-----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, P7qaB0TdbGbjbM1oTh3/f8R6IABfswUEHsOcVgTnjlAAOY3W/E+/kAOZAmOoKBEa JyQ+kllWjHm5jAbYjpbYHw== /in/edgar/work/0000900741-00-000014/0000900741-00-000014.txt : 20001115 0000900741-00-000014.hdr.sgml : 20001115 ACCESSION NUMBER: 0000900741-00-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HAVEN BANCORP INC CENTRAL INDEX KEY: 0000900741 STANDARD INDUSTRIAL CLASSIFICATION: [6035 ] IRS NUMBER: 113153802 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-21628 FILM NUMBER: 766923 BUSINESS ADDRESS: STREET 1: 615 MERRICK AVE CITY: WESTBURY STATE: NY ZIP: 11590 BUSINESS PHONE: 5166838385 MAIL ADDRESS: STREET 1: 93 22 JAMAICA AVE CITY: WOODHAVEN STATE: NY ZIP: 11421 10-Q 1 0001.txt 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 September 30, 2000 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: 000-21628 HAVEN BANCORP, INC. (Exact name of registrant as specified in its charter) DELAWARE (State or other jurisdiction of incorporation or organization) 11-3153802 (I.R.S. Employer Identification No.) 615 MERRICK AVENUE, WESTBURY, NEW YORK 11590 (Address of principal executive offices) (Zip Code) (516) 683-4100 (Registrant's telephone number, including area code) 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. 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 9,383,353 shares of the Registrant's common stock outstanding as of November 13, 2000. HAVEN BANCORP, INC. FORM 10-Q INDEX PART I - FINANCIAL INFORMATION PAGE Item 1. Financial Statements (Unaudited) Consolidated Statements of Financial Condition as of September 30, 2000 and December 31, 1999 3 Consolidated Statements of Income for the three months and nine months ended September 30, 2000 and 1999 4 Consolidated Statement of Changes in Stockholders' Equity for the nine months ended September 30, 2000 5 Consolidated Statements of Cash Flows for the nine months ended September 30, 2000 and 1999 6 Notes to Consolidated Financial Statements 7-10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10-26 Item 3. Quantitative and Qualitative Disclosures about Market Risk 27 PART II - OTHER INFORMATION Item 1. Legal Proceedings 27 Item 2. Changes in Securities and Use of Proceeds 27 Item 3. Defaults Upon Senior Securities 27 Item 4. Submission of Matters to a Vote of Security Holders 27 Item 5. Other Information 27 Item 6. Exhibits and Reports on Form 8-K 27 Signature Page 2 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) HAVEN BANCORP, INC. Consolidated Statements of Financial Condition (Dollars in thousands, except for share data) (Unaudited)
September 30, December 31, 2000 1999 ----------- ------------ ASSETS Cash and due from banks $ 52,308 $ 41,479 Money market investments 15,100 1,238 Securities available for sale (Note 3) 903,750 937,299 Loans held for sale 1,425 82,709 Federal Home Loan Bank of NY stock, at cost 27,865 27,865 Loans receivable: First mortgage loans 1,855,282 1,777,208 Cooperative apartment loans 5,233 3,669 Other loans 21,421 25,948 --------- --------- Total loans receivable 1,881,936 1,806,825 Less allowance for loan losses (17,586) (16,699) --------- --------- Loans receivable, net 1,864,350 1,790,126 Premises and equipment, net 33,489 35,928 Accrued interest receivable 15,788 15,825 Other assets 44,801 33,381 --------- --------- Total assets $2,958,876 $2,965,850 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Deposits $2,159,499 $2,080,613 Borrowed funds 652,228 749,232 Other liabilities 23,561 30,422 --------- --------- Total liabilities 2,835,288 2,860,267 --------- --------- Stockholders' Equity: Preferred stock, $.01 par value, 2,000,000 shares authorized, none issued - - Common stock, $.01 par value, 30,000,000 shares authorized, 9,918,750 shares issued; 9,343,315 and 9,000,237 shares out- standing at September 30, 2000 and December 31, 1999, respectively 100 100 Additional paid-in capital 54,011 52,336 Retained earnings, substantially restricted 101,937 89,083 Accumulated other comprehensive loss: Unrealized loss on securities available for sale, net of tax effect (24,170) (25,465) Treasury stock, at cost (575,435 and 918,513 shares at September 30, 2000 and December 31, 1999, respectively) (6,641) (8,934) Unallocated common stock held by Bank's ESOP (726) (934) Unearned common stock held by Bank's Recognition Plans and Trusts (206) (231) Unearned compensation (717) (372) --------- --------- Total stockholders' equity 123,588 105,583 --------- --------- Total liabilities and stockholders' equity $2,958,876 $2,965,850 ========= =========
See accompanying notes to consolidated financial statements. 3 HAVEN BANCORP, INC. Consolidated Statements of Income (Dollars in thousands, except per share data) (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, ------------------ ------------------ 2000 1999 2000 1999 ---- ---- ---- ---- Interest income: Loans $34,798 $31,339 $103,328 $85,490 Mortgage-backed securities 12,384 12,952 38,034 38,288 Money market investments 120 53 380 122 Debt and equity securities 5,004 4,134 14,153 9,294 ------ ------ ------- ------- Total interest income 52,306 48,478 155,895 133,194 ------ ------ ------- ------- Interest expense: Deposits: Savings accounts 4,203 5,114 13,220 14,798 NOW accounts 192 428 863 1,171 Money market accounts 543 430 1,715 1,289 Certificate accounts 17,725 13,554 49,377 37,378 Borrowed funds 10,633 10,400 32,299 25,880 ------ ------ ------ ------ Total interest expense 33,296 29,926 97,474 80,516 ------ ------ ------ ------ Net interest income before provision for loan losses 19,010 18,552 58,421 52,678 Provision for loan losses 596 1,035 1,746 2,590 ------ ------ ------ ------ Net interest income after provision for loan losses 18,414 17,517 56,675 50,088 ------ ------ ------ ------ Non-interest income: Loan fees and servicing income 267 528 874 1,455 Mortgage banking income 86 97 1,341 3,042 Retail banking fees 5,911 4,472 16,587 11,416 Net gain on sales of interest-earning assets 146 111 271 1,680 Insurance, annuity and mutual fund fees 2,384 2,231 6,805 6,374 Other 190 170 426 487 ------ ------ ------ ------ Total non-interest income 8,984 7,609 26,304 24,454 ------ ------ ------ ------ Non-interest expense: Compensation and benefits 8,375 10,917 27,954 32,884 Occupancy and equipment 3,106 3,482 9,871 10,265 Data processing 1,159 991 3,313 2,572 Real estate owned operations, net (22) 112 (119) (72) Federal deposit insurance premiums 105 255 333 763 Restructuring charges - - 6,877 - Other 3,109 4,529 12,098 13,748 ------ ------ ------ ------ Total non-interest expense 15,832 20,286 60,327 60,160 ------ ------ ------ ------ Income before income tax expense 11,566 4,840 22,652 14,382 Income tax expense 4,555 1,890 8,455 5,504 ------ ------ ------ ------ Net income $7,011 $2,950 $14,197 $8,878 ====== ====== ====== ====== Net income per common share: Basic $ 0.77 $ 0.34 $ 1.58 $ 1.02 ====== ====== ====== ====== Diluted $ 0.73 $ 0.32 $ 1.51 $ 0.97 ====== ====== ====== ======
