-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, J0MOBm5ImBs6Y3V5MOtW2M3uof3gcrEoqoM6WyUTfFy0JhdFpv7OLleqyjP5OOJR 2WzCb+tEIKT3H6bWm4ggOw== 0000946275-00-000244.txt : 20000515 0000946275-00-000244.hdr.sgml : 20000515 ACCESSION NUMBER: 0000946275-00-000244 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000512 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ADVANCE FINANCIAL BANCORP CENTRAL INDEX KEY: 0001023398 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 550753533 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-21885 FILM NUMBER: 627384 BUSINESS ADDRESS: STREET 1: 1015 COMMERCE STREET CITY: WELLSBURG STATE: WV ZIP: 26070 BUSINESS PHONE: 3047373531 MAIL ADDRESS: STREET 1: 1015 COMMERCE STREET CITY: WELLSBURG STATE: WV ZIP: 26070 10QSB 1 FORM 10-QSB United States Securities and Exchange Commission Washington, D.C. 20552 FORM 10QSB {x} QUARTERLY REPORT UNDER SECTION 13 OF 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 { } TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCAHANGE ACT For the transition period from ________________to__________________ Commission file Number 0-21885 ------------------------------ Advance Financial Bancorp ------------------------- (Exact name of registrant as specified in its charter) West Virginia 55-0753533 - ------------- ---------- (State or jurisdiction of (IRS Employer Identification No.) incorporation or organization) 1015 Commerce Street, Wellsburg, WV 26070 ----------------------------------------- (Address of principal executive offices) (304) 737-3531 -------------- (Registrant's telephone number, including area code) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subjected to such filing requirements for the past 90 days. Yes x No --- --- State the number of shares outstanding for each of the issuer's classes of common equity as of the latest practicable date: Class: Common Stock, par value $.10 per share Outstanding at May 12, 2000: 932,285 Advance Financial Bancorp Index
Page Number ------ Part I - FINANCIAL INFORMATION Item 1 - Financial Statements Consolidated Balance Sheet ( Unaudited) as of March 31, 2000 and June 30, 1999 3 Consolidated Statement of Income (Unaudited) For the Three Months ended March 31, 2000 and 1999 4 Consolidated Statement of Income (Unaudited) For the Nine Months ended March 31, 2000 and 1999 5 Consolidated Statement of Cash Flows (Unaudited) For the Nine Months ended March 31, 2000 and 1999 6 Notes to the Unaudited Consolidated Financial Statements 7- 8 Item 2 - Management's Discussion and Analysis 9-14 Part II - OTHER INFORMATION Item 1 - Legal Proceedings 15 Item 2 - Changes in Securities 15 Item 3 - Default Upon Senior Securities 15 Item 4 - Submissions of Matters to a vote of Security Holders 15 Item 5 - Other Information 15 Item 6 - Exhibits and Reports on Form 8-K 15 SIGNATURES 16
ADVANCE FINANCIAL BANCORP CONSOLIDATED BALANCE SHEET (UNAUDITED)
MARCH 31, JUNE 30, 2000 1999 ---------------- ---------------- Assets Cash and cash equivalents: Cash and amounts due from banks $1,039,454 $1,395,704 Interest bearing deposits with other institutions 5,489,049 2,964,166 ---------------- ---------------- Total cash and cash equivalents 6,528,503 4,359,870 ---------------- ---------------- Investment securities: Securities held to maturity (fair value of $1,186,527 and $970,914) 1,249,519 999,896 Securities available for sale 8,233,301 4,481,475 ---------------- ---------------- Total investment securities 9,482,820 5,481,371 ---------------- ---------------- Mortgaged-backed securities: Securities held to maturity (fair value of $2,128,276 and $2,456,645) 2,179,688 2,472,681 Securities available for sale 1,580,413 1,832,845 ---------------- ---------------- Total mortgage-backed securities 3,760,101 4,305,526 ---------------- ---------------- Loans held for sale 147,892 - Loans receivable, (net of allowance for loan losses of $658,714 and $582,280 ) 120,288,394 109,899,551 Office properties and equipment, net 4,112,006 4,084,793 Federal Home Loan Bank Stock, at cost 800,000 629,500 Accrued interest receivable 823,644 664,058 Other assets 857,239 501,967 ---------------- ---------------- TOTAL ASSETS $146,800,599 $129,926,636 ================ ================ Liabilities: Deposits $117,883,575 $105,338,770 Advances from Federal Home Loan Bank 13,500,000 9,000,000 