FORM 10-Q
Securities and Exchange Commission
Washington, D.C. 20549
[x] Quarterly Report pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
[ ] For the Three and Nine Months Ended March 31, 1997
Commission File Number 0-27178
Peekskill Financial Corporation
(Exact name of the registrant as specified in its charter)
Delaware 13-3858258
(State of incorporation) (I.R.S. Employer Identification Number)
1019 Park Street, Peekskill, New York 10566
(Address of principal executive offices)
(914) 737-2777
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes [x] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
stock, as of the latest practicable date.
Class: SHARES OUTSTANDING at April 30, 1997
----- ------------------------------------
Common Stock, $.01 par value 3,203,121
Peekskill Financial Corporation
Form 10-Q
Three and Nine Months Ended March 31, 1997
Part I - Financial Information
ITEM 1 - FINANCIAL STATEMENTS (Unaudited) Page
Condensed Consolidated Balance Sheets at March 31, 1997
and June 30, 1996 3
Condensed Consolidated Statements of Income for the three and
nine months ended March 31, 1997 and 1996 4
Condensed Consolidated Statements of Cash Flows for the nine
months ended March 31, 1997 and 1996 5
Notes to Condensed Consolidated Interim Financial Statements 6
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF 7
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Part II - Other Information
Other Information 15
Signatures 16
2
Part I FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Peekskill Financial Corporation and Subsidiary
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except for share and per share amounts)
March 31, 1997 June 30, 1996
-------------- -------------
Assets:
Cash and due from banks.................................. $ 622 $ 1,020
Interest-bearing deposits................................ 2,130 16,300
Securities:
Held-to-maturity (fair value of $129,563 at March
31, 1997 and $128,089 at June 30, 1996)............. 129,531 129,200
Available-for-sale, at fair value...................... 2,958 2,459
------- -------
Total securities..................................... 132,489 131,659
------- -------
Loans, net:
Loans.................................................. 44,661 40,076
Allowance for loan losses.............................. (607) (519)
------- -------
Total loans, net..................................... 44,054 39,557
Federal Home Loan Bank stock............................. 1,463 1,319
Real estate owned........................................ 220 ---
Accrued interest receivable.............................. 986 1,111
Deferred income taxes, net............................... 297 ---
Other assets............................................. 333 357
------- -------
Total assets........................................... $182,594 $191,323
======== ========
Liabilities and stockholders' equity:
Liabilities:
Depositor accounts..................................... $132,718 $128,304
Mortgage escrow deposits............................... 2,150 2,031
Deferred income taxes.................................. --- 70
Other liabilities...................................... 1,020 1,144
------- -------
Total liabilities.................................... 135,888 131,549
------- -------
Stockholders' equity: (Note 2)
Preferred stock (par value $0.01 per share; 100,000
shares authorized; none issued or outstanding)........... --- ---
Common stock (par value $0.01 per share; 4,900,000
shares authorized and 4,099,750 shares issued)......... 41 41
Additional paid-in capital............................... 40,016 39,972
Unallocated common stock held by Employee Stock
Ownership Plan ("ESOP")................................ (3,075) (3,198)
Common stock awarded under Recognition and
Retention Plan ("RRP")................................. (1,232) ---
Treasury stock, at cost (896,629 shares)................. (12,407) ---
Retained earnings-substantially restricted............... 23,389 22,984
Net unrealized loss on securities available for sale,
net of taxes........................................... (26) (25)
------- -------
Total stockholders' equity............................ 46,706 59,774
------- -------
Total liabilities and stockholders' equity............ $182,594 $191,323
======== ========
See accompanying notes to unaudited condensed consolidated interim financial
statements.
