1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON DC 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 quarter ended.......................................June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ................ to ......................
COMMISSION FILE NUMBER: 0-24358
ML BANCORP, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2752439
------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
Two Aldwyn Center
Villanova, Pennsylvania 19085
------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code:)
(610) 526-6460
Indicate by check mark whether the registrant (1) has filed all reports required
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or 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:
As of July 31, 1997, there were 14,547,600 shares issued and 11,293,054
shares outstanding of the Registrant's Common Stock.
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ML BANCORP, INC.
TABLE OF CONTENTS
Item
No.
- ---
PART I - CONSOLIDATED FINANCIAL INFORMATION
1 CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of Financial Condition
June 30, (unaudited) and March 31, 1997............................ 1
Consolidated Statements of Operations for the Three Months
Ended June 30, 1997 and 1996 (unaudited) .......................... 2
Consolidated Statements of Cash Flows for the Three Months
Ended June 30, 1997 and 1996 (unaudited) .......................... 3
Notes to Consolidated Financial Statements (unaudited)............. 5
2 Management's Discussion and Analysis of Financial
Condition and Results of Operations................................ 8
PART II - OTHER INFORMATION
1 Legal Proceedings.................................................. 13
2 Changes in Securities ............................................. 13
3 Defaults Upon Senior Securities ................................... 13
4 Submission of Matters to a Vote of Security Holders ............... 13
5 Other Information ................................................. 13
6 Exhibits and Reports on Form 8-K .................................. 13
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ML BANCORP, INC.
Consolidated Statements of Financial Condition
June 30 and March 31, 1997
(in thousands, except share and per share data)
=============================================================================================================================
(Unaudited)
JUNE 30, March 31,
ASSETS 1997 1997
- -----------------------------------------------------------------------------------------------------------------------------
Cash (including interest-bearing deposits of $17,803 and $7,082
at June 30 and March 31, 1997, respectively) $ 24,272 17,744
Assets available for sale:
Securities 649,396 597,825
Loans 169,718 104,708
Investments (market value $39,582 and $31,730
at June 30 and March 31, 1997, respectively) 39,694 32,071
Mortgage-related securities (market value $371,586 and $380,046
at June 30 and March 31, 1997, respectively) 372,450 385,293
Loans receivable, net of allowance for loan loss ($15,514 and $14,733
at June 30 and March 31, 1997, respectively) 719,858 730,535
Accrued income receivable 13,628 12,591
Other real estate owned, net 1,465 1,332
Premises and equipment, at cost less accumulated depreciation
($17,558 and $16,904 at June 30 and March 31, 1997, respectively) 16,675 16,988
Mortgage servicing rights 55,146 49,721
Goodwill and other intangible assets 2,494 2,751
Other assets 5,402 8,288
- -----------------------------------------------------------------------------------------------------------------------------
Total assets $ 2,070,198 1,959,847
=============================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- -----------------------------------------------------------------------------------------------------------------------------
Customer accounts $ 903,607 873,357
Advances from Federal Home Loan Bank 454,671 437,418
Securities sold under agreements to repurchase 495,599 456,285
Advance payments by borrowers for taxes and insurance 4,335 3,670
Other liabilities 18,541 3,413
- -----------------------------------------------------------------------------------------------------------------------------
Total liabilities 1,876,753 1,774,143
- -----------------------------------------------------------------------------------------------------------------------------
Corporation-obligated mandatorily redeemable capital securities of subsidiary
trust holding solely junior subordinated debentures of the Corporation 50,000 50,000
Stockholders' Equity:
Preferred stock, no par value, authorized 5,000,000 shares;
no shares issued and outstanding - -
Common stock, $.01 par value, authorized 30,000,000 shares;
14,547,600 shares issued 73 73
Additional paid-in capital 97,585 97,237
Common stock acquired by stock benefit plans (6,990) (7,336)
Treasury stock, at cost; 3,254,546 and 3,271,046 shares
at June 30 and March 31, 1997, respectively (37,023) (37,147)
Retained earnings 85,948 83,280
Unrealized gain (loss) on securities available for sale 3,852 (403)
- -----------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 143,445 135,704
- -----------------------------------------------------------------------------------------------------------------------------
Total liabilities, minority interest in subsidiaries and stockholders' equity $ 2,070,198 1,959,847
=============================================================================================================================
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ML BANCORP, INC.
