-----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, CSx63ruzv9Yk5FcURk2NKPmCSyDnKMWzOBjdOkwHWJteC830K6yM2BtPUyrNfv7c gDclzxvD3q08aOEmDE6Bsw== 0000755933-96-000009.txt : 19960816 0000755933-96-000009.hdr.sgml : 19960816 ACCESSION NUMBER: 0000755933-96-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERCHANGE FINANCIAL SERVICES CORP /NJ/ CENTRAL INDEX KEY: 0000755933 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 222553159 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10518 FILM NUMBER: 96611961 BUSINESS ADDRESS: STREET 1: PARK 80 WEST PLAZA TWO STREET 2: ATTN INTERCHANGE STATE BANK CITY: SADDLE BROOK STATE: NJ ZIP: 07662 BUSINESS PHONE: 2017032265 MAIL ADDRESS: STREET 1: PARK 80 WEST STREET 2: PLAZE II CITY: SADDLE BROOK STATE: NJ ZIP: 07663 FORMER COMPANY: FORMER CONFORMED NAME: INTERCHANGER STATE BANK DATE OF NAME CHANGE: 19870416 FORMER COMPANY: FORMER CONFORMED NAME: INTERCHANGE FINANCIAL SERVICES CORP DATE OF NAME CHANGE: 19861209 10-Q 1 FOR THE PERIOD ENDED JUNE 30, 1996 INTERCHANGE FINANCIAL SERVICES CORPORATION CONSOLIDATED BALANCE SHEETS (in thousands)
JUNE 30, December 31, 1996 1995 -------- ------------ ASSETS Cash and due from banks ............................... $ 26,326 $ 25,151 Federal funds sold .................................... -- -- --------- --------- Total cash and cash equivalents ....................... 26,326 25,151 --------- --------- Investment securities at amortized cost (approximate market value of $76,383 and $75,611 ) ........... 76,432 74,688 --------- --------- Securities available for sale at estimated market value (amortized cost of $49,529 and $66,604 ) ........ 49,238 67,545 --------- --------- Loans ................................................. 325,463 311,164 Less: Allowance for loan losses ...................... 3,824 3,647 --------- --------- Net loans ............................................. 321,639 307,517 --------- --------- Premises and equipment, net ........................... 5,389 5,510 Foreclosed real estate ................................ 1,140 1,213 Accrued interest receivable and other assets .......... 11,143 9,833 --------- --------- TOTAL ASSETS .......................................... $ 491,307 $ 491,457 ========= ========= LIABILITIES Deposits Noninterest bearing ............................. $ 75,916 $ 69,213 Interest bearing ................................ 361,968 367,239 --------- --------- Total deposits ........................................ 437,884 436,452 Securities sold under agreements to repurchase ........ 100 1,704 Short-term borrowings ................................. 7,900 9,200 Accrued interest payable and other liabilities ........ 3,766 3,860 --------- --------- TOTAL LIABILITIES ..................................... 449,650 451,216 --------- --------- STOCKHOLDERS' EQUITY Common stock .......................................... 4,733 4,495 Capital surplus ....................................... 14,932 12,110 Retained earnings ..................................... 22,151 22,990 Unrealized (loss) gain on securities available for sale, net of income taxes .............................. (159) 646 --------- --------- Total stockholders' equity ............................ 41,657 40,241 --------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ............ $ 491,307 $ 491,457 ========= ========= See notes to consolidated financial statements
INTERCHANGE FINANCIAL SERVICES CORPORATION CONSOLIDATED STATEMENTS OF INCOME (in thousands except per share data)
Three months ended Six months ended June 30, June 30, ------------------------ ------------------------ 1996 1995 1996 1995 ---------- ---------- ------------ -------- INTEREST INCOME Interest and fees on loans ......................................... $ 7,107 $ 6,802 $14,173 $13,490 Interest on federal funds sold ..................................... 142 117 370 189 Interest and dividends on securities Taxable interest income ........................................ 1,929 2,267 3,790 4,556 Interest income exempt from federal income taxes ............... 16 14 30 29 Dividends ...................................................... 38 50 76 80 ------- ------- ------- ------- TOTAL INTEREST INCOME .............................................. 9,232 9,250 18,439 18,344 ------- ------- ------- ------- INTEREST EXPENSE Interest on deposits ............................................... 3,540 3,666 7,138 7,083 Interest on short-term borrowings .................................. 105 117 255 262 Interest on long-term borrowings ................................... -- 44 -- 107 ------- ------- ------- ------- TOTAL INTEREST EXPENSE ............................................. 