Peekskill Financial Corporation and Subsidiary
Condensed Consolidated Statements of Income
(Unaudited)
(In thousands, except for per share amounts)
For the Three Months For the Nine Months
Ended March 31, Ended March 31,
1997 1996 1997 1996
---- ---- ---- ----
Interest and dividend income:
Loans.................................. $ 869 $ 815 $ 2,513 $ 2,518
Securities............................. 2,066 1,892 6,175 5,433
Interest-bearing deposits and other.... 110 429 534 661
----- ----- ----- -----
Total interest and dividend income.... 3,045 3,136 9,222 8,612
----- ----- ----- -----
Interest expense:
Depositor accounts and escrow.......... 1,361 1,316 4,022 4,085
FHLB advances.......................... --- --- --- 3
----- ----- ----- -----
Total interest expense................ 1,361 1,316 4,022 4,088
----- ----- ----- -----
Net interest income................... 1,684 1,820 5,200 4,524
Provision for loan losses .............. 15 5 128 35
----- ----- ----- -----
Net interest income after
provision for loan losses............... 1,669 1,815 5,072 4,489
----- ----- ----- -----
Non-interest income..................... 52 68 176 217
----- ----- ----- -----
Non-interest expense:
Compensation and benefits............. 430 313 1,289 1,056
Federal deposit insurance:
Regular premiums.................... 36 90 201 266
Special assessment.................. --- --- 884 ---
Occupancy costs....................... 91 90 257 244
Computer service fees................. 45 45 137 137
Safekeeping and custodial expenses.... 25 25 72 69
Other operating expenses.............. 185 117 538 284
----- ----- ----- -----
Total non-interest expense.......... 812 680 3,378 2,056
----- ----- ----- -----
Income before income tax expense
and cumulative effect of change
in accounting principle ........... 909 1,203 1,870 2,650
Income tax expense...................... 385 532 571 1,132
----- ----- ----- -----
Income before cumulative effect of
change in accounting principle...... 524 671 1,299 1,518
Cumulative effect of change in
accounting principle, net of taxes.... --- --- --- (59)
----- ----- ----- -----
Net income............................ $524 $671 $1,299 $1,459
==== ==== ====== ======
Earnings per share (Note 3)........... $0.17 $0.18 $0.39
===== ===== =====
See accompanying notes to unaudited condensed consolidated interim financial
statements.
4
Peekskill Financial Corporation and Subsidiary
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
For the Nine Months Ended
March 31,
1997 1996
---- ----
Cash flows from operating activities:
Net income................................................. $ 1,299 $ 1,459
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses................................ 128 35
ESOP expense............................................. 167 56
RRP expense.............................................. 168 ---
Net amortization and accretion of deferred fees,
discounts and premiums................................... (117) (68)
Depreciation and amortization expense.................... 54 50
Cumulative effect of change in accounting principle...... --- 59
Net decrease in accrued interest receivable.............. 125 32
Net decrease (increase) in other assets.................. 5 (102)
Net change in deferred tax assets and liabilities........ (367) (103)
Net increase in other liabilities........................ 376 645
-------- ------
Net cash provided by operating activities.............. 1,838 2,063
-------- ------
Cash flows from investing activities:
Purchases of securities:
Held-to-maturity......................................... (14,900) (38,834)
Available-for-sale....................................... (500) (500)
Proceeds from principal payments, maturities and calls
of securities:
Held-to-maturity......................................... 14,649 14,716
Available-for-sale....................................... --- 500
Originations of loans, net of principal payments........... (4,805) 2,732
Purchase of FHLB stock..................................... (144) ---
Purchase of property and equipment......................... (35) ---
-------- ------
Net cash used in investing activities................... (5,735) (21,386)
-------- ------
Cash flows from financing activities:
Net increase (decrease) in depositor accounts.............. 4,414 (1,873)
Net increase (decrease) in mortgage escrow deposits........ 119 (851)
Proceeds from Federal Home Loan Bank advances.............. --- 2,000
Repayments of Federal Home Loan Bank advances.............. (500) (2,000)
Net proceeds from issuance of common stock................. --- 40,000
Purchases of treasury stock................................ (12,377) ---
Common stock purchased by RRP.............................. (1,430) ---
Common stock purchased by ESOP............................. --- (3,280)
Dividends paid............................................. (897) ---
-------- ------
Net cash (used in) provided by financing activities..... (10,671) 33,996
-------- ------
Net (decrease) increase in cash and cash equivalents......... (14,568) 14,673
Cash and cash equivalents at beginning of period............. 17,320 4,681
-------- ------
Cash and cash equivalents at end of period................... $ 2,752 $19,354
======= =======
Supplemental disclosures:
Interest paid.............................................. $ 4,054 $ 4,076
Income taxes paid.......................................... 338 778
Securities purchased not yet settled....................... --- 1,910
Loan transferred to real estate owned...................... 220 ---
Reclassification of RRP shares to treasury stock........... 30 ---
See accompanying notes to unaudited condensed consolidated interim financial
statements.