Consolidated Statements of Operations
Three months ended June 30, 1997 and 1996
(in thousands, except share and per share data)
==================================================================================================
(Unaudited)
Three months
ended June 30,
--------------------------------
1997 1996
- --------------------------------------------------------------------------------------------------
Interest income:
Loans $ 17,222 16,216
Mortgage-related and investment securities 6,999 7,393
Assets available for sale 12,419 9,788
Interest-bearing deposits 150 129
- --------------------------------------------------------------------------------------------------
Total interest income 36,790 33,526
- --------------------------------------------------------------------------------------------------
Interest expense:
Customer accounts 8,182 8,282
FHLB advances 6,801 6,420
Other borrowings 6,364 5,754
- --------------------------------------------------------------------------------------------------
Total interest expense 21,347 20,456
- --------------------------------------------------------------------------------------------------
Net interest income 15,443 13,070
Provision for loan losses 1,050 1,000
- --------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 14,393 12,070
Non-interest income:
Retail fees and charges 676 413
Mortgage banking operations 3,198 3,172
Net gain (loss) on:
Sales of securities available for sale 154 -
Other real estate activities 65 309
Rental income 171 171
Other 64 99
- --------------------------------------------------------------------------------------------------
Total non-interest income 4,328 4,164
- --------------------------------------------------------------------------------------------------
Non-interest expenses:
Compensation and employee benefits $ 5,779 5,474
Advertising 371 535
Data processing 473 415
Federal insurance premiums 132 462
Amortization of goodwill and other intangible assets 274 1,619
Net occupancy costs 1,593 1,422
Professional fees 607 199
Minority interest in expense of subsidiaries 1,247 -
Other 1,556 1,433
- --------------------------------------------------------------------------------------------------
Total non-interest expenses 12,032 11,559
- --------------------------------------------------------------------------------------------------
Income before income taxes 6,689 4,675
Income taxes 2,935 1,430
- --------------------------------------------------------------------------------------------------
Net income $ 3,754 3,245
==================================================================================================
Primary earnings per share $ 0.34 0.27
==================================================================================================
Fully diluted earnings per share $ 0.33 0.27
==================================================================================================
Weighted average number of shares-primary 11,197,005 12,038,604
==================================================================================================
Weighted average number of shares-fully diluted 11,290,512 12,048,706
==================================================================================================
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ML BANCORP, INC.
Consolidated Statements of Cash Flows
Three months ended June 30, 1997 and 1996
(in thousands)
================================================================================================================================
(Unaudited)
Three months
ended June 30,
-------------------------------------
1997 1996
- --------------------------------------------------------------------------------------------------------------------------------
Net cash flows from operating activities:
Net income $ 3,754 3,245
- --------------------------------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Amortization of:
Goodwill and other intangible assets $ 274 1,619
Deferred loan origination fees (572) (792)
Premiums and discounts 978 801
Common stock acquired by stock benefit plans 694 789
Mortgage servicing rights 2,005 2,000
Provision for loan losses 1,050 1,000
Net (gain) loss on sale of assets available for sale:
Securities (154) -
Loans (1,600) (2,212)
Net (gain) loss on other real estate activities (65) (309)
Depreciation and amortization 740 602
Increase/decrease in:
Loans available for sale (63,410) 2,885
Accrued income receivable (1,037) (428)
Deferred federal income taxes 4,020 (562)
Other assets 2,886 (1,628)
Other liabilities 8,142 (955)
- --------------------------------------------------------------------------------------------------------------------------------
Total adjustments (46,049) 2,810
- --------------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by operating activities (42,295) 6,055
- --------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Net decrease (increase) in loans receivable 9,881 (27,748)
Proceeds from sales of:
FHLB stock 2,902 687
Securities available for sale 5,515 -
Proceeds from maturities or repayments of:
Mortgage-related securities 12,397 17,905
Securities available for sale 24,110 38,868
Investments 5,000 6,000
Purchases of:
Securities available for sale (74,354) (96,600)
Investments (15,524) (14,885)
Mortgage servicing rights (7,430) (22,687)
Net decrease (increase) in other real estate owned (34) 552
Proceeds from other real estate activities 284 126
Excess of liabilities assumed over assets acquired (17) (3,752)
Purchases of premises and equipment (427) (772)
- --------------------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (37,697) (102,306)
- --------------------------------------------------------------------------------------------------------------------------------
(Continued)
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ML BANCORP, INC.
