securities classified as
trading are carried at fair value and are recorded on a trade date basis. At
December 31, 2000, the Company's securities available for sale had an amortized
cost of $393.2 million and market value of $387.1 million (unrealized loss of
$6.1 million). Changes in the market value of securities available for sale do
not affect the Company's income. In addition, changes in the market value of
securities available for sale do not affect the Bank's regulatory capital
requirements or its loan-to-one borrower limit.
At December 31, 2000, the Company's investment portfolio policy allowed
investments in instruments such as: (i) U.S. Treasury obligations, (ii) U.S.
federal agency or federally sponsored agency obligations, (iii) mortgage-backed
securities, (iv) banker's acceptances, (v) certificates of deposit, and (vi)
investment grade corporate bonds, and commercial paper, (vii) equity securities,
(viii) trust preferred certificates, and (ix) mutual funds. The board of
directors may authorize additional investments.
As a source of liquidity and to supplement the Company's lending
activities, the Company has invested in residential mortgage-backed securities.
Mortgage-backed securities can serve as collateral for borrowings and, through
repayments, as a source of liquidity. Mortgage-backed securities represent a
participation interest in a pool of single-family or other type of mortgages.
Principal and interest payments are passed from the mortgage originators,
through intermediaries (generally quasi-governmental agencies) that pool and
repackage the participation interests in the form of securities. The
quasi-governmental agencies guarantee the payment of principal and interest to
investors and include the Federal Home Loan Mortgage Corporation ("FHLMC"),
Government National Mortgage Association ("GNMA"), and Federal National Mortgage
Association ("FNMA").
Mortgage-backed securities typically are issued with stated principal
amounts. The securities are backed by pools of mortgages that have loans with
interest rates that are within a set range and have varying maturities. The
underlying pool of mortgages can be composed of either fixed rate or adjustable
rate mortgage loans. Mortgage-backed securities are generally referred to as
mortgage participation certificates or pass-through certificates. The interest
rate risk characteristics of the underlying pool of
11
mortgages (i.e., fixed rate or adjustable rate) and the prepayment risk, are
passed on to the certificate holder. The life of a mortgage-backed pass-through
security is equal to the life of the underlying mortgages. Expected maturities
will differ from contractual maturities due to scheduled repayments and because
borrowers may have the right to call or prepay obligations with or without
prepayment penalties. Mortgage-backed securities issued by FHLMC, GNMA, and FNMA
make up a majority of the pass- through certificates market.
Real estate mortgage investment conduits ("REMICs") are also
mortgage-backed securities. REMICs held by the Company at December 31, 2000
consisted of floating-rate tranches, in the amount of $6.0 million. The interest
rate of all of the Company's floating-rate securities adjusts monthly and
provides the institution with net interest margin protection in an increasing
market interest rate environment. The securities are backed by mortgages on one-
to four-family residential real estate and have contractual maturities up to 30
years. At December 31, 2000, none of these securities are deemed to be "High
Risk" according to Federal Financial Institutions Examination Council ("FFIEC")
guidelines which have been adopted by the OTS. The securities are primarily
companion tranche to "PACs" and "TACs". PACs and TACs (Planned and Targeted
Amortization Classes) are designed to provide a specific principal and interest
cash-flow. Principal payments that are received in excess of the amount needed
for the PACs and TACs is allocated to the companion tranche. When the PACs and
TACs are repaid in full, all principal is then used to pay the companion
tranche.
Investment Portfolio. The following table sets forth the carrying value
(market value or amortized cost, as applicable) of the Company's investment
securities portfolio, short-term investments, FHLB stock, mortgage-backed
securities, and trading securities at the dates indicated.
