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 June 30, 2001
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
- --------------------------------------------------------------------------------
(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
- --------------------------------------------------------------------------------
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
------------- -------------
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, August 6, 2001.
Class Outstanding
- --------------------------------------------------------------------------------
$.10 par value common stock 6,739,955
THISTLE GROUP HOLDINGS, CO. AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2001
INDEX
Page
Number
------
PART I - 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
THISTLE GROUP HOLDINGS, CO. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(IN THOUSANDS)
June 30, 2001 December 31, 2000
------------- -----------------
ASSETS
Cash on hand and in banks ...................................................... $ 2,449 $ 4,132
Interest-bearing deposits ...................................................... 18,798 16,188
---------- ------
Total cash and cash equivalents .............................. 21,247 20,320
Investments held to maturity
(approximate fair value of $75,176)........................... 75,780 --
Investments available for sale at fair value
(amortized cost of $34,164 and $134,858) ..................... 33,116 128,198
Mortgage-backed securities available for sale at fair value
(amortized cost of $268,387 and $258,297) .................... 270,595 258,870
Trading securities.............................................................. 35,180 28,034
Loans receivable (net of allowance for loan losses of
$1,899 and $1,682) ........................................... 240,848 215,832
Loans held for sale ............................................................ -- 3,528
Accrued interest receivable .................................................... 4,512 4,711
FHLB stock - at cost ........................................................... 8,594 8,594
Real estate acquired through foreclosure - net ................................. 74 47
Office properties and equipment - net .......................................... 6,375 6,920
Cash surrender value of life insurance ......................................... 12,283 12,066
Excess of cost over fair value of net assets acquired .......................... 8,042 7,419
Prepaid expenses and other assets .............................................. 2,997 2,243
Prepaid income taxes............................................................ 326 --
Deferred income taxes .......................................................... 1,246 3,398
---------- ---------
TOTAL ASSETS ................................................. $ 721,215 $ 700,180
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits ....................................................................... $ 417,035 $ 406,684
Accrued interest payable ....................................................... 910 982
Advances from borrowers for taxes and insurance ................................ 1,908 2,534
FHLB advances .................................................................. 171,884 171,884
Payable to brokers and dealers ................................................. 33,774 27,879
Accounts payable and accrued expenses .......................................... 6,023 4,871
Other borrowings ............................................................... 2,500 1,750
Dividends payable .............................................................. 488 498
Accrued income taxes ........................................................... -- 40
---------- ---------
TOTAL LIABILITIES ............................................ 634,522 617,122
---------- ---------
Commitments and Contingencies
Stockholders' Equity:
Preferred stock, no par value - 10,000,000 shares authorized,
none issued in 2001 and 2000 ................................................... -- --
Common stock - $.10 par, 40,000,000 shares authorized, 8,999,989
issued in 2001 and 2000; 6,954,432 outstanding June 30, 2001
and 7,118,161 outstanding December 31, 2000 .................................... 900 900
Additional paid-in capital ..................................................... 92,896 93,330
Common stock acquired by stock benefit plans ................................... (6,800) (7,261)
Treasury stock at cost, 2,045,557 shares at June 30, 2001 and
1,881,828 shares at December 31, 2000 .......................................... (18,080) (16,645)
Accumulated other comprehensive loss............................................ (112) (4,015)
Retained earnings - partially restricted ....................................... 17,889 16,749
---------- ---------
Total stockholders' equity ................................... 86,693 83,058
---------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ..................................... $ 721,215 $ 700,180
========== =========
See notes to unaudited consolidated financial statements.