3,645 3,827 7,393 7,452 ------- ------- ------- ------- NET INTEREST INCOME ................................................ 5,587 5,423 11,046 10,892 Provision for loan losses .......................................... 150 375 400 600 ------- ------- ------- ------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES ................................................... 5,437 5,048 10,646 10,292 ------- ------- ------- ------- NONINTEREST INCOME Service fees on deposit accounts ................................... 395 374 764 735 Net gain on sale of loans available for sale ....................... -- 11 -- 22 Net gain on sale of securities available for sale .................. -- 15 235 15 Accretion of discount in connection with acquisition ............... 190 190 380 380 Other .............................................................. 398 523 843 977 ------- ------- ------- ------- TOTAL NONINTEREST INCOME ........................................... 983 1,113 2,222 2,129 ------- ------- ------- ------- NONINTEREST EXPENSES Salaries and benefits .............................................. 1,901 1,832 3,803 3,670 Net occupancy ...................................................... 553 515 1,098 1,025 Furniture and equipment ............................................ 185 178 363 329 Advertising and promotion .......................................... 190 189 348 379 Federal Deposit Insurance Corporation assessment ................... 13 240 25 465 Foreclosed real estate expense ..................................... 56 38 119 110 Other .............................................................. 1,248 849 2,358 1,962 ------- ------- ------- ------- TOTAL NONINTEREST EXPENSES ......................................... 4,146 3,841 8,114 7,940 ------- ------- ------- ------- Income before income taxes ........................................ 2,274 2,320 4,754 4,481 Income taxes ....................................................... 796 755 1,664 1,511 ------- ------- ------- ------- NET INCOME ......................................................... $ 1,478 $ 1,565 $ 3,090 $ 2,970 ======= ======= ======= ======= PER COMMON SHARE ................................................... $ 0.52 $ 0.54 $ 1.09 $ 1.03 ======= ======= ======= ======= See notes to consolidated financial statements
INTERCHANGE FINANCIAL SERVICES CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (in thousands)
Unrealized Gain/(Loss)on Securities Preferred Common Capital Retained Available Treasury Stock Stock Surplus Earnings for Sale Stock Total ------------------------------------------------------------------------------ Balance at January 1, 1995 ....................... $ 5,000 $ 4,495 $ 11,333 $ 18,737 $ (1,813) $ (2,623) $35,129 Net income ....................................... 2,970 2,970 Dividends on common stock at $0.343 per share .... (971) (971) Dividends on preferred stock ..................... (57) (57) Increase in market valuation-securities available for sale, net of income taxes ...... 1,253 1,253 -------- -------- -------- -------- -------- -------- -------- Balance at June 30, 1995 ......................... 5,000 4,495 11,333 20,679 (560) (2,623) 38,324 Net income ....................................... 3,310 3,310 Dividends on common stock at $0.343 per share (1) (971) (971) Dividends on preferred stock ..................... (28) (28) Purchase of 32,000 preferred shares .............. (1,600) (1,600) Retirement of 100,000 shares of preferred stock .. (5,000) 777 4,223 -- Increase in market valuation-securities available for sale, net of income taxes ...... 1,206 1,206 -------- -------- -------- -------- -------- -------- -------- Balance at December 31, 1995 ..................... -- 4,495 12,110 22,990 646 -- 40,241 Net income ....................................... 3,090 3,090 Dividends on common stock at $0.362 per share (1) (1,025) (1,025) 5% common stock dividend ......................... 226 2,678 (2,904) -- Fractional shares of 5% common stock dividend .... (5) (5) Issued 7,498 shares of common stock in connection with incentive plan ............ 12 149 161 Decrease in market valuation-securities available for sale, net of income taxes ...... (805) (805) -------- -------- -------- -------- -------- -------- -------- BALANCE AT JUNE 30, 1996 ......................... $ -- $ 4,733 $ 14,932 $ 22,151 $ (159) $ -- $ 41,657 ======== ======== ======== ======== ======== ======== ======== - -------- (1) Restated for retroactive effect of 5% common stock dividend issued on April 19,1996 to shareholders of record on March 20, 1996 See notes to consolidated financial statements.
