-----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, ByOpygyNjpfyYMaSTRJBmcVwkzue8ziRM7JCVeTaJIQmXIGEybAXg/pNGNig7WW5 SaKJPvfhV3H/G1bV3YxxpA== 0000909654-97-000183.txt : 19970520 0000909654-97-000183.hdr.sgml : 19970520 ACCESSION NUMBER: 0000909654-97-000183 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FINANCIAL BANCORP INC CENTRAL INDEX KEY: 0000855932 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 061391814 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-18126 FILM NUMBER: 97606727 BUSINESS ADDRESS: STREET 1: 45-25 QUEENS BLVD CITY: LONG ISLAND CITY STATE: NY ZIP: 11104 BUSINESS PHONE: 7187295002 MAIL ADDRESS: STREET 1: 45-25 QUEENS BLVD CITY: LONG ISLAND CITY STATE: NY ZIP: 11104 10-Q 1 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1997 -------------- or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to --------------- ------------------ Commission File Number: 0-18126 ------- FINANCIAL BANCORP, INC. ----------------------- (Exact name of registrant as specified in its charter) Delaware 06-1391814 -------- ---------- (State or other jurisdiction of (I.R.S. Employer identification No.) incorporation or organization) 42-25 Queens Boulevard, Long Island City, NY 11104 -------------------------------------------------- (Address of principal executive offices) (Zip Code) (718) 729-5002 -------------- (Registrant's telephone number, including area code) Not Applicable - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. (1) X Yes No --- --- (2) X Yes No --- --- APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. There were 1,717,486 shares of the Registrant's common stock outstanding as of May 12, 1997. ------------ -1- 2 FINANCIAL BANCORP, INC. Form 10-Q Index Part I - Financial Information Page - ------------------------------ ---- Item 1. Financial Statements Consolidated Statements of Financial Condition as of March 31, 1997 (Unaudited) and September 30, 1996 3 Consolidated Statements of Income for the Three and Six Months ended March 31, 1997 and 1996 (Unaudited) 4 Consolidated Statement of Changes in Stockholders' Equity for the Six Months ended March 31, 1997 (Unaudited) 5 Consolidated Statements of Cash Flows for the Six Months ended March 31, 1997 (Unaudited) 6-7 Notes to Consolidated Financial Statements 8-11 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 12-17 Part II - Other Information - --------------------------- Item 1. Legal Proceedings 18 Item 2. Changes in Securities Not applicable. 18 Item 3. Defaults Upon Senior Securities Not applicable. 18 Item 4. Submission of Matters to a Vote of Security Holders 18 Item 5. Other Information 19 Item 6. Reports on Form 8-K 19 Exhibits 19 Exhibit 11: Computation of per share earnings 20 Signature Page 21 -2- 3
FINANCIAL BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED) MARCH 31, SEPTEMBER 30, 1997 1996 -------------- ----------------- Assets - ------ Cash and amounts due from depository institutions $2,462,256 $2,917,223 Federal funds sold and securities purchased under agreements to resell 2,975,000 2,185,000 -------------- ----------------- Total cash and cash equivalents 5,437,256 5,102,223 Investment securities available for sale 5,604,250 3,608,125 Investment securities held to maturity, net; estimated fair value of $42,264,000 and $49,903,000 at March 31, 1997 and September 30, 1996, respectively 44,058,872 51,122,128 Mortgage-backed securities available for sale 9,703,791 5,016,112 Mortgage-backed securities held to maturity, net; estimated fair value of $45,264,000 and $49,901,000 at March 31, 1997 and September 30, 1996, respectively 45,206,529 49,836,734 Loans receivable, net 147,217,588 140,314,158 Real estate owned, net 0 377,910 Investments in real estate, net 3,492,565 3,493,153 Premises and equipment, net 2,528,406 2,522,264 Federal Home Loan Bank of New York stock, at cost 1,770,900 1,675,800 Accrued interest receivable, net 1,836,340 1,788,970 Other assets 2,340,636 1,904,945 -------------- ----------------- Total assets $269,197,133 $266,762,522 ============== ================= Liabilities and stockholders' equity - ------------------------------------ Deposits $206,179,787 $202,883,766 Advance payments by borrowers for taxes and insurance 1,282,000 1,063,036 Advances from Federal Home Loan Bank of New York 8,000,000 9,725,000 Securities sold under agreements to repurchase 5,000,000 14,046,000 Treasury tax and loan account and other short term borrowings 20,000,000 9,880,970 Other liabilities 2,543,230 3,376,552 -------------- ----------------- Total liabilities 243,005,017 240,975,324 -------------- ----------------- Stockholders' equity Preferred stock, $0.01 par value, 2,500,000 shares authorized; none issued Common stock, $0.01 par value, 6,000,000 shares authorized; 2,185,000 shares issued, 1,747,686 and 1,790,622 shares outstanding at March 31, 1997 and September 30, 1996, respectively 21,850 21,850 Additional paid-in capital 20,186,367 20,151,858 Retained earnings - substantially restricted 13,092,823 12,218,607 Common stock acquried by Employee Stock Ownership Plan (ESOP) (1,092,494) (1,173,422) Common stock acquired by Recognition & Retention Plan (RRP) (386,088) (454,221) Unrealized gain (loss) on securities available for sale, net of income taxes (40,724) (488) Treasury stock, at cost; 437,314 and 394,378 shares at March 31, 1997 and at September 30, 1996, respectively (5,589,618) (4,976,986) --------------- ----------------- Total stockholders' equity 26,192,116 25,787,198 --------------- ----------------- Total liabilities and stockholders' equity $269,197,133 $266,762,522 =============== =================
See accompanying notes to consolidated financial statements -3- 4
