-----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, Ut0/vyAtc5a4lEvwWJkhql9VgoEIfhNxRVj2Jw12ggcSbu0bLij16vYhqR4zhId0 lJhrlTHNwm9haBfjecPqjw== 0000946275-01-500092.txt : 20010516 0000946275-01-500092.hdr.sgml : 20010516 ACCESSION NUMBER: 0000946275-01-500092 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010515 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: 1635765 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 f10qsb_033101-0192.txt FORM 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 EXCHANGE 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 1, 2001: 932,285 Advance Financial Bancorp Index Page Number ------ Part I - FINANCIAL INFORMATION Item 1 - Financial Statements Consolidated Balance Sheet (Unaudited) as of March 31, 2001 and June 30, 2000 3 Consolidated Statement of Income (Unaudited) For the Three Months ended March 31, 2001 and 2000 4 Consolidated Statement of Income (Unaudited) For the Nine Months ended March 31, 2001 and 2000 5 Consolidated Statement of Cash Flows (Unaudited) For the Nine Months ended March 31, 2001 and 2000 6 Notes to the Unaudited Consolidated Financial Statements 7-8 Item 2 - Management's Discussion and Analysis 9-15 Part II - OTHER INFORMATION Item 1 - Legal Proceedings 16 Item 2 - Changes in Securities 16 Item 3 - Default Upon Senior Securities 16 Item 4 - Submissions of Matters to a Vote of Security Holders 16 Item 5 - Other Information 16 Item 6 - Exhibits and Reports on Form 8-K 16 SIGNATURES 17 ADVANCE FINANCIAL BANCORP CONSOLIDATED BALANCE SHEET (UNAUDITED)
MARCH 31, JUNE 30, 2001 2000 ------------- ------------- Assets Cash and cash equivalents: Cash and amounts due from banks $ 969,657 $ 1,109,746 Interest bearing deposits with other institutions 9,868,455 4,641,878 ------------- ------------- Total cash and cash equivalents 10,838,112 5,751,624 ------------- ------------- Investment securities: Securities held to maturity (fair value of $747,560 and $1,187,625) 749,867 1,249,672 Securities available for sale 12,429,775 8,234,637 ------------- ------------- Total investment securities 13,179,642 9,484,309 ------------- ------------- Mortgaged-backed securities: Securities held to maturity (fair value of $1,768,550 and $2,027,016) 1,743,414 2,089,010 Securities available for sale 6,382,952 1,556,172 ------------- ------------- Total mortgage-backed securities 8,126,366 3,645,182 ------------- ------------- Loans held for sale 764,771 -- Loans receivable, (net of allowance for loan losses of $711,193 and $682,103 ) 125,702,544 119,721,308 Office properties and equipment, net 3,909,768 4,070,295 Federal Home Loan Bank Stock, at cost 1,075,000 800,000 Accrued interest receivable 1,019,382 870,955 Other assets 918,065 920,767 ------------- ------------- TOTAL ASSETS $ 165,533,650 $ 145,264,440 ============= ============= Liabilities: Deposits $ 128,715,969 $ 118,930,939 Advances from Federal Home Loan Bank 20,000,000 10,500,000 Advance payments by borrowers for taxes and insurance 140,777 203,320 Accrued interest payable and other liabilities 532,929 561,907 ------------- ------------- TOTAL LIABILITIES 149,389,675 130,196,166 ------------- ------------- 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 10,334,137 10,329,885 Retained earnings - substantially restricted 8,612,394 8,181,053 Unallocated shares held by Employee Stock Ownership Plan (ESOP) (445,844) (510,915) Unallocated shares held by Restricted Stock Plan (RSP) (357,500) (505,849) Treasury Stock (152,165 shares at cost) (2,233,265) (2,233,265) Accumulated other comprehensive income (loss) 125,608 (301,080) ------------- ------------- TOTAL STOCKHOLDERS' EQUITY 16,143,975 15,068,274 ------------- ------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 165,533,650 $ 145,264,440 ============= =============
See accompanying notes to the unaudited consolidated financial statements -3- ADVANCE FINANCIAL BANCORP CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2001 2000 ---------- ---------- INTEREST AND DIVIDEND INCOME Loans $2,675,618 $2,434,748 Investment securities 211,270 172,683 Interest-bearing deposits with other institutions 70,433 42,812 Mortgage-backed securities 145,273 63,615 Dividends on Federal Home Loan Bank Stock 17,892 13,426 ---------- ---------- Total interest and dividend income 3,120,486 2,727,284 ---------- ---------- INTEREST EXPENSE Deposits 1,539,014 1,263,373 Advances from Federal Home Loan Bank 306,432 208,344 ---------- ---------- Total interest expense 1,845,446 1,471,717 ---------- ---------- NET INTEREST INCOME 1,275,040 1,255,567 Provision for loan losses 48,300 51,000 ---------- ---------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 1,226,740 1,204,567 ---------- ---------- NONINTEREST INCOME Service charges on deposit accounts 121,967 105,844 Gain on sale of loans 36,163 1,994 Loss on other real estate owned - - Loss on sale of investments - - Other income 87,299 62,766 ---------- ---------- Total noninterest income 245,429 170,604 ---------- ---------- NONINTEREST EXPENSE Compensation and employee benefits 527,848 502,256 Occupancy and equipment 192,027 178,320 Professional fees 24,583 23,212 Advertising 29,860 28,253 Data processing charges 68,432 71,951 Other expenses 250,460 215,231 ---------- ---------- Total noninterest expenses 1,093,210 1,019,223 ---------- ---------- Income before income taxes 378,959 355,948 Income taxes 131,379 140,100 ---------- ---------- NET INCOME $ 247,580 $ 215,848 ========== ========== EARNINGS PER SHARE Basic $ .29 $ .24 Diluted $ .29 $ .24
See accompanying notes to the unaudited consolidated financial statements. -4- ADVANCE FINANCIAL BANCORP CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
NINE MONTHS ENDED MARCH 31, 2001 2000 ----------- ----------- INTEREST AND DIVIDEND INCOME Loans $ 7,879,632 $ 7,067,649 Investment securities 557,171 482,007 Interest-bearing deposits with other institutions 212,613 124,881 Mortgage-backed securities 302,764 193,195 Dividends on Federal Home Loan Bank Stock 47,982 37,857 ----------- ----------- Total interest and dividend income 9,000,162 7,905,589 ----------- ----------- INTEREST EXPENSE Deposits 4,482,580 3,650,718 Advances from Federal Home Loan Bank 713,432 559,720 ----------- ----------- Total interest expense 5,196,012 4,210,438 ----------- ----------- NET INTEREST INCOME 3,804,150 3,695,151 Provision for loan losses 119,100 126,000 ----------- ----------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 3,685,050 3,569,151 ----------- ----------- NONINTEREST INCOME Service charges on deposit accounts 357,295 323,739 Gain on sale of loans 45,574 6,133 Loss on other real estate owned (20,000) - Loss on sale of investments (1,705) - Other income 226,956 184,748 ----------- ----------- Total noninterest income 608,120 514,620 ----------- ----------- NONINTEREST EXPENSE Compensation and employee benefits 1,538,020 1,442,155 Occupancy and equipment 563,678 505,617 Professional fees 81,210 81,234 Advertising 83,089 91,361 Data processing charges 181,766 247,256 Other expenses 730,346 679,957 ----------- ----------- Total noninterest expenses 3,178,109 3,047,580 ----------- ----------- Income before income taxes 1,115,061 1,036,191 Income taxes 426,255 406,482 ----------- ----------- NET INCOME $ 688,806 $ 629,709 =========== =========== EARNINGS PER SHARE Basic $ .79 $ .70 Diluted $ .79 $ .70
See accompanying notes to the unaudited consolidated financial statements. -5- ADVANCE FINANCIAL BANCORP CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED MARCH 31, 2001 2000 ------------ ------------ OPERATING ACTIVITIES Net Income $ 688,806 $ 629,709 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, amortization and accretion, net 454,991 414,673 Provision for loan losses 119,100 126,000 Loss on other real estate owned 20,000 - Loss on sale of investments 1,705 - Gain on sale of loans (45,574) (6,133) Origination of loans held for sale (4,437,165) (1,758,832) Proceeds from the sale of loans 3,717,968 1,617,073 (Increase) decrease in other assets and liabilities (345,023) 46,198 ------------ ------------ Net cash provided by operating activities 174,808 1,068,688 ------------ ------------ INVESTING ACTIVITIES Investment securities held to maturity: Purchases - (249,453) Investment securities available for sale: Purchases (7,736,171) (4,467,656) Maturities and repayments 4,510,025 504,545 Mortgage-backed securities held to maturity: Maturities and repayments 343,965 291,248 Mortgage-backed securities available for sale: Purchases (5,002,344) - Maturities and repayments 349,358 221,657 Purchase of Federal Home Loan Bank Stock (275,000) (170,500) Net increase in loans (6,100,336) (10,872,341) Purchases of premises and equipment (142,840) (298,227) ------------ ------------ Net cash used in investing activities (14,053,343) (15,040,727) ------------ ------------ FINANCING ACTIVITIES Net increase in deposits 9,785,030 12,544,805 Net (decrease) increase in short term advances from FHLB (2,500,000) 2,500,000 Net Proceeds from advances from the FHLB 12,000,000 2,000,000 Net change in advances for taxes and insurance (62,543) (44,538) Purchase of treasury stock - (606,375) Cash dividends paid (257,464) (253,220) ------------ ------------ Net cash provided by financing activities 18,965,023 16,140,672 ------------ ------------ Increase in cash and cash equivalents 5,086,488 2,168,633 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 5,751,624 4,359,870 ------------ ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 10,838,112 $ 6,528,503 ============ ============ SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest on deposits and borrowings $ 4,607,835 $ 4,202,908 Income taxes $ 448,332 $ 267,672
