-----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, PKtT5GaoltJVdbrfsi9TlMIQHy1W6zB57prXx+Vzsgrc32a4eaGDQYw+hIq5z+1Y HTzQiNumsClrE1vGzlyo9A== 0000950169-97-000713.txt : 19970815 0000950169-97-000713.hdr.sgml : 19970815 ACCESSION NUMBER: 0000950169-97-000713 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 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: 97660169 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 FINANCIAL BANCORP, INC. 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 June 30, 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 (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 1,722,031 shares of the Registrant's common stock outstanding as of August 13, 1997. 1 FINANCIAL BANCORP, INC. Form 10-Q Index
Part I - Financial Information Page Item 1. Financial Statements Consolidated Statements of Financial Condition as of June 30, 1997 (Unaudited) and September 30, 1996 3 Consolidated Statements of Income for the Three and Nine Months ended June 30, 1997 and 1996 (Unaudited) 4 Consolidated Statement of Changes in Stockholders' Equity Nine Months ended June 30, 1997 (Unaudited) 5 Consolidated Statements of Cash Flows for the Nine Months ended June 30, 1997 and 1996 (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 Not applicable. Item 5. Other Information 18 Item 6. Reports on Form 8-K None. 18 Exhibits 18 Exhibit 11: Computation of per share earnings 19 Signature Page 20
2 FINANCIAL BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED)
JUNE 30, SEPTEMBER 30, 1997 1996 --------------- --------------- Assets Cash and amounts due from depository institutions $2,960,078 $2,917,223 Federal funds sold and securities purchased under agreements to resell 5,350,000 2,185,000 --------------- --------------- Total cash and cash equivalents 8,310,078 5,102,223 Investment securities available for sale 722,750 3,608,125 Investment securities held to maturity, net; estimated fair value of $54,861,000 and $49,903,000 at June 30, 1997 and September 30, 1996, respectively 55,359,764 51,122,128 Mortgage-backed securities available for sale 9,731,836 5,016,112 Mortgage-backed securities held to maturity, net; estimated fair value of $43,472,500 and $49,901,000 at June 30, 1997 and September 30, 1996, respectively 42,975,576 49,836,734 Loans receivable, net 153,223,601 140,314,158 Real estate owned, net 137,006 377,910 Investments in real estate, net 3,516,509 3,493,153 Premises and equipment, net 2,503,736 2,522,264 Federal Home Loan Bank of New York stock, at cost 1,835,000 1,675,800 Accrued interest receivable, net 1,841,838 1,788,970 Other assets 2,327,396 1,904,945 --------------- --------------- Total assets $282,485,090 $266,762,522 =============== =============== Liabilities and stockholders' equity Deposits $209,377,801 $202,883,766 Advance payments by borrowers for taxes and insurance 1,136,854 1,063,036 Advances from Federal Home Loan Bank of New York 8,000,000 9,725,000 Securities sold under agreements to repurchase 15,000,000 14,046,000 Treasury tax and loan account and other short term borrowings 19,951,645 9,880,970 Other liabilities 2,578,274 3,376,552 --------------- --------------- Total liabilities 256,044,574 240,975,324 --------------- --------------- 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, 1,722,031 and 1,790,622 shares outstanding at June 30, 1997 and September 30, 1996, respectively 21,850 21,850 Additional paid-in capital 20,197,251 20,151,858 Retained earnings - substantially restricted 13,602,887 12,218,607 Common stock acquried by Employee Stock Ownership Plan (ESOP) (1,052,030) (1,173,422) Common stock acquired by Recognition & Retention Plan (RRP) (352,021) (454,221) Unrealized gain (loss) on securities available for sale, net of income taxes 47,591 (488) Treasury stock, at cost; 462,969 and 394,378 shares at June 30, 1997 and at September 30, 1996, respectively (6,025,012) (4,976,986) --------------- --------------- Total stockholders' equity 26,440,516 25,787,198 --------------- --------------- Total liabilities and stockholders' equity $282,485,090 $266,762,522 =============== ===============