Advance payments by borrowers for taxes and insurance 152,455 196,993 Accrued interest payable and other liabilities 440,786 397,421 ---------------- ---------------- TOTAL LIABILITIES 131,976,816 114,933,184 ---------------- ---------------- Stockholders' Equity: Preferred stock, $.10 par value; 500,000 shares authorized, none issued - - Common stock, $.10 par value; 2,000,000 shares authorized 1,084,450 shares issued 108,445 108,445 Additional paid in capital 10,329,658 10,316,719 Retained earnings - substantially restricted 8,000,223 7,623,733 Unallocated shares held by Employee Stock Ownership Plan (ESOP) (532,604) (597,767) Unallocated shares held by Restricted Stock Plan (RSP) (540,534) (682,357) Treasury Stock (152,165 and 103,165 shares at cost) (2,233,265) (1,626,890) Accumulated other comprehensive loss (308,140) (148,431) ---------------- ---------------- TOTAL STOCKHOLDERS' EQUITY 14,823,783 14,993,452 ---------------- ---------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $146,800,599 $129,926,636 ================ ================
See accompanying notes to the unaudited consolidated financial statements. -3- ADVANCE FINANCIAL BANCORP CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2000 1999 ------------------- ------------------- INTEREST AND DIVIDEND INCOME Loans $2,434,748 $2,139,788 Investment securities 172,683 56,170 Interest-bearing deposits with other institutions 42,812 50,190 Mortgage-backed securities 63,615 38,846 Dividends on Federal Home Loan Bank Stock 13,426 9,972 ------------------- ------------------- Total interest and dividend income 2,727,284 2,294,966 ------------------- ------------------- INTEREST EXPENSE Deposits 1,263,373 1,049,053 Advances from Federal Home Loan Bank 208,344 119,145 ------------------- ------------------- Total interest expense 1,471,717 1,168,198 ------------------- ------------------- NET INTEREST INCOME 1,255,567 1,126,768 Provision for loan losses 51,000 37,500 ------------------- ------------------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 1,204,567 1,089,268 ------------------- ------------------- NONINTEREST INCOME Service charges on deposit accounts 105,844 91,106 Gain on sale of loans 1,994 16,332 Gain on sale of investments - 13,745 Other income 62,766 67,906 ------------------- ------------------- Total noninterest income 170,604 189,089 ------------------- ------------------- NONINTEREST EXPENSE Compensation and employee benefits 502,256 447,863 Occupancy and equipment 178,320 148,419 Professional fees 23,212 22,635 Advertising 28,253 34,664 Data processing charges 71,951 84,884 Other expenses 215,231 203,054 ------------------- ------------------- Total noninterest expenses 1,019,223 941,519 ------------------- ------------------- Income before income taxes 355,948 336,838 Income taxes 140,100 128,140 ------------------- ------------------- NET INCOME $ 215,848 $ 208,698 =================== =================== EARNINGS PER SHARE Basic $ .24 $ .23 Diluted $ .24 $ .23
See accompanying notes to the unaudited consolidated financial statements. -4- ADVANCE FINANCIAL BANCORP CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
NINE MONTHS ENDED MARCH 31, 2000 1999 --------------- --------------- INTEREST AND DIVIDEND INCOME Loans $7,067,649 $6,335,060 Investment securities 482,007 119,705 Interest-bearing deposits with other institutions 124,881 259,931 Mortgage-backed securities 193,195 55,565 Dividends on Federal Home Loan Bank Stock 37,857 30,360 --------------- --------------- Total interest and dividend income 7,905,589 6,800,621 --------------- --------------- INTEREST EXPENSE Deposits 3,650,718 3,215,903 Advances from Federal Home Loan Bank 559,720 365,672 --------------- --------------- Total interest expense 4,210,438 3,581,575 --------------- --------------- NET INTEREST INCOME 3,695,151 3,219,046 Provision for loan losses 126,000 112,500 --------------- --------------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 3,569,151 3,106,546 --------------- --------------- NONINTEREST INCOME Service charges on deposit accounts 323,739 277,191 Gain on sale of loans 6,133 86,567 Gain on sale of investments - 13,745 Other income 184,748 205,219 --------------- --------------- Total noninterest income 514,620 582,722 --------------- --------------- NONINTEREST EXPENSE Compensation and employee benefits 1,442,155 1,306,900 Occupancy and equipment 505,617 441,627 Professional fees 81,234 107,998 Advertising 91,361 98,663 Data processing charges 247,256 257,060 Other expenses 679,957 612,422 --------------- --------------- Total noninterest expenses 3,047,580 2,824,670 --------------- --------------- Income before income taxes 1,036,191 864,598 Income taxes 406,482 335,592 --------------- --------------- NET INCOME $ 629,709 $ 529,006 =============== =============== EARNINGS PER SHARE Basic $ .70 $ .56 Diluted $ .70 $ .56