See accompanying notes to consolidated financial statements. 4 HAVEN BANCORP, INC. Consolidated Statement of Changes in Stockholders' Equity Nine months ended September 30, 2000 (Unaudited)
Accumulated Other Unallocated Unearned Additional Comprehen- Common Common Common Paid-In Retained sive Treasury Stock Held Stock Held Unearned Total Stock Capital Earnings Loss Stock by ESOP by RRP Compensation (Dollars in thousands) ----- ------ ---------- -------- ---------- -------- ----------- ---------- ------------ Balance at December 31, 1999 $105,583 100 52,336 89,083 (25,465) (8,934) (934) (231) (372) Comprehensive Income: Net income 14,197 - - 14,197 - - - - - Other comprehensive income, net of tax Net unrealized appreciation on securities available for sale, net of reclassification adjustment (1) 1,295 - - - 1,295 - - - - ------- Comprehensive Income 15,492 - - - - - - - - Dividends declared (note 5) (1,343) - - (1,343) - - - - - Treasury stock issued for RRP and deferred compensation plan (40,164 shares) - - 389 - - 258 - - (647) Stock options exercised, net of tax effect (305,566 shares) (note 4) 2,526 - 491 - - 2,035 - - - Allocation of ESOP stock and amortization of award of RRP stock and related tax benefits 1,028 - 795 - - - 208 25 - Amortization of deferred compensation plan 302 - - - - - - - 302 ------- --- ------ ------- ------ ------ ------ ----- ----- Balance at September 30, 2000 $123,588 100 54,011 101,937 (24,170) (6,641) (726) (206) (717) ======= === ====== ======= ====== ====== ====== ===== ===== (1) Disclosure of reclassification adjustment: (in thousands) Nine months ended September 30, 2000 ------------------ Net unrealized holding gain arising during period $ 1,124 Less: reclassification adjustment for net gains included in net income 171 ------ Net unrealized gain on securities available for sale $ 1,295 ======
See accompanying notes to consolidated financial statements. 5 HAVEN BANCORP, INC. Consolidated Statements of Cash Flows (Dollars in thousands) (Unaudited)
Nine months ended September 30, ------------------ 2000 1999 ---- ---- Cash flows from operating activities: Net income $14,197 8,878 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Amortization of cost of stock benefit plans 1,330 1,094 Amortization of net deferred loan origination fees (1,215) (522) Amortization of premiums and accretion of discounts on loans, mortgage-backed and debt securities (232) 90 Provision for loan losses 1,746 2,590 Provision for losses on real estate owned 50 36 Deferred income taxes (1,418) 644 Net gain on sales of interest-earning assets (271) (1,680) Net decrease in loans held for sale 81,284 212 Depreciation and amortization 3,266 3,307 Decrease (increase) in accrued interest receiveable 37 (3,769) Decrease in due to broker - (97,458) (Decrease) increase in other liabilities (6,861) 23,248 (Increase) decrease in other assets (9,287) 8,097 ------ ------ Net cash provided by (used in) operating activities 82,626 (55,233) ------ ------ Cash flows from investing activities: Net increase in loans (75,333) (426,582) Proceeds from disposition of assets (including REO) 302 111 Purchases of securities available for sale (105,417) (437,103) Principal repayments and maturities on securities available for sale 86,111 160,310 Proceeds from sales of securities available for sale 54,164 145,961 Purchases of FHLB stock, net - (3,745) Net increase in premises and equipment (827) (388) ------- ------- Net cash used in investing activities (41,000) (561,436) ------- ------- Cash flows from financing activities: Net increase in deposits 78,886 292,799 Net (decrease) increase in short term borrowed funds (226,872) 328,556 Increase in long term borrowed funds 129,868 8,068 Payment of common stock dividends (1,343) (1,945) Stock options exercised 2,526 548 ------- ------- Net cash (used in) provided by financial activities (16,935) 628,026 ------- ------- Net increase in cash and cash equivalents 24,691 11,357 Cash and cash equivalents at beginning of period 42,717 44,808 ------ ------- Cash and cash equivalents at end of period $67,408 $ 56,165 ====== ======= Supplemental information: Cash paid during the period for: Interest $98,269 $ 79,938 Income taxes 10,615 2,203 Additions to real estate owned 597 622 ======= =======
See accompanying notes to consolidated financial statements. 6 HAVEN BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 2000 and 1999 (Unaudited) NOTE 1 - BASIS OF PRESENTATION. The accompanying unaudited consolidated financial statements include the accounts of Haven Bancorp, Inc. ("Haven Bancorp" or the "Company") and its wholly- owned subsidiary, CFS Bank ("CFS" or the "Bank") and subsidiaries, as of September 30, 2000 and December 31, 1999 and for the three- month and nine-month periods ended September 30, 2000 and 1999, respectively. Material intercompany accounts and transactions have been eliminated in consolidation. Certain reclassifications have been made to prior period amounts to conform to the current period presentation. The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all necessary adjustments, consisting only of normal recurring accruals necessary for a fair presentation, have been included. The results of operations for the three-month and nine-month periods ended September 30, 2000 are not necessarily indicative of the results that may be expected for the entire fiscal year. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Annual Report to Stockholders for the fiscal year ended December 31, 1999. NOTE 2 - MERGER AGREEMENT WITH QUEENS COUNTY BANCORP, INC. On June 27, 2000, Haven Bancorp, Inc. announced that it had entered into an Agreement and Plan of Merger, dated as of June 27, 2000 ("Merger Agreement"), with Queens County Bancorp, Inc., a Delaware corporation ("Queens"). Queens is the bank holding company parent of Queens County Savings Bank, a New York State chartered stock savings bank. The Merger Agreement provides, among other things, that Haven Bancorp will merge with and into Queens, with Queens being the surviving corporation ("Merger"). Pursuant to the Merger Agreement, each share of Haven Bancorp's common stock, par value $0.01 per share ("Haven Common Stock"), issued and outstanding immediately prior to the Effective Time (as defined in the Merger Agreement) will be converted into and become the right to receive 1.04 shares of Queens common stock, par value $0.01 per share ("Queens Common Stock"), except for (i) shares of Haven Common Stock held directly or indirectly by Queens, other 7 than shares held in a fiduciary capacity in satisfaction of a debt previously contracted, (ii) shares held by Haven Bancorp as treasury stock and (iii) unallocated shares held in Haven Bancorp's Recognition and Retention Plans. Cash will be paid in lieu of fractional shares. The Merger is intended to qualify as a tax-free reorganization. Consummation of the Merger is subject to the satisfaction of certain customary conditions, including approval of the Merger Agreement by the stockholders of both Haven Bancorp and Queens and approval of the appropriate regulatory agencies. Haven Bancorp has the right to terminate the Merger Agreement if (i) the Queens Market Value on the Valuation Date falls below 80% of the Initial Queens Market Value and (ii) the Queens Ratio is less than 0.80 times the Index Ratio, unless Queens elects to increase the Merger Consideration to be received by Haven Bancorp's stockholders, all as defined and set forth in the Merger Agreement. In connection with the Merger Agreement, Haven Bancorp granted to Queens a stock option pursuant to a Stock Option Agreement, dated as of June 27, 2000, which, under certain limited circumstances, would enable Queens to purchase up to 19.9% of Haven Bancorp's issued and outstanding shares of common stock at a price per share equal to $18.0625. NOTE 3 - SECURITIES AVAILABLE FOR SALE. The amortized cost and estimated fair values of securities available for sale at September 30, 2000 are summarized as follows:
Gross Gross Estimated Amortized Unrealized Unrealized Fair Cost Gains Losses Value --------- ---------- ---------- --------- (In thousands) Debt and equity securities available for sale: U.S. Government and Agency obligations $ 115,597 122 (3,740) 111,979 Corporate debt securities 102,931 - (3,920) 99,011 Preferred Stock 10,650 - (1,319) 9,331 ------- ----- ------ ------- 229,178 122 (8,979) 220,321 ------- ----- ------ ------- MBSs available for sale: GNMA Certificates 4,020 56 - 4,076 FNMA Certificates 113,482 180 (3,323) 110,339 FHLMC Certificates 26,564 204 (128) 26,640 CMOs and REMICS 568,877 370 (26,873) 542,374 ------- ----- ------ ------- 712,943 810 (30,324) 683,429 --------- ----- ------ ------- Total $ 942,121 932 (39,308) 903,750 ========= ===== ====== =======
The net unrealized loss on securities available for sale at September 30, 2000, was reported as a separate component of stockholders' equity in the amount of $24.2 million, which is net of a tax effect of $14.2 million. 8 NOTE 4 - STOCK PLANS. Changes in outstanding options for the benefit of directors, officers and other key employees of the Bank for the nine months ended September 30, 2000 are as follows:
Weighted Average Options Exercise Price ------- ---------------- Balance at December 31, 1999 1,387,580 $10.13 Granted 25,000 16.72 Forfeited (60,300) 17.92 Exercised (305,566) 8.28 --------- ----- Balance at September 30, 2000 1,046,714 10.34 ========= ===== Options exercisable at September 30, 2000 889,603 9.38 ========= =====
NOTE 5 - DIVIDENDS PAYABLE. On October 25, 2000, the Company's Board of Directors approved a quarterly cash dividend of $0.075 per share, payable on November 15, 2000, to shareholders of record as of November 1, 2000. NOTE 6 - RECENT ACCOUNTING PRONOUNCEMENTS. In June 2000, the FASB issued SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities - an amendment of FASB Statement No. 133". SFAS No. 138 amends the accounting and reporting standards of SFAS No. 133 for certain derivative instruments and certain hedging activities. Management of the Company currently believes the implementation of SFAS No. 138 will not have a material impact on the Company's financial condition or results of operations. In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." SFAS No. 140 replaces SFAS No. 125 and revises the standards for accounting and reporting for securitizations and other transfers of financial assets and extinguishments of liabilities. SFAS No. 140 is effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2000. SFAS No. 140 is effective for recognition and reclassification of collateral and for disclosures relating to securitization transactions and collateral for fiscal years ending after December 15, 2000. Management of the Company currently believes the implementation of SFAS No. 140 will not have a material impact on the Company's financial condition or results of operation. NOTE 7 - NET INCOME PER SHARE OF COMMON STOCK. There were 9,089,133 basic weighted average shares outstanding and 9,576,140 9 diluted weighted average shares outstanding for the three months ended September 30, 2000. There were 8,960,973 basic weighted average shares outstanding and 9,397,022 diluted weighted average shares outstanding for the nine months ended September 30, 2000. The weighted average number of shares outstanding does not include 145,225 unallocated shares which are owned by the Employee Stock Ownership Plan ("ESOP") as of September 30, 2000 in accordance with American Institute of CPAs Statement of Position 93-6, "Employers' Accounting for ESOPs". NOTE 8 - COMPREHENSIVE INCOME (LOSS) - Comprehensive income was $15.5 million for the nine-month period ended September 30, 2000, whereas, there was a comprehensive loss of $8.6 million for the nine-month period ended September 30, 1999. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL Haven Bancorp, Inc. ("Haven Bancorp" or the "Company") is the holding company for CFS Insurance Agency, Inc. and CFS Bank ("CFS" or the "Bank"), a federally chartered stock savings bank. CFS converted from a mutual to a stock savings bank on September 23, 1993 in conjunction with the issuance of the Bank's capital stock to Haven Bancorp. Haven Bancorp's business currently consists primarily of the business of the Bank. The Bank's principal business has been and continues to be attracting retail deposits from the general public and investing those deposits, together with funds generated from operations primarily in one- to four-family, owner occupied residential mortgage loans. In addition, the Bank will invest in debt, equity and mortgage-backed securities ("MBSs") to supplement its lending portfolio. The Bank also invests, to a lesser extent, in multi-family residential mortgage loans, commercial real estate loans and other marketable securities. The Bank's results of operations are dependent primarily on its net interest income, which is the difference between the interest income earned on its loan and securities portfolios and its cost of funds, which primarily consist of the interest paid on its deposits and borrowed funds. The Bank's net income also is affected by its non-interest income, its provision for loan losses and operating expenses consisting primarily of compensation and benefits, occupancy and equipment, real estate owned operations, net, federal deposit insurance premiums and other general and administrative expenses. The earnings of the Bank are significantly affected by general economic and competitive conditions, particularly changes in market interest rates, and to a lesser extent, by government policies and actions of regulatory authorities. 10 On June 27, 2000, the Company and Queens County Bancorp, Inc. (Nasdaq: QCSB) announced the signing of a definitive agreement and plan of merger under which the Company will merge with and into Queens County Bancorp, Inc. in a transaction valued at approximately $196 million as of June 27, 2000. Under the terms of the agreement, which has been unanimously approved by the Boards of Directors of both companies, the Company's stockholders are expected to receive 1.04 shares of Queens County Bancorp common stock in exchange for each share of the Company's common stock. The combined entity, to be named New York Community Bancorp, Inc. (and traded on Nasdaq under the symbol "NYCB"), will have assets of approximately $5.1 billion and deposits of approximately $3.2 billion prior to a planned restructuring. Upon completion of the merger which is expected to occur during the fourth quarter, the pro forma company will have a network of 19 traditional branch offices and three customer service centers serving Queens and Nassau counties, and 62 supermarket branches extending throughout the New York metropolitan area. In order to complete the merger, the boards of directors of Haven and Queens have each called special meetings of stockholders to be held on November 20, 2000. ANALYSIS OF CHANGES IN FINANCIAL CONDITION FROM DECEMBER 31, 1999 TO SEPTEMBER 30, 2000 ASSETS The Company had total assets of $2.96 billion at September 30, 2000 compared to $2.97 billion at December 31, 1999. Securities available for sale ("AFS") decreased by $33.5 million, or 3.6% to $903.8 million at September 30, 2000 from $937.3 million at December 31, 1999 primarily due to principal repayments and sales of $86.1 million and $54.2 million, respectively, which were partially offset by purchases of $105.4 million. During the nine months ended September 30, 2000, the Bank purchased $50.4 million of MBSs and $55.0 million of debt and equity securities. The emphasis on debt and equity securities was due to the availability of more favorable rates and shorter durations than MBSs. Total loans increased by $75.1 million, or 4.2% to $1.88 billion at September 30, 2000 from $1.81 billion at December 31, 1999. Loan originations and purchases during the nine-month period ended September 30, 2000 totaled $401.5 million (comprised of $204.2 million of residential one- to four-family mortgage loans, $4.2 million of home equity loans and lines of credit, $37.5 million of multi-family loans, $125.7 million of commercial real estate loans and $29.9 million of construction and land loans). Residential loan originations and purchases include loans originated for sale or purchased in the secondary market for the nine months ended September 30, 2000 totaling $131.9 million. During the first nine months of 2000, the Bank sold $207.0 million of residential loans on a servicing released basis to third party investors. During the first nine months of 2000, principal repayments on loans totaled $199.3 million. 11 LIABILITIES Deposits increased by $78.9 million, or 3.8% to $2.16 billion at September 30, 2000 from $2.08 billion at December 31, 1999 primarily due to deposit inflows from the Bank's supermarket branches. The Bank had 62 supermarket bank branches as of September 30, 2000 compared to 63 supermarket branches at December 31, 1999. During the first quarter of 2000, the Bank closed one branch in an Edwards Superstore in Bayshore, New York and relocated another branch from the Pathmark Supermarket in Woodmere, New York to the Pathmark Supermarket in Springfield Gardens, New York. Deposits in the supermarket branches totaled $929.3 million at September 30, 2000 compared to $842.3 million at December 31, 1999. Core deposits (comprised of checking, savings and money market accounts) were equal to 46.0% of total supermarket branch deposits at September 30, 2000 compared to 43.8% in the Bank's eight traditional branches. Core deposits for the supermarket branches included $227.2 million of "Liquid Asset" account balances at September 30, 2000. This account was introduced at the supermarket branches in the second quarter of 1998 and currently pays an initial rate of 4.25% for balances over $2,500. Overall, core deposits represented 46.4% of total deposits at September 30, 2000 compared to 45.4% at December 31, 1999. Borrowed funds decreased by $97.0 million, or 12.9% to $652.2 million at September 30, 2000 from $749.2 million at December 31, 1999 primarily due to the fact that deposit in-flows and certain other cash flows during the nine months ended September 30, 2000 were used to pay down borrowings due to lower loan demand. STOCKHOLDERS' EQUITY Haven Bancorp's stockholders' equity increased to $123.6 million at September 30, 2000 from $105.6 million at December 31, 1999. The increase in stockholders' equity was primarily due to net income of $14.2 million for the nine months ended September 30, 2000. In addition, there was a decrease of $1.3 million in the unrealized depreciation on securities available for sale. For the nine months ended September 30th, dividends declared totaled $1.3 million, which was offset by the amortization of awards of shares of stock by the Bank's ESOP, RRPs and deferred compensation plans and stock option exercises. 12 NON-PERFORMING ASSETS The following table sets forth information regarding all non- accrual loans (which consist of loans 90 days or more past due and restructured loans that have not yet performed in accordance with their modified terms for the required three-month seasoning period), restructured loans and real estate owned ("REO").