See accompanying notes to consolidated financial statements 3 FINANCIAL BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED ---------------------------------------------------------------------- JUNE 30, JUNE 30, -------------------------------- --------------------------------- 1997 1996 1997 1996 -------------- -------------- --------------- --------------- Interest income: Loans $3,088,028 $2,723,674 $8,953,736 $7,562,761 Mortgage-backed securities 938,701 957,329 2,864,489 3,042,021 Investments and other interest-earning assets 1,024,865 837,766 2,917,439 2,499,764 Federal funds sold and securities purchased under agreements to resell 18,217 13,086 55,395 32,321 -------------- -------------- --------------- --------------- Total interest income 5,069,811 4,531,855 14,791,059 13,136,867 -------------- -------------- --------------- --------------- Interest expense: Deposits 2,034,239 1,867,413 5,979,707 5,658,326 Borrowings 492,858 263,534 1,335,193 713,386 -------------- -------------- --------------- --------------- Total interest expense 2,527,097 2,130,947 7,314,900 6,371,712 Net interest income 2,542,714 2,400,908 7,476,159 6,765,155 Provision for loan losses 111,000 159,453 306,600 289,453 -------------- -------------- --------------- --------------- Net interest income after provision for loan losses 2,431,714 2,241,455 7,169,559 6,475,702 -------------- -------------- --------------- --------------- Non-interest income (loss): Fees and service charges 145,392 111,026 412,747 282,870 Gain on sale of investment securities 3,034 31,009 29,387 51,029 Gain (loss) from real estate operations 15,400 (265,797) 13,428 (307,845) Miscellaneous 11,898 14,225 31,288 33,513 -------------- -------------- --------------- --------------- Total non-interest income 175,724 (109,537) 486,850 59,567 -------------- -------------- --------------- --------------- Non-interest expenses: Salaries and employee benefits 734,612 647,863 2,480,075 1,959,045 Net occupancy expense of premises 126,445 121,744 397,173 353,077 Equipment 159,002 141,559 470,347 417,969 Advertising 7,952 12,880 24,004 57,947 (Gain) Loss from real estate owned (79) 36,768 8,234 82,715 Federal insurance premium 30,425 98,051 142,653 285,832 Miscellaneous 387,066 272,470 967,075 829,487 -------------- -------------- --------------- --------------- Total non-interest expenses 1,445,423 1,331,335 4,489,561 3,986,072 -------------- -------------- --------------- --------------- Income before income taxes 1,162,015 800,583 3,166,848 2,549,197 Income taxes 500,637 295,388 1,332,505 1,065,643 -------------- -------------- --------------- --------------- Net income $661,378 $505,195 $1,834,343 $1,483,554 ============== ============== =============== =============== Net income per common share & common stock equivalents $0.40 $0.29 $1.10 $0.82 ============== ============== =============== =============== Weighted average number of common shares & common stock equivalents 1,652,600 1,748,700 1,670,800 1,805,300 ============== ============== =============== ===============
See accompanying notes to consolidated financial statements 4 FINANCIAL BANCORP. INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
Retained Common Common Additional Earnings - Stock Stock Common Paid-in Substantially Acquired Acquired Stock Capital Restricted By ESOP By RRP ----------- -------------- ---------------- ----------------- ------------ Balance at September 30, 1996 $21,850 $20,151,858 $12,218,607 ($1,173,422) ($454,221) Net Income for the nine months ended June 30, 1997 - - 1,834,343 - - Purchase of 77,200 shares of treasury stock - - - - - Amortization relating to allocation of ESOP stock and earned portion of RRP stock - 74,560 - 121,392 102,200 Adjustment to valuation reserve on securities available for sale - - - - - Stock issued upon exercise of stock options - (29,167) - - - Cash dividends paid on common stock - - (450,063) - - ----------- -------------- ---------------- ----------------- ------------ Balance at June 30, 1997 $21,850 $20,197,251 $13,602,887 ($1,052,030) ($352,021) =========== ============== ================ ================= ============