See accompanying notes to the unaudited consolidated financial statements. -5- ADVANCE FINANCIAL BANCORP CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED MARCH 31, 2000 1999 ---------------- ---------------- OPERATING ACTIVITIES Net Income $ 629,709 $ 529,006 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, amortization and accretion, net 414,673 427,030 Provision for loan losses 126,000 112,500 Gain on sale of investments - (13,745) Gain on sale of loans (6,133) (86,567) Origination of loans held for sale (1,758,832) (8,302,946) Proceeds from the sale of loans 1,617,073 8,849,713 Increase in other assets and liabilities 46,198 (87,186) ---------------- ---------------- Net cash provided by operating activities 1,068,688 1,427,805 ---------------- ---------------- INVESTING ACTIVITIES Investment securities held to maturity: Purchases (249,453) (2,987,988) Maturities and repayments - 3,737,988 Investment securities available for sale: Purchases (4,467,656) (2,000,000) Maturities and repayments 504,545 146,512 Mortgage-backed securities held to maturity: Purchases - (1,006,296) Maturities and repayments 291,248 225,855 Mortgage-backed securities available for sale: Purchases - (2,034,336) Maturities and repayments 221,657 73,959 Purchases of Federal Home Loan Bank Stock (170,500) - Net increase in loans (10,872,341) (10,167,452) Purchases of premises and equipment (298,227) (168,715) ---------------- ---------------- Net cash used in investing activities (15,040,727) (14,180,473) ---------------- ---------------- FINANCING ACTIVITIES Net increase in deposits 12,544,805 11,699,954 Net Proceeds (Repayments) from advances from Federal Home Loan Bank 4,500,000 (1,000,000) Net change in advances for taxes and insurance (44,538) (52,027) Purchase of treasury stock (606,375) (626,027) Cash dividends paid (253,220) (224,138) ---------------- ---------------- Net cash provided by financing activities 16,140,672 9,797,762 ---------------- ---------------- Increase (decrease) in cash and cash equivalents 2,168,633 (2,954,906) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 4,359,870 9,084,193 ---------------- ---------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $6,528,503 $6,129,287 ================ ================ SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest on deposits and borrowings $4,202,908 $3,578,452 Income taxes $ 267,672 $ 250,476
See accompanying notes to the unaudited consolidated financial statements. -6- ADVANCE FINANCIAL BANCORP NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - BASIS OF PRESENTATION The consolidated financial statements of Advance Financial Bancorp (the "Company"), includes its wholly-owned subsidiary, Advance Financial Savings Bank (the "Bank"), and its wholly-owned subsidiary, Advance Financial Service Corporation of West Virginia. All significant intercompany balances and transactions have been eliminated. The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-QSB and, therefore, do not necessarily include all information that would be included in audited financial statements. The information furnished reflects all adjustments, which are, in the opinion of management, necessary for a fair statement of results of operations. All such adjustments are of a normal recurring nature. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the fiscal year ended June 30, 2000 or any other interim period. These statements should be read in conjunction with the consolidated statements of and for the year ended June 30, 1999 and related notes which are included on the Form 10-KSB (file no. 0-21885) NOTE 2 - EARNINGS PER SHARE The following table sets forth a reconciliation of the denominator of the basic and dilutive earnings per share computation in accordance with SFAS No. 128.