Consolidated Statements of Cash Flows, Continued
(in thousands)
================================================================================================================================
(Unaudited)
Three months
ended June 30,
-------------------------------------
1997 1996
- --------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net increase in customer accounts $ 30,250 11,462
Dividends paid (1,087) (1,188)
Proceeds from securities sold under agreements to repurchase 153,476 39,517
Payments of securities sold under agreements to repurchase (114,162) (26,248)
Proceeds from FHLB advances 27,253 110,801
Payments of FHLB advances (10,000) (25,000)
Net decrease in advance payments by borrowers for taxes and insurance 665 1,481
Stock options exercised 125 -
- --------------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 86,520 110,825
- --------------------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 6,528 14,574
Cash and cash equivalents:
Beginning of period 17,744 23,323
- --------------------------------------------------------------------------------------------------------------------------------
End of period $ 24,272 37,897
================================================================================================================================
Supplemental disclosure:
Cash payments for interest $ 20,193 21,114
Cash payments for income taxes - 250
Transfer of loans receivable into other real estate owned 318 22
Net unrealized gain (loss) on securities available for sale 7,221 (3,136)
Tax effect on unrealized gain (loss) on securities available for sale 4,255 (1,192)
================================================================================================================================
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ML BANCORP, INC.
Notes to Consolidated Financial Statements (unaudited)
================================================================================
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying consolidated financial statements were prepared in
accordance with instructions to Form 10-Q, and therefore, do not
include information or footnotes necessary for a complete presentation
of financial position, results of operations and cash flows in
conformity with generally accepted accounting principles. However, all
normal, recurring adjustments which, in the opinion of management, are
necessary for a fair presentation of the financial statements, have
been included. These financial statements should be read in conjunction
with the audited financial statements and the notes thereto included in
the ML Bancorp, Inc. ("Company") Annual Report for the period ended
March 31, 1997. The results for the three months ended June 30, 1997
are not necessarily indicative of the results that may be expected for
the fiscal year ended March 31, 1998.
In July 1996, the Company declared a two-for-one stock split of its
common stock. One share for each share held by shareholders of record
on August 9, 1996 was distributed on September 6, 1996. All share and
per share data have been adjusted for the two-for-one stock split.
(2) RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share"
(EPS). This statement, which supercedes APB Opinion No. 15, simplifies
the standards for computing EPS and makes them comparable to
international standards. SFAS No. 128 replaces the current "primary"
and "fully diluted" earnings per share with "basic" and "diluted"
earnings per share. Basic EPS 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
were exercised or converted into common stock, or resulted in the
issuance of common stock that then shared in the earnings of the
company. Diluted EPS is computed similarly to fully diluted EPS
pursuant to APB Opinion No. 15. This statement is effective for
financial statements issued for periods ending after December 15, 1997,
including interim periods; earlier application is not permitted. This
statement requires restatement of all prior period EPS data presented.
If this statement would have been in effect for these financial
statements, the reported EPS would have been as follows:
For three months ended June 30,
---------------------------------------
1997 1996
------------------ ------------------
Earnings per share:
Basic $0.36 $0.28
Diluted 0.33 0.27
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." This statement establishes standards for the reporting and
display of comprehensive income and its components in a full set of
general purpose financial statements. SFAS No. 130 requires that all
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ML BANCORP, INC.
Notes to Consolidated Financial Statements (unaudited)
================================================================================
(2) CONTINUED
items that are required to be recognized as components of comprehensive
income be reported in a financial statement that is displayed with the
same prominence as other financial statements. The statement does not
require a specific format for that financial statement but requires
that an enterprise display an amount representing total comprehensive
income for the period in that financial statement. SFAS No. 130 is
effective for fiscal years beginning after December 15, 1997. The
Company will include this new reporting information in its fiscal 1999
consolidated financial statements as required.