Unrealized (Loss) Gain on Securities Available For Sale, Treasury Net of Income Taxes Stock Total --------------------- -------------- -------------- Balance at September 30, 1996 ($488) ($4,976,986) $25,787,198 Net Income for the nine months ended June 30, 1997 - - 1,834,343 Purchase of 77,200 shares of treasury stock - (1,158,463) ($1,158,463) Amortization relating to allocation of ESOP stock and earned portion of RRP stock - - $298,152 Adjustment to valuation reserve on securities available for sale 48,079 - $48,079 Stock issued upon exercise of stock options - 110,437 $81,270 Cash dividends paid on common stock - - (450,063) ------------------- -------------- -------------- Balance at June 30, 1997 $47,591 ($6,025,012) $26,440,516 =================== ============== ==============
See accompanying notes to consolidated financial statements. 5 FINANCIAL BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED ---------------------------------------------- JUNE 30, ---------------------------------------------- 1997 1996 ----------------- --------------- Cash flow from operating activities: Net income $1,834,343 $1,483,554 Adjustments to reconcile net income to net cash provided by operating activities (Gain) on sale of real estate owned (9,262) (5,837) (Gain) on sale of securities available for sale (29,387) (51,029) Net accretion of discounts on investment securities (150,205) (38,317) Net amortization of premiums on mortgage-backed securities 27,303 4,923 Accretion of deferred loan fees and discounts (89,911) (67,587) Depreciation and amortization of premises and equipment 226,841 223,998 Provision for loan losses 306,600 289,453 Provision for losses on real estate owned 0 43,229 Cost of ESOP and RRP 298,152 226,763 Writedown of investment in real estate 14,673 262,500 Deferred income taxes (76,881) 18,282 (Increase) in accrued interest receivable, net (52,866) (199,298) (Increase) in refundable income taxes (240,000) (251,524) (Increase) decrease in other assets (143,348) 30,726 (Decrease) in other liabilities (798,278) (82,843) --------------------- --------------------- Net cash provided by operating activities 1,117,774 1,886,993 --------------------- --------------------- Cash flows from investing activities: Purchases of investment securities available for sale (4,938,672) (8,596,719) Purchases of investment securities held to maturity (20,091,000) (43,040,000) Proceeds from sales of investment securities available for sale 7,890,781 7,028,594 Proceeds from maturities of investment securities 16,000,000 31,930,000 Purchases of mortgage-backed securities available for sale (5,046,497) (5,068,148) Proceeds from principal repayments on mortgage-backed securities 7,216,705 9,718,721 Purchases of mortgage loans (6,668,211) (14,873,829) Loan originations, net of repayments (6,498,927) (12,403,138) Additions to premises and equipment (199,774) (1,088,198) Proceeds from sale of and insurance recoveries on real estate owned 276,499 65,486 Capitalized expenses on real estate owned 0 (10,873) Purchase of Federal Home Loan Bank of N.Y. stock (159,200) (252,800) Net decrease in investments in real estate (31,895) (29,500) --------------------- --------------------- Net cash provided by investing activities (12,250,191) (36,620,404) --------------------- ---------------------
See accompanying notes to consolidated financial statements. 6 FINANCIAL BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) (UNAUDITED)
NINE MONTHS ENDED ----------------------------------------------- JUNE 30, ----------------------------------------------- 1997 1996 ------------------- --------------------- Cash flows from financing activities: Net increase in deposits $6,494,035 $14,154,567 Proceeds from FHLB of NY advances 0 9,200,000 Repayments of FHLB of NY advances (1,200,000) 0 Net (decrease) increase in short-term borrowings from FHLB of NY (525,000) 1,250,000 Proceeds from reverse repurchase agreements 15,000,000 25,828,750 Repayments of reverse repurchase agreements (14,046,000) (25,226,250) Net increase in other short-term borrowings 10,070,675 9,437,203 Increase in advance payments by borrowers for taxes and insurance 73,818 67,201 Dividends paid (450,063) (353,476) Reissuance of treasury stock 81,270 0 Purchase of treasury stock (1,158,463) (2,304,319) ------------------- --------------------- Net cash provided by financing activities 14,340,272 32,053,676 ------------------- --------------------- Net increase (decrease) in cash and cash equivalents 3,207,855 (2,679,735) Cash and cash equivalents - beginning 5,102,223 