3
THISTLE GROUP HOLDINGS, CO. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
-------------- --------------
2001 2000 2001 2000
INTEREST INCOME:
Interest on loans..................................... $ 4,606 $ 3,693 $ 9,280 $ 7,024
Interest on mortgage-backed securities................ 4,421 3,646 8,888 7,132
Interest and dividends on investments................. 2,268 2,735 4,777 5,465
------- -------- -------- -------
Total interest income............................. 11,295 10,074 22,945 19,621
------- -------- -------- -------
INTEREST EXPENSE:
Interest on deposits.................................. 4,581 3,618 9,369 6,902
Interest on borrowed money............................ 2,471 2,527 4,838 4,973
------- -------- -------- -------
Total interest expense............................ 7,052 6,145 14,207 11,875
------- -------- -------- -------
NET INTEREST INCOME 4,243 3,929 8,738 7,746
PROVISION FOR LOAN LOSSES................................ 120 120 240 240
------- -------- -------- -------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES....................................... 4,123 3,809 8,498 7,506
------- -------- -------- -------
OTHER INCOME:
Service charges and other fees........................ 211 114 407 221
Loss on sale of real estate owned..................... -- (9) -- (34)
Gain on sale of mortgage-backed securities............ 141 -- 141 173
Gain (loss) on sale of loans.......................... -- -- (11) 23
Gain on sale of investments........................... -- 333 -- 333
Loss on SBIC investments.............................. (57) -- (303) --
Rental income......................................... 46 44 96 73
Trading revenues from brokerage operations............ 535 114 895 114
Miscellaneous other income............................ -- 19 83 50
------- -------- -------- -------
Total other income................................ 876 615 1,308 953
------- -------- -------- -------
OTHER EXPENSES:
Salaries and employee benefits........................ 1,895 1,284 3,679 2,588
Occupancy and equipment............................... 559 343 1,151 666
Federal insurance premium............................. 21 15 41 30
Professional fees..................................... 102 91 213 177
Advertising and promotion............................. 80 70 174 161
Amortization of excess of cost over fair value
of assets acquired.................................... 180 -- 360 --
Other................................................. 761 603 1,632 1,142
------- -------- -------- -------
Total other expenses.............................. 3,598 2,406 7,250 4,764
------- -------- -------- -------
INCOME BEFORE INCOME TAXES............................... 1,401 2,018 2,556 3,695
------- -------- -------- -------
INCOME TAXES............................................. 256 438 435 810
------- -------- -------- -------
NET INCOME............................................... $ 1,145 $ 1,580 $ 2,121 $ 2,885
======= ======== ======== =======
BASIC EARNINGS PER SHARE................................. $ .17 $ .23 $ .32 $ .41
DILUTED EARNINGS PER SHARE............................... $ .17 $ .23 $ .32 $ .41
WEIGHTED AVERAGE SHARES
OUTSTANDING - BASIC................................... 6,541,185 6,877,771 6,546,716 6,974,481
WEIGHTED AVERAGE SHARES
OUTSTANDING - DILUTED................................. 6,581,352 6,909,325 6,590,439 7,005,967
See notes to unaudited consolidated financial statements.
4
THISTLE GROUP HOLDINGS, CO. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
For the Six Months
Ended June 30,
------------------------
2001 2000
---- ----
OPERATING ACTIVITIES:
Net income.................................................................. $ 2,121 $ 2,885
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Provision for loan losses................................................ 240 240
Depreciation............................................................. 499 294
Amortization of stock benefit plans...................................... 445 444
Amortization of excess of cost over fair value of net assets acquired.... 362
Amortization of net premiums (discounts) on:
Loans purchased........................................................ 36 21
Investments............................................................ (523) (669)
Mortgage-backed securities............................................. 547 439
Loss (gain) on sale of loans............................................. 11 (23)
Gain on sale of investments.............................................. -- (333)
Gain on sale of mortgage-backed securities............................... (141) (173)
Net decrease in trading securities....................................... (7,146) (13,160)
Loss on sale of real estate owned........................................ -- 34
Increase in other assets................................................. (1,344) (738)
Decrease in other liabilities............................................ 6,865 7,216
------- -------
Net cash provided by (used in) operating activities......................... 1,972 (3,523)
INVESTING ACTIVITIES:
Principal collected on:
Mortgage-backed securities............................................... 45,175 10,013
Loans.................................................................... 25,999 16,184
Loans originated............................................................ (51,001) (35,704)
Loans acquired.............................................................. -- (10,373)
Purchases of:
Investments ............................................................. (75) (263)
Mortgage-backed securities............................................... (67,048) (31,914)
Office properties and equipment.......................................... (939) (407)
FHLB Stock............................................................... -- (149)
Proceeds from the sale of loans............................................. 3,199 23
Proceeds from the sale of investments....................................... -- 833
Proceeds from the sale of mortgage-backed securities........................ 11,377 17,617
Proceeds from sale of real estate owned..................................... -- 27
Maturities and calls of investments......................................... 24,632 --
------- -------
Net cash used in investing activities....................................... (8,681) (34,113)
FINANCING ACTIVITIES:
Net increase in deposits.................................................... 10,351 25,695
Net decrease in advances from borrowers for taxes and insurance............. (626) (573)
Net decrease in other borrowings............................................ 750 4,060
Purchase of treasury stock.................................................. (1,858) (2,509)
Cash dividends.............................................................. (981) (893)
------- -------
Net cash provided by financing activities................................... 7,636 25,780
------- -------
Net increase (decrease) in cash and cash equivalents........................ 927 (11,856)
Cash and cash equivalents, beginning of period.............................. 20,320 37,197
------- -------
Cash and cash equivalents, end of period.................................... 21,247 25,341
======= =======
SUPPLEMENTAL DISCLOSURES
Interest paid on deposits and funds borrowed................................ $14,283 $11,850
Income taxes paid........................................................... 468 546
Noncash transfers from loans to real estate owned........................... 47 85
Noncash transfer of investments from available for sale to held to maturity. 75,446 --
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 accounting
principles generally accepted in the United States of America. 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
six-month periods ended June 30, 2001 are not necessarily indicative of the
results which may be expected for the entire fiscal year or any other future
interim period.