September 30, December 31, 2000 1999 ------------ ------------ (Dollars in Thousands) Non-accrual loans One- to four-family $ 3,883 3,663 Cooperative 318 206 Multi-family 274 1,139 Non-residential and other 1,793 1,986 ------ ------ Total non-accrual loans 6,268 6,994 ------ ------ Restructured loans One- to four-family 183 314 Cooperative 175 178 Multi-family 211 225 ------ ------ Total restructured loans 569 717 ------ ------ Total non-performing loans 6,837 7,711 ------ ------ REO One- to four-family 551 268 Cooperative 21 56 ------ ------ Total REO 572 324 Less allowance for REO (21) - ------ ------ REO, net 551 324 ------ ------ Total non-performing assets $ 7,388 8,035 ====== ====== Non-performing loans to total loans 0.36% 0.42 Non-performing assets to total assets 0.25 0.27 Non-performing loans to total assets 0.23 0.26
13 The decrease in non-performing assets was due to a decrease of $874,000 in non-performing loans from December 31, 1999 to September 30, 2000 which was partially offset by an increase in REO, net from $324,000 at December 31, 1999 to $551,000 at September 30, 2000. The ratios of non-performing loans to total loans, non-performing assets to total assets, and non-performing loans to total assets each declined from December 31, 1999 to September 30, 2000, primarily due to the growth in the mortgage loan portfolio and a decline in non-performing loans. The Bank maintains an allowance for loan losses and an allowance for REO, which it believes are adequate for probable losses at each period end. Management's judgment as to probable losses is based on its review of the loan and REO portfolios and its judgment regarding prevailing and anticipated economic conditions and a variety of other factors which have an impact on those portfolios. Although management believes that the allowances are adequate as of the period end, additional provisions may be required in the future. ALLOWANCE FOR LOAN LOSSES The following table sets forth the changes in the allowance for loan losses for the nine months ended September 30, 2000 and 1999:
September 30, September 30, 2000 1999 ------------ ------------- (Dollars in Thousands) Balance at beginning of period $ 16,699 13,978 Charge-offs: Residential (421) (244) Non-residential and other (847) (848) ------ ------ Total charge-offs (1,268) (1,092) Recoveries 409 352 ------ ------ Net charge-offs (859) (740) Provision for loan losses 1,746 2,590 ------ ------ Balance at end of period $17,586 15,828 ====== ====== Ratio of net charge-offs during the period to average loans outstanding during the period 0.05% 0.05 Ratio of allowance for loan losses to total loans at the end of the period 0.93 0.91 Ratio of allowance for loan losses to non- performing loans at the end of the period 257.23 192.72
14 ASSET/LIABILITY MANAGEMENT The Company has attempted to reduce its exposure to interest rate risk through the origination and purchase of adjustable-rate mortgage ("ARM") loans, debt securities and MBSs, maintaining an AFS portfolio and extending liability maturities in its certificate of deposit and borrowings portfolios. During the first nine months of 2000, the Bank originated, or purchased for its portfolio, $71.2 million of residential ARM loans and $115.9 million of multi- family, commercial real estate and construction ARM loans. During the nine-month period, the Bank purchased $54.6 million of adjustable-rate debt securities and MBSs. At September 30, 2000, $245.6 million, or 27.2% of the Company's AFS portfolio were adjustable-rate securities and $658.1 million, or 72.8% of the portfolio were fixed-rate securities. Historically, the Company has been able to maintain a substantial level of core deposits (comprised of checking, savings and money market accounts) which the Company believes helps to limit interest rate risk by providing a relatively stable, low cost, long-term funding base. At September 30, 2000, core deposits represented 46.4% of deposits compared to 45.4% of deposits at December 31, 1999. During the first nine months of 2000, savings accounts decreased by $5.8 million, net of interest, whereas, certificates of deposit increased by $3.9 million, net of interest. The number of checking accounts decreased by 3,329, or 1.7% to 190,249 at September 30, 2000 from 193,578 at December 31, 1999. The number of checking accounts in the supermarket branches decreased by 283 accounts and the number of checking accounts in the traditional branches declined by 3,046 accounts. The Company expects to attract a higher percentage of core deposits from its supermarket branch locations as the supermarket branching program continues to mature. During the first nine months of 2000, the Bank replaced $126.5 million of shorter-term borrowed funds with ten-year, fixed- rate borrowed funds, which can be called after three years of the borrowing date. 15 LIQUIDITY AND CAPITAL RESOURCES The Bank is required to maintain minimum levels of liquid assets as defined by regulations of the Office of Thrift Supervision ("OTS"). This requirement, which may be varied by the OTS depending upon economic conditions and deposit flows, is based upon a percentage of withdrawable deposits and short-term borrowings. The required ratio is currently 4%. The Bank's ratio was 5.43% at September 30, 2000 compared to 4.31% at December 31, 1999. The Company's primary sources of funds are deposits, advances from the Federal Home Loan Bank of New York ("FHLB-NY"), principal and interest payments on loans and MBSs and retained earnings. Proceeds from the sale of AFS securities and loans held for sale are also a source of funding, as are, to a lesser extent, the sales of insurance, annuities and securities brokerage activities conducted by the Company's subsidiary, CFS Insurance Agency, Inc. and the Bank's subsidiary, CFS Investments, Inc. While maturities and scheduled amortization of loans and MBSs are somewhat predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions, competition and regulatory changes. The Company's most liquid assets are cash and short-term investments. The levels of these assets are dependent on the Company's operating, financing, lending and investing activities during any given period. At September 30, 2000 and December 31, 1999, cash and short-term investments totaled $67.4 million and $42.7 million, respectively. The Company and the Bank have other sources of liquidity which include debt securities maturing within one year, loans held for sale and AFS securities. Other sources of funds include FHLB advances, which at September 30, 2000 totaled $519.2 million. An additional source of funds are sales of securities under repurchase agreements, which totaled $81.8 million at September 30, 2000. As of September 30, 2000, the Bank exceeded all regulatory capital requirements as detailed in the following table:
Total Tangible Capital Leverage Capital Risk-Based Capital (3) -------------------- -------------------- ----------------------- Amount Ratio (1) Amount Ratio (1) Amount Ratio (1) ------ ---------- ------ ---------- ------ ---------- (Dollars in thousands) Capital for regulatory purposes $188,612 6.30% $188,612 6.30% $205,098 13.17% Minimum regulatory requirement 59,860 2.00(2) 119,720 4.00(2) 124,604 8.00 ------- ---- ------- ---- ------- ---- Excess $128,752 4.30% $ 68,892 2.30% $ 80,494 5.17% ======= ==== ======= ==== ======= ====
16 (1) For tangible and leverage capital, the ratio is to adjusted total assets. For total risk-based capital, the ratio is to total risk-weighted assets. (2) Under the OTS's prompt corrective action regulations, (i) the tangible capital requirement was effectively increased from 1.50% to 2.00% since OTS regulations stipulate that an institution with less than 2.00% tangible capital will be deemed to be classified as "critically undercapitalized," and (ii) the leverage capital requirement was effectively increased from 3.00% to 4.00% because under the OTS regulations an institution with less than 4.00% leverage capital is classified as "undercapitalized". (3) The OTS requirement that an interest rate risk component be incorporated into its existing risk-based capital standard has been indefinitely deferred by the OTS. However, the Bank does not believe that its risk-based capital requirement would be materially affected as a result of the interest rate risk component. ANALYSIS OF CORE EARNINGS The Company's profitability is primarily dependent upon net inter- est income, which represents the difference between income on interest-earning assets and expenses on interest-bearing liabilities. Net interest income is dependent on the average balances and rates received on interest-earning assets and the average balances and rates paid on interest-bearing liabilities. Net income is further affected by the provision for loan losses, non-interest income, non-interest expense and income taxes. 17 The following table sets forth certain information relating to the Company's average consolidated statements of financial condition and consolidated statements of income for the three months and nine months ended September 30, 2000 and 1999 and reflects the average yield on assets and average cost of liabilities for the periods indicated. Such yields and costs are derived by dividing income or expense annualized by the average balance of assets or liabilities, respectively, for the periods shown. Average balances were derived from average daily balances. The average balance of loans includes loans on which the Company has discontinued accruing interest. The yields and costs include fees which are considered adjustments to yields.
Three months ended September 30, 2000 1999 ------------------------ ------------------------ Average Average Average Yield/ Average Yield/ Balance Interest Cost Balance Interest Cost ------- -------- ------- ------- -------- ------- (Dollars in thousands) Assets: Interest-earning assets: Mortgage loans $1,860,302 $34,267 7.37% $1,688,701 $30,615 7.25% Other loans 21,959 531 9.67 39,093 724 7.41 Mortgage-backed securities 691,076 12,384 7.17 800,778 12,952 6.47 Money market investments 13,169 120 3.63 2,717 53 7.80 Debt and equity securities 254,169 5,004 7.88 236,259 4,134 7.00 --------- ------ --------- ------ Total interest-earning assets 2,840,675 52,306 7.37 2,767,548 48,478 7.01 Non-interest earning assets 135,661 ------ 138,167 ------ --------- --------- Total assets 2,976,336 2,905,715 ========= ========= Liabilities and stockholders' equity: Interest-bearing liabilities: Savings accounts 637,743 4,203 2.62 654,038 5,114 3.13 Certificate accounts 1,174,542 17,725 6.00 1,027,514 13,554 5.28 NOW accounts 282,979 192 0.27 243,768 428 0.70 Money market accounts 64,989 543 3.34 55,249 430 3.11 Borrowed funds 666,311 10,633 6.38 743,586 10,400 5.59 --------- ------ --------- ------ Total interest-bearing liabilities 2,826,564 33,296 4.71 2,724,155 29,926 4.39 Other liabilities 32,387 ------ 70,176 ------ --------- --------- Total liabilities 2,858,951 2,794,331 Stockholders' equity 117,385 111,384 --------- --------- Total liabilities and stockholders' equity $2,976,336 $2,905,715 ========= ========= Net interest income/net interest rate spread $19,010 2.66% $18,552 2.62% ====== ==== ====== ==== Net interest earning assets/net interest margin $14,111 2.68% $43,393 2.68% ====== ==== ====== ==== Ratio of interest-earning assets to interest-bearing liabilities 100.50% 101.59% ====== ======
18
Nine months ended September 30, 2000 1999 ------------------------ ------------------------ Average Average Average Yield/ Average Yield/ Balance Interest Cost Balance Interest Cost ------- -------- ------- ------- -------- ------- (Dollars in thousands) Assets: Interest-earning assets: Mortgage loans $1,850,670$101,722 7.33% $1,517,812 $83,130 7.30% Other loans 23,630 1,606 9.06 36,769 2,360 8.56 Mortgage-backed securities 713,503 38,034 7.11 784,139 38,288 6.51 Money market investments 10,349 380 4.90 2,149 122 7.57 Debt and equity securities 243,896 14,153 7.74 184,446 9,294 6.72 --------- ------- --------- ------ Total interest-earning assets 2,842,048 155,895 7.31 2,525,315 133,194 7.03 Non-interest earning assets 124,931 ------- 150,900 ------ --------- --------- Total assets 2,966,979 2,676,215 ========= ========= Liabilities and stockholders' equity: Interest-bearing liabilities: Savings accounts 640,679 13,220 2.76 622,453 14,798 3.17 Certificate accounts 1,148,443 49,377 5.74 950,846 37,378 5.24 NOW accounts 277,462 863 0.42 234,998 1,171 0.66 Money market accounts 69,462 1,715 3.30 56,533 1,289 3.04 Borrowed funds 685,069 32,299 6.29 629,823 25,880 5.48 --------- ------ --------- ------ Total interest-bearing liabilities 2,821,115 97,474 4.61 2,494,653 80,516 4.30 Other liabilities 37,183 ------ 65,437 ------ --------- --------- Total liabilities 2,858,298 2,560,090 Stockholders' equity 108,681 116,125 --------- --------- Total liabilities and stockholders' equity $2,966,979 $2,676,215 ========= ========= Net interest income/net interest rate spread $58,421 2.70% $52,678 2.73% ====== ==== ====== ==== Net interest earning assets/net interest margin $20,933 2.74% $30,662 2.78% ====== ==== ====== ==== Ratio of interest-earning assets to interest-bearing liabilities 100.74% 101.23% ====== ======