7,853,316 ------------------- --------------------- Cash and cash equivalents - ending $8,310,078 $5,173,581 =================== ===================== Supplemental schedule of noncash investing and financing activities: Loans transferred to real estate owned $137,006 $247,469 =================== ===================== 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 $85,855 ($13,084) Deferred income taxes (37,776) 5,757 ------------------- --------------------- $48,079 ($7,327) =================== ===================== Supplemental disclosures of cash flow information: Cash paid (net of refunds received) during the year for: Federal, state and city income taxes 1,649,384 1,299,000 =================== ===================== Interest paid on deposits and borrowed funds $7,255,336 $6,361,568 =================== =====================
See accompanying notes to consolidated financial statements. 7 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 "registrant" or 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. 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 nine months ended June 30, 1997 are not necessarily indicative of the results that may be expected for the entire fiscal year. Certain amounts for the three and nine months ended June 30, 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. In February 1997, the FASB issued SFAS No. 128, "Earnings per share." SFAS No. 128 establishes standards for computing and presenting earnings per share ("EPS") and applies to 8 entities with publicly held common stock or potential common stock. SFAS No. 128 supersedes the standards for computing EPS previously found in Accounting Principles ("APS") Opinion No. 15, "Earnings per Share." SFAS No. 128 is effective for financial statements issued for periods ending after December 15, 1997, including interim periods; earlier application is not permitted. SFAS No. 128 requires reinstatement of all prior-period EPS data presented. SFAS No. 128, when adopted, is not expected to have material adverse effect on the Company's consolidated financial condition and statement of operations. 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 June 30, 1997 and September 30, 1996, respectively.
JUNE 30, 1997 SEPTEMBER 30, 1996 ---------------------------------- -------------------------------- CARRYING FAIR CARRYING FAIR VALUE VALUE VALUE VALUE --------------- --------------- -------------- --------------- (in thousands) Investment Securities: Available for sale U.S. Treasury securities $0 $0 $2,919 $2,908 Corporate preferred stock 700 723 700 700 Less: Unrealized gain (loss) 23 - (11) - --------------- -------------- --------------- --------------- Total investment securities available for sale $723 $723 $3,608 $3,608 =============== ============== =============== =============== Held to maturity U.S. Government and agency obligations $55,360 $54,861 $51,122 $49,903 --------------- -------------- --------------- --------------- Total investment securities held to maturity $55,360 $54,861 $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 June 30, 1997 and September 30, 1996, respectively.
JUNE 30, 1997 SEPTEMBER 30, 1996 ---------------------------------- -------------------------------- CARRYING FAIR CARRYING FAIR VALUE VALUE VALUE VALUE --------------- --------------- -------------- --------------- (in thousands) Mortgage-backed securities: Available for sale FHLMC certificates $4,651 $4,701 $5,006 $5,016 FNMA certificates 5,019 5,031 - - Add: Unrealized gain 62 - 10 - ------------ -------------- ---------------- ---------------- Total mortgage-backed securities available for sale $9,732 $9,732 $5,016 $5,016 ============ ============== ================ ================ Held to maturity GNMA certificates $24,440 $24,792 $27,106 $27,198 FHLMC certificates 14,379 14,523 17,999 17,960 FNMA certificates 2,212 2,213 2,697 2,708 Other pass-through certificates 1,945 1,945 2,035 2,035 ------------ -------------- ---------------- ---------------- Total mortgage-backed securities held to maturity $42,976 $43,473 $49,837 $49,901 ============ ============== ================ ================
9 Loans Receivable, net The following table sets forth the composition of the Company's loan portfolio at June 30, 1997 and September 30, 1996, respectively.
