-----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, UHKpwCnifw9mvhprSubozLNjB4KKx9Ulsvb4hYTAlMfQSuBA9aRg2iW7RdvK3ISo AdgIYu5lqtM50419vBadQw== 0000950152-02-006350.txt : 20020814 0000950152-02-006350.hdr.sgml : 20020814 20020814105918 ACCESSION NUMBER: 0000950152-02-006350 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GRAND CENTRAL FINANCIAL CORP CENTRAL INDEX KEY: 0001070680 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 341877137 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-25045 FILM NUMBER: 02732370 BUSINESS ADDRESS: STREET 1: C/O CENTRAL FEDERAL SAVINGS AND LOAN STREET 2: ASSOCIATION OF WELLSVILLE 601 MAIN ST CITY: WELLSVILLE STATE: OH ZIP: 43968 BUSINESS PHONE: 3305321517 MAIL ADDRESS: STREET 1: C/O CENTRAL FEDERAL SAVINGS & LOAN STREET 2: WELLSVILLE /601 MAIN ST CITY: WELLSVILLE STATE: OH ZIP: 43968 10QSB 1 l95307ae10qsb.txt GRAND CENTRAL FINANCIAL CORP. 10-QSB/6-30-2002 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (Mark one) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2002 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to______________ Commission File Number 0-25045 GRAND CENTRAL FINANCIAL CORP. ----------------------------- (Exact name of small business issuer as specified in its charter) Delaware 34-1877137 - -------- ---------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 601 Main Street, Wellsville, Ohio 43968 ---------------------------------------- (Address of principal executive offices) (330) 532-1517 -------------- (Issuer's telephone number) State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date. Class: Outstanding at July 31, 2002 Common stock, $0.01 par value 1,683,396 shares Transitional Small Business Disclosure Format (check one) Yes [ ] No[X] GRAND CENTRAL FINANCIAL CORP. FORM 10-QSB QUARTER ENDED JUNE 30, 2002 INDEX
PART I. Financial Information PAGE Item 1 - Financial Statements Consolidated Balance Sheets as of June 30, 2002 and December 31, 2001 ................................................................... 3 Consolidated Statements of Income for the three and six months ended June 30, 2002 and 2001............................................................... 4 Condensed Consolidated Statements of Changes in Shareholders' Equity for the six months ended June 30, 2002............................................... 5 Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2002 and 2001 ................................................. 6 Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2002 and 2001......................................................... 7 Notes to Consolidated Financial Statements .......................................... 8 Item 2 - Management's Discussion and Analysis or Plan of Operation......................... 9 PART II. Other Information Item 1. Legal Proceedings................................................................. 16 Item 2. Changes in Securities ............................................................ 16 Item 3. Defaults Upon Senior Securities................................................... 16 Item 4. Submission of Matters to a Vote of Security Holders............................... 16 Item 5. Other Information................................................................. 16 Item 6. Exhibits and Reports on Form 8-K.................................................. 17 Signatures ................................................................................ 19
GRAND CENTRAL FINANCIAL CORP. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS (In thousands, except per share data) - --------------------------------------------------------------------------------
June 30, December 31, 2002 2001 ---- ---- ASSETS Cash and amounts due from depository institutions $ 15,121 $ 4,378 Interest-bearing deposits in other banks 2 2 ----------------- ----------------- Total cash and cash equivalents 15,123 4,380 Time deposits with other banks 7,104 7,006 Securities available for sale 1,749 2,092 Securities held to maturity (estimated fair value of $23,039 in 2002 and $31,777 in 2001) 22,829 23,343 Loans held for sale 468 8,221 Loans, net 63,047 70,570 Federal Home Loan Bank stock, at cost 3,405 3,328 Premises and equipment, net 880 849 Accrued interest receivable 463 530 Other assets 876 608 ----------------- ------------------ Total assets $ 115,944 $ 120,927 ================= ================= LIABILITIES AND SHAREHOLDERS' EQUITY Deposits Non interest-bearing $ 507 $ 825 Interest-bearing 77,712 75,343 ----------------- ----------------- Total deposits 78,219 76,168 Federal Home Loan Bank advances 11,898 18,393 Loan payable 6,800 7,000 Advance payments by borrowers for taxes and