INTERCHANGE FINANCIAL SERVICES CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
For the six months ended June 30, --------------------------- 1996 1995 --------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income ................................................................................. $ 3,090 $ 2,970 Non-cash items included in earnings Depreciation and amortization of fixed assets ........................................... 511 395 Amortization of securities premiums ..................................................... 550 748 Accretion of securities discounts ....................................................... (31) (27) Amortization of premiums in connection with acquisition ................................. 222 222 Accretion of discount in connection with acquisition .................................... (380) (380) Provision for loan losses ............................................................... 400 600 Net gain on sale of securities available for sale ....................................... (235) (15) Net gain on sale of loans available for sale ........................................... -- (22) Net gain on sale of foreclosed real estate .............................................. (7) (13) Decrease/(increase) in carrying value of loans available for sale ....................... 42 (81) Loss on sale of fixed assets ............................................................ -- 25 (Increase) decrease in operating assets Net origination of loans available for sale ............................................. (114) (193) Proceeds from sale of loans available for sale .......................................... -- 837 Accrued interest receivable ............................................................. 178 209 Deferred income taxes ................................................................... (84) 26 Other ................................................................................... (1,171) 735 Increase/(decrease) in operating liabilities Accrued interest payable ................................................................ 51 141 Other ................................................................................... (145) 25 -------- -------- CASH PROVIDED BY OPERATING ACTIVITIES ...................................................... 2,877 6,202 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from (payments for) Net (originations)/ repayment of loans .................................................. (12,451) 2,076 Purchase of loans ....................................................................... (1,798) (502) Purchase of securities available for sale ............................................... (21,527) (4,915) Maturities of securities available for sale ............................................. 365 1,146 Sale of securities available for sale ................................................... 38,349 2,359 Sale of foreclosed real estate .......................................................... 251 309 Purchase of investment securities ....................................................... (16,215) -- Maturities of investment securities ..................................................... 14,059 5,000 Net payments on foreclosed real estate .................................................. 8 (18) Purchase of fixed assets ............................................................... (402) (1,100) Sale of fixed assets .................................................................... -- 3 -------- -------- CASH PROVIDED BY INVESTING ACTIVITIES ...................................................... 639 4,358 -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from (payments for) Deposits more than withdrawals .......................................................... 1,432 7,872 Securities sold under agreements to repurchase .......................................... 5,778 -- Other borrowings ........................................................................ (1,300) (6,500) Retirement of securities sold under agreement ........................................... -- to repurchase ........................................................................ (7,382) (602) Dividends ............................................................................... (1,025) (1,028) Common stock issued ..................................................................... 156 -- -------- -------- CASH USED FOR FINANCING ACTIVITIES ......................................................... (2,341) (258) -------- -------- INCREASE IN CASH AND CASH EQUIVALENTS ...................................................... 1,175 10,302 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR ............................................... 25,151 25,965 -------- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD ................................................... $ 26,326 $ 36,267 ======== ======== - -------- Supplemental disclosure of cash flow information: Cash paid for: Interest ............................................................................. $ 7,341 $ 7,311 Income taxes ......................................................................... 