FINANCIAL BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) THREE MONTHS ENDED SIX MONTHS ENDED ---------------------------- ------------------------------- MARCH 31, MARCH 31, ---------------------------- ------------------------------- 1997 1996 1997 1996 ----------- ------------- ----------- ------------- Interest income: Loans $2,966,415 $2,500,456 $5,865,708 $4,839,087 Mortgage-backed securities 970,279 1,014,461 1,925,788 2,084,692 Investments and other interest-earning assets 850,692 870,042 1,892,574 1,661,998 Federal funds sold and securities purchased under agreements to resell 21,389 8,232 37,178 19,235 ----------- ------------- ----------- ------------- Total interest income 4,808,775 4,393,191 9,721,248 8,605,012 ----------- ------------- ----------- ------------- Interest expense: Deposits 1,964,254 1,881,737 3,945,468 3,790,913 Borrowings 365,570 288,199 842,335 449,852 ----------- ------------ ----------- ------------ Total interest expense 2,329,824 2,169,936 4,787,803 4,240,765 Net interest income 2,478,951 2,223,255 4,933,445 4,364,247 Provision for loan losses 96,000 76,000 195,600 130,000 ----------- ------------ ----------- ------------ Net interest income after provision for loan losses 2,382,951 2,147,255 4,737,845 4,234,247 ----------- ------------ ----------- ------------ Non-interest income (loss): Fees and service charges 136,075 83,772 267,355 171,844 Gain on sale of investment securities 0 20,020 26,353 20,020 Gain (loss) from real estate operations 26,081 (19,438) (1,972) (42,048) Miscellaneous 8,761 7,590 19,390 19,288 ----------- ------------ ----------- ------------ Total non-interest income 170,917 91,944 311,126 169,104 ----------- ------------ ----------- ------------ Non-interest expenses: Salaries and employee benefits 1,003,416 664,677 1,745,463 1,311,182 Net occupancy expense of premises 138,217 118,853 270,728 231,333 Equipment 160,999 138,760 311,345 276,410 Advertising 6,465 20,018 16,052 45,067 (Gain) Loss from real estate owned (10,071) 16,731 8,313 45,947 Federal insurance premium 30,456 98,636 112,228 187,781 Miscellaneous 329,966 295,607 580,009 557,017 ------------ ------------ ----------- ------------ Total non-interest expenses 1,659,448 1,353,282 3,044,138 2,654,737 ------------ ------------ ----------- ------------ Income before income taxes 894,420 885,917 2,004,833 1,748,614 Income taxes 314,894 391,316 831,868 770,255 ------------ ------------ ----------- ------------ Net income $579,526 $494,601 $1,172,965 $978,359 ============ ============ =========== ============ Net income per common share & common stock equivalents $0.35 $0.27 $0.70 $0.53 ============ ============ =========== ============ Weighted average number of common shares & common stock equivalents 1,671,700 1,816,200 1,680,100 1,847,300 ============ ============ =========== ============
See accompanying notes to consolidated financial statements -4- 5
FINANCIAL BANCORP. INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED) Retained Common Common Unrealized (Loss) on Additional Earnings - Stock Stock Investment Securities Common Paid-in Substantially Acquired Acquired Available for sale, Treasury Stock Capital Restricted By ESOP By RRP Net of Income Taxes Stock Total ------- --------- ------------ --------- --------- --------------------- -------- ------- Balance at September 30, 1996 $21,850 $20,151,858 $12,218,607 ($1,173,422) ($454,221) ($488) ($4,976,986) $25,787,198 Net Income for the six months ended March 31, 1997 - - 1,172,965 - - - - 1,172,965 Purchase of 47,000 shares of treasury stock - - - - - - (663,938) ($663,938) Amortization relating to allocation of ESOP stock and earned portion of RRP stock - 47,451 - 80,928 68,133 - - $196,512 Adjustment to valuation reserve on securities available for sale - - - - - (40,236) - ($40,236) Stock issued upon exercise of stock options - (12,942) - - - - 51,306 $38,364 Cash dividends paid on common stock - - (298,749) - - - - (298,749) ------- ----------- ------------ ----------- --------- --------- ---------- ----------- Balance at March 31, 1997 $21,850 $20,186,367 $13,092,823 ($1,092,494) ($386,088) ($40,724) ($5,589,618) $26,192,116 ======= =========== =========== ============ ========== ========= ============ ===========
See accompanying notes to consolidated financial statements. -5- 6
FINANCIAL BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) SIX MONTHS ENDED ---------------------------- MARCH 31, ---------------------------- 1997 1996 ------------ ------------- Cash flow from operating activities: Net income $1,172,965 $978,359 Adjustments to reconcile net income to net cash provided by operating activities Loss (Gain) on sale of real estate owned 5,411 (5,837) (Gain) on sale of securities available for sale (26,353) (20,020) Net amortization of premiums and accretion of discounts on investment securities (99,291) 7,010 Net amortization of premiums and accretion of discounts on mortgage-backed securities 17,270 1,368 Accretion of deferred loan fees and discounts (57,253) (34,565) Depreciation and amortization of premises and equipment 146,132 150,565 Provision for loan losses 195,600 130,000 Provision for losses on real estate owned 0 8,436 Cost of ESOP and RRP 196,512 174,494 Deferred income taxes (7,492) 18,827 (Increase) in accrued interest receivable, net (47,370) (411,211) (Increase) in refundable income taxes (212,598) (134,452) (Increase) in other assets (183,987) (61,142) (Decrease) in other liabilities (833,322) (90,274) ------------ ------------- Net cash provided by operating activities 266,224 711,558 ------------ ------------- Cash flows from investing activities: Purchases of investment securities available for sale (4,938,672) (5,686,719) Purchases of investment securities held to maturity (8,840,000) (30,566,875) Proceeds from sales of investment securities available for sale 2,947,031 2,010,625 Proceeds from maturities of investment securities 16,000,000 21,430,000 Purchases of mortgage-backed securities available for sale (5,046,497) 0 Purchases of mortgage loans 0 (7,960,066) Proceeds from principal repayments on mortgage-backed securities 4,924,319 6,186,101 Loan originations, net of repayments (6,945,777) (8,377,946) Additions to premises and equipment (158,686) (980,656) Proceeds from sale of and insurance recoveries on real estate owned 276,499 25,066 Capitalized expenses on real estate owned 0 (1,476) Purchase of Federal Home Loan Bank of N.Y. stock (95,100) (252,800) Net decrease in investments in real estate 7,000 0 ------------ ------------- Net cash provided by investing activities (1,869,883) (24,174,746) ------------ -------------