JUNE 30, SEPTEMBER 30, 1997 1996 --------------- --------------- (in thousands) Real estate mortgages: One-to-four family $125,473 $115,500 Equity and second mortgages 2,555 2,780 Multi-family 6,123 5,622 Commercial 18,583 15,301 --------------- -------------- 152,734 139,203 --------------- -------------- Construction/land 2,189 4,920 --------------- -------------- Consumer: Passbook or certificate 176 171 Home improvement 4 7 Student education guaranteed by the State of New York 216 202 Personal 31 21 --------------- -------------- 427 401 Commercial, including lines of credit 137 168 --------------- -------------- Total loans 155,487 144,692 --------------- -------------- Less: Loans in process 643 2,509 Allowance for loan losses 1,375 1,573 Deferred loan fees and discounts 245 296 --------------- -------------- 2,263 4,378 --------------- -------------- Total loans receivable, net $153,224 $140,314 =============== ==============
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 June 30, 1997. The following table sets forth the composition of the Bank's FHLB advances as of June 30, 1997 and September 30, 1996, respectively.
JUNE 30, SEPTEMBER 30, 1997 1996 ------------------- ------------------- (in thousands) FHLB advances: Fixed rate: 5.133% due February 1997 $0 $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 =================== ===================
10 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 June 30, 1997 and September 30, 1996, respectively.
JUNE 30, 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 - 5.813% due May 2002, callable May 1998 10,000 - ------------------- ------------------- Total securities sold under agreements to repurchase $15,000 $14,046 =================== ===================
11 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. Financial Federal is headquartered in Long Island City, New York and operates four full service branches 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 interest 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 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 June 30, 1997, the Company's total assets were $282.5 million, representing a $15.7 million, or a 5.9%, increase from $266.8 million as of September 30, 1996. Loans receivable increased by $12.9 million, or 9.2%, to $153.2 million at June 30, 1997, from $140.3 million at September 30, 1996. Investment securities, inclusive of available for sale, increased by $1.4 million to $56.1 million at June 30, 1997, from $54.7 million at September 30, 1996. The increase in total assets was modestly offset by a $2.1 million, or a 3.9% decrease in mortgage-backed securities, inclusive of available for sale, to $52.7 million at June 30, 1997, from $54.8 million at September 30, 1996. Asset growth was funded by a $6.5 million increase in deposits to $209.4 million at June 30, 1997, from $202.9 million at September 30, 1996. Furthermore, advances from the FHLB decreased by $1.7 million, to $8.0 million, at June 30, 1997, as compared to $9.7 million at September 30, 1996. Securities sold under agreements to repurchase increased by $1.0 million, to $15.0 million at June 30, 1997, from $14.0 million at 12 September 30, 1996. The treasury tax and loan account and other short-term borrowings increased by $10.1 million, to $20.0 million at June 30, 1997, from $9.9 million at September 30, 1996. Total deposits at June 30, 1997, increased by $6.5 million, or 3.2%, to $209.4 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 June 30, 1997, from $9.7 million at September 30, 1996. During the nine month period ended June 30, 1997, the treasury tax and loan account and other short-term borrowings increased by $10.1 million, to $20.0 million at June 30, 1997, from $9.9 million at September 30, 1996. In addition, securities sold under agreements to repurchase increased by $1.0 million, or 6.8%, to $15.0 million at June 30, 1997, from $14.0 million at September 30, 1996. The increase in deposits and borrowings enabled the Bank to fund new loan originations, to purchase one-to-four family adjustable rate loans and to purchase investment and mortgage-backed securities. Total stockholders' equity was $26.4 million at June 30, 1997, reflecting a $653,000, or a 2.5% increase, from $25.8 million at September 30, 1996. The increase in stockholders' equity was the result of earnings, partially offset by the repurchase of the Company's common stock and the payment of the Company's quarterly cash dividend. At