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, 2001 or any other interim period. These statements should be read in conjunction with the consolidated statements of and for the year ended June 30, 2000 and related notes which are included on the Form 10-KSB (file no. 0-21885). NOTE 2 - EARNINGS PER SHARE There were no convertible securities, which would affect the numerator in calculating basic and diluted earnings per share; therefore, net income as presented on the Consolidated Statement of Income will be used as the numerator. The following table sets forth the composition of the weighted-average common shares (denominator) used in the basic and diluted earnings per share computation. Nine Months Ended March 31 2001 2000 ---------- ---------- Weighted-average common shares outstanding 1,084,450 1,084,450 Average treasury stock shares (152,165) (127,298) Average unearned ESOP and RSP shares (55,683) (62,551) ---------- ---------- Weighted-average common shares and common stock equivalents used to calculate basic earnings per share 876,602 894,601 Additional common stock equivalents (stock options) used to calculate diluted earnings per share - - ---------- ---------- Weighted-average common shares and common stock equivalents used to calculate diluted earnings per share 876,602 894,601 ========== ========== -7- NOTE 2 - EARNINGS PER SHARE (CONTINUED) Three Months Ended March 31 2001 2000 ---------- ---------- Weighted-average common shares outstanding 1,084,450 1,084,450 Average treasury stock shares (152,165) (152,165) Average unearned ESOP and RSP shares (53,655) (60,654) ---------- ---------- Weighted-average common shares and common stock equivalents used to calculate basic earnings per share 878,630 871,631 Additional common stock equivalents (stock options) used to calculate diluted earnings per share - - ---------- ---------- Weighted-average common shares and common stock equivalents used to calculate diluted earnings per share 878,630 871,631 ========== ========== NOTE 3 - COMPREHENSIVE INCOME Other accumulated comprehensive income (loss) consists solely of net unrealized gains and losses on available for sale securities. For the three and nine months ended March 31, 2001, comprehensive income totaled $369,318 and $1,115,494, respectively. For the three and nine months ended March 31, 2000, comprehensive income totaled $237,007 and $470,000, respectively. NOTE 4 - SUBSEQUENT EVENT On April 18, 2001, the Company entered into a definitive merger agreement to acquire Ohio State Financial Services, Inc. of Bridgeport, Ohio ("OSFS"). The merger is subject to regulatory approvals, OSFS's shareholders approval, and other conditions. The Company will acquire all of the outstanding common stock of OSFS for $16.00 per share in cash, or approximately $8.0 million. It is anticipated that the merger will close by the end of the Company's first quarter of fiscal 2002. -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, 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. OVERVIEW - -------- On April 18, 2001, the Company entered into a definitive merger agreement to acquire Ohio State Financial Services, Inc. of Bridgeport, Ohio ("OSFS"). The merger is subject to regulatory approvals, OSFS's shareholder approval and other conditions. The Company will acquire all of the outstanding common stock of OSFS for $16.00 per share in cash, or approximately $8.0 million. It is anticipated that the merger will close by the end of the company's first quarter of fiscal 2002. COMPARISON OF FINANCIAL CONDITION AT MARCH 31, 2001 AND JUNE 30, 2000 - --------------------------------------------------------------------- Total assets increased by approximately $20,269,000 to $165,533,650 at March 31, 2001, from $145,264,440 at June 30, 2000. The increase is distributed among increases in interest-bearing deposits with other financial institutions, investment and mortgage-backed securities, as well as, increased loan demand. Advances from the Federal Home Loan Bank ("FHLB") and deposits, which increased by $9,500,000 and $9,785,000, respectively, were used to fund the asset growth. Investment securities increased by $3,695,000 to $13,179,642 at March 31, 2001, from $9,484,309 