See accompanying notes to consolidated financial statements. -6- 7
FINANCIAL BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) (UNAUDITED) SIX MONTHS ENDED ----------------------------- MARCH 31, ----------------------------- 1997 1996 ------------ ------------- Cash flows from financing activities: Net increase in deposits $3,296,021 $7,496,599 Proceeds from FHLB of NY advances 0 9,200,000 Repayments of FHLB of NY advances (1,725,000) 0 Net (decrease) in short-term borrowings from FHLB of NY 0 (4,200,000) Proceeds from reverse repurchase agreements 5,000,000 18,100,000 Repayments of reverse repurchase agreements (14,046,000) (12,126,250) Net increase in other short-term borrowings 10,119,030 4,867,356 Increase in advance payments by borrowers for taxes and insurance 218,964 145,565 Dividends paid (298,750) (223,168) Reissuance of treasury stock 38,365 0 Purchase of treasury stock (663,938) (1,286,186) ------------ ------------- Net cash provided by financing activities 1,938,692 21,973,916 ------------ ------------- Net increase (decrease) in cash and cash equivalents 335,033 (1,489,272) Cash and cash equivalents - beginning 5,102,223 7,853,316 ------------ ------------- Cash and cash equivalents - ending $5,437,256 $6,364,044 ============ ============= Supplemental schedule of noncash investing and financing activities: Loans transferred to real estate owned $0 $47,360 ============ ============= Loans to facilitate sale of real estate owned $96,000 $148,500 ============ ============= Property transferred to investment in real estate $0 $195,724 ============ ============= Transfer to investment securities available for sale Investment securities $0 $1,989,839 ============ ============= Unrealized (loss) gain on securities available for sale ($71,851) $22,978 Deferred income taxes 31,615 (10,110) ------------ ------------- ($40,236) $12,868 ============ ============= Supplemental disclosures of cash flow information: Cash paid (net of refunds received) during the year for: Federal, state and city income taxes 1,051,957 888,000 ============ ============= Interest paid on deposits and borrowed funds $4,790,337 $4,099,891 ============ =============
See accompanying notes to consolidated financial statements. -7- 8 FINANCIAL BANCORP, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements include the accounts of Financial Bancorp, Inc. (the "Company"), its wholly owned subsidiaries, 842 Manhattan Avenue Corp. which manages real property, and Financial Federal Savings Bank (the "Bank") a federally chartered stock association, and the Bank's wholly owned subsidiaries, Finfed Development Corp., which participates in a joint venture for the development of land and sale of lots, Finfed Funding Ltd., which serves as a conduit for funding investments in Finfed Development Corp., and F.S. Agency Inc., which is engaged in the sale of annuities. All significant intercompany accounts and transactions have been eliminated in consolidation. Certain information and footnote disclosures required under generally accepted accounting principles have been condensed or omitted from the following consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission. Financial Bancorp, Inc. (the "registrant" or the "Company") believes that the disclosures presented are adequate to assure that the information presented is not misleading in any material respect. It is suggested that the following consolidated financial statements be read in conjunction with the year-end consolidated financial statements and notes thereto included in the registrant's Annual Report on Form 10-K for the year ended September 30, 1996. The results of operations for the three and six months ended March 31, 1997 are not necessarily indicative of the results that may be expected for the entire fiscal year. Certain amounts for the three and six months ended March 31, 1996 have been reclassified to conform with the current period's presentation. RECENT ACCOUNTING PRONOUNCEMENTS In October 1995, the Financial Accounting Standards Board (the "FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 123 "Accounting for Stock-Based Compensation," effective for fiscal years beginning after December 15, 1995. The Company has elected to continue to measure compensation cost using the intrinsic value-based method of accounting prescribed by the Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees." Pro forma disclosures required for entities that elect to continue to measure compensation cost using APB Opinion No. 25 must include the effects of all awards granted in fiscal years that begin after December 15, 1994. Management will implement the pro forma disclosure required by SFAS No. 123 with the preparation of the annual financial statement for the fiscal year ending September 30, 1997. -8- 9 EARNINGS PER SHARE Net income per common share and common stock equivalents is computed by dividing net income by the weighted average number of shares of common stock outstanding adjusted for the unallocated shares held by the ESOP. Stock options granted are considered in earnings per share as common stock equivalents, if dilutive, using the treasury stock method. INVESTMENT SECURITIES The following table sets forth certain information regarding the carrying and estimated fair value of the Company's investment securities at March 31, 1997 and September 30, 1996, respectively.