1,872 1,443 Supplemental disclosure of non-cash investing activities: Loans transferred to foreclosed real estate .......................................... $ 179 $ 347 Decrease/(increase)-market valuation of securities available for sale .......................................................................... 1,231 (1,941) Amortization of valuation allowance-securities transferred from availabe to sale to held to maturity ............................. 17 -- See notes to consolidated financial statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 1996 1. FINANCIAL STATEMENTS The consolidated financial statements should be read in conjunction with the financial statements and schedules as presented in the Annual Report on Form 10-K of Interchange Financial Services Corporation (the "Company") for the year ended December 31, 1995. Consolidated financial data for the six months ended June 30, 1996 and 1995, are unaudited but reflect all adjustments consisting of only normal recurring adjustments which are, in the opinion of management, considered necessary for a fair presentation of the financial condition and results of operations for the interim periods. Results for interim periods are not necessarily indicative of results to be expected for any other period or the full year. 2. LEGAL PROCEEDINGS Interchange State Bank's (the "Bank"), a wholly owned subsidiary of the Company was a party to a lawsuit commenced in April 1989 (Great American Mortgage Corp., et al, v. Robert Utter, et al.), filed in the Superior Court of New Jersey alleging that the Bank was statutorily liable in conversion for having paid checks drawn on deposit accounts of plaintiffs at the Bank bearing irregular endorsements. Various other legal proceedings related to the foregoing were also instituted in which the Bank pursued various parties whom the Bank alleged were liable to it. On August 2, 1996, the Bank paid $120,000 plus prejudgment interest to settle the final matter pertaining to these occurrences. The remainder of a reserve, which had been established in 1992, was sufficient to cover the amount of the settlement. All legal proceedings related to these occurrences have now been resolved. The Company is also a party to routine litigation involving various aspects of its business, none of which, in the opinion of management, after consultation with legal counsel, is expected to have a material adverse impact on the consolidated financial condition, results of operations or liquidity of the Company. 3. EMPLOYEES' STOCK OPTION PLAN In October 1995, the Financial Accounting Standards Board adopted Statement No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"), which was effective for the Company as of January 1, 1996. SFAS No. 123 requires expanded disclosures of stock-based compensation arrangements with employees and encourages, but does not require compensation cost to be measured based on the fair value of the equity instrument awarded. Companies are permitted, however, to continue to apply APB Opinion No. 25, which recognizes compensation cost based on the intrinsic value of the equity instrument awarded. The Company will continue to apply APB Opinion No. 25 to its stock-based compensation awards to employees and will disclose the required pro forma effect on net income and earnings per share in its annual financial statements. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion is an analysis of the consolidated financial condition and results of operations of the Company for the six months ended June 30, 1996 and 1995, and should be read in conjunction with the consolidated financial statements and notes thereto included in Item 1 hereof. RESULTS OF OPERATIONS EARNINGS SUMMARY Net Income for the six months ended June 30, 1996, was $3.1 million or $1.09 per share, as compared to $3.0 million or $1.03 per share for the same period a year ago. The increase was attributable to several components which are described in detail in the following paragraphs. The Company's most important revenue source is net interest income which is the difference between interest earned on its interest earning assets, such as loans and investments, and the interest paid on its interest bearing liabilities, primarily deposits. Changes in net interest income from period to period result from increases or decreases in the average balances of interest earning assets and interest bearing liabilities and increases or decreases in the spread between the average rates earned on such assets and the average rates paid on such liabilities. Earnings for the six month period improved as a result of a $154 thousand or 1.4% growth in net interest income from the same period a year ago. Contributing to the growth in net interest income was an increase of $13.8 million in average interest earning assets for the 1996 period over the comparable 1995 period. The growth occurred mostly in loans which had an average balance of $315 million, an increase of $27.9 million or 9.7% over the comparable 1995 period. The growth positively affected net interest income despite a 9 basis points decrease in net yield on average earning