At December 31,
-----------------------------------
2000 1999 1998
-------- -------- --------
(In Thousands)
Investment Securities:
Trading securities(4)(5) ............ $ 28,034 $ -- $ --
-------- -------- --------
U.S. Treasury securities ............ -- -- 5,032
FHLB and FHLMC bonds(3) ............. 16,203 13,661(1) 10,154
Other agencies(2) (3) ............... 47,874 45,192(1) 8,178
Municipal bonds(3) .................. 46,101 37,129(1) 30,765
Mutual funds(3) ..................... 1,439 1,345 1,285
Capital trust securities(3)(4) ...... 10,727 11,340 11,647
Subordinated debt(3)(4) ............. 750 750 750
-------- -------- --------
Total investment securities ....... 123,094 109,417 67,811
-------- -------- --------
Interest-bearing deposits ............ 16,188 17,703 21,614
Federal funds sold ................... -- -- 2,000
FHLB of Pittsburgh stock ............. 8,594 8,844 5,344
Mortgage-backed securities(3) ........ 258,870 204,706 229,883
Equity investments(3)(4) ............. 5,104 6,046 6,592
-------- -------- --------
Total Investments ................. $439,884 $346,716 $333,244
======== ======== ========
- ----------------
(1) Classified as available for sale in 1999 due to the adoption of SFAS No.
133 and as held to maturity in 1998.
(2) Consists of FNMA, FHLMC, and Student Loan Marketing Association debentures
and certificates of deposit.
(3) Classified as available for sale and carried at approximate fair value.
(4) Consists of investments held by the Company and not the Bank.
(5) Classified as trading and carried at approximate fair value.
12
Investment Portfolio Maturities. The following table sets forth certain
information regarding the carrying values, weighted average yields and
maturities of the Company's investment and mortgage-backed securities portfolio
at December 31, 2000. The table does not include trading securities, equity
investments, interest bearing deposits, federal funds sold and FHLB stock, and
does not take into consideration the effects of scheduled repayments or the
effects of possible prepayments.
One Year or Less One to Five Years Five to Ten Years More than Ten Years Total Investment Securities
------------------ ----------------- ------------------- ------------------- -----------------------------
Carrying Average Carrying Average Carrying Average Carrying Average Carrying Average Market
Value Yield(%) Value Yield(%) Value Yield(%) Value Yield(%) Value Yield(%) Value
----- -------- ----- -------- ----- -------- ----- -------- ----- -------- ------
(Dollars in Thousands)
FHLB and FHLMC bonds
and notes.............. $ -- --% $ -- --% $ -- --% $ 16,203 6.86% $ 16,203 6.86% $ 16,203
Other agencies(1)........ 727 6.29 -- -- 6,024 6.70 41,123 7.03 47,874 6.99 47,874
Municipal bonds(2)....... -- -- -- 153 7.86 45,948 5.33 46,101 5.33 46,101
Mutual funds............. 1,439 6.74 -- -- -- -- -- -- 1,439 6.74 1,439
Capital trust
securities............. -- -- -- -- 2,210 8.49 8,517 8.88 10,727 8.79 10,727
Subordinated debt........ -- -- 750 8.25 -- -- -- -- 750 8.25 750
Mortgage-backed
securities:
GNMA pass-through...... -- -- -- -- -- -- 160,075 7.36 160,075 7.36 160,075
FNMA pass-through...... -- -- -- -- -- -- 73,727 6.63 73,727 6.63 73,727
FHLMC pass-through..... -- -- -- -- -- -- 16,569 7.17 19,075 7.25 19,075
FHLMC REMICs........... -- -- -- -- 2,506 7.78 5,993 7.60 5,993 7.60 5,993
------ ------- -------- -------- --------
Total.................. $2,166 6.59% $ 750 8.25% $10,893 7.33% $368,155 6.93% $381,964 6.94% $381,964
====== ==== ====== ===== ======= ===== ======== ===== ======== ====== ========
- -----------------
(1) Consists of FNMA and FHLMC debentures and certificates of deposit.
(2) Tax exempt securities are presented on a coupon basis.
13
Sources of Funds
General. Deposits are the major source of the Company's funds for
lending and other investment purposes. In addition to deposits, the Company
derives funds from the amortization, prepayment or sale of loans, maturities of
investment securities and operations. Scheduled loan principal repayments are a
relatively stable source of funds, while deposit inflows and outflows and loan
prepayments are significantly influenced by general interest rates and market
conditions. The Company can also borrow from the Federal Home Loan Bank ("FHLB")
of Pittsburgh.