5
PEEKSKILL FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Unaudited)
NOTE 1: Presentation of Financial Information
Peekskill Financial Corporation (the "Holding Company") was
incorporated in September 1995 and on December 29, 1995 became the holding
company for First Federal Savings Bank (the "Bank") upon the completion of the
Conversion of the Bank from a mutual savings bank to a stock savings bank (the
"Conversion"). The Holding Company and the Bank (collectively, the "Company")
are located in Peekskill, New York and the Holding Company's principal business,
subsequent to the Conversion, is the ownership of its wholly-owned subsidiary,
the Bank. Prior to the Conversion, the Holding Company had no operations other
than those of an organizational nature. Accordingly, all financial and other
information for periods prior to the Conversion, as set forth herein, refer to
the Bank.
The accompanying unaudited condensed consolidated interim financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. The accompanying unaudited
condensed consolidated interim financial statements should be read in
conjunction with the financial statements and related management's discussion
and analysis of financial condition and results of operations of the Company as
of and for the year ended June 30, 1996 included in the Form 10-K filed with the
Securities and Exchange Commission. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. The results of operations for the three
and nine months ended March 31, 1997 are not necessarily indicative of results
that may be expected for the entire year ending June 30, 1997.
The unaudited condensed consolidated interim financial statements
include the accounts of the Holding Company and its wholly-owned subsidiary, the
Bank.
NOTE 2. Stockholders' Equity
Concurrent with the Conversion, on December 29, 1995 the Holding
Company sold 4,099,750 shares of its common stock in a subscription and
community offering at a price of $10 per share, for gross proceeds of $41.0
million. The Holding Company used $20.5 million of the proceeds to acquire all
of the common stock issued by the Bank in the Conversion. The remaining proceeds
were retained by the Holding Company. In accordance with the Plan of Conversion,
the Holding Company and the Bank shared the costs of the Conversion which
totaled $1.0 million. On a consolidated basis, the net offering proceeds were
$40.0 million which resulted in an increase in stockholders' equity of $36.7
million after deducting shares purchased by the Employee Stock Ownership Plan
("ESOP").
6
On July 16, 1996, the Company purchased 4% (163,990 shares) of its
outstanding common stock for the purpose of funding its Recognition and
Retention Plan ("RRP") for $2.0 million. Of the 163,990 shares, 117,290 have
been granted to employees and directors, and accordingly, are presented as
common stock awarded under the RRP on the balance sheet. In the future, the
remaining 46,700 shares (which are included in treasury stock) can be used for
RRP grants to employees or directors.
On July 29, 1996, the Company received approval from the Office of
Thrift Supervision ("OTS") to repurchase up to 5% of its outstanding common
stock. The Company completed the repurchase of 204,987 shares between July 31,
1996 and August 15, 1996 for $2.5 million.
On September 4, 1996, the Company received approval from the OTS to
repurchase an additional 5% of its outstanding common stock. The Company
completed the repurchase of 190,429 shares between September 9, 1996 and
November 6, 1996 for $2.7 million.