assets for the 1996 period, as compared to the same 1995 period. Some of the benefit derived from the positive trend in earning assets was offset by $4.7 million or 1.3% increase in interest-bearing liabilities. While interest-bearing liabilities increased, the Company's funding costs decreased 8 basis points for the 1996 period as compared to the 1995 period. Earnings for the 1996 period also benefited from a $93 thousand net increase in noninterest income. The increase was the result of a $235 thousand gain from the sale of securities that occurred in the first quarter of 1996. The benefit derived from the gain was partially offset by the reduction of service fee income due to the sale of loan servicing rights which occurred in the fourth quarter of 1995. The service fee income for the first six months of 1995 was approximately $117 thousand. Noninterest expenses for the period increased $174 thousand or 2.2% over the same period a year ago despite a $440 thousand decrease in fees paid to the Federal Deposit Insurance Corporation ("FDIC") for deposit insurance. This occurred because other noninterest expenses for the 1995 period were favorably affected by the $250 thousand reversal of a previously established litigation reserve resulting from the partial settlement of a lawsuit. Adjusted for the reversal of the reserve, noninterest expenses for the 1996 period would have decreased $76 thousand or 1.0% as compared to the same period a year ago. Earnings for the six month period ended June 30, 1996, were favorably affected by a $200 thousand decrease in the provision for loan losses as compared to the same period a year ago. The amount provided for loan losses during 1996 was reduced based upon the results of the analysis described in the section titled "Provision for Loan Losses and Loan Loss Experience" in which, based on management's opinion, using the best available information, it was determined that the allowance for loan losses was sufficient to cover future loan losses on existing loans. Net Income for the second quarter of 1996 was $1.5 million or $0.52 per share as compared to $1.6 million or $0.54 per share for the same period a year ago. The decrease was attributable to several components which are described in detail in the following paragraphs. Net income decreased because noninterest expenses for the second quarter 1996 increased $305 thousand or 7.9% over the same period a year ago despite a $227 thousand decrease in fees paid to the FDIC for deposit insurance. This occurred because other noninterest expenses for the 1995 period were favorably affected by the $250 thousand reversal of a previously established litigation reserve resulting from the partial settlement of a lawsuit. Adjusted for the reversal of the reserve, noninterest expenses for the second quarter 1996 would have increased $55 thousand or 1.3% as compared to the same period a year ago. In addition to normal growth, noninterest expenses were negatively affected by increased occupancy and start-up costs due largely to the opening of a new branch office during the current quarter. Earnings for the quarter were favorably impacted by a $164 thousand or 3.0% growth in net interest income compared to the same period a year ago. Contributing to this growth was an increase of $14.9 million in average interest earning assets over the comparable 1995 period. The growth occurred mostly in loans which had an average aggregate balance of $319 million, an increase of $31.6 million or 11.0% over the comparable 1995 period. The growth positively affected net interest income despite a 2 basis points decrease in net yield on average earning assets for the 1996 period as compared to the same 1995 period. Some of the benefit derived from the positive trend in earning assets was offset by $4.4 million or 1.2% increase in interest bearing liabilities. While interest bearing liabilities increased, the Company's funding costs decreased 25 basis points and provided a boost to the Company's net interest spread for the 1996 period as compared to the 1995 period. Earnings for the quarter ended June 30, 1996, were favorably affected by a $225 thousand decrease in the provision for loan losses, as compared to the same period a year ago. The amount provided for loan losses during 1996 was reduced based upon the results of the analysis described in section titled "Provision for Loan Losses and Loan Loss Experience" in which, based on management's opinion, using the best available information, it was determined that the allowance for loan losses was sufficient to cover future loan losses on existing loans. NONPERFORMING ASSETS Nonperforming assets, consisting of nonaccrual loans, restructured loans and foreclosed real estate, increased $1.1 million from $5.2 million at December 31, 1995, to $6.3 million at June 30, 1996. For the second quarter 1996, nonperforming assets increased $527 thousand from $5.8 million for the quarter ended March 31, 1996. The ratio of nonperforming assets to total loans and foreclosed real estate increased from 1.66% at December 31, 1995, to 1.93% at June 30, 1996. The ratio, at June 30, 1996, increased from 1.82% as of the