These unaudited consolidated financial 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 on Form 10-K for the year ended
December 31, 2000.
NOTE 3 - INVESTMENTS
On May 31, 2001, the Company reclassified certain U.S. government agency
securities, FHLB and FHLMC bonds and municipal bonds from available for sale to
held to maturity as it is the intent of the Company to hold such securities to
maturity.
Investments held to maturity at June 30, 2001 consisted of the following:
June 30, 2001
Amortized Approximate
Cost Fair Value
--------- ------------
U.S. Treasury securities and securities
of U.S. government agencies -
1 to 5 years....................................... $ 3,000 $ 3,000
More than 10 years................................. 11,945 11,813
FHLB and FHLMC bonds - more than 10 years.......... 14,406 14,067
Municipal bonds - 5 to 10 years.................... 147 148
Municipal bonds - more than 10 years............... 46,282 46,148
--------- ----------
Total.............................................. $ 75,780 $ 75,176
========= ==========
Investments available for sale at June 30, 2001 and December 31, 2000 consisted
of the following:
June 30, 2001 December 31, 2000
Amortized Approximate Amortized Approximate
Cost Fair Value Cost Fair Value
---- ---------- ---- ----------
U.S. Treasury securities and securities
of U.S. government agencies -
5 to 10 years...................................... $ 3,008 $ 3,094 $ 6,011 $ 6,024
More than 10 years................................. 10,000 9,891 42,000 41,123
FHLB and FHLMC bonds - more than 10 years.......... 18,883 16,203
Municipal bonds - 5 to 10 years.................... 153 153
Municipal bonds - more than 10 years............... 46,703 45,948
Mutual funds....................................... 1,492 1,492 1,439 1,439
Capital trust securities........................... 12,820 11,319 12,847 10,727
Equity investments................................. 5,345 5,821 5,345 5,104
Other.............................................. 1,499 1,499 1,477 1,477
--------- ---------- --------- ----------
Total.............................................. $ 34,164 $ 33,116 $ 134,858 $ 128,198
========= ========== ========= ==========
6
NOTE 4 - MORTGAGE-BACKED SECURITIES AVAILABLE FOR SALE
Mortgage-backed securities at June 30, 2001 and December 31, 2000 consisted of
the following:
June 30, 2001 December 31, 2000
Amortized Approximate Amortized Approximate
Cost Fair Value Cost Fair Value
---- ---------- ---- ----------
GNMA pass-through certificates....................... $ 154,700 $ 156,562 $ 159,303 $ 160,075
FNMA pass-through certificates....................... 80,489 80,288 74,246 73,727
FHLMC pass-through certificates...................... 27,758 28,161 18,837 19,075
FHLMC real estate mortgage investment conduits....... 5,440 5,584 5,911 5,993
--------- ---------- --------- ----------
Total................................................ $ 268,387 $ 270,595 $ 258,297 $ 258,870
========= ========== ========= ==========
NOTE 5 - TRADING SECURITIES
Trading securities are securities owned by TGH Securities, a wholly owned
broker/dealer subsidiary of the Company. Trading securities are recorded on a
trade date basis and 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 June 30, 2001 and December 31, 2000 consisted of the
following:
June 30, 2001 December 31, 2000
------------- -----------------
Mortgage loans:
1 - 4 family residential............................. $ 124,334 $ 121,230
Commercial real estate............................... 60,295 54,763
Home equity lines of credit and improvement loans............. 17,512 12,999
Commercial non-mortgage loans................................. 22,185 14,731
Construction loans - net...................................... 18,300 14,210
Loans on savings accounts..................................... 739 726
Consumer loans ............................................ 619 152
---------- ----------
Total loans.......................................... 243,984 218,811
---------- ----------
Plus: unamortized premiums.................................... 307 347
Less:
Net discounts on loans purchased..................... (14) (15)
Deferred loan fees................................... (1,530) (1,629)