MARCH 31, 1997 SEPTEMBER 30, 1996 ---------------------- ---------------------- CARRYING FAIR CARRYING FAIR VALUE VALUE VALUE VALUE ---------- --------- ---------- ---------- (in thousands) Investment Securities: Available for sale U.S. Treasury securities $4,939 $4,894 $2,919 $2,908 Corporate preferred stock 700 710 700 700 Less: Unrealized gain (loss) (35) - (11) - ---------- --------- ---------- ---------- Total investment securities available for sale $5,604 $5,604 $3,608 $3,608 ========== ========= ========== ========== Held to maturity U.S. Government and agency obligations $44,059 $42,264 $51,122 $49,903 ---------- --------- ---------- ---------- Total investment securities held to maturity $44,059 $42,264 $51,122 $49,903 ========== ========= ========== ==========
MORTGAGE-BACKED SECURITIES The following table sets forth certain information regarding the carrying and estimated fair value of the Company's mortgage-backed security portfolio at March 31, 1997 and September 30, 1996, respectively.
MARCH 31, 1997 SEPTEMBER 30, 1996 ---------------------- ---------------------- CARRYING FAIR CARRYING FAIR VALUE VALUE VALUE VALUE ---------- --------- ---------- ---------- (in thousands) Mortgage-backed securities: Available for sale FHLMC certificates $4,704 $4,696 $5,006 $5,016 FNMA certificates 5,037 5,008 - - Add: Unrealized (loss) gain (37) - 10 - ---------- --------- --------- -------- Total mortgage-backed securities available for sale $9,704 $9,704 $5,016 $5,016 ========== ========= ========= ======== Held to maturity GNMA certificates $25,359 $25,473 $27,106 $27,198 FHLMC certificates 15,432 15,398 17,999 17,960 FNMA certificates 2,421 2,398 2,697 2,708 Other pass-through certificates 1,995 1,995 2,035 2,035 ---------- --------- --------- -------- Total mortgage-backed securities held to maturity $45,207 $45,264 $49,837 $49,901 ========== ========= ========= ========
-9- 10 LOANS RECEIVABLE, NET The following table sets forth the composition of the Company's loan portfolio at March 31, 1997 and September 30, 1996, respectively.
MARCH 31, SEPTEMBER 30, 1997 1996 ---------- ---------- (in thousands) Real estate mortgages: One-to-four family $120,113 $115,500 Equity and second mortgages 2,700 2,780 Multi-family 6,198 5,622 Commercial 17,330 15,301 --------- -------- 146,341 139,203 --------- -------- Construction/land 2,806 4,920 --------- -------- Consumer: Passbook or certificate 174 171 Home improvement 5 7 Student education guaranteed by the State of New York 220 202 Personal 35 21 --------- -------- 434 401 Commercial, including lines of credit 139 168 --------- -------- Total loans 149,720 144,692 --------- -------- Less: Loans in process 1,029 2,509 Allowance for loan losses 1,264 1,573 Deferred loan fees and discounts 209 296 --------- -------- 2,502 4,378 --------- -------- Total loans receivable, net $147,218 $140,314 ========= ========
-10- 11 ADVANCES FROM FEDERAL HOME LOAN BANK OF NEW YORK ("FHLB") As a member of the FHLB, the Bank has an available overnight line of credit subject to the terms and conditions of the lender's overnight advance program in the amount of $26,398,500 at March 31, 1997. The following table sets forth the composition of the Bank's FHLB advances as of March 31, 1997 and September 30, 1996, respectively.
MARCH 31, SEPTEMBER 30, 1997 1996 ---------- ---------- (in thousands) FHLB advances: Fixed rate: 5.133% due February 1997 $ - $1,200 5.597% due December 1997 2,000 2,000 5.670% due December 1998 6,000 6,000 -------- ------- Total fixed rate 8,000 9,200 Overnight line of credit: 6.125% due October 1996 - 525 -------- ------- Total overnight line of credit - 525 -------- ------- Total FHLB advances $8,000 $9,725 ======== =======
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE Securities sold under agreements to repurchase consist of borrowings collateralized by investment securities. The following table sets forth the composition of the Company's borrowings collateralized by securities sold under agreements to repurchase as of March 31, 1997 and September 30, 1996, respectively.