at June 30, 2000. The increase is attributed to the purchase of municipal and corporate securities offset by multiple calls on FHLB bonds. During the nine month period, the Company has purchased five long-term insured municipal bond securities classified as available for sale totalling approximately $5,800,000 that have a tax equivalent yield of approximately 7.66%. Also during this period, the Company purchased three 36-month corporate bonds classified as available for sale totalling approximately $2,000,000 with a yield of approximately 6.0%. The purchases of the municipal and corporate bonds were offset by having five FHLB bonds called totalling $4,500,000 during the period. Mortgage-backed securities increased by $4,481,000 to $8,126,366 at March 31, 2001, from $3,645,182 at June 30, 2000. The increase is primarily the result of a GNMA security classified as available for sale that was purchased in November 2000. The security has a weighted-average coupon of 7.5%. Net loans receivable increased by $5,981,000 to $125,702,544 at March 31, 2001, from $119,721,308 at June 30, 2000. The increase in loans was primarily due to an increase in non-residential mortgages of $3,150,000, commercial loans of $1,641,000 and automobile loans of $1,531,000. Non-residential mortgage loans and commercial loans have increased due to strong demand for the Company's competitively priced adjustable rate mortgage products and demand from existing customers. Automobile loans have increased due principally to increased loan activity written by automobile dealership customers of the Company. See "Risk Elements". -9- Deposits increased by $9,785,000 to $128,715,969 at March 31, 2001 from $118,930,939 at June 30, 2000. Within the deposit line item, certificates of deposit increased by $9,266,000 to $85,277,814 at March 31, 2001 from $76,011,529 at June 30, 2000. This increase is primarily the result of certificate of deposit specials that have been offered over the nine-month period ended March 31, 2001. Although the same specials are being offered currently with the exception of the eleven (11) month special which has been eliminated, the annual percentage rates have been reduced for each term from the rates reported in the prior two three month periods. The seven month special currently has an annual percentage rate of 4.50%, down from 5.87% and 6.66%, respectively, the thirteen (13) month special currently has an annual percentage rate of 4.55%, down from 5.92% and 6.92%, respectively, and the nineteen (19) month special currently has an annual percentage rate of 4.60%, down from 5.92% and 6.92%, respectively. The seven and nineteen month maturity areas continue to be equally popular with the Company's customers. Savings deposits and demand deposits increased $263,000 and $256,000, respectively, for the nine-month period ended March 31, 2001. The increase in core deposits is a reversal of the trend noticed during the first six-month period. The core deposit increases and significant growth in certificates can be attributed to customers altering their investment options. Advances from the FHLB increased $9,500,000 to $20,000,000 at March 31, 2001 from $10,500,000 at June 30, 2000. This increase is the net result of activity over the current period. During the nine month period ended March 31, 2001, the Company has taken out three $5 million convertible select advances. The first was obtained in November 2000 and has a maturity of November 2010 with a conversion date of November 2003, it is priced at 6.05%. The second was obtained in December 2000 and has a maturity of December 2010 with a conversion date of December 2004, it is priced at 5.54%. The third advance was obtained in March 2001 and has a maturity of March 2011 with a conversion date of March 2002 if three-month Libor exceeds 6.99%, it is priced at 4.96%. The increase in advances is offset by the maturity of a $2,500,000 short term advance and the payoff of a $3 million dollar advance that was priced at 5.52% and was to be converted in October 2001. The additional $9,500,000 in funds were used primarily to purchase investment and mortgage-backed securities. Stockholders' Equity increased by approximately, $1,076,000 to $16,143,975 at March 31, 2001 from $15,068,274 at June 30, 2000. Net income of $689,000, the recognition of shares in the Employee Stock Ownership Plan and Restricted Stock Plan of $217,000, and an increase in the net unrealized gain on securities of $427,000 were offset by the payment of cash dividends of $257,000. COMPARISON OF THE RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED - -------------------------------------------------------------------------------- MARCH 31, 2001 AND 2000 - ----------------------- Net interest income increased $19,000 or 1.55%, to $1,275,000 for the three months ended March 31, 2001 from $1,256,000 for the comparable period ended 2000. 