Allowance for loan losses............................ (1,899) (1,682)
---------- ----------
Total $ 240,848 $ 215,832
========== ==========
NOTE 7 - DEPOSITS
The major types of deposits by amounts and percentages were as follows:
June 30, 2001 December 31, 2000
Amount % of Total Amount % of Total
------ ---------- ------ ----------
NOW accounts and
transaction checking $ 40,532 9.7% $ 41,181 10.1%
Money Market Demand accounts 34,152 8.2% 26,582 6.5%
Passbook accounts 103,336 24.8% 103,209 25.4%
Certificate accounts 239,015 57.3% 235,712 58.0%
---------- ----- ---------- -----
Total $ 417,035 100.0% $ 406,684 100.0%
========== ====== ========== ======
7
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
For the three and six-month periods ended June 30, 2001, the Company reported
total comprehensive income of approximately $780 and $6,200, respectively. For
the three and six-month periods of the prior year the Company reported total
comprehensive income of approximately $2,000 and $4,300, respectively. Items of
other comprehensive income consisted of unrealized gains or (losses), net of
taxes, on available for sale securities and reclassification adjustments for
gains or (losses) included in net income.
NOTE 10 - DIVIDENDS
On June 13, 2001, the Company declared a dividend of $.07 per share payable July
13, 2001 to stockholders of record on June 30, 2001.
NOTE 11 - NEW ACCOUNTING STANDARDS
In June 2001, the Financial Accounting Standards Board ("FASB") issued two new
pronouncements: Statement of Financial Accounting Standards ("SFAS") No. 141,
Business Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets.
SFAS 141 is effective as follows: a) use of the pooling-of-interest method is
prohibited for business combinations initiated after June 30, 2001; and b) the
provisions of SFAS 141 also apply to all business combinations accounted for by
the purchase method that are completed after June 30, 2001 (that is, the date of
the acquisition is July 2001 or later). There are also transition provisions
that apply to business combinations completed before July 1, 2001, that were
accounted for by the purchase method. SFAS 142 is effective for fiscal years
beginning after December 15, 2001 to all goodwill and other intangible assets
recognized in an entity's statement of financial position at that date,
regardless of when those assets were initially recognized. The Company is
currently evaluating the provisions of SFAS 141 and SFAS 142 and has not yet
determined the effect that adoption of these standards will have on its
consolidated financial statements.
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 and general market conditions.
Overview
- --------
o Net interest income decreased 5.6 % from first quarter 2001 and increased
8.0% from the second quarter 2000.
o TGH Securities trading revenues, which are included in non-interest income,
increased 48.6% from first quarter 2001. TGH securities commenced
operations in May 2000.
o Non-interest expense decreased 1.5% from first quarter 2001 but increased
49.5% from second quarter 2000.
o Transaction and money market account deposits grew 5.4% from first quarter
2001.
o Loans grew 6% from first quarter 2001.
----------------------------------------------------------------------------
QTR 6/30/01 QTR 3/31/01 $ INCREASE % INCREASE
----------------------------------------------------------------------------
Net Interest Income $ 4,243 $ 4,495 $ (252) (5.6%)
----------------------------------------------------------------------------
Non-interest Income 876 432 444 102.8%
----------------------------------------------------------------------------
Non-interest Expense 3,598 3,652 (54) (1.5%)
----------------------------------------------------------------------------
Net Income 1,145 976 169 17.3%
----------------------------------------------------------------------------
Loans 240,848 227,742 13,106 5.8%
----------------------------------------------------------------------------
Deposits 417,035 407,142 9,893 2.4%
----------------------------------------------------------------------------
Comparison of Financial Condition
- ---------------------------------
The Company continued to experience strong asset growth during the quarter.