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 GENERAL. The Company reported net income of $7.0 million for the three months ended September 30, 2000 compared to net income of $3.0 million for the three months ended September 30, 1999. Net interest income increased $458,000 from the prior year period and non-interest income increased $1.4 million from the prior year period. Non-interest expense decreased by $4.5 million, or 22.0% to $15.8 million for the three months ended September 30, 2000 from $20.3 million for the same period in 1999. The decrease in non- interest expense was due to the restructuring of the residential mortgage division, the reduction of the Company's workforce and the elimination of certain discretionary expenses. Income tax expense increased $2.7 million due to an increase of $6.7 million in pre- tax income. 19 NET INTEREST INCOME. Net interest income increased by $458,000, or 2.5% to $19.0 million for the three months ended September 30, 2000 from $18.6 million for the three months ended September 30, 1999. The increase was primarily due to an increase in the total average balance of interest-earning assets of $73.1 million, or 2.6% to $2.84 billion for the three months ended September 30, 2000 from $2.77 billion for the same period last year. This growth is mainly due to growth in the Bank's mortgage loan and debt and equity securities portfolios. The average yield on interest-earning assets increased to 7.37% for the three-month period ended September 30, 2000 from 7.01% for the three-month period in 1999, resulting from the general increase in market interest rates in 1999 and the first nine months of 2000. The average cost of interest-bearing liabilities increased to 4.71% from 4.39% for the three months ended September 30, 2000 and 1999, respectively. The net interest spread was 2.66% for the three months ended September 30, 2000 compared to 2.62% for the comparable period in 1999. Interest income increased by $3.8 million, or 7.9% to $52.3 million for the three months ended September 30, 2000 from $48.5 million for the three months ended September 30, 1999. The increase was primarily the result of a $3.7 million increase in interest income on mortgage loans and an increase of $870,000 in interest income on debt and equity securities. Interest income on mortgage loans increased by $3.7 million, or 11.9% to $34.3 million for the three months ended September 30, 2000, from $30.6 million for the comparable three-month period in 1999, primarily as a result of an increase in average balances of mortgage loans of $171.6 million and an increase of 12 basis points in the average yield. Interest income on debt and equity securities increased by $870,000, or 21.0% to $5.0 million for the three months ended September 30, 2000 from $4.1 million for the comparable three-month period in 1999, primarily as a result of an increase in the average balance outstanding of $17.9 million and an increase in the average yield of 88 basis points. The increase in average balances between the periods was primarily due to an emphasis on purchases of debt and equity securities for the AFS portfolio due to more favorable rates and shorter durations than MBSs. Interest expense increased by $3.4 million, or 11.3% to $33.3 million for the three months ended September 30, 2000 from $29.9 million for the three months ended September 30, 1999. The increase was the result of a $3.1 million increase in interest expense on deposits and an increase of $233,000 in interest expense on borrowed funds. Interest expense on deposits increased by $3.1 million, or 16.1% to $22.7 million for the three months ended September 30, 2000 from 20 $19.5 million for the comparable three-month period in 1999. This increase was primarily due to the average balance which increased by $179.7 million, or 9.1% to $2.16 billion for the three months ended September 30, 2000 from $1.98 billion for the comparable three-month period in 1999. The increase in deposits was primarily attributable to the Bank's supermarket banking program. At September 30, 2000, the Bank had 62 supermarket branches operating with deposits totaling $929.3 million compared to 61 supermarket branches at September 30, 1999 with deposits totaling $778.1 million. The increase in the average balance was primarily due to certificate account balances which increased by $147.0 million, or 14.3% to $1.17 billion for the three months ended September 30, 2000 from $1.03 billion for the comparable three-month period in 1999. Interest expense on certificate accounts increased by $4.2 million, or 30.8% to $17.7 million for the three months ended September 30, 2000 from $13.6 million in the same period in 1999. The average cost of certificate accounts was 6.00% for the third quarter of 2000 compared to 5.28% for the third quarter of 1999, primarily due to the general rise in market interest rates between the periods. The overall average cost of deposits was 4.20% for the three months ended September 30, 2000 compared to 3.94% for the third quarter of 1999. Interest expense on borrowed funds increased by $233,000, or 2.2% to $10.6 million for the three months ended September 30, 2000 from $10.4 million for the comparable three-month period in 1999. Borrowed funds, on an average basis, decreased by $77.3 million between the periods due primarily since deposit inflows and other cash flows have been used to pay down borrowings due to a reduction in mortgage loan originations. The average rate paid on borrowings increased to 6.38% for the three months ended September 30, 2000 from 5.59% for the prior year period due to an increase in market interest rates during 1999 and the first nine months of 2000. PROVISION FOR LOAN LOSSES. The Bank provided $596,000 for loan losses for the three months ended September 30, 2000 compared to $1.0 million for the comparable three-month period in 1999. The provision for loan losses is established based on management's periodic review and evaluation of the loan portfolio and reflects the decrease in non-performing loans. NON-INTEREST INCOME. Non-interest income increased by $1.4 million, or 18.1% for the three months ended September 30, 2000 to $9.0 million from $7.6 million for the comparable three-month period in 1999. Retail banking fees increased by $1.4 million, or 32.2% to $5.9 million for the third quarter of 2000 compared to $4.5 million for the same period last year. The increase in retail banking fees is primarily due to the number of checking accounts which increased by 2,539, or 1.4% to 190,249 accounts at September 30, 2000 from 187,710 accounts at September 30, 1999. A 21 significant portion of this growth is attributable to the Bank's supermarket banking program. The supermarket branches generated retail banking fees of $4.7 million for the third quarter of 2000 compared to $3.5 million for the third quarter of last year. Insurance, annuity and mutual fund fees for the third quarter of 2000 increased by $153,000, or 6.9% to $2.4 million from $2.2 million for the same period last year. Non-interest income for the third quarter of 2000 included $86,000 of mortgage banking income compared to mortgage banking income of $97,000 in the third quarter of 1999. Loan fees and servicing income was $267,000 for the third quarter of 2000 compared to $528,000 for the same period last year since the results for 1999 included additional fees on commercial real estate loans. The decrease in mortgage banking income is due to a decrease in the Bank's loans