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, 2001 decreased to 2.80% from 3.25% for the comparable period ended 2000. See "Average Balance Sheet" for the three-month periods ended March 31, 2001 and 2000. Net interest income increased $109,000 or 2.95%, to $3,804,000 for the nine-months ended March 31, 2001 from $3,695,000 for the comparable period ended 2000. 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, 2001 decreased to 2.96% from 3.27% for the comparable period ended 2000. See "Average Balance Sheet" for the nine-month periods ended March 31, 2001 and 2000. -10- Noninterest income increased $74,000 or 43.86%, to $245,000 for the three months ended March 31, 2001 from $171,000 for the comparable period ended 2000. Noninterest income increased $93,000 or 18.17% to $608,000 for the nine-months ended March 31, 2001 from $515,000 for the comparable period ended 2000. For the three and nine month period of 2001, miscellaneous fees and fees on deposit accounts increased by $27,000 and $62,000, respectively, also gain on sales of fixed rate loans and related servicing rights increased $48,000 and $54,000, respectively. These net increases were offset by a write-down of Other Real Estate Owned of $20,000 and a recognized loss on an investment of $2,000 for the nine-month period. Noninterest expense increased $74,000 or 7.26%, to $1,093,000 for the three months ended March 31, 2001 from $1,019,000 for the comparable 2000 period. Noninterest expense increased $131,000 or 4.28%, to $3,178,000 for the nine months ended March 31, 2001 from $3,048,000 for the comparable period ended 2000. For the three and nine month periods ended March 31, 2001, compensation and employee benefits increased $26,000 or 5.10%, and $96,000 or 6.65%, respectively. The increases in compensation and employee benefits are due to the hiring of additional employees for loan collection and data processing, as well as, additional costs of living increases for all full time employees. For the three and nine month periods ended March 31, 2001, occupancy and equipment increased $14,000 and $58,000 respectively. The increases are due primarily to an increase in combined equipment depreciation and maintenance of $6,000 and $54,000 for the three and nine month periods, respectively. The increases are directly related to the in-house item-processing department that began formation during the latter part of 1999. Data processing charges decreased $3,000 and $65,000 for the three and nine-month periods ended March 31, 2001. The decreases are due to the completion of the conversion to in house item processing in January 2000. The decreases in data processing are offset by similar increases in "occupancy and equipment" for maintenance and depreciation and in "other expenses" for supplies, communications and postage, which increased $10,000 and $35,000 for the three and nine month periods, respectively. Other Expenses have increased $35,000 and $50,000, respectively for the three and nine month periods ended March 31, 2001. In addition to the increases in supplies, postage and communications discussed above, state franchise taxes have increased $12,000 and $11,000, respectively, and expenses related to the company's merchant card program have increased $7,000 and $10,000, respectively. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- As of March 31, 2001, the Company had commitments to fund loans of approximately $997,650. These loan commitments are expected to be funded by April 30, 2001. 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, 2001, 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 15.38%, 14.72%, 9.68% and 14.68%, 14.03%, and 9.18%, respectively, at March 31, 2001. -11- Average Balance Sheet for the Three-Month Period Ended March 31 The following table sets forth certain information relating to the Company's average balance sheet and reflects the average yield on assets and average cost of liabilities for the periods indicated and the average yields earned and rates paid. Such yields and costs are derived by dividing income or expense by the average balance of assets or liabilities, respectively, for the periods presented. Average balances are derived from month-end balances. Management does not believe that the use of month-end balances instead of daily average balances has caused any material differences in the information presented.