On December 19, 1996, the Company received approval from the OTS to
repurchase up to 10% of its outstanding common stock. The Company completed the
repurchase of 366,013 shares on January 2, 1997 for $5.4 million.
On February 5, 1997 the Company received approval from the OTS to
repurchase up to 5% of its outstanding common stock. The Company has repurchased
88,500 shares of the 164,700 approved shares for $1.3 million.
Note 3. Earnings Per Share
Earnings per share is reported for periods after the Conversion, based
on net income divided by the weighted average number of common shares
outstanding and dilutive stock options, if any (3,011,071 and 3,368,348 common
and common equivalent shares, respectively, for the quarter and nine months
ended March 31, 1997). Fully diluted weighted average number of common shares
outstanding for the quarter and nine months ended March 31, 1997 were 3,011,071
and 3,374,292, respectively. For purposes of determining the weighted average
number of common shares outstanding, ESOP shares committed to be released to
participants as of the date of the financial statements have been considered
outstanding. ESOP shares that have not been committed to be released have not
been considered outstanding in computing earnings per share.
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share," which
requires presentation of both basic EPS and diluted EPS by all entities with
complex capital structures. Basic EPS, which replaces primary EPS, 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
EPS reflects the potential dilution that could occur if securities or other
contracts to issue common stock (such as the Company's stock options) were
exercised or converted into
7
common stock or resulted in the issuance of common stock that then shared in the
earnings of the entity. As required, the Company will adopt SFAS No. 128 in its
fiscal quarter ending December 31, 1997 and will restate all prior-period EPS
data, at that time.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Comparison of Financial Condition at March 31, 1997 and June 30, 1996
Total assets at March 31, 1997 were $182.6 million compared to $191.3
million at June 30, 1996, a decrease of $8.7 million or 4.5%. The decrease was
due primarily to the purchase of $1.4 million of the Company's common stock to
fund the Company's RRP and repurchases of $12.4 million of treasury stock,
partially offset by a $4.4 million increase in depositor accounts. The treasury
stock purchases contributed to the $14.2 million decrease in the Company's
investment in interest-bearing deposits during the nine months ended March 31,
1997. The Company has invested the $4.4 million increase in depositor accounts
into the loan portfolio, which increased $4.5 million during the nine month
period.
Total non-performing assets increased $1.0 million from $1.3 million at
June 30, 1996 to $2.3 million at March 31, 1997. The increase was primarily
caused by the Company classifying as non-accrual certain participation loans
with a principal balance of $1.1 million (the "TASCO Loans"), partially offset
by a $100,000 decrease in other non-performing loans. The TASCO Loans were
placed on non-accrual status in the quarter ended September 30, 1996 because the
FDIC is disputing its obligation to pass-through principal and interest payments
on the loans whether or not the same is collected from the borrower. The FDIC
ceased passing through any payments on the TASCO Loans in April 1996. Settlement
negotiations between the parties are proceeding; however, no assurance can be
given as to when a settlement may be reached. As a result, the required
principal and interest payments on the Bank's investment were over 90 days
delinquent at March 31, 1997. On April 25, 1997, the Company received payments
of $25,000 from TASCO representing amounts passed through by the FDIC for the
months of March and April 1997. However, no resolution of this matter has been
reached to date and accordingly, the TASCO Loans remain on non-accrual status.
At March 31, 1997, there were no loans on non-accrual status other than the
TASCO Loans.
During the current quarter the Bank foreclosed on one property with a
market value of $220,000, for which the Bank has a contract of sale. Total
charge-offs against the allowance for loan losses were $40,000 for the
nine-month period, a portion of which related to the foreclosure discussed
above. The ratio of non-performing assets to total assets increased to 1.2% at
March 31, 1997 from 0.65% at June 30, 1996. The allowance for loan losses
increased $88,000 from $519,000 at June 30, 1996 to $607,000 at March 31, 1997,
due to the $128,000 provision for loan losses, partially offset by the $40,000
of charge-offs described above. The ratio of the allowance for loan losses to
non-performing assets decreased to 26.98% at March 31, 1997 from 41.45% at June
30, 1996.