Nine Months Ended March 31 2000 1999 ------------ ------------- Denominator: Denominator for basic earnings per share Weighted-average shares 894,643 951,949 Effect of dilutive securities: Employee stock options - - ------------ ------------- Dilutive potential common shares 894,643 951,949 Denominator; Denominator for dilutive earnings per share adjusted Weighted-average shares 894,643 951,949 ============ =============
-7- NOTE 2 - EARNINGS PER SHARE (CONTINUED)
Three Months Ended March 31 2000 1999 --------- ----------- Denominator: Denominator for basic earnings per share Weighted-average shares 871,950 921,500 Effect of dilutive securities: Employee stock options - - ---------- ---------- Dilutive potential common shares 871,950 921,500 Denominator; Denominator for dilutive earnings per share adjusted Weighted-average shares 871,950 921,500 ========== ==========
NOTE 3 - COMPREHENSIVE INCOME Other accumulated comprehensive loss consists solely of net unrealized gains and losses on available for sale securities. For the three and nine months ended March 31, 2000, comprehensive income totaled $237,007 and $470,000, respectively. For the three and nine months ended March 31, 1999, comprehensive income totaled $175,932 and $485,779, respectively. -8- MANAGEMENT'S DISCUSSION AND ANALYSIS 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 ability to control costs and expenses, Year 2000 issues, and general economic conditions. Advance Financial Bancorp (the "Company") undertakes no obligation to publicly release the results of any revisions to those forward-looking statements which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. The Company conducts no significant business or operations of its own other than holding all of the outstanding stock of the Advance Financial Savings Bank (the "Bank"). As a result, references to the Company generally refer to the Bank unless the context indicates otherwise. COMPARISON OF FINANCIAL CONDITION AT MARCH 31,2000 AND JUNE 30, 1999 - -------------------------------------------------------------------- Total assets increased $16,874,000 to $146,800,000 at March 31, 2000, from $129,926,000 at June 30, 1999. At March 31, 2000, deposits and Federal Home Loan Bank ("FHLB") advances increased $12,545,000 and $4,500,000, respectively. These increases were used to fund loan demand and to purchase investment securities. Interest-bearing deposits with other financial institutions increased by $2,525,000 to $5,489,000 at March 31, 2000, from $2,964,000 at June 30, 1999. This additional liquidity enables the Company's management to properly manage interest rate risk in the current interest rate environment by being less dependent on outside funding to meet loan demand. Investment securities available for sale increased by $3,752,000 to $8,233,000 at March 31, 2000, from $4,481,000 at June 30, 1999. This increase includes approximately $1,470,000 in three FHLB bonds with callable options ranging from 3 months to 18 months and an effective weighted average interest rate of 7.11%. The funding for these bonds came from the strong deposit growth. The increase also includes the purchase of a $2,500,000 15-year FHLB bond in August 1999 with a callable option of 1-year and an effective interest yield of 8.10%. The funding for this bond came from a FHLB advance that matures in August 2000 and has an effective cost of funds of 5.94%. Management placed these investments into this category for liquidity purposes while maximizing interest yields in excess of the federal overnight rates paid on interest-bearing demand deposits. Net loans receivable increased by $10,389,000 to $120,288,000 at March 31, 2000, from $109,900,000 at June 30, 1999. The loan increase was spread over the entire portfolio. Loans secured by 1-4 family residences increased by $2,980,000 due to demand for ARMs and the bank's "no fee" Equity Line of Credit program. The company's "no fee" program ended during November 1999. Multi-family residential loans and Non-residential real estate loans increased by $2,839,000 and $1,655,000, respectively, due to strong loan demand for the Company's competitively priced ARM products. Automobile loans increased $1,686,000 due principally to increased loan activity written by automobile dealership customers of the Company. Commercial loans increased by $1,308,000 due principally to the addition of a new automobile dealership to the Company's customer base. See "Risk Elements". -9- Deposits