Deposits. Consumer and commercial deposits are attracted principally
from within the Company's primary market area through the offering of a broad
selection of deposit instruments including checking, regular savings, money
market deposits, term certificate accounts and individual retirement accounts.
Deposit account terms vary according to the minimum balance required, the time
periods the funds must remain on deposit and the interest rate, among other
factors. The Company regularly evaluates the internal cost of funds, surveys
rates offered by competing institutions, reviews the Company's cash flow
requirements for lending and liquidity and executes rate changes when deemed
appropriate. The Company does not obtain funds through brokers, nor does it
solicit funds outside the Commonwealth of Pennsylvania.
Jumbo Certificates of Deposit. The following table indicates the amount
of the Company's certificates of deposit of $100,000 or more by time remaining
until maturity as of December 31, 2000.
Certificates
Maturity Period of Deposits
--------------- ------------
(In Thousands)
Within three months................... $ 7,517
Three through six months.............. 8,043
Six through twelve months............. 9,435
Over twelve months.................... 6,190
-------
$31,185
=======
Borrowings
Deposits are the primary source of funds of the Company's lending and
investment activities and for its general business purposes. The Bank may obtain
advances from the FHLB of Pittsburgh to supplement its supply of lendable funds.
Advances from the FHLB of Pittsburgh are typically secured by a pledge of the
Bank's stock in the FHLB of Pittsburgh and a portion of the Company's first
mortgage loans and certain other assets. The following table sets forth certain
information as to FHLB advances at the dates indicated.
14
As of and For the
Year Ended December 31,
-----------------------------
2000 1999 1998
--------- -------- --------
(Dollars In Thousands)
FHLB advances...................................... $171,884 $176,884 $106,884
Weighted average interest rate of FHLB advances.... 5.30% 5.03% 5.20%
Maximum amount of advances at any month end........ $206,884 $176,884 $106,884
Average amount of advances......................... $174,901 $154,801 $ 38,884
Weighted average interest rate of average amount
of advances.................................... 5.59% 5.14% 5.03%
Subsidiaries
TGH Corp.
TGH Corp., a Delaware Corporation, was organized by the Company in 1999 to
hold certain investments. TGH Corp. is not a material part of the Company's
operations.
TGH Securities
TGH Securities, a Pennsylvania corporation, was formed by the Company
in February 2000, and commenced business on May 23, 2000. TGH Securities, a
registered broker-dealer, buys and sells short- term municipal bonds. For the
year ended December 31, 2000, TGH Securities was not a material part of the
Company's operations.
Other Subsidiaries
The Bank has three subsidiaries, Ridge Service Corporation, which is
inactive, Montgomery Service Corporation, which manages a small commercial real
estate property and invests in small business investment companies, and Roxdel
Corp., which holds investments. Such subsidiaries were not a material part of
the Bank's operations.
Personnel
As of December 31, 2000, the Company had 107 full-time employees and 35
part-time employees. The employees are not represented by a collective
bargaining unit. The Company believes its relationship with its employees to be
satisfactory.
Regulation
Set forth below is a brief description of certain laws which relate to
the regulation of the Company and the Bank. The description does not purport to
be complete and is qualified in its entirety by reference to applicable laws and
regulations.
15
Regulation of the Company
General. The Company is a unitary thrift holding company subject to
regulatory oversight by the OTS. As such, the Company is required to register
and file reports with the OTS and is subject to regulation and examination by
the OTS. In addition, the OTS has enforcement authority over the Company and its
non-savings association subsidiaries, should such subsidiaries be formed, which
authority also permits the OTS to restrict or prohibit activities that are
determined to be a serious risk to the subsidiary savings association. This
regulation and oversight is intended primarily for the protection of the
depositors of the Bank and not for the benefit of stockholders of the Company.