8
Stockholders' equity decreased $13.1 million from $59.8 million at June
30, 1996 to $46.7 million at March 31, 1997, primarily reflecting the $13.8
million in total common stock purchases relating to treasury stock and the RRP.
During the nine months ended March 31, 1997, the Company had net income of $1.3
million, partially offset by dividends paid of $897,000. Equity as a percent of
assets decreased to 25.6% at March 31, 1997 from 31.2% at June 30, 1996. Book
value per share was $14.58 at both June 30, 1996 and March 31, 1997, due
primarily to the stock purchased to fund the Company's RRP, partially offset by
earnings retained for the period.
Comparison of Operating Results for the Three Months Ended
March 31, 1997 and 1996
Net income for the quarter ended March 31, 1997 was $524,000 (or $0.17
per common share) compared to $671,000 (or $0.18 per common share) for the
comparable period last year, a decrease of $147,000 or 21.9%. The decrease is
primarily attributable to a $136,000 decrease in net interest income and a
$132,000 increase in non-interest expense, partially offset by a $147,000
decrease in income tax expense.
Net interest income for the quarter ended March 31, 1997 decreased
$136,000, compared with the same period in the prior year. The decrease was
caused by a $12.5 million decrease in average net earning assets, due primarily
to funds being used to repurchase the Company's stock, partially offset by an 11
basis point increase in the net interest rate spread. The increase in the net
interest rate spread was due primarily to a 14 basis point increase in the rate
earned on interest-earning assets. The Company's ratio of interest-earning
assets to interest-bearing liabilities decreased from 147.7% for the quarter
ended March 31, 1996 to 137.0% for the quarter ended March 31, 1997.
The provision for loan losses was $15,000 and $5,000 for the quarters
ended March 31, 1997 and 1996, respectively.
Non-interest income decreased $16,000 for the quarter ended March 31,
1997, compared to the year-ago period, reflecting decreases in loan late fees
and service charges.
Non-interest expense increased $132,000 for the three months ended
March 31, 1997 compared to the three months ended March 31, 1996. The increase
for the quarter reflects to a $68,000 increase in other operating expenses
caused by increased advertising expenses and the increased costs associated with
being a public company. Compensation and benefits expense increased $117,000 for
the quarter ended March 31, 1997 compared to the same period in the prior year.
The increase was primarily due to $45,000 of RRP expense in the current quarter,
as well as costs associated with additional personnel and normal salary
increases. These increases were partially offset by a $54,000 reduction in
Federal deposit insurance premiums. The ratio of non-interest expense to average
assets, on an annualized basis, increased from 1.42% for the quarter ended March
31, 1996 to 1.78% for the same period in the current year.
9
Income tax expense decreased $147,000, or 27.6%, from $532,000 for the
quarter ended March 31, 1996 to $385,000 for the same period in the current
year. The decrease was primarily attributable to a 24.4% decrease in pre-tax
income.
Comparison of Operating Results for the Nine Months Ended
March 31, 1997 and 1996
Net income for the nine months ended March 31, 1997 was $1.3 million
(or $0.39 per common share) compared to $1.5 million for the comparable period
last year. Excluding the earnings charge for the one-time Federal deposit
insurance assessment ($520,000 net of taxes) and the earnings credit for the
effect of a change in the New York State tax law ($238,000 net of Federal
taxes), net income would have been $1.6 million for the nine months ended March
31, 1997.
Net interest income for the nine months ended March 31, 1997 increased
$676,000, or 14.9%, compared to the same period in the prior year. The increase
was caused primarily by a $16.5 million increase in net earning assets,
partially offset by a 9 basis point decrease in the net interest rate spread.