increased by $12,545,000 to $117,884,000 at March 31, 2000 from $105,339,000 at June 30, 1999. Within the deposit line item, certificates of deposit increased by $10,736,000 to $74,452,000 at March 31, 2000 from $63,716,000 at June 30, 1999. This increase is primarily the result of three certificate of deposit specials. The first was called "Advantage 2000", this certificate offered above market rates on certificates of deposit at 5.25% for 12 months and 5.50% for 18 months. The "advantage" of this product was that the customers had a 10-day option at the end of 1999 to redeem the certificate with no penalty. This successful special was offered from June 20, 1999 to September 30, 1999. During the ten day option period of 1999, the Company had approximately $2,350,000 of the "Advantage 2000" certificates redeemed without penalty which was approximately 35% of the total amount deposited in the certificate product. The Company was able to retain all but approximately $330,000 of the redeemed certificates with customers generally transferring the funds into another of the certificate products called "Fives Are Wild". The second certificate of deposit special was called "Fives Are Wild", this certificate offered above market interest rates on certificates of deposit of 5.55% for five months, 5.75% for ten months, 6.0% for 15 or 18 months, and 6.07% for 21 months. The "Fives Are Wild" program began in mid October and ended on March 29, 2000. In mid January of 2000, the Company offered a third certificate of deposit special that paid above market interest rates of 6% for 6 months, 6.25% for 12 months, 6.35% for 24 months and 6.89% for 36 months. As with the previous specials, this special was well received by the area consumers. This special ended on March 29, 2000, as well. Savings deposits increased $1,406,000 while demand deposits increased $403,000 for the nine-month period ended March 31, 2000. The demand deposit increase was primarily the net result of an increase in non-interest bearing deposits of $1,189,000, NOW accounts of $182,000, and a decrease in large money market demand accounts of $968,000. The majority of the money withdrawn from the money market demand account was generally deposited in the certificate of deposit specials. Advances from the FHLB increased by $4,500,000 to $13,500,000 at March 31, 2000 from $9,000,000 at June 30, 1999. This increase involves two separate advances. The first advance was for $2,500,000 with a weighted average rate of 5.94% that has a one-year maturity of August of 2000. The proceeds of this advance were used to purchase a FHLB bond described above under investment securities. The second advance was to increase an existing $3,000,000 callable advance to $5,000,000 with a weighted average rate of 5.52% that has an initial call date in October 2001. The additional $2,000,000 in proceeds from this advance were used to fund a three year adjustable rate mortgage loan originated in October 1999. A third advance for $2,500,000 with a weighted average rate of 5.76% that matured in January 2000 was taken in November 1999. The proceeds of this advance were held to fund Y2K liquidity. At maturity in January 2000, the Company repaid $1,000,000 of the outstanding amount by utilizing excess cash on hand. The remaining $1,500,000 was put onto the RepoPlus line of credit and subsequently repaid in mid February 2000. In addition to the increases and changes to advances from the FHLB discussed above, during the quarter ended December 31, 1999, the FHLB called all three outstanding advances at June 30, 1999, amounting to $9,000,000. The Company elected to renew these advances at the proposed higher rates offered by the FHLB. The new weighted average rate of the renewed $9,000,000 in advances increased to 5.63% from 5.37% prior to the calls. Equity capital decreased by approximately, $170,000 to $14,824,000 at March 31, 2000 from $14,993,000 at June 30, 1999. Net income of $630,000 and the recognition of shares in the Employee Stock Ownership Plan and Restricted Stock Plan of $220,000, were offset by the payment of cash dividends of $253,000, an increase in net unrealized loss on securities of $160,000 and the purchase of 49,000 shares of treasury stock for $607,000, at an average cost of approximately $12.38 per share. -10- COMPARISON OF THE RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED - -------------------------------------------------------------------------------- MARCH 