June 30, 1997, the Company had 1,722,031 common shares outstanding. During the nine months ended June 30, 1997, the Company's tangible and stated book value per share of common stock increased by $0.96 and $0.95, respectively, to $15.28 and $15.35, from $14.32 and $14.40, respectively, at September 30, 1996. Non-performing loans totaled $3.0 million, or 1.94% of total loans at June 30, 1997, as compared to $5.5 million, or 3.79% of total loans at September 30, 1996. At June 30, 1997, non-performing assets totalled $5.4 million, or 1.89% of total assets, as compared to $8.0 million, or 3.01% of total assets as of September 30, 1996. The decrease in non-performing loans and non-performing assets is primarily attributable to the $2.3 million balance of Thrift Association Service Corporation ("TASCO") pass-through securities, which in April 1997, the FDIC reinstated the pass-through of principal and interest payments on these securities. The Company's allowance for loan losses to non-performing assets and to total loans equalled 25.69% and 0.88%, respectively, as compared 19.57% and 1.09%, respectively, at September 30, 1996. ANALYSIS OF OPERATIONS COMPARISON OF THE THREE MONTHS AND NINE MONTHS ENDED JUNE 30, 1997 AND 1996 Net income for the three months ended June 30, 1997 totalled $661,378, or $0.40 per share as compared to net income of $505,195, or $0.29 per share for the quarter ended June 30, 1996. The $156,183, or 30.9% increase was primarily attributable to a $141,806, or 5.9%, increase in net interest income and a $285,261 increase in non-interest income, offset in part by a $114,088, or an 8.6% increase in non-interest expenses. For the nine month period ended June 30, 1997, net income increased $350,789, or 23.6%, to $1,834,343, or $1.10 per share, from $1,483,554, or $0.82 per share for the same period in 1996. The $350,789, or 23.7% increase 13 was primarily attributable to a $711,004, or a 10.5%, increase in net interest income and a $427,283 increase in non-interest income, offset in part by a $503,489, or a 12.6% increase in non-interest expenses. The return on average assets equalled 0.97% and 0.91% for the quarter ended and the nine months ended June 30, 1997, respectively, as compared to 0.81% and 0.83% for the quarter ended and the nine months ended June 30, 1996, respectively. The Company's return on average equity equalled 10.08% and 9.40% for the quarter ended and nine months ended June 30, 1997, respectively, compared with 7.57% and 7.34% for the quarter ended and the nine months ended June 30, 1996, respectively. Net interest income increased $141,806, or 5.9%, to $2.5 million for the quarter ended June 30, 1997, from $2.4 million for the quarter ended June 30, 1996. For the nine month period ended June 30, 1997, net interest income increased $711,004, or 10.5%, to $7.5 million, from $6.8 million for the same period in 1996. The increase in net interest income for the three and nine months ended June 30, 1997, was primarily due to the continued leveraging of the balance sheet, by utilizing low cost borrowings and deposit growth to fund new loan originations, loan purchases and the purchase of investment and mortgage-backed securities. As a result, for the quarter ended June 30, 1997, average interest-earning assets increased by $23.6 million, or 9.9%, to $261.6 million from $238.0 million for the quarter ended June 30, 1996. The increase in average interest-earning assets was offset by a $23.7 million, or 11.3%, increase in average interest-bearing liabilities to $234.0 million for the quarter ended June 30, 1997, from $210.3 million for the quarter ended June 30, 1996. For the nine months ended June 30, 1997, average interest-earning assets increased by $26.4 million, or 11.5%, to $256.1 million from $229.7 million for the same period in 1996. The increase in average interest-earning assets was offset by a $25.4 million, or 12.4%, increase in interest-bearing liabilities to $229.7 million for the nine months ended June 30, 1997, as compared to $204.3 million for the same period in 1996. The Company's net interest margin decreased by 14 basis points to 3.90%, for the quarter ended June 30, 1997, as compared to 4.04% for the quarter ended June 30, 1996. For the nine month period ended June 30, 1997, the net interest margin decreased by 4 basis points to 3.89%, from 3.93% for the same period in 1996. The Company's net interest spread decreased 13 basis points and 3 basis points to 3.42% and 3.44%, for the