The decrease in the net interest rate spread was due in part to a reduction in
mortgage interest income of $67,000 relating to the TASCO Loans. The Company's
ratio of interest-earning assets to interest-bearing liabilities increased from
128.4% for the nine months ended March 31, 1996 to 141.5% for the nine months
ended March 31, 1997.
The provision for loan losses was $128,000 and $35,000, respectively,
for the nine months ended March 31, 1997 and 1996. The increase of $93,000 was
primarily provided for the TASCO Loans, for which the FDIC is disputing whether
it is a guarantor for the loans. See "Comparison of Financial Condition at March
31, 1997 and June 30, 1996." Management continues to evaluate the adequacy of
the allowance for loan losses based on the local economic and real estate
markets and the levels of non-performing loans.
Non-interest income decreased $41,000 for the nine months ended March
31, 1997, compared to the year-ago period, reflecting decreases in loan late
fees and service charges.
Non-interest expense increased $1.3 million for the nine months ended
March 31, 1997 compared to the nine months ended March 31, 1996. The increase
was primarily due to the following: a special one-time assessment of $884,000
for Federal deposit insurance; $169,000 and $111,000 of additional expenses
relating to the RRP and ESOP, respectively; and a $254,000 increase in other
non-interest expense reflecting increased advertising expenses and the costs
associated with being a public company. These increases in the current
nine-month period were partially offset by the $100,000 payment made in the nine
months ended March 31, 1996 to the estate of the Company's former CEO. The ratio
of non-interest expense to average assets, on an annualized basis, increased
from 1.60% for the nine months ended March 31, 1996 to 2.42% for the same period
in the current year. Excluding the $884,000
10
charge described above, the ratio for the nine months ended March 31, 1997 would
have been 1.79%.
Income tax expense decreased from $1.1 million for the nine months
ended March 31, 1996 to $571,000 for the same period in the current year. The
decrease reflects the current-period recognition of a New York State tax
benefit, net of Federal taxes, of $238,000 relating to an amendment to the New
York State tax law to prevent the recapture of the Bank's State tax bad debt
reserve. The remaining decrease was caused primarily by a decrease of $780,000,
or 29.4%, in pre-tax income.
The following tables show the Company's average consolidated balances, interest
income and expense, and average rates (annualized) for the periods indicated.
Nine Months Ended
----------------------------------------------------------------------------
March 31, 1997 March 31, 1996
-------------------------------------- ----------------------------------
Average Average Average Average
Balance Interest Yield/Rate Balance Interest Yield/Rate
------- -------- ---------- ------- -------- ----------
(Dollars in Thousands)
Interest-Earning Assets:
Loans.......................................... $ 42,429 $ 2,513 7.90% $ 38,772 $ 2,518 8.66%
Mortgage-backed securities(1).................. 116,675 5,529 6.32 106,536 5,055 6.33
Other debt securities(1)....................... 13,192 646 6.54 8,748 378 5.76
Other interest-earning assets.................. 11,987 534 5.93 16,028 661 5.50
-------- ------- -------- -------
Total interest-earning assets.................. $184,283 9,222 6.67 $170,084 8,612 6.75
======== ======= ======== =======
Interest-Bearing Liabilities:
Regular savings and club accounts.............. $56,785 1,286 3.02% $ 63,600 1,461 3.06%
Money market and NOW accounts.................. 11,229 206 2.45 12,567 230 2.44
Savings certificates........................... 62,183 2,530 5.42 56,326 2,394 5.67
Borrowings..................................... --- --- --- --- 3 ---
-------- ------- ---- -------- -------
Total interest-bearing liabilities............. $130,197 4,022 4.12 $132,493 4,088 4.11
======== ======= ======== =======
Net interest income............................. $ 5,200 $ 4,524
======= =======
Net interest rate spread(2)..................... 2.55% 2.64%
==== ====
Net earning assets.............................. $ 54,086 $ 37,591
======== =========
Net yield on average interest-earning assets(3). 3.76% 3.55%
==== ====