MARCH 31, SEPTEMBER 30, 1997 1996 ---------- ---------- (in thousands) Securities sold under agreements to repurchase: 5.44% due December 1995 $ 0 $14,046 5.291% due December 2001, callable December 1997 5,000 - ---------- ---------- Total securities sold under agreements to repurchase $5,000 $14,046 ========== ==========
-11- 12 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL Financial Bancorp, Inc. is the holding company for Financial Federal Savings Bank, which converted to a federally chartered stock savings association on August 17, 1994 and to a federally chartered stock savings bank on October 20, 1994. The Bank is headquartered in Long Island City, New York and operates five full service branches, four in Queens and one in Brooklyn. Deposits of the Bank are insured up to the applicable limits of the Federal Deposit Insurance Corporation ("FDIC"). The Bank is subject to regulation by the Office of Thrift Supervision ("OTS") and the FDIC. The Company is listed on The Nasdaq Stock Market under the symbol "FIBC". The Company's results of operations are generally dependent on the Bank. The Bank's sources of earnings primarily consist of net interest income, which is the difference between the income earned on interest-earning assets and the expenses paid on interest-bearing liabilities. The results of operations are also affected, to a lesser extent, by non-interest income, which includes loan servicing fees and charges, and other miscellaneous income. In addition, operations are impacted by non-interest expenses such as employee salaries and benefits, office occupancy, data processing and federal deposit insurance premiums. The Bank is primarily engaged in the origination of one-to-four family residential mortgage loans, multi-family and commercial real estate mortgage loans, and to a lesser extent residential and commercial construction loans. As a community-oriented institution, the Bank is generally engaged in attracting retail deposits from the areas surrounding its branch offices. In addition, the Bank may borrow funds from the FHLB or through reverse repurchase agreements. These funds are then generally concentrated in lending activities throughout the New York City metropolitan area. FINANCIAL CONDITION As of March 31, 1997, the Company's total assets were $269.2 million, representing a $2.4 million, or a 0.9% increase from $266.8 million as of September 30, 1996. Loans receivable increased by $6.9 million, or 4.9%, to $147.2 million at March 31, 1997, from $140.3 million at September 30, 1996. The increase in loans receivable was partially offset by a $5.0 million, or a 9.3 % decrease in investment securities, inclusive of available for sale, to $49.7 million at March 31, 1997, from $54.7 million at September 30, 1996. Asset growth was funded by a $3.3 million increase in deposits to $206.2 million at March 31, 1997, from $202.9 million at September 30, 1996. Furthermore, advances from the FHLB decreased by $1.7 million to $8.0 million, at March 31, 1997, as compared to $9.7 million at September 30, 1996. Securities sold under agreements to repurchase decreased by $9.0 million, to $5.0 million at March 31, 1997, from $14.0 million at September 30, 1996. The treasury tax and loan account and other short- -12- 13 term borrowings increased by $10.1 million, to $20.0 million at March 31, 1997, from $9.9 million at September 30, 1996. At March 31, 1997, investment securities, including available for sale, consisted primarily of medium term U.S. Government Agency obligations, with features such as calls and/or interest rate "step-ups". Investment securities available for sale increased by $2.0 million, to $5.6 million at March 31, 1997, from $3.6 million at September 30, 1996, while investment securities held to maturity, decreased by $7.1 million to $44.0 million, at March 31, 1997, from $51.1 at September 30, 1996. Mortgage-backed securities available for sale increased by $4.7 million at March 31, 1997, to $9.7 million, from $5.0 million at September 30, 1996, while mortgage-backed securities held to maturity decreased by $4.6 million, at March 31, 1997, to $45.2 million, from $49.8 million at September 30, 1996. The decrease in the investment securities held to maturity is due to $16.0 million of callable bonds which were called by their issuer. The decrease in mortgage-backed securities held to maturity is due to normal repayments experienced during the period. As of March 31, 1997, loans receivable increased by $6.9 million, or 4.9%, to $147.2 million, from $140.3 million as of September 30, ]996. This increase in loans receivable primarily resulted from $15.1 million of loan originations. Non-performing loans totaled $5.3 million, or 3.53% of total loans at March 31, 1997 as compared to $4.6 million, or 3.15% of total loans at September 30, 1996. Of the $5.3 million in non-performing loans, $2.5 million consists of the balance of Thrift Association Service Corporation ("TASCO") pass-through securities. In May 1996, the FDIC stated that they would not continue the pass-through of principal and interest payments whether or not collected. The most recent information received stated that the scheduled principal and interest payments would resume in April 1997, however, interest and principal in arrears would not be paid. At March 31, 1997 non-performing assets totalled $7.4 million, or 2.77% of total assets, as compared to $7.1 million, or 2.67% of total assets as of September 30, 1996. The Company's allowance for loan losses to total assets and to total loans equalled 16.97% and 0.84%, respectively, as compared to 22.11% and 1.09%, respectively, at September 30, 1996. Total deposits at March 31, 1997, increased by $3.3 million, or 1.6%, to $206.2 million from $202.9 million at September 30, 1996. Furthermore, advances from the FHLB, decreased by $1.7 million, or 17.7%, to $8.0 million at March 31, 1997. During the six month period ended March 31 1997, securities sold under agreements to repurchase decreased by $9.0 million, to $5.0 million, or 64.4%, from $14.0 million at September 30, 1996. The treasury tax and loan account and other short term borrowings increased by $10.1 million to $20.0 million at March 31, 1997 from $9.9 million at September 30, 1996. Total stockholders' equity was $26.2 million at March 31, 1997, reflecting a $405,000 or a 1.6% increase from $25.8 million at September 30, 1996. The increase in stockholders' equity was the result of retained earnings, partially offset by the repurchase of the Company's common stock and the payment of the Company's regular quarterly cash dividend. At March 31, 1997, the Company had 1,747,686 common shares outstanding. Since September 30, 1996, the Company's tangible and stated book value per share of common stock increased by $0.59, to $14.91 and $14.99, from $14.32 and $14.40, respectively, at September 30, 1996. -13- 14 ANALYSIS OF OPERATIONS COMPARISON OF THE THREE MONTHS AND SIX MONTHS ENDED MARCH 31, 1997 AND 1996 Net income for the three months ended March 31, 1997 totalled $579,526, or $0.35 per share as compared to $494,601, or $0.27 per share for the quarter ended March 31, 1996. The $84,925 or 17.2% increase was primarily attributable to a $255,696, or 11.5% increase in net interest income and a $78,973, or an 85.9% increase in non-interest income, offset in part by a $306,166 increase in non-interest expense, during the quarter ended March 31, 1997. For the six month period ended March 31, 1997, net income increased $194,606, or 19.9%, to $1,172,965, or $0.70 per share, from $978,359, or $0.53 per share, for the same period in 1996. The return on average assets equalled 0.88% and 0.89% for the quarter and the six months ended March 31, 1997, respectively, as compared to 0.82% and 0.83% for the quarter ended and the six months ended March 31, 1996, respectively. The Company's return on average equity equalled 8.92% and 9.06%, for the quarter and six months ended March 31, 1997, respectively, compared with 7.35 % and 7.22 %, for the quarter and the six months ended March 31, 1996, respectively. Net interest income increased $255,696, or 11.5 %, to $2.5 million for the quarter ended March 31, 1997, from $2.2 million for the quarter ended March 31, 1996. For the six month period ended March 31, 1997, net interest income increased $569,198, or 13.0%, to $4.9 million, from $4.4 million for the same period in 1996. The increase in net interest income for the quarter and six months ended March 31, 1997, was primarily due to the continued leveraging of the balance sheet, utilizing low cost borrowings and deposit growth to fund mortgage loan originations and purchases of investment securities and mortgage-backed securities. As a result, for the quarter ended March 31, 1997, average interest-earning assets were $250.7 million, which represents a $20.4 million, or an 8.9% increase, from $230.3 million, for the same period in 1996. The increase in average interest-earning assets was offset by a $16.6 million, or an 8.0% increase in average interest-bearing liabilities to $224.2 million for the quarter ended March 31, 1997, from $207.6 million for the same quarter last year. For the six months ended March 31, 1997, average interest-earning assets increased by $27.5 million, or 12.2%, to $252.8 million, from $225.3 million for the same period last year. The increase in average interest-earning assets was offset by a $26.1 million, or 13.0%, increase in average interest-bearing liabilities to $227.4 million for the six months ended March 31, 1997, as compared to $201.3 million for the same six month period in 1996. The Company's net interest margin increased by 10 basis points to 3.96%, for the quarter ended March 31, 1997, as compared to 3.86% for the quarter ended March 31, 1996. For the six month period ended March 31, 1997, the net interest margin increased by 3 basis points to 3.90%, as compared to 3.87% for the same period in 1996. The net interest spread increased 2 basis points and 3 basis points to 3.46% and 3.47%, for the quarter and the six months ended March 31, 1997, respectively, as compared with 3.44% and 3.44% for the same periods in 1996, respectively. The increase in the net interest margin and net interest spread is reflective -14- 15 of the positive results obtained by the Company's continuing efforts to build its loan portfolio. The average yield on interest-earning assets was 7.67% for the quarter ended March 31, 1997, as compared to 7.64% for the quarter ended March 31, 1996, and the average cost of interest bearing liabilities was 4.21% for the quarter ended March 31, 1997, as compared to 4.19% for the quarter ended March 31, 1996. For the six month period ended March 31, 1997, the average yield on interest-earning assets was 7.69%, as compared to 7.64% for the same period in 1996, and the average cost of interest-bearing liabilities was 4.22%, as compared to 4.20% for the same period in 1996. The Company's provision for loan losses for the quarter ended and the six months ended March 31, 1997 increased by $20,000 and $65,600, to $96,000 and $195,600, respectively. The increase in provisions for loan losses reflects managements on-going effort to maintain adequate allowances. Non-interest income, for the quarter ended March 31, 1997, increased $78,973, or 85.9%, to $170,917 as compared to $91,944 for the quarter ended March 31, 1996. For the six month period ended March 31, 1997, non-interest income increased $142,022, or 84.0%, to $311,126 from $169,104 for the six month period ended March 31, 1996. The increase in non-interest income for the quarter ended March 31, 1997, is primarily attributable to the $52,303 increase in income realized from additional fee income and automated teller machines (ATM's) related service fees and a $45,519 increase in income realized from the Company's real estate operations. The $142,022 increase in non-interest income for the six months ended March 31, 1997, is primarily attributable to the $95,511 increase in fee related income and the $40,076 increase in income realized from real estate operations. Non-interest expenses increased by $306,166, or 22.6%, to $1.7 million for the quarter ended March 31. 