31, 2000 AND 1999 - ----------------------- Net interest income increased $129,000 or 11.43%, to $1,256,000 for the three months ended March 31, 2000 from $1,127,000 for the comparable period ended 1999. The increase in net interest income resulted primarily from an increase in the average volume of the underlying principle balances in interest earning assets and liabilities. The net interest spread for the three months ended March 31, 2000 decreased to 3.25% from 3.35% for the comparable period ended 1999. The average yield on interest earning assets increased by 19 basis points to 8.02% for the three months ended March 31, 2000, from 7.83% for the comparable period ended 1999. The average cost of funds increased by 29 basis points to 4.77% for the three months ended March 31, 2000 from 4.48% for the comparable period ended 1999. Net interest income increased $476,000 or 14.79%, to $3,695,000 for the nine months ended March 31, 2000 from $3,219,000 for the comparable period ended 1999. The increase in net interest income resulted primarily from an increase in the average volume of the underlying principle balances in interest earning assets and liabilities. The net interest spread for the nine months ended March 31, 2000 decreased to 3.26% from 3.27% for the comparable period ended 1999. The average yield on interest earning assets decreased by 6 basis points to 7.94% for the nine months ended March 31, 2000, from 8.00% for the comparable period ended 1999. The average cost of funds decreased by 5 basis points to 4.68% for the nine months ended March 31, 2000 from 4.73% for the comparable period ended 1999. Interest and dividend income increased $432,000 or 18.84% for the three months ended March 31, 2000 compared to the same period ended 1999. This increase was primarily due to an increase in earnings on loans of $295,000 as the average principle balance increased $13,440,000 to $119,039,000 for the period ended March 31, 2000, from $105,599,000 for the comparable 1999 period. Interest and dividend income on investments and interest-bearing deposits with other financial institutions increased approximately $137,000 as average principal balances increased $5,378,000 to $16,976,000 for the period ended March 31, 2000, from $11,598,000 for the comparable 1999 period. Interest and dividend income increased $1,105,000 or 16.25% for the nine months ended March 31, 2000 compared to the same period ended 1999. This increase was primarily due to an increase in earnings on loans of $733,000 as the average principle balance increased $13,210,000 to $115,731,000 for the period ended March 31, 2000, from $102,521,000 for the comparable 1999 period. Interest and dividend income on investments and interest-bearing deposits with other financial institutions increased approximately $372,000 as average principal balances increased $6,236,000 to $17,070,000 for the period ended March 31, 2000, from $10,834,000 for the comparable 1999 period. Interest expense increased $304,000 or 25.98%, for the three months ended March 31, 2000 compared to the same period ended 1999. This increase was primarily due to an increase in interest on deposits of $214,000 as the average balance increased $13,667,000 to $108,980,000 for the period ended March 31, 2000, from $95,313,000 for the comparable 1999 period. Interest expense on advances increased $89,000 as the average balance increased $5,417,000 to $14,417,000 for the period ended March 31, 2000, from $9,000,000 for the comparable 1999 period. Interest expense increased $629,000 or 17.56%, for the nine months ended March 31, 2000 compared to the same period ended 1999. This increase was primarily due to an increase in interest on deposits of $435,000 as the average balance increased $15,117,000 to $107,013,000 for the period ended March 31, 2000, from $91,897,000 for the comparable 1999 period. Interest expense on advances increased $194,000 as the average balance increased $4,083,000 to $13,139,000 for the period ended March 31, 2000, from $9,056,000 for the comparable 1999 period. -11- Noninterest income decreased $18,000 or 9.78%, to $171,000 for the three months ended March 31, 2000 from $189,000 for the comparable period ended 1999. Noninterest income decreased $68,000 or 11.69%, to $515,000 for the nine months ended March 31, 2000 from $583,000 for the comparable period ended 1999. For the three and nine month periods of 2000, gains on sales of fixed rate mortgage loans and related