insurance 604 603 Accrued interest payable 69 88 Other liabilities 631 515 ----------------- ----------------- Total liabilities 98,221 102,767 ----------------- ----------------- Commitments and Contingencies Preferred stock, authorized 1,000,000 shares, no shares issued and outstanding Common stock, $.01 par value, 6,000,000 shares authorized, 1,938,871 shares issued 19 19 Additional paid-in capital 8,306 8,310 Retained earnings, substantially restricted 14,003 13,962 Unearned stock based incentive plan shares (211) (270) Treasury stock, 255,565 and 196,540 shares, at cost (2,877) (2,226) Unearned Employee Stock Ownership Plan shares (1,536) (1,651) Accumulated other comprehensive income 19 16 ----------------- ----------------- Total shareholders' equity 17,723 18,160 ----------------- ----------------- Total liabilities and shareholders' equity $ 115,944 $ 120,927 ================= =================
- -------------------------------------------------------------------------------- See accompanying notes to consolidated financial statements. 3. GRAND CENTRAL FINANCIAL CORP. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amount) - --------------------------------------------------------------------------------
Three months ended Six months ended June 30, June 30, -------- -------- 2002 2001 2002 2001 ---- ---- ---- ---- INTEREST INCOME Loans, including fees $ 1,280 $ 1,750 $ 2,745 $ 3,474 Interest on securities 444 690 897 1,438 Interest-bearing deposits in banks 43 81 66 159 --------------- -------------- -------------- --------------- Total interest income 1,767 2,521 3,708 5,071 INTEREST EXPENSE Deposits 662 833 1,350 1,665 FHLB borrowings 165 432 341 992 Loan payable 82 143 163 269 --------------- -------------- -------------- --------------- Total interest expense 909 1,408 1,854 2,926 NET INTEREST INCOME 858 1,113 1,854 2,145 Provision for loan losses - - - - --------------- -------------- -------------- --------------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 858 1,113 1,854 2,145 NON-INTEREST INCOME Service charges 25 32 48 84 Gain on sale of loans 69 15 172 19 Gain on sale of securities - 4 10 4 Other income 10 20 19 29 --------------- -------------- -------------- --------------- Total non-interest income 104 71 249 136 NON-INTEREST EXPENSE Salaries and employee benefits 461 461 902 898 Net occupancy expense 62 66 125 153 Data processing expense 32 36 66 71 FDIC assessments 3 3 7 7 Franchise taxes 73 76 152 150 Other expenses 128 404 310 591 --------------- -------------- -------------- --------------- Total non-interest expense 759 1,046 1,562 1,870 Income before income taxes 203 138 541 411 Income tax expense 63 47 192 140 --------------- -------------- -------------- --------------- Net income $ 140 $ 91 $ 349 $ 271 =============== ============== ============== =============== Earnings per share Basic $ .09 $ .06 $ .22 $ .18 Diluted $ .09 $ .06 $ .22 $ .17
- -------------------------------------------------------------------------------- See accompanying notes to consolidated financial statements. 4. GRAND CENTRAL FINANCIAL CORP. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (In thousands, except per share amount) - --------------------------------------------------------------------------------
Unearned Employee Additional Stock Common Paid-in Retained Ownership Stock Capital Earnings Plan Shares ----- ------- -------- ----------- BALANCES AT JANUARY 1, 2002 $ 19 $ 8,310 $ 13,962 $ (1,651) Commitment to release ESOP shares (4) 115 Release of incentive shares Cash dividends (308) Purchase of treasury stock Comprehensive income: Net income, for six months ended June 30, 2002 349 Change in unrealized gain on securities available-for-sale, net of tax Total comprehensive income ----------- ----------- ----------- ----------- BALANCES AT JUNE 30, 2002 $ 19 $ 8,306 $ 14,003 $ (1,536) =========== =========== =========== ===========
Unearned Stock Accumulated Based Other Total Incentive Treasury Comprehensive Shareholders' Plan Shares Stock Income Equity ----------- ----- ------ ------ BALANCES AT JANUARY 1, 2002 $ (270) $ (2,226) $ 16 $ 18,160 Commitment to release ESOP shares 111 Release of incentive shares 59 59 Cash dividends (308) Purchase of treasury stock (651) (651) Comprehensive income: Net income, for six months ended June 30, 2002 349 Change in unrealized gain on securities available-for-sale, net of tax 3 3 ---------- Total comprehensive income 352 ----------- ----------- ----------- ---------- BALANCES AT JUNE 30, 2002 $ (211) $ (2,877) $ 19 $ 17,723 =========== =========== =========== ==========