quarter ended and the nine months ended June 30, 1997, respectively, compared with 3.55% and 3.47% for the same periods in 1996, respectively. The decline in the net interest margin and net interest rate spread, for the quarter and nine months ended June 30, 1997, reflects the increased leveraging of the balance sheet. The average yield on interest-earning assets was 7.75%, for the quarter ended June 30, 1997, as compared to 7.62% for the same period in 1996, and the average cost of interest-bearing liabilities was 4.33% for the quarter ended June 30, 1997, as compared to 4.07% for the same period in 1996. During the nine months ended June 30, 1997, the average yield on interest-earning assets was 7.70%, as compared to 7.63% for the same period in 1996, and the average cost of interest-bearing liabilities was 4.26% for the nine months ended June 30, 1997, as compared to 4.16% for the same period in 1996. 14 The Company's provision for loan losses for the quarter ended June 30, 1997, decreased by $48,453, to $111,000, from $159,453 for the quarter ended June 30, 1996. For the nine month period ended June 30, 1997, provisions for loan losses increased by $17,147, to $306,600, from $289,453 for the same period in 1996. The increased provisions in fiscal 1996 was reflective of the significant increase in loan originations and the purchase of one-to-four family mortgage loans. Non-interest income, for the quarter ended June 30, 1997, increased by $285,261, to $175,724 from a loss of $109,537 for the quarter ended June 30, 1996. For the nine months ended June 30, 1997, non-interest income increased by $427,283, to $486,850, as compared to $59,567 for the same period in 1996. The increase in non-interest income is primarily attributable a reduction in losses sustained on the Bank's real estate operation, in which a service corporation of Financial Federal Savings Bank has a one-third interest. In addition, for the three months ended and the nine months ended June 30, 1997, fees and service charges increased by $34,366 and $129,877, respectively, to $145,392 and $412,747, respectively, from $111,026 and $282,870, respectively, for the same periods in 1996. Non-interest expenses increased by $114,088, or 8.6%, for the quarter ended June 30, 1997, to $1.4 million, from $1.3 million for the same period in 1996. During the nine month period ended June 30, 1997, non-interest expenses increased by $503,489, or 12.6%, to $4.5 million, from $4.0 million for the same period in 1996. For the quarter ended June 30, 1997, salaries and employee benefits increased by $86,749, or 13.4%, to $734,612, from $647,863 for the same period 1996. For the nine months ended June 30, 1997, salaries and employee benefits increased by 521,030, or 26.6%, to $2.5 million, from $2.0 million for the same period in 1996. The increase in salaries and employee benefits includes a one-time charge of $268,000 pursuant to the employment contract with the former Executive Vice President and Chief Operating Officer. The increase is also attributable to the reinstatement of the Company's bonus accrual and additional costs associated with the amortization and appreciation of shares in the Company's stock-related benefit plans. For the quarter ended June 30, 1997, occupancy expense increased by $4,701, to $126,445 from $121,744 for the quarter ended June 30, 1996. For the nine months ended June 30, 1997, occupancy expense increased by $44,096, to $397,173, from $353,077 for the same period in 1996. The increase in occupancy expense is primarily attributable to the increased rental costs associated with the Bank's branch offices. Equipment expense, for the quarter and nine months ended June 30, 1997, increased by $17,443 and $52,378, to $159,002 and $470,347, respectively, from $141,559 and $417,969, respectively, for the same periods in 1996. The increase in equipment expense for the quarter and nine months ended June 30, 1997, represents increased costs associated with demand deposit and check processing servicing fees and other vendor related services and contracts. Advertising expense, for the quarter and nine months ended June 30, 1997, decreased by $4,928 and $33,943, to $7,952 and $24,004, respectively, from $12,880 and $57,947, respectively, for the same periods in 1996. 