Total assets were $721.2 million at June 30, 2001, representing an increase of
$9.7 million from the balance of $711.5 million at March 31, 2001. The increase
for the six months ended June 30, 2001 was $21.0 million. This increase was due
primarily to an increase in loans receivable of $21.5 million which was funded
by deposits and calls on investment securities.
Investments held to maturity increased $75.8 million to $75.8 million at June
30, 2001 as the Company transferred certain available-for-sale securities during
the quarter to held-to-maturity securities. It is the Company's intent to hold
such securities until maturity.
Investments available for sale decreased $95.1 million to $33.1 million at June
30, 2001 from $128.2 million at December 31, 2000 due to the transfer discussed
above, as well as to $10.0 million in calls on securities.
Trading securities increased $7.1 million to $35.2 million at June 30, 2001 from
$28.0 million at December 31, 2000. Fluctuations in the balance of trading
securities are due to the operation of TGH Securities.
Mortgage-backed securities increased $11.7 million, or 4.5%, to $270.6 million
at June 30, 2001 from $258.9 million at December 31, 2000. This increase was the
result of $31.5 million in purchases offset by $28.6 million in sales and $11.2
million in repayments.
Loans receivable increased $25.0 million, or 11.6%, to $240.8 million at June
30, 2001 from $215.8 million at December 31, 2000. This increase was the result
of $51.0 million of loan originations including $13.3 million of non-residential
loans, offset by principal repayments of $26.0 million. Loans grew $13.1 million
or 6% from the first quarter of 2001, of which $7.7 million represented
aggregate growth in residential, construction, and home equity loans and lines
of credit.
Deposits increased $10.3 million, or 2.5%, to $417.0 million at June 30, 2001
from $406.7 million at December 31, 2000. NOW accounts, transaction checking and
money market accounts increased $6.9 million; passbook accounts increased
$127,000, and certificates increased $3.3 million as a result of the Company's
plan to develop and expand new and existing customer relationships. Of this
increase at June 30, 2001, transaction and money market account deposits grew
5.4% from first quarter 2001.
9
Accounts payable and accrued expenses increased $7.0 million, or 21.5%, to $39.8
million at June 30, 2001 from $32.7 million at December 31, 2000. The
fluctuation is due mainly to the activity at TGH Securities and represents
monies due to brokers/dealers for securities purchased. This payable may
fluctuate from period to period, depending upon the amount of securities owned
by TGH Securities at each quarter end or year end.
Total stockholders' equity increased $3.6 million, or 4.4%, to $86.7 million at
June 30, 2001 from $83.1 million at December 31, 2000 primarily due to a
decrease in the accumulated other comprehensive loss of $3.9 million as a result
of changes in the net unrealized loss on the available for sale securities
portfolio due to fluctuations in the interest rates. Because of interest rate
changes, the Company's accumulated other comprehensive loss may fluctuate for
each interim and year-end period.
Non-performing Assets
- ---------------------
The following table sets forth information regarding non-performing loans and
real estate owned.
At At
June 30, 2001 December 31, 2000
------------- -----------------
(Dollars in Thousands)
Total non-performing loans....................... $ 2,973 $ 170
Real estate owned................................ 74 47
------- ------
Total non-performing assets...................... $ 3,047 $ 217
======= ======
Total non-performing loans to
total loans...................................... 1.23% .08%
Total non-performing assets to
total assets..................................... .42% .03%
Allowance for loan loss.......................... $ 1,899 $1,682
Allowance for loan losses as a percentage
of total non-performing assets................... 62% 775%
Allowance for loan losses as a percentage
of total non-performing loans.................... 64% 989%
Allowance for loan losses as a percentage
of total average loans........................... .82% .81%
Non-performing assets were $3.0 million at June 30, 2001 as compared to $217,000
at December 31, 2000. This increase was due to one non-performing commercial
real estate loan which was classified as substandard. The loan is collateralized
by the underlying property as well as additional collateral. The Company is
vigorously pursuing all legal remedies.
Comparison of Operations for the Three and Six-month Periods Ended June 30, 2001
and 2000
- --------------------------------------------------------------------------------
Net Income. Net income for the three and six months ended June 30, 2001
decreased $435,000, or 27.5%, and $764,000, or 26.4%, respectively, over the
same periods in 2000. The decrease for the three-month period is due to an
increase of $1.2 million in non-interest expense, offset by an increase in net
interest income of $314,000 and an increase of $261,000 in other income. The
decrease for the six-month period is due to an increase of $2.5 million in
non-interest expense, offset by an increase in net interest income of $992,000
and an increase of $335,000 in other income.