servicing rights decreased by a combined $37,000 and $159,000, respectively. These decreases are due to the lack of demand of fixed rate mortgages as a result of the changing interest rate environment during the nine months ended March 31, 2000 in comparison to the rate environment during the same period ended 1999. Offsetting these decreases for the three and nine month periods of 2000 are increases in service charges on deposit accounts of $ 15,000 and $47,000, respectively, and ATM income of $7,000 and $26,000, respectively. These increases are due primarily to increased customer activity. Noninterest expense increased $77,000 or 8.25%, to $1,019,000 for the three months ended March 31, 2000, from $942,000 for the comparable 1999 period. Noninterest expense increased $223,000 or 7.89%, to $3,048,000 for the nine months ended March 31, 2000 from $2,825,000 for the comparable 1999 period. For the three and nine month periods ended March 31, 2000, compensation and employee benefits increased $54,000 and $135,000, respectively, due to the hiring of additional employees for loan collection, accounting and data processing, as well as, additional costs of living increases for all full time employees. Occupancy and equipment increased $30,000 and $64,000, respectively, due primarily to the incurrence of real estate taxes for the Wintersville branch of $3,000 and $18,000, respectively, and an increase in combined equipment depreciation and maintenance of $25,000 and $43,000, respectively. Professional fees decreased $0 and $27,000, respectively, primarily due to the preparation of regulatory reports internally that were previously out sourced. Data processing charges decreased $13,000 and $10,000, respectively due to the conversion to in house item processing in January 2000. The decrease in data processing is offset by similar increases in "occupancy and equipment" for maintenance and depreciation and in "other expenses" for supplies and postage, which increased for the three and nine month periods $12,000 and $14, 0000, respectively. Anticipated future decreases in data processing will be offset by similar increases in these line items. Other expenses increased $12,000 and $68,000, respectively due primarily to, supplies and postage as discussed above, and additional Ohio franchise tax due to the Wintersville branch of $11,000 and $27,000, respectively. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- As of March 31, 2000, the Company had commitments to fund loans of approximately $734,000. These loan commitments were funded in April 2000. Management monitors both the Company's and the Bank's total risk-based, Tier I risk-based and Tier I leveraged capital ratios in order to assess compliance with regulatory guidelines. At March 31, 2000, both the Company and the Bank exceeded the minimum risk-based and leveraged capital ratio requirements. The Company's and the Bank's total risk-based, Tier I risk-based and Tier I leverage ratios are 15.89%, 15.22%, 9.72% and 14.84%, 14.18%, and 9.57%, respectively, at March 31, 2000. -12- RISK ELEMENTS - ------------- The table below presents information concerning nonperforming assets including nonaccrual loans, renegotiated loans, loans 90 days past due, other real estate loans and repossessed assets. A loan is classified as nonaccrual when, in the opinion of management, there are serious doubts about collectibility of interest and principal. At the time the accrual of interest is discontinued, future income is recognized only when cash is received. Renegotiated loans are those loans which terms have been renegotiated to provide a reduction or deferral of principal or interest as a result of the deterioration of the borrower. March 31, June 30, 2000 1999 ------------ ------------ Loans on a nonaccrual basis $355 $456 Loans past due 90 days or more and still accruing 191 309 ------------ ------------ Total nonperforming loans 546 765 ------------ ------------ Other real estate 407 50 Repossessed assets 14 9 ------------ ------------ Total nonperforming assets $967 $824 ------------ ------------ Nonperforming loans as a percentage of total loans 0.45% 0.69% ============ ============ Nonperforming assets as a percentage of total assets 0.66% 0.63% ============ ============ Allowance for loan losses to nonperforming loans 120.70% 76.12% ============ ============ Nonaccrual loans consist of $310,000 in one to four family residential mortgages and $45,000 in a multi-family real