1997, from $1.4 million for the same period in 1996. During the six month period ended March 31, 1997, non-interest expenses increased by $389,401, or 14.7%, to $3.0 million, from $2.7 million for the six month period ended March 31, 1996. For the quarter ended March 31, 1997, salaries and employee benefits increased by $338,739, or 50.l% to $1.0 million, from $664,677 for the same period in 1996. The increase in salaries and employee benefits is primarily attributable to a one-time charge of $268,000 pursuant to the employment contract with the former Executive Vice President and Chief Operating Officer, in addition to the reinstatement of the Company's bonus accrual and additional costs associated from the amortization and appreciation of shares in the Company's stock-related benefit plans. For the six months ended March 31, 1997, salaries and employee benefits increased by $434,281, or 33.1%, to $1.7 million from $1.3 million for the six months ended March 31, 1996. For the quarter ended March 31, 1997, occupancy expense increased by $19,364 to $138,217 from $118,853 for the same period last year. For the six months ended March 31, 1997, occupancy expense increased by $39,395, to $270,728 from $231,333 for the same period in 1996. The increase in occupancy cost is primarily attributable to the increased rental costs associated with one of the Bank's branch offices. Equipment expense for the quarter and six months ended March 31, 1997, increased by $22,239 and $34,935, to $160,999 and $311,345, -15- 16 respectively, from $138,760 and $276,410, respectively for the same periods in 1996. The increase in equipment expense for the quarter and six months ended March 31, 1997, represents costs associated with the Banks demand deposit and check processing servicing fees and other vendor related services and contracts. Advertising expense, for the quarter and six months ended March 31, 1997, decreased by $13,553 and $29,015, to $6,645 and $16,052, respectively. The Company has limited advertising expenditures in an effort to bolster current earnings. Although non-interest expenses have increased, the ratio of operating expenses to average assets, exclusive of the former executive's severance payment, for the quarter and six months ended March 31, 1997, decreased 8 basis points and 13 basis points, to 2.13% and 2.09%, respectively, as compared to 2.21 % and 2.22% for the same periods in 1996. During 1997 the Company has been successful in controlling operating expenses, as evidenced by the efficiency ratio of 53.4% and 53.0%, exclusive of the former executives severance payment, for the quarter and six months ended March 31, 1997, respectively, as compared to 57.7% and 57.2%, respectively for the same periods in 1996. For the quarter ended March 31, 1997, income tax expense decreased by $76,422 to $314,894 as compared to $391,316 for the same quarter in 1996, as a result of the recent enactment of the New York State and New York City income tax amendments. For the six month period ended March 31, 1997, income tax expense increased by $61,613 to $831,868 as compared to $770,255 for the same period in 1996, as a result of the increase in income before taxes. LIQUIDITY AND CAPITAL RESOURCES The Bank is required to maintain an average daily balance of liquid assets (as defined in the regulations) equal to a monthly average of not less than the specified percentage of its net withdrawable deposit accounts plus short-term borrowings. This liquidity requirement is currently 5%. OTS regulations also require each member savings institution to maintain an average daily balance of short-term liquid assets at a specified percentage (currently 1 %) of the total of its net withdrawable deposit accounts and borrowings payable in one year or less. Monetary penalties may be imposed for failure to meet these liquidity requirements. The liquidity of the Bank at March 31, 1997 was 11.5%, which exceeded the then applicable 5% liquidity requirement. It's short-term liquidity ratio at March 31. 1997, was 3.3%. The primary investment activities of the Bank are the origination of mortgage loans and the purchase of investment securities and mortgage-backed securities. The Company's primary sources of funds are the Bank's deposit accounts, proceeds from principal and interest payments on loans and investments, and to a lesser extent, advances and overnight borrowings from the FHLB, as well as reverse repurchase agreements. While maturities and scheduled amortization of loans, mortgage-backed securities and investment securities are predictable sources of funds, deposit flows, mortgage prepayments and callable investment securities are greatly influenced by market interest rates, general economic conditions and competition within the financial industry. At March 31, 1997, the Bank had outstanding loan commitments to originate mortgage loans of $5.2 million and $5.0 million in commitments to purchase investment securities. Management anticipates that it will have sufficient funds available and borrowing capability to meet its current -16- 17 