As a unitary thrift holding company, the Company generally is not
subject to any restrictions on its business activities. While the
Gramm-Leach-Bliley Act (the "GLB Act"), enacted in November 1999, terminated the
"unitary thrift holding company" exemption from activity restrictions on a
prospective basis, the Company enjoys grandfathered status under this provision
of the GLB Act because it acquired the Bank prior to May 4, 1999. As a result,
the Company's freedom from activity restrictions as a unitary thrift holding
company were not affected by the GLB Act. However, if the Company were to
acquire control of an additional savings association, its business activities
would be subject to restriction under the Home Owners' Loan Act. Furthermore, if
the Company were in the future to sell control of the Bank to any other company,
such company would not succeed to the Company's grandfathered status under the
GLB Act and would be subject to the same activity restrictions. The continuation
of the Company's exemption from restrictions on business activities as a unitary
thrift holding company is also subject to the Company's continued compliance
with the Qualified Thrift Lender ("QTL") test. See "- Regulation of the Bank -
Qualified Thrift Lender Test."
Regulation of the Bank
General. Set forth below is a brief description of certain laws that
relate to the regulation of the Bank. The description does not purport to be
complete and is qualified in its entirety by reference to applicable laws and
regulations. As a federally chartered, SAIF-insured savings association, the
Bank is subject to extensive regulation by the OTS and the FDIC. Lending
activities and other investments must comply with various federal statutory and
regulatory requirements. The Bank is also subject to certain reserve
requirements promulgated by the Federal Reserve Board.
The OTS, regularly examines the Bank and prepares reports for the
consideration of the Bank's Board of Directors on any deficiencies that are
found in the Bank's operations. The Bank's relationship with its depositors and
borrowers is also regulated to a great extent by federal and state law,
especially in such matters as the ownership of savings accounts and the form and
content of the Bank's mortgage documents.
The Bank must file reports with the OTS concerning its activities and
financial condition, in addition to obtaining regulatory approvals prior to
entering into certain transactions such as mergers with or acquisitions of other
savings institutions. This regulation and supervision establishes a
comprehensive framework of activities in which an institution can engage and is
intended primarily for the protection of the SAIF and depositors. The regulatory
structure also gives the regulatory authorities extensive discretion in
connection with their supervisory and enforcement activities and examination
policies, including policies with respect to the classification of assets and
the establishment of adequate loan loss reserves for regulatory purposes.
16
Insurance of Deposit Accounts. The deposit accounts held by the Bank
are insured by the SAIF to a maximum of $100,000 for each insured member (as
defined by law and regulation). Insurance of deposits may be terminated by the
FDIC upon a finding that the institution has engaged in unsafe or unsound
practices, is in an unsafe or unsound condition to continue operations or has
violated any applicable law, regulation, rule, order or condition imposed by the
FDIC or the institution's primary regulator.
The Bank is required to pay insurance premiums based on a percentage of
its insured deposits to the FDIC for insurance of its deposits by the SAIF. The
FDIC has set the deposit insurance assessment rates for SAIF-member institutions
for the first six months of 2001 at 0% to .027% of insured deposits on an
annualized basis, with the assessment rate for most savings institutions set at
0%. In addition, all FDIC-insured institutions are required to pay assessments
to the FDIC at an annual rate of approximately .0212% of insured deposits to
fund interest payments on bonds issued by the Financing Corporation ("FICO"), an
agency of the Federal government established to recapitalize the predecessor to
the SAIF. These assessments will continue until the FICO bonds mature in 2017.
Regulatory Capital Requirements. OTS capital regulations require
savings institutions to meet three capital standards: (1) tangible capital equal
to 1.5% of total adjusted assets, (2) core capital equal to at least 3% of total
adjusted assets for savings institutions that receive the highest supervisory
rating for safety and soundness and 4% of total adjusted assets for all other
thrifts, and (3) risk-based capital equal to 8% of total risk-weighted assets.
At December 31, 2000, the Bank was in compliance with its regulatory capital
requirements.
For purposes of the OTS capital regulations, tangible capital is
defined as core capital less all intangible assets, less certain mortgage
servicing rights and less certain investments. Core, or Tier 1, capital is
defined as common stockholders' equity, noncumulative perpetual preferred stock
and minority interests in the equity accounts of consolidated subsidiaries,
certain nonwithdrawable accounts and pledged deposits of mutual savings
associations and qualifying supervisory goodwill, less nonqualifying intangible
assets, certain mortgage servicing rights and certain investments.
The risk-based capital standard for savings institutions requires the
maintenance of total risk-based capital of 8% of risk-weighted assets.