Period Ended March 31, -------------------------------------------------------------------- 2001 2000 -------------------------------- ---------------------------------- Average Average Average Average Balance Interest Yield/Cost Balance Interest Yield/Cost --------- -------- ---------- --------- --------- ---------- Interest-earning assets: Loans receivable (1) $126,640 $2,676 8.45% $119,039 $2,435 8.18% Investment securities (2) 19,898 299 6.02% 13,135 229 6.97% Mortgage-backed securities 8,305 145 6.98% 3,841 63 6.56% --------- -------- -------- --------- --------- -------- Total interest-earning assets 154,843 3,120 8.06% 136,015 2,727 8.02% -------- -------- --------- -------- Non-interest-earning assets 7,182 7,226 --------- --------- Total assets $162,025 $143,241 ========= ========= Interest-bearing liabilities: Interest-bearing demand deposits $19,093 156 3.27% $20,010 170 3.39% Certificates of deposit 83,298 1,262 6.06% 71,987 979 5.44% Savings deposits 17,236 121 2.81% 16,983 115 2.71% FHLB borrowings 20,750 306 5.90% 14,417 208 5.78% --------- -------- -------- --------- --------- -------- Total interest-bearing liabilities 140,377 1,845 5.26% 123,397 1,472 4.77% -------- -------- --------- -------- Non-interest bearing liabilities 5,691 5,105 --------- --------- Total liabilities 146,068 128,502 Stockholders' equity 15,957 14,739 --------- --------- Total liabilities and stockholders' equity $162,025 $143,241 ========= ========= Net interest income $1,275 $1,255 ======== ========= Interest rate spread (3) 2.80% 3.25% ======== ======== Net yield on interest-earning assets (4) 3.29% 3.69% ======== ======== Ratio of average interest-earning assets to average interest-bearing liabilities 110.31% 110.23% ======== ========
- -------------------- (1) Average balances include non-accrual loans. (2) Includes interest-bearing deposits in other financial institutions and FHLB stock. (3) Interest-rate spread represents the difference between the average yield on interest earning assets and the average cost of interest-bearing liabilities. (4) Net yield on interest-earning assets represents net interest income as a percentage of average interest-earning assets. Average Balance Sheet for the Nine-Month Period Ended March 31 The following table sets forth certain information relating to the Company's average balance sheet and reflects the average yield on assets and average cost of liabilities for the periods indicated and the average yields earned and rates paid. Such yields and costs are derived by dividing income or expense by the average balance of assets or liabilities, respectively, for the periods presented. Average balances are derived from month-end balances. Management does not believe that the use of month-end balances instead of daily average balances has caused any material differences in the information presented.