quarter ended March 31, 1996. PROVISION FOR LOAN LOSSES AND LOAN LOSS EXPERIENCE The provision for loan losses represents management's determination of the amount necessary to bring the allowance for loan losses to a level that management considers adequate to reflect the risk of future losses inherent in the Company's loan portfolio. In its evaluation of the adequacy of the allowance for loan losses, management considers past loan loss experience, changes in the composition of nonperforming loans, the condition of borrowers facing financial pressure, the relationship of the current level of the allowance to the credit portfolio and to nonperforming loans and existing economic conditions. However, the process of determining the adequacy of the allowance is necessarily judgmental and subject to changes in external conditions. Accordingly, there can be no assurance that existing levels of the allowance will ultimately prove adequate to cover actual loan losses. The allowance for loan losses was $3.8 million at June 30, 1996, and $3.6 million at December 31, 1995, representing 74.0% and 91.7% of nonperforming loans at those dates, respectively. Securities Investment securities and securities available for sale consist of the following: (in thousands)
June 30, 1996 ------------------------------------------------------------- Gross Gross Amortized Unrealized Unrealized Market Cost Gains Losses Value ------------ --------- ----------- ------------- Investment securities Obligations of U.S. Treasury ....................... $ 56,828 $ 238 $ 44 $ 57,022 Obligations of U.S. Agencies ....................... 11,093 -- 122 10,971 Obligations of state and political subdivision ...................................... 2,794 -- 11 2,783 Other debt securities .............................. 5,717 -- 110 5,607 -------- -------- -------- -------- 76,432 238 287 76,383 -------- -------- -------- -------- Securities available for sale Obligations of U.S. Treasury ....................... 25,743 400 450 25,693 Obligations of U.S. Agencies ....................... 17,586 4 219 17,371 Other debt securities .............................. 2,288 -- 26 2,262 Equity securities .................................. 3,912 -- -- 3,912 -------- -------- -------- -------- 49,529 404 695 49,238 -------- -------- -------- -------- Total securities ................................. $125,961 $ 642 $ 982 $125,621 ======== ======== ======== ======== December 31, 1995 ------------------------------------------------------------- Gross Gross Estimated Amortized Unrealized Unrealized Market Cost Gains Losses Value ------------ --------- ----------- ------------- Investment securities Obligations of U.S. Treasury ....................... $ 65,223 $ 942 $ 26 $ 66,139 Obligations of U.S. agencies ....................... 8,037 7 -- 8,044 Obligations of states & political subdivisions ..................................... 1,278 -- -- 1,278 Other debt securities .............................. 150 -- -- 150 -------- -------- -------- -------- 74,688 949 26 75,611 -------- -------- -------- -------- Securities available for sale Obligations of U.S. Treasury ....................... 40,888 1,466 184 42,170 Obligations of U.S. agencies ....................... 23,282 -- 341 22,941 Equity securities .................................. 2,434 -- -- 2,434 -------- -------- -------- -------- 66,604 1,466 525 67,545 -------- -------- -------- -------- Total securities ................................. $141,292 $ 2,415 $ 551 $143,156 ======== ======== ======== ========
At June 30, 1996, the contractual maturities of investment securities and securities available for sale are as follows: (in thousands)
Securities Investment Securities Available for Sale ------------------------------- --------------------------- Amortized Market Amortized Market Cost Value Cost Value ------------- ------------- ------------ ------------ Within 1 year .......................................... $36,779 $36,925 $ -- $ -- After 1 but within 5 years ............................. 28,775 28,741 26,653 26,445 After 5 but within 10 years ............................ 4,206 4,173 10,712 10,733 After 10 years ......................................... 6,672 6,544 8,252 8,148 Equity securities ...................................... -- -- 3,912 3,912 ------- ------- ------- ------- Total .......................... $76,432 $76,383 $49,529 $49,238 ======= ======= ======= =======
CAPITAL ADEQUACY The table below presents the Company's capital position as of June 30, 1996: (dollars in thousands) Stockholders' equity ......................................... $ 41,657 Intangible assets ............................................ (1,149) Unrealized loss-securities available for sale, net of income taxes ..................................... 159 --------- Tier 1 capital ............................................... 40,667 Allowable portion of allowance for loan losses ......................................... 3,824 --------- Total risk-based capital ..................................... $ 44,491 ========= Risk weighted assets ......................................... $ 310,377 =========