Total Interest Income. Interest income for the three months ended June 30, 2001
increased $1.2 million over the three months ended June 30, 2000 primarily due
to an increase of $105.6 million in the average balance of interest-earning
assets, partially offset by a decrease in the average yield of 41 basis points.
Interest income for the six months ended June 30, 2001 increased $3.3 million
over the six months ended June 30, 2000 primarily due to an increase of $106.8
million in the average balance of interest-earning assets, partially offset by a
decrease in the average yield of 15 basis points.
Total Interest Expense. Interest expense for the three months ended June 30,
2001 increased $900,000 over the three months ended June 30, 2000. The increase
in interest expense primarily reflects an increase of $92.6 million in the
average balance of interest-bearing liabilities, partially offset by a decrease
of 16 basis points in the average cost of funds. Interest expense for the six
months ended June 30, 2001 increased $2.3 million over the six months ended June
30, 2000. The increase in interest expense primarily reflects an increase of
$97.8 million in the average balance of interest-bearing liabilities.
10
Net Interest Income. Net interest income for the three months ended June 30,
2001 increased $314,000, or 8.2%, over the three months ended June 30, 2000 due
to the reasons discussed above. The net interest spread, the difference between
the average rate earned and the average rate paid, decreased by 25 basis points
to 2.03% for the three months ended June 30, 2001 from 2.28% for the same period
in 2000. Net interest income for the six months ended June 30, 2001 increased
$992,000, or 13.2%, as compared to the same period of the prior year. The net
interest spread for the current six-month period decreased by 14 basis points to
2.14% for the six months ended June 30, 2001 from 2.28% for the same period in
2000. During the three months ended June 30, 2001, uncollected interest of
$130,000 was charged against interest income due to a commercial loan that was
classified as non-performing. Additionally, due to heavy repayments in the
Company's investment portfolio and the continuation of the Federal Reserve's
reduction of interest rates during the first six months of 2001, the Company has
experienced reduced interest margins.
The declining rate environment has caused margin compression. The result of
Federal Reserve easings of 275 basis points during the first six months has been
very positive for the Bank in its effort to aggressively price down its
deposits. Unfortunately, this same action by the Federal Reserve has had a
muting effect on net interest margins as very high prepayments from the Bank's
securities portfolio and intermittent calls on agency securities occur
immediately, causing somewhat higher cash balances in the short term and lower
reinvestment rates. Forward, the Bank will continue to price down its deposits.
On the asset side, cash from calls and repayments will be used to fund loans and
purchase mortgage-backed securities. These purchases will have short to medium
duration and good cash flow. These characteristics should position the entire
portfolio well with respect to earnings and book value in the event the interest
rate environment reverses during the next year. However, given the current rate
environment and the Company's asset strategy, the Company does not expect
interest rate margins to increase over the next six months of 2001.
Provision for Losses on Loans. The provision for losses on loans for the three
and six months ended June 30, 2001 totaled $120,000 and $240,000, respectively,
as compared to $120,000 and $240,000 for the same periods in 2000. Provisions
for loan losses are charged to earnings to bring the total allowance for loan
losses to a level considered appropriate by management based on historical
experience, the volume and type of lending conducted by the Company, the amount
of the Company's classified assets, the status of past due principal and
interest payments, general economic conditions, particularly as they relate to
the Company's primary market area, and other factors related to the
collectibility of the Company's loan portfolio. Management will continue to
review its loan portfolio to determine the extent, if any, to which 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. Total non-interest income for the three months and six months
ended June 30, 2001 increased $261,000 and $355,000, respectively, over the same
periods of the prior year. The increase in non-interest income was primarily due
to the operations of TGH Securities. In the three and six months ended June 30,
2001, trading revenues from TGH Securities were $535,000 and $895,000,
respectively, compared to $114,000 and $114,000, respectively, over the same
prior year periods.