estate mortgage at March 31, 2000. Management regularly performs an analysis to identify the inherent risks of loss in its loan portfolio. This evaluation includes evaluations of concentrations of credit, past loss experience, current economic conditions, amount and composition of loan portfolio (including loans being specifically monitored by management), estimated fair value of underlying collateral, loan commitments outstanding, delinquencies, and other information available at such times. The Company monitors its allowance for loan losses and makes future adjustments to the allowance through the provision for loan losses as economic conditions dictate. Management continues to offer a wide variety of loan products. Although the Company maintains its allowance for loan losses at a level that it considers to be adequate to provide for the inherent risk of loss in its portfolio, there can be no assurance that future losses will not exceed estimated amounts or that additional provisions for loan losses will not be required in future periods due to the higher degree of credit risk included in the loan portfolio. 13- The following is a breakdown of the loan portfolio mix at March 31, 2000 and June 30, 1999: March 31, June 30, 2000 1999 ---------------- ----------------- Mortgage loans: 1-4 family $62,146,866 $59,673,803 Multi-family 5,528,621 2,689,531 Non-residential 24,377,631 23,216,018 Construction 2,999,365 2,073,165 ---------------- ----------------- 95,052,483 87,652,517 ---------------- ----------------- Consumer Loans: Home Improvement 1,268,510 1,195,518 Automobile 10,337,746 8,647,953 Share loans 1,250,658 1,360,054 Other 2,566,385 2,384,401 ---------------- ----------------- 15,423,299 13,587,926 ---------------- ----------------- ---------------- ----------------- Commercial Loans 11,694,429 10,387,570 ---------------- ----------------- Less: Loans in process 1,092,432 1,006,813 Net deferred loan fees 130,671 139,369 Allowance for loan losses 658,714 582,280 ---------------- ----------------- 1,881,817 1,728,462 ---------------- ----------------- Total $120,288,394 $109,899,551 ================ ================= -14- PART II - OTHER INFORMATION Item 1 - Legal Proceedings NONE Item 2 - Changes in securities NONE Item 3 - Defaults upon senior securities NOT APPLICABLE Item 4 - Submission of matters to a vote of security holders NONE Item 5 - Other information NONE Item 6 - Exhibits and reports on Form 8-K (a) List of Exhibits: 3(i) Certificate of Incorporation of Advance Financial Bancorp * 3(ii) Amended Bylaws of Advance Financial Bancorp ***** 4(i) Specimen Stock Certificate * 4(ii) Shareholders Rights Plan ** 10 Employment Agreement between the Bank and Stephen M. Gagliardi *** 10.1 1998 Stock Option Plan **** 10.2 Restricted Stock Plan and Trust Agreement **** 27 Financial Data Schedule (electronic filing only) (b) None - -------------------------------------------------------------------------------- * Incorporated by reference to the Registration Statement on Form S-1 (File No. 333-13021) declared effective by the SEC on November 12, 1996 ** Incorporated by reference to the Form 8-K ( File No. 0-21885) filed July 17, 1997 *** Incorporated by reference to the June 30, 1997 Form 10K-SB (File No. 0-21885) filed September 23, 1997 **** Incorporated by reference to the proxy statement for the Special Meeting of the Stockholders on January 20, 1998 and filed with the SEC on December 12, 1997. *****Incorporated by reference to the June 30, 1999 Form 10KSB (File No. 0-21885) filed on . September 23, 1999. -15- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused the report to be signed on its behalf by the undersigned, thereunto duly authorized. Advance Financial Bancorp Date: May 12, 2000 By:/s/Stephen M. Gagliardi ----------------------------------------- Stephen M. Gagliardi President and Chief Executive Officer Date: May 12, 2000 By:/s/Stephen M. Magnone ----------------------------------------- Stephen M. Magnone Vice President and CFO -16 EX-27 2 FDS
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE QUARTERLY REPORT ON FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL INFORMATION. 1000 9-MOS JUN-30-2000 MAR-31-2000 1,039 5,489 0 0 9,814 3,429 3,315 120,947 659 146,801 117,884 2,500 593 11,000 0 0 108 14,715 146,801 7,068 838 0 7,906 3,651 4,210 3,695 126 0 3,048 1,036 1,036 0 0 630 0.70 0.70 3.71 355 191 0 0 582 53 4 659 659 0 0
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