Average interest-earning assets to
average interest-bearing liabilities........... 1.42x 1.28x
==== ====
Three Months Ended
----------------------------------------------------------------------------
March 31, 1997 March 31, 1996
-------------------------------------- ----------------------------------
Average Average Average Average
Balance Interest Yield/Rate Balance Interest Yield/Rate
------- -------- ---------- ------- -------- ----------
(Dollars in Thousands)
Interest-Earning Assets:
Loans.......................................... $ 43,173 $ 869 8.05% $ 37,692 $ 815 8.65%
Mortgage-backed securities(1).................. 117,773 1,852 6.29 113,665 1,756 6.18
Other debt securities(1)....................... 12,967 214 6.60 10,478 136 5.19
Other interest-earning assets.................. 6,473 110 6.80 27,809 429 6.17
------- ----- ------- -----
Total interest-earning assets.................. $180,386 3,045 6.75 $189,644 3,136 6.61
======= ===== ======= =====
Interest-Bearing Liabilities:
Regular savings and club accounts.............. $55,893 421 3.01% $ 59,115 448 3.03%
Money market and NOW accounts.................. 11,037 68 2.46 12,134 74 2.44
Savings certificates........................... 64,727 872 5.39 57,144 794 5.56
------- ------- -------- -----
Total interest-bearing liabilities............. $131,657 1,361 4.13 $128,393 1,316 4.10
======= ======= ======== =======
Net interest income............................. $ 1,684 $ 1,820
======= =======
Net interest rate spread(2)..................... 2.62% 2.51%
==== ====
Net earning assets.............................. $ 48,729 $ 61,251
======== ========
Net yield on average interest-earning assets(3). 3.73% 3.84%
==== ====
Average interest-earning assets to
average interest-bearing liabilities........... 1.37x 1.48x
==== ====
(1) Average balances calculated using amortized cost.
(2) Average rate on total interest-earning assets less average rate on total
interest-bearing liabilities
(3) Net interest income divided by total average interest-earning assets
LIQUIDITY AND CAPITAL RESOURCES
12
The Bank's primary sources of funds are depositor accounts from its
market area; proceeds from principal and interest payments on loans;
mortgage-backed and other debt securities; and borrowings from the Federal Home
Loan Bank of New York ("FHLB"). While maturities and scheduled amortization of
loans, mortgage-backed and other debt securities are a predictable source of
funds, deposit flows and loan and mortgage-backed securities prepayments are
greatly influenced by general interest rates, economic conditions and
competition.
The primary investing activities of the Bank are the origination of
mortgage loans and the purchase of securities, and its primary financing
activity is the attraction of depositor accounts.
The Bank maintains a line of credit with the FHLB for which the Bank
has pledged certain securities as collateral. In addition, the Bank has the
ability to borrow additional funds from the FHLB by pledging additional
securities. Other sources of liquidity include the sale of securities in the
available-for-sale portfolio. The Bank had no borrowings at March 31, 1997 and
$500,000 at June 30, 1996.
The Bank is required to maintain minimum levels of liquid assets as
defined by OTS regulations. This requirement, which may be varied by the OTS
depending upon economic conditions and deposit flows, is based upon percentages
of liquid assets to depositor accounts and short-term borrowings. The required
minimum liquidity ratios are currently 5.0% for total liquid assets and 1% for
short-term liquid assets. The Bank's average daily total liquidity ratio for the
month of March 1997 was 45.96% and its short-term liquidity ratio for the same
period was 4.41%
The Bank's most liquid assets are cash and cash equivalents, which
consist of short-term highly liquid investments with original maturities of less
than three months that are readily convertible to known amounts of cash and
interest-bearing deposits in other financial institutions. The level of these
assets is dependent on cash flows from the Bank's operating, financing and
investing activities during any given period. Cash and cash equivalents
decreased $14.6 million, from $17.3 million at June 30, 1996 to $2.7 million at
March 31, 1997 primarily reflecting purchases of treasury stock and RRP stock.