Period Ended March 31, ---------------------------------------------------------------------- 2001 2000 --------------------------------- ---------------------------------- Average Average Average Average Balance Interest Yield/Cost Balance Interest Yield/Cost --------- -------- ---------- --------- --------- ---------- Interest-earning assets: Loans receivable (1) $123,688 $7,880 8.49% $115,731 $7,068 8.14% Investment securities (2) 16,552 817 6.58% 13,056 644 6.58% Mortgage-backed securities 5,932 303 6.81% 4,014 193 6.41% --------- -------- -------- --------- --------- -------- Total interest-earning assets 146,172 9,000 8.21% 132,801 7,905 7.94% -------- -------- --------- -------- Non-interest-earning assets 7,123 7,184 --------- --------- Total assets $153,295 $139,985 ========= ========= Interest-bearing liabilities: Interest-bearing demand deposits $19,335 497 3.43% $20,701 521 3.36% Certificates of deposit 79,929 3,619 6.04% 69,578 2,792 5.35% Savings deposits 17,287 367 2.83% 16,734 337 2.69% FHLB borrowings 15,416 713 6.17% 13,139 560 5.68% --------- -------- -------- --------- --------- -------- Total interest-bearing liabilities 131,967 5,196 5.25% 120,152 4,210 4.67% -------- -------- --------- -------- Non-interest bearing liabilities 5,760 4,957 --------- --------- Total liabilities 137,727 125,109 Stockholders' equity 15,568 14,876 --------- --------- Total liabilities and stockholders' equity $153,295 $139,985 ========= ========= Net interest income $3,804 $3,695 ======== ========= Interest rate spread (3) 2.96% 3.27% ======== ======== Net yield on interest-earning assets (4) 3.47% 3.71% ======== ======== Ratio of average interest-earning assets to average interest-bearing liabilities 110.76% 110.53% ======== ========
- ---------------------- (1) Average balances include non-accrual loans. (2) Includes interest-bearing deposits in other financial institutions and FHLB stock. (3) Interest-rate spread represents the difference between the average yield on interest earning assets and the average cost of interest-bearing liabilities. (4) Net yield on interest-earning assets represents net interest income as a percentage of average interest-earning assets. 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, 2001 2000 ------ ------ Loans on a nonaccrual basis $ 669 $ 304 Loans past due 90 days or more and still accruing 546 189 ------ ------ Total nonperforming loans 1,215 493 ------ ------ Other real estate 387 407 Repossessed assets 16 21 ------ ------ Total nonperforming assets $1,618 $ 921 ------ ------ Nonperforming loans as a percentage of total net loans 0.97% 0.41% ====== ====== Nonperforming assets as a percentage of total assets 0.98% 0.63% ====== ====== Allowance for loan losses to nonperforming loans 58.53% 138.36% ====== ====== Nonaccrual loans consist of $443,000 in one to four family residential mortgages and $226,000 in non-residential real estate mortgages at March 31, 2001. 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. -14- The following is a breakdown of the loan portfolio composition at March 31, 2001 and June 30, 2000: March 31, June 30, 2001 2000 ------------ ------------ Mortgage Loans: 1-4 family $ 61,686,418 $ 62,163,992 Multi-family 5,909,990 5,469,906 Non-residential 27,693,943 24,543,795 Construction 3,157,391 3,241,801 ------------ ------------ 98,447,742 95,419,494 ------------ ------------ Consumer Loans: Home Improvement 1,327,553 1,439,387 Automobile 12,434,755 10,903,416 Share loans 1,546,547 1,406,328 Other 2,686,545 2,675,498 ------------ ------------ 17,995,400 16,424,629 ------------ ------------ ------------ ------------ Commercial Loans 12,141,009 10,500,256 ------------ ------------ Less: Loans in process 2,058,296 1,812,877 Net deferred loan fees 112,118 128,091 Allowance for loan losses 711,193 682,103 ------------ ------------ 2,881,607 2,623,071 ------------ ------------ Total $125,702,544 $119,721,308 ============ ============ -15- 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:
2 Agreement and Plan of Merger between Advance Financial Bancorp and Ohio State Financial Services, Inc.****** 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 ****
(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 28, 1999. ****** Incorporated by reference to Form 8K filed April 19, 2001. -16- 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 15, 2001 By: /s/Stephen M. Gagliardi ------------------------------------- Stephen M. Gagliardi President and Chief Executive Officer Date: May 15, 2001 By: /s/Stephen M. Magnone ------------------------------------- Stephen M. Magnone Vice President and CFO -17 -----END PRIVACY-ENHANCED MESSAGE-----