In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments
of an Enterprise and Related Information." SFAS No. 131 establishes
standards for the way that public business enterprises report
information about operating segments in annual financial statements and
requires that those enterprises report selected information about
operating segments in interim financial reports issued to stockholders.
Is also establishes standards for related disclosures about products
and services, geographic areas, and major customers. SFAS No. 131 is
effective for financial statements for periods beginning after December
15, 1997. The Company will include this new reporting information in
its fiscal 1999 consolidated financial statements as required.
(3) LOANS RECEIVABLE
Loans receivable at June 30 and March 31, 1997 consisted of the
following (in thousands):
JUNE 30, March 31,
1997 1997
- ----------------------------------------------------------------------------------------------
Real estate loans:
One- to four-family $ 299,371 310,456
Construction and land:
Residential 93,383 90,618
Commercial 29,062 38,913
Commercial real estate 132,456 130,017
Multi-family 14,523 12,411
- ----------------------------------------------------------------------------------------------
Total real estate loans 568,795 582,415
- ----------------------------------------------------------------------------------------------
Other loans:
Consumer:
Home equity and equity lines of credit 138,298 131,699
Other 10,946 10,990
Commercial 85,090 84,034
- ----------------------------------------------------------------------------------------------
Total other loans 234,334 226,723
- ----------------------------------------------------------------------------------------------
803,129 809,138
Loans in process (construction loans) (64,279) (59,916)
Deferred loan fees (3,478) (3,954)
Allowance for loan losses (15,514) (14,733)
- ----------------------------------------------------------------------------------------------
$ 719,858 730,535
==============================================================================================
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ML BANCORP, INC.
Notes to Consolidated Financial Statements (unaudited)
================================================================================
(3) CONTINUED
Activity in the allowance for loan losses for the three months ended
June 30, 1997 and 1996 consisted of the following (in thousands):
Three months ended
June 30,
-----------------------------
1997 1996
- ------------------------------------------------------------------------
Balance, beginning of period $ 14,733 13,124
Provision for loan losses 1,050 1,000
Charge-offs (277) (108)
Recoveries 8 37
- ------------------------------------------------------------------------
Balance, end of period $ 15,514 14,053
========================================================================
(4) CUSTOMER ACCOUNTS
The major types of customer accounts by amounts and the percentages of
such types to total customer accounts are as follows (in thousands):
JUNE 30, 1997 March 31, 1997
--------------------------------- ---------------------------------
% of % of
AMOUNT total Amount total
- ------------------------------------------------------------------------------------------------------------------------
Noninterest-bearing accounts $ 137,164 15.18 % $ 118,836 13.61 %
Money market and NOW accounts 156,443 17.31 156,325 17.90
Passbook and statement savings accounts 90,365 10.00 88,574 10.14
- ------------------------------------------------------------------------------------------------------------------------
383,972 42.49 363,735 41.65
Certificates of deposit 472,219 52.26 469,073 53.71
Repurchase agreements with customers 47,416 5.25 40,549 4.64
- ------------------------------------------------------------------------------------------------------------------------
$ 903,607 100.00 % $ 873,357 100.00 %
========================================================================================================================
(5) SUBSEQUENT EVENT
In August 1997, the Company received approval from its primary
regulator, the Office of Thrift Supervision ("OTS"), to repurchase 10%
(approximately 1.1 million shares) of its common stock. The Company
intends to complete such repurchase no later than eighteen months from
the approval date.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company's net income for the quarter ended June 30, 1997 amounted to $3.8
million or $0.33 per fully diluted share, compared to net income of $3.2 million
or $0.27 per share for the comparable quarter in 1996.
FINANCIAL CONDITION
CASH AND INVESTMENTS. Cash and Investments increased by $14.2 million or 28.4%
from $49.8 million at March 31, 1997 to $64.0 million at June 30, 1997. The
increase was primarily attributable to investment purchases of $15.5 million
partially offset by $5.0 million of maturities occurring during the quarter.
MORTGAGE-RELATED SECURITIES AND SECURITIES AVAILABLE-FOR-SALE. Mortgage-related
securities and securities available-for-sale increased by $38.7 million or 3.9%
at June 30, 1997 to $1,021.8 million from $983.1 million at March 31, 1997. This
increase is mainly associated with $74.4 million in mortgage-related security
purchases partially offset by $36.5 million in repayments.