The Bank anticipates that it will have sufficient funds available to
meet its current commitments. At March 31, 1997, the Bank had commitments to
originate loans of $1.6 million. Savings certificates which are scheduled to
mature in one year or less at March 31, 1997 totaled $53.4 million. Management
believes that a significant portion of such depositor accounts will remain with
the Bank.
At March 31, 1997, the Bank's capital exceeded each of the capital
requirements of the OTS. At March 31, 1997, the Bank's tangible and core capital
levels were both $44.2 million (24.5% of total adjusted assets) and its
risk-based capital level was $44.8 million (97.7% of total risk-weighted
assets). The current minimum regulatory capital ratio requirements are 1.5% for
tangible capital, 3.0% for core capital and 8.0% for risk-weighted capital.
13
REGULATORY DEVELOPMENT
The deposits of savings associations, such as the Bank, are presently
insured by the Savings Association Insurance Fund ("SAIF"), which together with
the Bank Insurance Fund ("BIF"), are the two insurance funds administered by the
FDIC. Beginning in 1995, financial institutions which are members of the BIF
experienced substantially lower deposit insurance premiums because the BIF had
achieved its required level of reserves while the SAIF had not yet achieved its
required reserves. In order to help eliminate this disparity and any competitive
disadvantage due to disparate deposit insurance premium schedules, legislation
to recapitalize the SAIF was enacted in September 1996.
The legislation required a special one-time assessment of 65.7 cents
per $100 of SAIF insured deposits held by depository institutions at March 31,
1995. The Bank's special assessment was $884,000 and, accordingly the Company
recognized an after-tax charge to earnings of approximately $520,000 during the
quarter ended September 30, 1996. The Bank paid this assessment on November 27,
1996. The legislation was intended to fully recapitalize the SAIF so that
commercial bank and thrift deposits will be charged the same FDIC premiums
beginning January 1, 1997. As of such date deposit insurance premiums for
highly-rated institutions, such as the Bank, were eliminated.
The Bank, however, continues to be subject to an assessment to fund
repayment of the Financing Corporation ("FICO") obligations. The present FICO
assessment for SAIF-insured institutions is 6.5 cents per $100 of deposits
compared to 1.3 cents per $100 of deposits for BIF-insured institutions. This
differential will continue until the year 2000 when the assessment will be
imposed at the same rate on all FDIC-insured institutions. Accordingly, as a
result of the elimination of the SAIF premium and the imposition of the FICO
assessment, the Bank's annual after-tax decrease in assessment costs is expected
to be approximately $131,000 based upon its June 30, 1996 assessment base.
14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
From time to time, the Company is involved as plaintiff or
defendant in various legal proceedings arising in the normal course of
its business. While the ultimate outcome of these various legal
proceedings cannot be predicted with certainty, it is the opinion of
management that the resolution of these legal actions should not have a
material effect on the Company's financial position or results of
operations.
Item 2. Changes in Securities
---------------------
None
Item 3. Defaults Upon Senior Securities
-------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None
Item 5. Other information
-----------------
None
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
a. Exhibits:
3. Amendment to By-Laws of Company
27. Financial Data Schedule
b. Reports on Form 8-K
None
15
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.
PEEKSKILL FINANCIAL CORPORATION
-------------------------------
(Registrant)
DATE: May 12, 1997 BY: /s/ Edlorus Maynard
-------------------
Eldorus Maynard
Chairman of the Board and
Chief Executive Officer
DATE: May 12, 1997 BY: /s/ William J. LaCalamito
-------------------------
William J. LaCalamito
President
(principal financial officer)
16