Risk-based capital equals the sum of core and supplementary capital. The
components of supplementary capital include, among other items, cumulative
perpetual preferred stock, perpetual subordinated debt, mandatory convertible
subordinated debt, intermediate-term preferred stock, the portion of the
allowance for loan losses not designated for specific loan losses, and up to 45%
of unrealized gains on equity securities. The portion of the allowance for loan
and lease losses includable in supplementary capital is limited to a maximum of
1.25% of risk-weighted assets. Overall, supplementary capital is limited to 100%
of core capital. A savings association must calculate its risk-weighted assets
by multiplying each asset and off-balance sheet item by various risk factors as
determined by the OTS, which range from 0% for cash to 100% for delinquent
loans, property acquired through foreclosure, commercial loans, and other
assets.
In addition to the above regulatory capital requirements, the OTS's
prompt corrective action regulation classifies savings associations by capital
levels and provides that the OTS will take various corrective actions, including
imposing significant operational restrictions, against any thrift that fails to
meet the regulation's capital standards. Under this regulation, a "well
capitalized" savings association is one that has a total risk-based capital
ratio of at least 10%, a Tier 1 risk-based capital ratio of at least 6% and a
leverage capital ratio of 5%, and is not subject to any capital order or
directive. A thrift is deemed "adequately capitalized" category if it has a
total risk-based capital ratio of at least 8%, a Tier 1 risk-based
17
capital ratio of at least 4%, and a leverage capital ratio of at least 4%.
Institutions with lower capital levels are deemed to be "undercapitalized,"
"significantly undercapitalized" or "critically undercapitalized," depending on
their capital levels. A thrift that falls within any of the three
undercapitalized categories is subject to severe regulatory sanctions under the
prompt corrective action regulation. At December 31, 2000, the Bank was
classified as "well capitalized."
Dividend and Other Capital Distribution Limitations. The OTS imposes
various restrictions or requirements on the ability of savings institutions to
make capital distributions, including cash dividends.
A savings association, such as the Bank, that is a subsidiary of a
unitary thrift holding company, must file an application or a notice with the
OTS at least 30 days before making a capital distribution. Savings associations
are not required to file an application for permission to make a capital
distribution and need only file a notice if the following conditions are met:
(1) they are eligible for expedited treatment under OTS regulations, (2) they
would remain adequately capitalized after the distribution, (3) the annual
amount of capital distribution does not exceed net income for that year to date
added to retained net income for the two preceding years, and (4) the capital
distribution would not violate any agreements between the OTS and the savings
association or any OTS regulations. Any other situation would require an
application to the OTS.
The OTS may disapprove an application or notice if the proposed capital
distribution would: (i) make the savings association undercapitalized,
significantly undercapitalized, or critically undercapitalized; (ii) raise
safety or soundness concerns; or (iii) violate a statue, regulation, or
agreement with the OTS (or with the FDIC), or a condition imposed in an
OTS-approved application or notice. Further, a federal savings association, like
the Bank, cannot distribute regulatory capital that is needed for its
liquidation account.
Qualified Thrift Lender Test. Federal savings institutions must meet
one of two Qualified Thrift Lender ("QTL") tests. To qualify as a QTL, a savings
institution must either (i) be deemed a "domestic building and loan association"
under the Internal Revenue Code by maintaining at least 60% of its total assets
in specified types of assets, including cash, certain government securities,
loans secured by and other assets related to residential real property,
educational loans and investments in premises of the institution or (ii) satisfy
the statutory QTL test set forth in the Home Owner's Loan Act by maintaining at
least 65% of its "portfolio assets" in certain"Qualified Thrift Investments"
(defined to include residential mortgages and related equity investments,
certain mortgage-related securities, small business loans, student loans and
credit card loans, and 50% of certain community development loans). For purposes
of the statutory QTL test, portfolio assets are defined as total assets minus
intangible assets, property used by the institution in conducting its business,
and liquid assets equal to 10% of total assets. A savings institution must
maintain its status as a QTL on a monthly basis in at least nine out of every 12
months. A failure to qualify as a QTL would result in a number of sanctions,
including certain operating restrictions. At December 31, 2000, the Bank was in
compliance with its QTL requirement, with 68.75% of its assets invested in
Qualified Thrift Investments.