LOANS AVAILABLE-FOR-SALE AND LOANS RECEIVABLE, NET. Total loans receivable
(loans receivable, net and loans available-for-sale) amounted to $889.6 million
at June 30, 1997 representing an increase of $54.3 million or 6.5% due primarily
to an increase of $65 million or 62.1% in loans available-for-sale, which was
partially offset by a reduction in loans receivable, net of $10.7 million or
1.5%. The increase in loans available-for-sale was primarily related to
increased residential mortgage warehouse loans while the decline in loans
receivable, net was caused by large construction loan paydowns amounting to
$11.6 million or 16.7% partially offset by consumer loan growth of $6.9 million
or 4.5%.
NONPERFORMING ASSETS. The Company's total nonperforming assets declined by $1.2
million from $10.7 million or 0.55% of total assets at March 31,1997 to $9.5
million or 0.46% of total assets at June 30, 1997. The Company's nonaccrual
loans at June 30,1997 amounted to $8.0 million resulting in a decline of $1.4
million or 14.5% from March 31, 1997.
Other real estate owned increased to $1.5 million at June 30, 1997 representing
an increase of $133,000 or 10.0% from the March 31, 1997 level of $1.3 million.
At June 30, 1997, the Company's allowance for loan losses amounted to $15.5
million (which included $500,000 of specific reserves for one commercial loan
and $100,000 for one residential mortgage project loan) or 193.1 % of
nonperforming loans and 1.71% of gross loans receivable. At March 31, 1997, the
Company's allowance for loan losses was $14.7 million (which included $500,000
for the commercial loan previously noted and $300,000 for two residential
mortgage project loans including the one previously referenced) or 156.9% of
nonperforming loans and 1.73% of gross loans receivable.
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MORTGAGE SERVICING RIGHTS. Mortgage servicing rights, both purchased and
originated ("MSRs") increased $5.4 million or 10.9% from $49.7 million at March
31,1997 to $55.1 million at June 30, 1997. The increase was due primarily to the
purchase of $6.7 million of MSRs and the origination of $776,000 of MSRs during
the quarter. Partially offsetting these increases was $2.0 of amortization of
MSRs during the quarter. As a result of management's quarterly analysis, there
was no change in the impairment reserve during the quarter.
CUSTOMER ACCOUNTS. Customer accounts amounted to $903.6 million at June 31, 1997
representing an increase of $30.2 million or 3.5 % from the level recorded at
March 31, 1997 of $873.4 million. The change was mainly associated with
increases in noninterest-bearing accounts of $18.3 million or 15.4% and
repurchase agreements with customers of $6.9 million or 16.9%.
BORROWINGS. Total borrowings increased by $56.6 million to $950.3 million at
June 30, 1997 as compared to $893.7 at March 31, 1997. The Company's borrowings
are primarily comprised of advances from the Federal Home Loan Bank ("FHLB") and
repurchase agreements. Repurchase agreements are commitments the Company enters
into to sell securities under terms which require it to repurchase the same
securities by a specified date. Such agreements represent a competitive cost
funding source for the Company; however, the Company is subject to the risk that
the lender may default at maturity and not return the collateral. The repurchase
agreements are primarily comprised of various Federal Home Loan Mortgage
Corporation ("FHLMC") and large, established brokerage institution repurchase
agreements. At June 30, 1997, the Company had repurchase agreements amounting to
$495.6 million with a weighted average maturity of approximately 13 months and a
weighted average interest rate of 5.74%. FHLB advances totaled $454.7 million at
June 30, 1997, with a weighted average maturity of approximately 26 months and a
weighted average interest rate of 6.01%.
EQUITY. Total equity amounted to $143.4 million or 6.93% of total assets at June
30, 1997, as compared to $135.7 million or 6.92% at March 31,1997. Total equity
increased by $7.7 million during the quarter ended June 30, 1997 primarily as a
result of net income of $3.8 million, a $4.3 million net of tax increase in
unrealized gains related to securities classified as assets available for sale
offset by a $1.1 million cash dividend paid to common stockholders.