- -------------------------------------------------------------------------------- See accompanying notes to consolidated financial statements. 5. GRAND CENTRAL FINANCIAL CORP. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands) - --------------------------------------------------------------------------------
Three Months Ended Six Months Ended June 30, June 30, -------- -------- 2002 2001 2002 2001 ---- ---- ---- ---- NET INCOME $ 140 $ 91 $ 349 $ 271 Other comprehensive income, net of tax Unrealized gain (loss) on securities available for sale arising during the period 5 (1) (4) 7 Less: Reclassification adjustment for accumulated gains included in net income - 3 7 3 --------------- -------------- -------------- --------------- Unrealized gains (losses) on securities 5 (4) 3 4 --------------- -------------- -------------- --------------- COMPREHENSIVE INCOME $ 145 $ 87 $ 352 $ 275 =============== ============== ============== ===============
- -------------------------------------------------------------------------------- See accompanying notes to consolidated financial statements. 6. GRAND CENTRAL FINANCIAL CORP. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) - --------------------------------------------------------------------------------
Six Months Ended June 30, 2002 2001 ---- ---- NET CASH FROM OPERATING ACTIVITIES $ 8,169 $ (1,179) CASH FLOWS FROM INVESTING ACTIVITIES Securities available for sale Purchases (228) (75) Proceeds from sales 166 79 Proceeds from maturities and payments 421 649 Securities held to maturity Purchases (12,534) - Proceeds from maturities and payments 13,054 3,738 Change in time deposits with other banks (98) 250 Net purchased of premises and equipment (88) - Net change in loans 7,483 4,715 --------------- ---------------- Net cash from investing activities 8,176 9,356 CASH FLOWS FROM FINANCING ACTIVITIES Net change in deposits 2,051 1,970 Net change in escrow accounts 1 (130) Payment of loan payable (200) (250) Cash dividends (308) (245) Purchase of treasury stock (651) - Proceeds from long-term FHLB advances - 15,310 Repayment of long-term FHLB advances (6,495) (23,235) --------------- ---------------- Net cash from financing activities (5,602) (6,580) NET CHANGE IN CASH AND CASH EQUIVALENTS 10,743 1,597 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 4,380 2,930 --------------- ---------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 15,123 $ 4,527 =============== ================
- -------------------------------------------------------------------------------- See accompanying notes to consolidated financial statements. 7. GRAND CENTRAL FINANCIAL CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Unless otherwise indicated, amounts in thousand. Basis of Presentation: The accompanying consolidated financial statements have been prepared pursuant to rules and regulations of the Securities and Exchange Commission (the "SEC") and in compliance with accounting principles generally accepted in the United States of America. Because this report is based on an interim period, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. In the opinion of the Management of the Grand Central Financial Corp. (the "Company"), the accompanying consolidated financial statements for the six months and three months ended June 30, 2002 and 2001 include all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of the financial condition and the results of operations for those periods. The financial performance reported for the Company for the six months and three months ended June 30, 2002 are not necessarily indicative of the results to be expected for the full year. This information should be read in conjunction with the Company's Annual Report to Shareholders and Form 10-KSB for the period ended December 31, 2001. Earnings Per Share: Basic earnings per common share is net income divided by the weighted average number of common shares outstanding during the period. ESOP shares are considered outstanding for this calculation unless unearned. Stock-based incentive plan shares are considered outstanding as they become vested. Diluted earnings per common share include the dilutive effect of stock-based incentive plan shares and the additional potential common shares issuable under stock options. The basic weighted average numbers of shares were 1,554,870 and 1,531,316 and the diluted weighted average numbers of shares were 1,587,552 and 1,571,495 for the six months ended June 30, 2002 and 2001, respectively. The basic weighted average numbers of shares were 1,535,209 and 1,532,356 and the diluted weighted average numbers of shares were 1,568,898 and 1,546,281 for the three months ended June 30, 2002 and 2001, respectively. - -------------------------------------------------------------------------------- 8. GRAND CENTRAL FINANCIAL CORP. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION - -------------------------------------------------------------------------------- FORWARD-LOOKING STATEMENTS This report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company intends such forward-looking statements to be covered by the safe harbor provisions which are not subject to certain risks and uncertainties for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and is including this statement for purposes of these safe harbor provisions. When used herein, the terms "anticipates", "plans", "expects", "believes", and similar expressions as they relate to the Company or its management are intended to identify such forward-looking statements. The Company's actual results, performance or achievements may materially differ from those expressed or implied in the forward-looking statements. Risks and uncertainties that could cause or contribute to such material differences include, but are not limited to, general economic conditions, interest rate environment, competitive conditions in the financial services industry, changes in law, governmental policies and regulations, and rapidly changing technology affecting financial services. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Further information concerning the Company and its business, including additional factors that could materially affect the Company's financial results, is included in the Company's filings with the SEC. The Company does not undertake - and specifically disclaims any obligation - - to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. - -------------------------------------------------------------------------------- 9. GRAND CENTRAL FINANCIAL CORP. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION - -------------------------------------------------------------------------------- GENERAL The Company is the holding company for its wholly-owned subsidiary, Central Federal Savings and Loan Association of Wellsville (the "Association"), and all material business of the Company is transacted through the Association. The Company's results of operations are dependent primarily on net interest income, which is the difference ("spread") between the interest income earned on its loans, mortgage-backed securities, and securities portfolio and its cost of funds, consisting of interest paid on its deposits and borrowed funds. The interest rate spread is affected by regulatory, economic and competitive factors that influence interest rates, loan demand and deposit flows. The Company's net income is also affected by, among other things, loan fee income, provisions for loan losses, service charges, operating expenses and franchise and income taxes. The Company's revenues are derived primarily from interest on mortgage loans, consumer loans, mortgage-backed securities and securities, as well as income from service charges and loan originations. The Company's operating expenses principally consist of employee compensation and benefits, occupancy, federal deposit-insurance premiums and other general and administrative expenses. The Company's results of operations are also significantly affected by general economic and competitive conditions, particularly changes in market interest rates, government policies and actions of regulatory authorities. Future changes in applicable law, regulations or government policies may materially impact the Company. MANAGEMENT STRATEGY The Company is a community-oriented financial institution offering a variety of financial services to meet the needs of the communities it serves. The Company attracts deposits from the general public and uses such deposits, together with borrowings and other funds, to originate one-to four-family residential mortgage loans and short-term consumer loans. To a lesser extent, the Company also originates residential construction loans in its market area and a limited amount of commercial business loans and loans secured by multi-family and non-residential real estate. Management's efforts to increase the Company's volume of shorter-term consumer loans have been intended to help reduce interest rate risk, as well as to build on the Company's residential mortgage business. The Company's deposits are insured up to the maximum allowable amount by the Savings Association Insurance Fund (the "SAIF"), and administered by the Federal Deposit Insurance Corporation (the "FDIC"). The Company also invests in mortgage-backed securities, most of which are insured or guaranteed by federal agencies, as well as securities issued by the U.S. government or agencies thereof. The Company is not aware of any market or institutional trends, events or uncertainties that are expected to have a material effect on liquidity, capital resources or operations, except as discussed below. The Company is also not aware of any current recommendations by its regulators which would have a material effect if implemented, except as discussed below. The following discussion compares the financial conditions of the Company and the Association, - -------------------------------------------------------------------------------- 10. GRAND CENTRAL FINANCIAL CORP. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION - -------------------------------------------------------------------------------- at June 30, 2002 to December 31, 2001 and the results of operations for the three months ended June 30, 2002 and 2001 and the six months ended June 30, 2002 and 2001. This discussion should be read in conjunction with the interim financial statements and footnotes included herein. COMPARISON OF FINANCIAL CONDITION AT JUNE 30, 2002 AND DECEMBER 31, 2001 Total assets of the Company were $115.9 million at June 30, 2002 compared to $120.9 million at December 31, 2001, representing a decrease of $5.0 million, or 4.1%. The primary component in the decrease in total assets were a $7.5 million decrease in loans, net, and a $7.8 million decrease in loans held for sale, which were partially offset by an increase in cash and cash equivalents of $10.7 million or 245.3%. The decrease in loans was primarily due to refinancing activity during the quarter. Interest rates for long-term, fixed rates continue to stay near 40 year lows. Management decided to sell the new loans rather than hold them in its portfolio. The Company also had a $4.8 million, or 26.9% decline in consumer loans, which are mostly automobile loans' due to local competition from dealers offering special rebates and financing programs. The Company currently grants loans for both new and used automobile purchases. The weighted average rate earned on new and used automobiles was 7.2% at June 30, 2002. Maturities for new and used automobile financing range from 24 months to 66 months. The Company does not originate sub prime automobile loans. Cash and cash equivalents increased due to the Company having excess funds from the sale of loans and through the increase in deposits. The Company reduced advances from the Federal Home Loan Bank of Cincinnati (the "FHLB") by $6.5 million or 35.3% from year-end 2001. The Company had used the advances to fund loan growth, but, based on the current lending environment, the advances are no longer needed. Management would consider using advances, if needed, in the future. COMPARISON OF RESULTS OF OPERATIONS FOR THE SIX MONTHS AND THREE MONTHS ENDED JUNE 30, 2002 AND JUNE 30, 2001 General. Net income for the three months ended June 30, 2002 increased by $49,000 or 53.8% from $91,000 for the three months ended June 30, 2001 to $140,000 for the three months ended June 30, 2002. Net income increased $78,000 or 28.8% for the six months ended June 30, 2002 compared to the six months ended June 30, 2001. The increases were mainly due to gain on sale of loans and securities. See the non-interest income section for an explanation about the gains. Net Interest Income. Net interest income is the largest component of the Company's net income, and consists of the difference between interest income generated on interest-earning assets and interest expense incurred on interest-bearing liabilities. Net interest income is primarily affected by the volumes, interest rates and composition of interest-earning assets and interest-bearing liabilities. Net interest income decreased approximately $291,000, or 13.6% and $255,000 or 22.9%, for the six months and three months ended June 30, 2002, respectively. The primary reason for the decrease in net interest income was the $1.4 million, or 26.9% decrease in interest income for the six months ended June 30, 2002 and the decrease of $754,000 or 29.9% for the three months ended June 30, 2002 compared to the 2001 periods. As mentioned earlier, rates for one-to-four family mortgages have been at historic lows over the past twelve months resulting in high refinancing activity. Due to refinancing, the Company has a smaller portfolio at a lower earning rate, resulting in lower interest income. The Company experienced similar circumstances with automobile loans. Management is in the - -------------------------------------------------------------------------------- 11. GRAND CENTRAL FINANCIAL CORP. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION - -------------------------------------------------------------------------------- process of reviewing the portfolios with the current market and has introduced new adjustable rate products to stimulate loan growth. The Company also earned less interest from its securities portfolio during the six months and three months ended June 20, 2002, sustaining a decrease of $541,000 and $246,000 or 37.6% and 35.7% when compared to the 2001 periods. Most of the Company's investments are in mortgage-backed instruments, which experienced rate reductions and prepayments similar to those on one-to-four family mortgages. The decrease in interest income was offset substantially by the decrease in interest expense. Interest expense for the six months ended June 20, 2002 decreased $1.1 million or 36.6% when compared to the first six months of 2001 and decreased $499,000 or 35.4% for the three months ended June 30, 2002 when compared to the three months ended June 30, 2001. The decreases were due to the declining interest rate environment during 2001 and 2002. The Company was able to decrease its expense while increasing overall deposits. Due to economic events during 2001, consumers moved money from the stock market back and into bank deposits. The Company also was able to reduce its advances with the FHLB with the funds received from loan and security pay downs and deposit growth. The Company reduced interest expense for FHLB advances by $651,000 for the six months ended June 30, 2002 and $267,000 in the three months ended June 30, 2002 or 65.6% and 61.8%, respectively, when compared to the prior periods. Provision for Loan Losses. The provision for loan losses is based on management's regular review of the loan portfolio, when it considers factors such as past experience, prevailing general economic conditions and considerations applicable to specific loans, such as the ability of the borrower to repay the loan and the estimated value of the underlying collateral, as well as changes in the size and growth of the loan portfolio. No provision for loan losses was recorded during the six months and three months ended June 30, 2002 or 2001. At June 30, 2002, the allowance for loan losses represented .56% of total loans compared to .47% at December 31, 2001. Management believes the allowance for loan losses is adequate to absorb probable losses; however, future additions to the allowance may be necessary based on changes in economic conditions. Non-interest Income. The Company experienced a $113,000, or 83.1%, increase in non-interest income for the six months ended June 30, 2002 compared to the 2001 period. For the three months ended June 30, 2002, non-interest income increased $33,000 or 46.5% over the comparable period in 2001. Gain on sale of loans for the six months ended June 30, 2002 increased $153,000 from $19,000 in the 2001 period to $177,000 in 2002. The Company sold $14.7 million of loans that were held for sale at December 31, 2001 along with loans originated during the first six months of 2002. Management decided to sell the low rate, long-term assets instead of holding them in the portfolio. Management has sold loans in the past and will continue to do so depending on the market environment. Non-interest Expense. Non-interest expense decreased $308,000, or 16.5% and $287,000 or 27.6%, for the six months and three months ended June 30, 2002 compared to the 2001 periods. Occupancy expense decreased in both 2002 periods from the 2001 periods. The decrease in occupancy expense is directly related to cost savings achieved based on management's decision to close a - -------------------------------------------------------------------------------- 12. GRAND CENTRAL FINANCIAL CORP. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION - -------------------------------------------------------------------------------- branch during 2001. However, since management has completed consolidating branches, management anticipates no further reductions in occupancy expense in the future. Income Taxes. The provision for income taxes totaled $63,000 and $192,000 for the three months and six months ended June 30, 2002 compared to $47,000 and $140,000 for the three months and six months ended June 30, 2001, due to the increase in income before taxes. - -------------------------------------------------------------------------------- 13. GRAND CENTRAL FINANCIAL CORP. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION - -------------------------------------------------------------------------------- LIQUIDITY AND CAPITAL RESOURCES The Company's primary sources of funds are the Association's deposits, principal and interest payments on loans, mortgage-backed and investment securities and borrowings from the FHLB-Cincinnati. The Company uses the funds generated to support its lending and investment activities as well as any other demands for liquidity such as deposit outflows. While maturities and scheduled amortization of loans are predictable sources of funds, deposit flows, mortgage prepayments and the exercise of call features are greatly influenced by general interest rates, economic conditions and competition. At June 30, 2002, the Company's liquidity ratio was 31.1%. At June 30, 2002, the Company exceeded all of its regulatory capital requirements with a Tier 2 capital level of $23.0 million, or 19.9%, of total adjusted assets, which exceeds the required level of $14.5 million, or 8.0%; Tier 1 of $22.9 million, or 16.76%, of adjusted total assets, which exceeds the required level of $2.3 million, or 4.0%; and risk-based capital of $22.9 million, or 41.2% of risk-weighted assets, which exceeds the required level of $5.2 million, or 8.0%. The Company's most liquid assets are cash and cash equivalents. The levels of those assets are dependent on the Company's operating, financing, lending and investing activities during any given period. At June 30, 2002, cash and cash equivalents totaled $15.1 million, or 13.0% of total assets. The Company has other sources of liquidity if a need for additional funds arises, including FHLB advances. At June 30, 2002, the Company had unused borrowing capacity from the FHLB of $56.2 million. Depending on market conditions, the pricing of deposit products and FHLB advances, the Company may use FHLB borrowing to fund asset growth. The Company relies primarily on competitive rates, customer service and long-standing relationships with customers to retain deposits. Based on the Company's experience with deposit retention and current retention strategies, management believes that, although it is not possible to predict future terms and conditions upon renewal, a significant portion of such deposits will remain with the Company. The Company approved the return of capital of $6.00 per share in March 2000 due to the excess capital raised during the initial public offering. During 1999, the Company reevaluated its branching strategy and determined to close certain under performing, in-store branch locations. As a result of that analysis, the Company reevaluated its current and anticipated future capital needs and determined that it was in the best interest of the Company and its shareholders to reduce the level of capital in the Company. The Company has completed its restructuring/rightsizing plans and evaluated all of its branch operations. Based on those evaluations, management does not anticipate closing any - -------------------------------------------------------------------------------- 14. GRAND CENTRAL FINANCIAL CORP. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION - -------------------------------------------------------------------------------- additional branch locations in the future. During the six months ended June 30, 2002, management took advantage of higher liquidity to repay short term Federal Home Loan Bank (FHLB) advances. All advances that could be repaid without penalty have been repaid; and management does not intend any further reduction to this type of funding other than through normal contractual repayment of the advances. Since management has no further plans to close branch locations or reduce the level of FHLB advances, other than through normal repayments, management does not anticipate any impact on the results of operations, liquidity or capital resources as a result of restructuring/rightsizing plans. The Company will continue to realize a benefit from reducing staffing and occupancy costs in 2002 compared to 2001 due to the branch closed during 2001. - -------------------------------------------------------------------------------- 15. GRAND CENTRAL FINANCIAL CORP. FORM 10-QSB Quarter ended June 30, 2002 PART II - OTHER INFORMATION - -------------------------------------------------------------------------------- Item 1. Legal Proceedings. None Item 2. Changes in Securities and Use of Proceeds. None Item 3. Defaults Upon Senior Securities. None Item 4. Submission of Matters to a Vote of Security Holders. Grand Central Financial Corp. held its Annual Meeting of Shareholders on April 24, 2002. Results of shareholder voting were as follows: a) Election of Director for a three year term: Gerry W. Grace -------------- For 1,460,433 Abstain 2,530 Against - b) Ratification of independent auditor for the fiscal year ending December 31, 2002 Crowe, Chizek and Company, LLP ------------------------------ For 1,460,373 Abstain 1,530 Against 1,060 The following