Federal Home Loan Bank System. The Bank is a member of the FHLB of
Pittsburgh, which is one of 12 regional FHLBs that administers the home
financing credit function of savings associations. Each FHLB serves as a reserve
or central bank for its members within its assigned region. It is funded
primarily from proceeds derived from the sale of consolidated obligations of the
FHLB System. It makes loans to members (i.e., advances) in accordance with
policies and procedures established by the Board of Directors of the FHLB.
18
As a member, the Bank is required to purchase and maintain stock in the
FHLB of Pittsburgh in an amount equal to the greater of 1% of its aggregate
unpaid residential mortgage loans, home purchase contracts or similar
obligations at the beginning of each year or 5% of the Bank's advances from the
FHLB. At December 31, 2000, the Bank was in compliance with this requirement.
Federal Reserve System. The Federal Reserve Board requires all
depository institutions to maintain non-interest bearing reserves at specified
levels against their transaction accounts (primarily checking, NOW, and Super
NOW checking accounts) and non-personal time deposits. The balances maintained
to meet the reserve requirements imposed by the Federal Reserve Board may be
used to satisfy the liquidity requirements that are imposed by the OTS. At
December 31, 2000, the Bank was in compliance with these Federal Reserve Board
requirements.
Item 2. Properties
- ------------------
The Company conducts its business through its administrative office
located in Philadelphia, Pennsylvania and its 11 branch locations throughout
Philadelphia, Chester and Delaware counties, Pennsylvania and Wilmington,
Delaware. All of the Company's office and branch facilities are owned by the
Company, except for 4 branch office locations in Westchester, Lionville, Media,
and Philadelphia, Pennsylvania which are leased. Management of the Company
considers the physical condition of each of the Company's administrative and
branch offices to be good and adequate for the conduct of the Company's
business.
Item 3. Legal Proceedings
- --------------------------
The Company is periodically involved as a plaintiff or defendant in
various legal actions, such as actions to enforce liens, condemnation
proceedings on properties in which the Company holds mortgage interests, matters
involving the making and servicing of mortgage loans and other matters incident
to the Company's business. In the opinion of management, none of these actions
individually or in the aggregate is believed to be material to the financial
condition or results of operations of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year ended December 31, 2000.
Part II
Item 5. Market for the Company's Common Equity and Related Stockholder Matters
- --------------------------------------------------------------------------------
The information contained in "Note 19 - Quarterly Financial Data" in
the Notes to Consolidated Financial Statements in the Corporation's 2000 Annual
Report to Stockholders (the "Annual Report"), is incorporated herein by
reference. The Company had approximately 1,000 holders of record as of March 5,
2001.
Item 6. Selected Financial Data
- --------------------------------
The information contained in the table captioned "Selected Consolidated
Financial Data" in the Annual Report is incorporated herein by reference.
19
Item 7. Management's Discussion and Analysis of Financial Condition and Results
- --------------------------------------------------------------------------------
of Operations
-------------
The information contained in the section captioned "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in the
Annual Report is incorporated herein by reference.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
- --------------------------------------------------------------------
The information contained in the sections captioned "Asset and
Liability Management" and "Market Risk Analysis" in the Annual Report is
incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
- ----------------------------------------------------
The Company's consolidated financial statements listed in Item 14 and
are incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
- --------------------------------------------------------------------------------
Financial Disclosure
--------------------
None.
Part III
Item 10. Directors and Executive Officers of the Company
- ---------------------------------------------------------
The information contained under the sections captioned "Section 16(a)
Beneficial Ownership Reporting Compliance" and "Proposal I" - "Election of
Directors" and "- Biographical Information" in the 2001 Proxy Statement (the
"Proxy Statement") are incorporated herein by reference.
Item 11. Executive Compensation
- --------------------------------
The information contained under the section captioned "Proposal I --
Election of Directors - Director and Executive Compensation" in the Proxy
Statement is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
- ------------------------------------------------------------------------
(a) Security Ownership of Certain Beneficial Owners
-----------------------------------------------
Information required by this item is incorporated herein by
reference to the Section captioned "Voting Securities and
Principal Holders Thereof -- Security Ownership of Certain
Beneficial Owners" of the Proxy Statement.