RESULTS OF OPERATIONS
NET INCOME. The Company's net income of $3.7 million or $0.33 per fully diluted
share for the quarter ended June 30, 1997, amounted to an increase of $509,000
or 15.7% above the $3.2 million recorded in the comparable period of 1996. The
improvement in first quarter earnings was primarily the result of a $2.3 million
or 19.2% increase in net interest income after the provision for loan losses
associated with an increase in interest earning assets and a lower cost of funds
attributable to an improved deposit mix and lower rates on borrowed funds. This
favorable change was partially offset by higher operating expenses of $473,000
or 4.1% above the prior comparable period due to the continuation of the
business center expansion program and the expense related to the issuance of
$50.0 million of Trust Preferred securities in March 1997 which were partially
offset by lower federal deposit insurance premiums and lower goodwill costs from
previous acquisitions.
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NET INTEREST INCOME. Net interest income before the provision for loan losses
amounted to $15.4 million for the quarter ended June 30, 1997, resulting in an
increase of $2.4 million or 18.2 % above the $13.1 recorded in the prior
comparable period.
Total interest income of $36.8 million was $3.3 million or 9.7% above the prior
comparable period of $33.5 million. This increase was primarily attributable to
the growth in average interest-earning assets of $157.9 million or 9.1% and also
benefited from an increase of four basis points in the yield on interest-earning
assets relative to the quarter ended June 30, 1996.
Total interest expense amounted to $21.3 million representing an increase of
$891,000 or 4.4% above the prior comparable period in 1996. The interest expense
impact of $138.4 million or 8.3% increase in average interest-bearing
liabilities was partially offset by an 18 basis point decrease in the average
rate paid for the current quarter over the prior comparable period in 1996. The
18 basis point decline was partly due to an increase in noninterest bearing
customer accounts of $23.3 million or 20.8% over the comparable period in 1996.
PROVISION FOR LOAN LOSSES. The Company establishes provisions for loan losses,
which are charged to earnings, in order to maintain the allowance for loan
losses at a level which is deemed to be appropriate based upon an assessment of
prior loss experience, the volume and type of lending being conducted by the
Company, industry standards, past due loans, economic conditions in the
Company's market area generally and other factors related to the collectibility
of the Company's loan portfolio. For the quarter ended June 30, 1997, the
provision for loan losses amounted to $1.1 million.
Consistent with its long-term goals, the Company intends to continue to increase
its originations and/or participations of commercial real estate and commercial
business loan. Commercial loans, while typically having a higher yield, entail
different risks when compared to residential lending because such loans usually
involve larger loan balances to single borrowers and because the payment
experience on such loans is dependent on the successful operation of the project
or the borrower's business. The Company attempts to mitigate risk exposure by
limiting such lending to proven developers/owners, only considering properties
with existing operating performance which can be analyzed, requiring
conservative debt coverage ratios and continually monitoring the operation and
physical condition of the collateral.
Although management utilizes its best judgment in providing for possible losses,
there can be no assurance that the Company will not have to increase its
provision for loan losses in the future as a result of adverse changes in
nonperforming loans or for other reasons, which could affect the Company's
results of operations. In addition, various regulatory agencies, as an integral
part of their examination process, periodically review the Company's provision
for loan losses and the carrying value of its other nonperforming assets based
on their judgments about information available to them at the time of their
review.
NONINTEREST INCOME. Total noninterest income of $4.3 million was $164,000 or
3.9% above the prior comparable period in 1996. Retail fees and charges
represented the largest increase as the total of $676,000 amounted to an
increase of $263,000 or 63.7% due to the larger retail customer base and the
higher level of investment product sales. Income from Mortgage Banking
operations of $3.2 million, which represents 73.9% of the noninterest income,
rose $26,000 or 0.8% above
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the prior comparable quarter of 1996. A gain on the sale of securities amounted
to $154,000 during the current quarter versus no gains or losses during the
previous comparable quarter of 1996.