loan originations and commitments to purchase investment securities. Certificates of deposit, which are scheduled to mature in one-year or less from March 31, 1997 totalled $54.6 million, of which $16.3 million represent "Silver Certificate of Deposit" accounts, which allow one withdrawal of principal per quarter without an early withdrawal penalty for direct deposit customers 62 years of age or older. The Bank generally maintains competitive pricing of its deposits in order to maintain a steady deposit growth balance. Although the OTS capital regulations require savings institutions to meet a 1.5% tangible capital ratio and a 3.0% leverage (core) capital ratio, the prompt corrective action standards also establish, in effect, a minimum 2.0% tangible capital standard, a 4.0% leverage (core) capital ratio (3.0% for institutions receiving the highest rating on the CAMEL financial institution rating system). The Bank's tangible capital and core capital totalled $20.7 million, or 7.43% at March 31, 1997, far in excess of the regulatory requirements. The Bank's risk-based capital ratio as of March 31, 1997, was $20.7 million, or 18.94%, also well in excess of the regulatory capital requirement of 8.0%. -17- 18 FINANCIAL BANCORP, INC. Part II. OTHER INFORMATION Item 1. Legal Proceedings The Company is not presently engaged in any legal proceeding of a material nature. Item 2. Changes in Securities Not applicable. Item 3. Defaults Upon Senior Securities Not applicable. Item 4. Submission of Matters to a Vote of Security-Holders The Company held its Annual Meeting of Shareholders on January 22, 1997. At the said meeting 1,747,686 shares of Common Stock were eligible to vote, of which 1,577,351 shares, were present in person or by proxy. The following matters were voted upon at the Annual Meeting and the number of affirmative votes, negative votes and abstentions with respect to the matters are as follows: 1. At the Annual Meeting, one director was elected for a three year term. The nominee was Peter S. Russo. FOR WITHHELD --- -------- Peter S. Russo 1,560,172 17,179 The names of each of the directors whose term of office continued after the Annual Meeting and their respective term expirations are as follows: Dominick L. Segrete 1998 Frank S. Latawiec 1998 Richard J. Hickey 1999 Raymond M. Calamari 1999 2. The appointment of Radics & Co., LLC as independent auditors of Financial Bancorp, Inc. for the fiscal year ending September 30, 1997, was ratified and approved in all respects. FOR AGAINST ABSTAIN --- ------- ------- 1,566,484 9,267 1,600 Item 5. Other information -18- 19 On September 27, 1996, the Company announced that it received regulatory approval from the Office of Thrift Supervision to commence its fifth repurchase program. The Company is authorized to purchase up to 89,531 or 5% of its common stock outstanding through open-market transactions, subject to the availability of stock, prior to August 17, 1997. Since September 27, 1996, the Company repurchased 77,200 shares at an average price of $15.01. On February 20, 1997, the Company announced that its Board of Directors unanimously elected Peter S. Russo as Chairman of the Board. In addition, the Company's Board of Directors unanimously elected Salvatore Farenga as a member of the Board. On April 23, 1997, the Holding Company declared its regular quarterly cash dividend for the quarter ended March 31, 1997, of $0.10 per share, payable on May 20, 1997 to stockholders of record on May 6, 1997. Item 6. (A) Exhibits Exhibit 3.1 Certificate of Incorporation of Financial Bancorp, Inc. * Exhibit 3.2 Bylaws of Financial Bancorp, Inc. * Exhibit 11 Earnings Per Share Exhibit 27 Financial Data Schedule (B) Reports on Form 8-K On March 13, 1997 the Company filed a Report on Form 8-K related to the resignation of its Executive Vice President and Chief Operating Officer, Irene C. Greco in order to persue other business interests. Ms. Greco received severance payments equivalent to the compensation she would have received under her existing employment agreements with the Company and Bank. -19- 20 SIGNATURES Pursuant to the requirements of The Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Financial Bancorp, Inc. (Registrant) Date: May 15, 1997 By: /s/ Frank S. Latawiec ------------------------------ Frank S. Latawiec President and Chief Executive Officer Date: May 15, 1997 By: /s/ P. James O'Gorman ------------------------------ P. James O'Gorman Executive Vice President and Chief Financial Officer -21- EX-11 2 1 Item 6. - ------- Exhibit 11 ----------
Three Months Six Months Ended Ended March 31, 1997 March 31, 1997 ----------------- ---------------- COMPUTATION OF PER SHARE EARNINGS Net income $579,526 $1,172,965 ======== ========== Weighted average common shares outstanding 1,635,800 1,644,200 Common stock equivalents due to dilutive effect of stock options 35,900 35,900 ------ ------ Total weighted average common shares and equivalents outstanding 1,671,700 1,680,100 ========= ========= Earnings per common share and common share equivalent $0.35 $0.70 ===== =====
EX-27 3 WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
9 This schedule contains summary information extracted from the Form 10-Q and is qualified in its entirety by reference to such financial statements. 0000855932 FINANCIAL BANCORP, INC. 1,000 6-MOS SEP-30-1996 MAR-31-1997 2,462,256 0 2,975,000 0 15,308,041 89,265,401 87,528,000 147,217,588 1,263,850 269,197,133 206,179,787 33,000,000 3,825,230 0 0 0 0 0 269,197,133 5,865,708 3,818,362 37,178 9,721,248 3,945,468 842,335 4,933,445 195,600 26,353 3,046,110 2,004,833 2,004,833 0 0 1,172,965 $0.70 $0.70 7.67% 5,282,000 0 0 0 1,672,000 0 0 1,263,850 1,263,850 0 711,850
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