Non-interest Expenses. Total non-interest expense for the three months and six
months ended June 30, 2001 increased $1.2 million and $2.5 million,
respectively, over the same periods of the prior year. The most significant
increases in non-interest expense for the current three months and six months
ended were primarily attributable to salary and employee benefits, occupancy and
equipment costs and goodwill amortization costs. The increase in expenses was
due to the addition of personnel in commercial lending, the operations of TGH
Securities and the branches acquired in the second quarter of 2000. Such
non-interest expenses were not reflected in the comparative 2000 periods. For
the current three and six month periods, salaries and employee benefits,
occupancy and equipment costs and goodwill amortization increased $1.0 million
and $1.9 million, respectively, over the same 2000 periods.
11
Liquidity and Capital Resources
- -------------------------------
On June 30, 2001, the Bank was in compliance with its three regulatory capital
requirements as follows:
Amount Percent
------ -------
(in Thousands)
Tangible capital.................... $ 53,461 8.14%
Tangible capital requirement........ 9,857 1.50%
--------- --------
Excess over requirement............. $ 43,604 6.64%
========= ========
Core capital........................ $ 53,461 8.14%
Core capital requirement............ 26,286 4.00%
--------- --------
Excess over requirement............. $ 27,175 4.14%
========= ========
Risk based capital.................. $ 55,360 20.99%
Risk based capital requirement...... 21,096 8.00%
--------- --------
Excess over requirement............. $ 34,264 12.99%
========= ========
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
six months ended June 30, 2001, the Company originated $51.0 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-backed securities totaled $67.0 million during the six-month period
ended June 30, 2001. 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'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 June 30, 2001, cash and cash equivalents totaled
$21.2 million. The Bank's liquidity ratio was 5.79% at June 30, 2001.
The Company anticipates that it will have sufficient funds available to meet its
current commitments. As of June 30, 2001, the Company had $30.9 million in
commitments to fund loans. Certificates of deposit, which were scheduled to
mature in one year or less, as of June 30, 2001 totaled $172.6 million.
Management believes that a significant portion of such deposits will remain with
the Company.
12
Additional Key Operating Information and Ratios
- -----------------------------------------------
During the third quarter, the Bank will open its newest banking office in the
Northern Liberties section of Philadelphia. Situated in a state-sponsored
Keystone Opportunity Zone, the building will also serve as an incubator site for
young local companies. In addition to the City of Philadelphia and the State of
Pennsylvania, sponsors of the building include Microsoft and the Eastern
Technology Council. The Northern Liberties office represents the Bank's first
Center City location, and positions the Bank in an under-banked, dynamic section
of the city.
For the For the
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2001(1) 2000(1) 2001(1) 2000(1)
Return on average assets .64% 1.08% .61% 1.01%
Return on average equity 5.28% 8.56% 4.89% 7.86%
Yield on average interest-earning assets 6.80% 7.21% 6.97% 7.12%
Cost of average interest-bearing liabilities 4.77% 4.93% 4.83% 4.84%
Interest rate spread (2) 2.03% 2.28% 2.14% 2.28%
Net interest margin 2.56% 2.81% 2.66% 2.81%
At June 30, 2001 At December 31, 2000
---------------- --------------------
Tangible book value per share $11.31 $10.63
(1) The ratios for the three and six-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 six months ended June 30, 2001 from
the information presented in the Form 10K for December 31, 2000, 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 June 30, 2001. 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 June 30,
2001 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
On April 18, 2001, the Annual Meeting of stockholders of the Company was held to
elect management's nominees for director and to ratify the appointment of the
Company's independent auditors. With respect to the election of directors, the
results were as follows:
Nominee For Withheld
------- --- --------
William A. Lamb, Sr. 6,149,008 98.6% 89,137 1.4%
Jerry A. Naessens 6,148,612 98.6% 89,533 1.4%
With respect to the ratification of Deloitte & Touche LLP as the Company's
independent certified accountants, the results were as follows:
For Against Abstain
--- ------- -------
6,173,373 99.0% 31,366 .5% 33,406 .5%
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:
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***
b) Reports on Form 8-K
The registrant filed on May 25, 2001 a Form 8-K (Items 7 and 9) which
included its 1st Quarter Report To Shareholders.
* 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.
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: August 14, 2001 By: /s/ John F. McGill, Jr.
---------------------------------------
John F. McGill, Jr.
President and Chief Executive Officer
(Principal Executive Officer)
Date: August 14, 2001 By: /s/ Jerry Naessens
---------------------------------------
Jerry Naessens
Chief Financial Officer
(Principal Financial Officer)
15