(b) Security Ownership of Management
--------------------------------
Information required by this item is incorporated herein by
reference to the sections captioned "Voting Securities and
Principal Holders Thereof -- Security Ownership of Certain
Beneficial Owners" and "Proposal I -- Election of Directors"
of the Proxy Statement.
(c) Management of the Corporation knows of no arrangements,
including any pledge by any person of securities of the
Corporation, the operation of which may at a subsequent date
result in a change in control of the Company.
20
Item 13. Certain Relationships and Related Transactions
- --------------------------------------------------------
The information required by this item is incorporated herein by
reference to the section captioned "Proposal I -- Election of Directors" and
"Voting Securities and Principal Holders Thereof" of the Proxy Statement.
Part IV
Item 14. Exhibits, Financial Statements, and Reports on Form 8-K
- -----------------------------------------------------------------
(a) Listed below are all financial statements and exhibits filed as
part of this report, and are incorporated by reference.
1. The consolidated statements of financial conditions of the
Company and subsidiary as of December 31, 2000 and 1999, and
the related consolidated statements of income, changes in
stockholders' equity and cash flows for each of the years in
the three year period ended December 31, 2000, together with
the related notes and the independent auditors' report of
Deloitte & Touche LLP independent certified public
accountants.
2. Schedules omitted as they are not applicable.
3. Exhibits
The following Exhibits are filed as part of this report:
3(i) Articles of Incorporation****
3(ii) Bylaws*
4.1 Shareholder Rights Plan**
10.1 1992 Stock Option Plan of Roxborough-Manayunk Federal Savings Bank*
10.2 1992 Management Stock Bonus Plan of Roxborough-Manayunk Bank*
10.3 1994 Stock Option Plan of Roxborough-Manayunk Bank*
10.4 1994 Management Stock Bonus Plan of Roxborough-Manayunk Bank*
10.5 Employment Agreement with John F. McGill, Jr.****
10.6 Employment Agreement with Jerry Naessens*
10.7 1999 Stock Option Plan ***
10.8 1999 Restricted Stock Plan***
13 Portions of the 2000 Annual Report to Stockholders
21 Subsidiaries of the Company (See "Item 1 - Business")
23 Consent of Independent Accountants
(b) No Reports on Form 8-K were filed during the last quarter of the
fiscal year covered by this Report.
- ----------------
* Incorporated by reference to the identically numbered exhibit to the
Company's Form S-1 Registration Statement No. 333-48749 filed on March 27,
1998.
** Incorporated by reference to Exhibit 1 to the Company's Form 8-A filed on
September 30, 1999.
*** Incorporated by reference to the appropriate exhibit of the Company's proxy
material filed on June 21, 1999.
**** Incorporated by reference to the identically number exhibits to the Form
10-K for December 31, 1999 filed on March 30, 2000.
21
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized as of March 19, 2001.
THISTLE GROUP HOLDINGS, CO.
By: /s/John F. McGill, Jr.
-------------------------------------
John F. McGill, Jr., President and
Chief Executive Officer
(Duly Authorized Representative)
Pursuant to the requirement of the Securities Exchange Act of 1934,
this report has been signed below on March 19, 2001 by the following persons on
behalf of the Company and in the capacities indicated.
/s/John F. McGill, Jr. /s/Jerry A. Naessens
- ----------------------------------- --------------------------------------------
John F. McGill, Jr. Jerry A. Naessens
President, Chief Executive Officer, Chief Financial Officer and Director
and Chairman (Principal Financial and Accounting Officer)
(Principal Executive Officer)
/s/Francis E. McGill, III /s/Add B. Anderson, Jr.
- ----------------------------------- --------------------------------------------
Francis E. McGill, III Add B. Anderson, Jr.
Secretary and Director Director
- ----------------------------------- --------------------------------------------
James C. Hellauer William A. Lamb
Director Director
/s/Charles A. Murray
- -----------------------------------
Charles A. Murray
Director