15 For the quarter ended June 30, 1997, miscellaneous expense increased by $114,596, to $387,066 from $272,470 for the quarter ended June 30, 1996. For the nine months ended June 30, 1997, miscellaneous expense increased by $137,588 to $967,075, from $829,487 for the same period in 1996. The increase in miscellaneous expense for the quarter and nine months ended June 30, 1997, represents increased compensation related legal fees and additional general and administrative costs. For the quarter ended and nine months ended June 30, 1997, the ratio of operating expenses to average assets equalled 2.11% and 2.10%, exclusive of a one-time charge for a former executive officer's severance payment, respectively, as compared to 2.08% and 2.17%, respectively, for the same periods in 1996. Furthermore, the Company's efficiency ratio, for the quarter and nine months ended June 30, 1997, was 53.54% and 53.20%, exclusive of a one-time charge for a former executive officer's severance payment, respectively, as compared to 51.08% ad 54.29%, respectively, for the same periods in 1996. For the quarter ended June 30, 1997, income tax expense increased by $205,249, to $500,637 as compared to $295,388, for the same quarter in 1996. For the nine month period ended June 30, 1997, income tax expense increased by $266,862, to $1,332,505, from $1,065,643 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 June 30, 1997 was 12.6%, which exceeded the applicable 5% liquidity requirement. Its short-term liquidity ratio at June 30, 1997, was 4.9%. 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 June 30, 1997, the Bank had outstanding loan commitments to originate mortgage loans of $5.8 million. Management anticipates that it will have sufficient funds available and borrowing capability to meet its current loan originations. Certificates of deposit, which are scheduled to mature in one-year or less from June 30, 1997 totalled $70.2 million, of which $15.9 million 16 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 and, when necessary supplements its deposit base with advances and other borrowings. 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 $20.4 million, or 7.32% at June 30, 1997, far in excess of the regulatory requirements. The Bank's risk-based capital ratio as of June 30, 1997, was $21.6 million, or 18.86%, also well in excess of the regulatory capital requirement of 8.0%. 17 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 Not applicable. Item 5. Other information On July 22, 1997, the Holding Company declared its regular quarterly cash dividend for the period ended June 30, 1997, of $0.10 per share, payable on August 20, 1997 to stockholders of record on August 6, 1997. Item 6. (A) Exhibits Exhibit 3.1 Certificate of Incorporation of Financial Bancorp, Inc. * Exhibit 3.2 By-laws of Financial Bancorp, Inc. * Exhibit 11 Earnings Per Share Exhibit 27 Financial Data Schedule (B) Reports on Form 8-K Not applicable. * Incorporated herein by reference to Form S-1, Registration Statement, as amended, filed on March 18, 1994, Registration Number 33-76664 18 Item 6. Exhibit 11
THREE MONTHS NINE MONTHS ENDED ENDED COMPUTATION OF PER SHARE EARNINGS JUNE 30, 1997 JUNE 30, 1997 ----------------- ----------------- Net income $661,378 $1,834,343 ======== ========== Weighted average common shares outstanding 1,620,600 1,636,300 Common stock equivalents due to dilutive effect of stock options 32,000 34,500 ------ ------ Total weighted average common shares and equivalents outstanding 1,652,600 1,670,800 ========= ========= Earnings per common share and common share equivalent $0.40 $1.10 ===== =====
19 SIGNATURES Pursuant to the requirements of The Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Financial Bancorp, Inc. (Registrant) Date: August 14, 1997 By: /s/ Frank S. Latawiec ________________________ Frank S. Latawiec President and Chief Executive Officer Date: August 14, 1997 By: /s/ P. James O'Gorman ________________________ P. James O'Gorman Executive Vice President and Chief Financial Officer 20 EX-27 2 FINANCIAL DATA SCHEDULE
9 This legend contains summary information extracted from the Form 10-Q and is qualified in its entirety by reference to such financial statements. US$ 9-MOS SEP-30-1996 OCT-01-1996 JUN-30-1997 1 2,960,078 0 5,350,000 0 10,454,586 98,335,340 98,333,500 153,223,601 0 282,485,090 209,377,801 42,951,645 3,715,128 0 0 0 21,850 20,197,251 282,485,090 8,953,736 5,781,928 55,395 14,791,059 5,979,707 7,314,900 7,476,159 306,600 29,387 4,489,561 3,166,848 3,166,848 0 0 1,834,343 $1.10 $1.10 7.70 2,507,000 $273,000 0 0 1,264,000 0 0 1,374,854 1,374,854 0 1,168,000
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