NONINTEREST EXPENSES. Noninterest expense growth of $473,000 or 4.1% above the
prior comparable quarter resulted in total expenses of $12.0 for the quarter
ended June 30, 1997. Compensation and employee benefits expense increased by
$305,000 or 5.6% from the prior comparable period due to annual merit raises and
the continuation of the business center expansion program. The net occupancy
costs of $1.6 million, which were $171,000 or 12.0% above the first quarter of
1996, were primarily associated with the business center expansion program. The
expense related to the Trust Preferred securities amounted to $1.2 million
during the quarter as a result of the issuance of ML Capital Trust securities
during the last quarter of fiscal 1997. Amortization of goodwill amounted to
$274,000 which represented a decline of $1.3 million or 83.1% from the quarter
ended June 30, 1996 due to the reduction of goodwill for the Suburban Federal
and Philadelphia Mortgage acquisitions and the completion of the goodwill
amortization for Hart Mortgage, the Colonial IRA Deposits and the Aldwyn Center
buildings. In addition, federal insurance premiums amounted to $132,000
resulting in a $330,000 or 71.4% decline primarily as a result of the reduction
of SAIF rates to approximately $0.06 per $100 of deposits from $0.23 per $100 of
deposits. Professional fees $607,000 were $408,000 above the prior comparable
quarter of 1996 due to legal expenses for a nonperforming loan and an increase
in legal expense of $200,000.
INCOME TAXES. Income tax expense totaled $2.9 million for the three months ended
June 30, 1997 compared to $1.4 million for the prior comparable period. The
increase in income tax expense is attributable to increased pre-tax earnings for
the quarter ended June 30, 1997 and additional state income tax expense recorded
due to prior year state tax net operating loss carryovers being fully utilized.
CAPITAL RESOURCES. The OTS regulations require that the Company's subsidiary,
Main Line Bank ("Bank") meet minimum regulatory tangible, core and risk-based
capital requirements. At June 30, 1997, the Bank exceeded all regulatory capital
requirements.
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The following table sets forth the Bank's compliance with each of the regulatory
capital requirements at June 30, 1997.
Tangible Core Risk-Based
Capital Capital Capital
-------------- -------------- --------------
Total Regulatory Capital $120,922 $120,922 $133,112
Minimum Required Regulatory Capital 30,801 61,769 78,067
-------------- -------------- --------------
Excess Regulatory Capital $90,121 $59,153 $55,045
Regulatory Capital as a
Percentage of Assets (1) 5.89% 5.89% 13.64%
Minimum Capital Required as a
Percentage of Assets 1.50% 3.00% 8.00%
-------------- -------------- --------------
Excess Regulatory Capital as a
Percentage of Assets 4.39% 2.89% 5.64%
============== ============== ==============
(1) Tangible and core capital are computed as a percentage of adjusted total
assets of $2.1 billion. Risk-based capital is computed as a percentage of
total risk-weighted assets of $976 million.
LIQUIDITY. The Bank is required by the OTS to maintain average daily balances of
liquid assets and short-term liquid assets (as defined) in amounts equal to 5%
and 1%, respectively, of net withdrawable deposits and borrowings payable in one
year or less to assure its ability to meet demand for withdrawals and repayment
of short-term borrowings. The liquidity requirements may vary from time to time
at the direction of the OTS depending upon economic conditions and deposit
flows. The Bank's liquidity ratio and short-term liquid asset ratio as of June
30, 1997, was 6.5% and 4.7%, respectively.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no material legal proceedings to which the Registrant or
any of its subsidiaries is a part or to which any of their
property is subject.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of the Registrant's Shareholders was held on
July 25, 1997. The items of business acted upon at the Annual
Meeting were (i) the election of one director for a four-year
term, (ii) the adoption of the 1997 Stock Option Plan and (iii)
the approval of KPMG Peat Marwick, L.L.P. as the Company's
independent auditors. The number of votes cast for, against or
withheld, as well as the number of abstentions and non-votes as to
the nominee for office and/or each matter voted upon was as
follows:
(i) Election of Director For Withheld
-------------------- --- --------
David B. Hastings 9,499,089 121,379
(ii) Adoption of the 1997 For Against Abstain Not Voted
Stock Option Plan --- ------- ------- ---------
7,885,806 1,620,813 69,616 1,716,319
(iii) Approval of KPMG Peat Marwick
L.L.P. as the Company's
independent auditors 9,513,157 86,510 20,801 1,672,086
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Not Applicable
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed in its behalf by the
undersigned, thereunto duly authorized.
ML BANCORP, INC.
Date: August 14, 1997
/s/ Brian M. Hartline
- ----------------------
Brian M. Hartline
Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)