Minimum Actual Requirement ------------ ------------ Risk-based ratio Tier 1 ................................... 13.10% 4.00% Total .................................... 14.33 8.00 Leverage capital ratio ........................ 8.30 3.00
LIQUIDITY Liquidity is the ability to provide sufficient resources to meet all financial obligations and finance prospective business opportunities. Liquidity levels over any given period of time are a product of the Company's operating, financing and investing activities. The extent of such activities are often shaped by such external factors as competition for deposits and demand for loans. Funding for the Company's loans and investments is derived primarily from deposits, along with interest and principal payments on loans and investments. At June 30, 1996, total deposits increased by $1.4 million from $436.5 million at December 31, 1995. Total deposits increased by $5.8 million from $432.0 million at June 30, 1995. In 1996, loan production continued to be the Company's principal investing activity. Net loans at June 30, 1996 amounted to $321.6 million compared to $307.5 million at December 31, 1995, an increase of $14.1 million for the six-month period. Furthermore, net loans increased $37.5 million from June 30, 1995. The Company's most liquid assets are cash and due from banks and federal funds sold. At June 30, 1996, the total of such assets amounted to $26.3 million compared to $25.1 million at December 31, 1995, an increase of $1.2 million. The Company's available for sale ("AFS") securities portfolio is also a significant source of liquidity. At June 30, 1996, the Company's AFS portfolio amounted to $49.2 million or 39.2% of total investments down from $67.5 million or 47.5% at December 31, 1995. The decline resulted from the sale of securities during the first quarter of 1996 in which only a portion of the proceeds were reinvested in AFS securities. In addition to the aforementioned sources of liquidity, the Company derives liquidity from various other sources, including federal funds purchased from other banks, the Federal Reserve discount window and sales of securities under repurchase agreements. The Bank also has a $47.5 million line of credit available through its membership in the Federal Home Loan Bank of New York. Management believes that the Company's sources of funds are sufficient to meet its funding requirements. PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Reference is made to Form 10-K filed for the year ended December 31, 1995. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On May 23, 1996, at the annual meeting, the following matters were submitted to a vote of security holders: (a) Election of directors: Anthony S. Abbate, Anthony Amato, John J. Eccleston and Eleanore S. Nissley were reelected, by the common shareholders, as directors of Interchange Financial Services Corporation. The votes were as follows: FOR AGAINST Anthony S. Abbate 2,384,240 3,690 Anthony Amato 2,384,991 2,939 John J. Eccleston 2,383,351 4,579 Eleanore S. Nissley 2,384,071 3,859 (b) Ratification of appointment of Deloitte & Touche LLP as independent auditors. The votes were as follows: FOR AGAINST ABSTAIN 2,369,939 2,377 15,614 The total number of shares of Interchange Financial Services Corporation common stock outstanding as of April 18, 1996, the record date for the annual meeting, was 2,704,598. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) The following exhibit is furnished herewith: EXHIBIT NO. 10 Material contracts (a) Agreement for legal services between Andora, Palmisano & Geaney and the Company dated April 25, 1996 11 Statement Re: Computation of Per Share Earnings (b) No reports on Form 8-K have been filed during the quarter ended June 31, 1996. SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. INTERCHANGE FINANCIAL SERVICES CORPORATION by: /S/ROBERT N. HARRIS ------------------- Robert N. Harris Executive Vice President EX-10 2 MATERIAL CONTRACTS AGREEMENT FOR LEGAL SERVICES THIS AGREEMENT for legal services made this 25th day of April, 1996, by and between: ANDORA, PALMISANO & GEANEY A Professional Corporation 303 Molnar Drive, P.O. Box 431 Elmwood Park, New Jersey 07407-0431 hereinafter referred to as "Attorneys", and INTERCHANGE FINANCIAL SERVICES CORPORATION Park 80 West, Plaza Two Saddle Brook, New Jersey 07662 and INTERCHANGE STATE BANK A Banking Corporation Park 80 West, Plaza Two Saddle Brook, New Jersey 07662 hereinafter referred to as "Clients". IN CONSIDERATION of the mutual promises, covenants and undertakings contained herein the Attorneys and the Clients agree as follows: 1. RETAINER Clients hereby retain the services of Attorneys to act as its corporate counsel for the term and compensation as outlined herein. 2. TERM The Attorneys shall be retained by Clients until the next annual reorganization meeting of Clients. 