directors' terms of office as a director continued after the meeting. (i) Jeffrey W. Aldrich (ii) Thomas P. Ash (iii) Williams R. Williams Item 5. Other Information. None - -------------------------------------------------------------------------------- 16. GRAND CENTRAL FINANCIAL CORP. FORM 10-QSB Quarter ended June 30, 2002 PART II - OTHER INFORMATION - -------------------------------------------------------------------------------- Item 6. Exhibits and Reports on Form 8-K. (a) Exhibit Number Exhibit ------ ------- 3.1 Certificate of Incorporation* 3.2 Bylaws* 4.0 Form of Common Stock Certificate* 11.1 Statement Re: Computation of earnings per common share 99.1 Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 99.2 Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. * Incorporated by reference into this document from the Exhibits filed with the Registration Statement on Form SB-2 and any amendments thereto, Registration No. 333-64089. Basic earnings per share is computed by dividing net income by the weighted average number of shares outstanding during the period, as restated for shares issued in business combinations accounted for as pooling-of-interests, stock splits and stock dividends. Diluted earnings per share is computed using the weighted average number of shares determined for the basic computation plus the number of shares of common stock that would be issued assuming all contingently issuable shares having a dilutive effect on earnings per share were outstanding for the period. The weighted average number of common shares outstanding for basic and diluted earnings per share computations were as follows:
Six Months Ended Three Months Ended June 30, June 30, -------- -------- 2002 2001 2002 2001 ---- ---- ---- ---- Numerator: Net income $ 349 $ 271 $ 140 $ 91 Denominator: Weighted-average common shares outstanding (basic) 1,554,870 1,531,316 1,535,209 1,532,356 Exercise of options 32,682 40,179 33,689 13,925 Weighted-average common shares outstanding (diluted) 1,587,552 1,571,495 1,568,898 1,546,281
- -------------------------------------------------------------------------------- 17. GRAND CENTRAL FINANCIAL CORP. FORM 10-QSB Quarter ended June 30, 2002 PART II - OTHER INFORMATION - -------------------------------------------------------------------------------- Earnings per share: Basic $ .22 $ .18 $ .09 $ .06 Diluted $ .22 $ .17 $ .09 $ .06 (b) Reports on Form 8-K - on June 26, 2002, the issuer filed a Form 8-K. The information reported is as follows: Grand Central Financial Corp. (the "Company"), reported the declaration of a cash dividend payable July 22, 2002 to stockholders of record at the close of business on July 8, 2002. - -------------------------------------------------------------------------------- 18. GRAND CENTRAL FINANCIAL CORP. FORM 10-QSB Quarter ended June 30, 2002 PART II - OTHER INFORMATION - -------------------------------------------------------------------------------- SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned hereunto duly authorized. GRAND CENTRAL FINANCIAL CORP. ----------------------------- Dated: August 14, 2002 By: /s/ William R. Williams ----------------------------------- William R. Williams President and Chief Executive Officer (principal executive officer) Dated: August 14, 2002 By: /s/ John A. Rife ----------------------------------- John A. Rife Executive Vice President and Treasurer (principal accounting and financial officer)
- -------------------------------------------------------------------------------- 19. EX-99.1 3 l95307aexv99w1.txt EXHIBIT 99.1 Exhibit 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Grand Central Financial Corp. (the "Company") on Form 10-QSB for the period ended June 30, 2002 as filed with the Securities and Exchange Commission (the "Report"), I, William R. Williams, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes- Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the period covered by the Report. /s/ William R. Williams ------------------------- William R. Williams Chief Executive Officer August 14, 2002 EX-99.2 4 l95307aexv99w2.txt EXHIBIT 99.2 Exhibit 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Grand Central Financial Corp. (the "Company") on Form 10-QSB for the period ended June 30, 2002 as filed with the Securities and Exchange Commission (the "Report"), I, John A. Rife, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C.ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes- Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the period covered by the Report. /s/ John A. Rife ------------------------- John A. Rife Chief Financial Officer August 14, 2002 -----END PRIVACY-ENHANCED MESSAGE-----