3. COMPENSATION The Clients shall pay the Attorneys for services rendered as corporate counsel an annual retainer of NINETY-FIVE THOUSAND DOLLARS ($95,000.00) payable in equal monthly installments on the first day of each and every month commencing the first day of the month following the execution of this Agreement. Clients shall, in addition to the annual retainer, pay to the Attorneys all out-of-pocket expenses, filing fees, or disbursements made by the Attorneys on Clients' behalf. Clients shall, in addition to the payment of the annual retainer and all costs, pay to the Attorneys a legal fee based on the rate per hour as shown on SCHEDULE A for all legal services provided to Clients by the Attorney which are "legal services rendered in addition to those rendered as corporate counsel." Such fees and costs shall be billed by Attorneys to clients on a thirty-day basis and Clients shall pay all bills within five (5) days after each monthly Board of Director's meeting of the Clients. 4. DEFINITIONS The following words and phrases shall have the following meanings: A. "Legal services rendered as corporate counsel" shall mean and include all of the following types of legal work: 1. Except as hereinafter set forth in subparagraph B, document review and drafting of documents on behalf of the Clients including, but not limited to: leases, notes, contracts, mortgages, commitment letters, disclosure statements, modifications, extensions and legal agreements not related to third-party borrowers, except residential mortgage reviews. 2. Providing legal advice required in the usual course of Clients' business including compliance analysis. 3. Attendance at Board of Director's and Shareholders' Meetings other than as a Director. 4. Advice regarding levies and executions 5. Preparation of annual SEC 10K, 10Q and "ordinary" proxy filings. B. "Legal services rendered in addition to those rendered as general corporate counsel" shall mean and include, but not be limited to, all of the following types of legal work which shall be billed on an hourly basis: 1. Litigation in which Clients are named as defendants. 2. Litigation or other proceedings in which Clients and another person or agency (i.e., Small Business Administration) specially retain Attorney. The hourly rate for such legal services shall be specifically agreed upon by Clients, the agency, and Attorneys. 3. Foreclosure litigation, including lien protection litigation in any Court including the Bankruptcy Court. 4. Regulatory or administrative law proceedings including but not limited to Department of Banking, zoning agencies, N.L.R.B., F.D.I.C., and Tax Court. 5. Loan reviews and closings, including modifications and extensions thereof, except that the fee shall be based upon $250.00 per hour plus costs and such fee shall not exceed 1/2% of the principal amount of the loan plus costs but in no event shall such fee be less than $250.00. 6. Closings in which the bank is a buyer or seller. 7. SEC Filings other than annual 10K, 10Q or "ordinary" proxy filings. 8. Mergers and Acquisitions. 9. All other legal services not specifically set forth in Paragraph 4A. 5. BINDING EFFECT This agreement shall be binding upon and shall inure to the benefit of the parties' successors or assigns. 6. NO ASSIGNMENT This agreement shall not be assigned or sublet without the express written consent of the parties. 7. LAW APPLICABLE This agreement shall be governed by the laws of the State of New Jersey. 8. SEVERABILITY In the event any clause, section or paragraph of this agreement shall be declared invalid or unenforceable by a court of competent jurisdiction, such invalidity or unenforceability shall not affect the remainder of this Agreement. IN WITNESS WHEREOF the parties have hereunto signed this agreement the date first above written. INTERCHANGE STATE BANK ATTEST: /S/BENJAMIN ROSENZWEIG /S/ ANTHONY S. ABBATE Benjamin Rosenzweig, Secretary Anthony S. Abbate, President INTERCHANGE FINANCIAL SERVICES CORPORATION ATTEST: /S/BENJAMIN ROSENZWEIG /S/ ANTHONY S. ABBATE Benjamin Rosenzweig, Secretary Anthony S. Abbate, President ATTEST: ANDORA, PALMISANO & GEANEY JOHN P. PALMISANO, /S/ ANTHONY D. ANDORA John P. Palmisano, Secretary Anthony D. Andora, President SCHEDULE A The hourly rates contained herein are subject to change on the anniversary dates of the Agreement of Legal Services. Schedule A, reviewed and approved at Annual Reorganization Meeting on April 25, 1996. Andora D. Andora $200.00 per hour John P. Palmisano $200.00 per hour John F. Geaney $200.00 per hour Other Partners and Senior Associates $175.00 per hour Other Associates $150.00 per hour EX-11 3 COMPUTATION OF PER SHARE EARNINGS EXHIBIT 11 COMPUTATION OF PER SHARE EARNINGS (IN THOUSANDS, EXCEPT PER SHARE DATA)
Six months ended June 30, -------------------- 1996 1995 ------- ------- Net income ........................................... $3,090 $2,970 Preferred dividend requirements ...................... $ -- $ 57 Weighted average common shares outstanding ........... 2,837 2,832 ------ ------ NET INCOME PER COMMON SHARE .......................... $ 1.09 $ 1.03 ====== ======
EX-27 4
9 1,000 6-Mos Dec-31-1996 Jun-30-1996 26,326 361,968 0 0 49,238 76,432 76,383 325,463 (3,824) 491,307 437,884 8,000 3,766 0 4,733 0 0 36,924 491,307 14,173 3,896 370 18,439 7,138 7,393 11,046 400 235 8,114 4,754 3,090 0 0 3,090 1.09 1.09 4.627 3,706 0 1,462 0 3,647 382 159 3,824 3,824 0 905
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