held for sale volume as a result of the wind-down and reorganization of the Bank's residential mortgage origination operation. The Company realized gains of $146,000 on the sale of interest earning assets during the third quarter of 2000, compared to a gain of $111,000 during the third quarter of last year. NON-INTEREST EXPENSE. Non-interest expense decreased by $4.5 million, or 22.0% for the three months ended September 30, 2000 to $15.8 million from $20.3 million for the comparable three-month period in 1999. The decrease was due to the restructuring of the residential mortgage division, the reduction of the Company's workforce and the elimination of certain discretionary expenses beginning in the first quarter of 2000. Compensation and benefit costs decreased by $2.5 million, or 23.3% from $10.9 million in the third quarter of 1999 to $8.4 million in the third quarter of 2000. The decrease was due to the aforementioned reduction of the Company's workforce and wind-down of the residential mortgage division. Occupancy and equipment costs decreased by $376,000, or 10.8% to $3.1 million for the third quarter of 2000 from $3.5 million for the same period last year primarily due to the closing of residential lending offices as a result of restructuring of the residential mortgage division. Data processing expenses increased by $168,000, or 17.0%, to $1.2 million for the third quarter of 2000 from $1.0 million for the same period in the prior year primarily due to growth in the supermarket banking program. The costs incurred for the federal deposit insurance premiums decreased by $150,000, or 58.8% to $105,000 for the three months ended September 30, 2000 from $255,000 for the same period last year due to a legislative change effective January 1, 2000. The assessment recognized for the third quarter of 2000 represented the Bank's share of interest due on the Financing Corporation bonds. The Bank is no longer subject to a quarterly premium for the SAIF fund due to its current risk classification. Other operating costs decreased by $1.4 million, or 31.4% to $3.1 million for the three 22 months ended September 30, 2000 from $4.5 million for the same period last year, due primarily to the restructuring of the residential mortgage lending division and the elimination of certain discretionary expenses. INCOME TAX EXPENSE. Income tax expense was $4.6 million for an effective tax rate of 39.4% for the three months ended September 30, 2000 compared to income tax expense of $1.9 million for an effective tax rate of 39.0% for the comparable period in 1999. COMPARISON OF OPERATING RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 GENERAL. The Company reported net income of $14.2 million for the nine months ended September 30, 2000 compared to net income of $8.9 million for the nine months ended September 30, 1999. Net interest income increased $5.7 million from the prior year period and non- interest income increased $1.9 million from the prior year period. Non-interest expense increased by $167,000, or 0.3% to $60.3 million for the nine months ended September 30, 2000 from $60.2 million for the nine months ended September 30, 1999. The increase was due primarily to pre-tax net restructuring charges of $6.9 million recognized in the first half of 2000. The Company recorded a net restructuring charge of approximately $6.6 million related to the completed sale of parts of the residential mortgage origination division and the reorganization of the remainder of the division. The Company also implemented a plan during the first quarter of 2000 to reduce operating expenses through a reduction in the Company's workforce and the elimination of certain discretionary expenses. Income tax expense increased $3.0 million due to an increase of $8.3 million in pre-tax income. NET INTEREST INCOME. Net interest income increased by $5.7 million, or 10.9% to $58.4 million for the nine months ended September 30, 2000 from $52.7 million for the nine months ended September 30, 1999. The increase was primarily due to an increase in the total average balance of interest-earning assets of $316.7 million, or 12.5% to $2.84 billion for the nine months ended September 30, 2000 from $2.53 billion for the same period last year. This growth is mainly due to growth in the Bank's mortgage loan and debt and equity securities portfolios. The average yield on interest-earning assets increased to 7.31% for the nine-month period ended September 30, 2000 from 7.03% for the nine-month period in 1999, resulting from the general increase in market interest rates in 1999 and the first nine months of 2000. The average cost of interest-bearing liabilities increased to 4.61% from 4.30% for the nine months ended September 30, 2000 and 1999, respectively. The net interest spread was 2.70% for the nine months ended September 30, 2000 compared to 2.73% for the comparable period in 1999. 23 Interest income increased by $22.7 million, or 17.5% to $155.9 million for the nine months ended September 30, 2000 from $133.2 million for the nine months ended September 30, 1999. The increase was primarily the result of a $18.6 million increase in interest income on mortgage loans and an increase of $4.9 million in interest income on debt and equity securities. Interest income on mortgage loans increased by $18.6 million, or 22.4% to $101.7 million for the nine months ended September 30, 2000, from $83.1 million for the comparable nine-month period in 1999, primarily as a result of an increase in average balances of mortgage loans of $332.9 million. Interest income on debt and equity securities increased by $4.9 million, or 52.3% to $14.2 million for the nine months ended September 30, 2000 from $9.3 million for the comparable nine-month period in 1999, primarily as a result of an increase in the average balance outstanding of $59.5 million and an increase in yield of 102 basis points. The increase in average balances between the periods was primarily due to the leverage strategy related to Haven Capital Trust II which was issued in May 1999 and an emphasis on purchases of debt and equity securities for the AFS portfolio due to better rates and shorter durations than MBSs. Interest expense increased by $17.0 million, or 21.1% to $97.5 million for the nine months ended September 30, 2000 from $80.5 million for the nine months ended June 30, 1999. The increase was the result of a $10.6 million increase in interest expense on deposits and an increase of $6.4 million in interest expense on borrowed funds. Interest expense on deposits increased by $10.6 million, or 19.3% to $65.2 million for the nine months ended September 30, 2000 from $54.6 million for the comparable nine-month period in 1999. This increase was primarily due to the average balance of deposits which increased by $271.2 million, or 14.5% to $2.14 billion for the nine months ended September 30, 2000 from $1.86 billion for the comparable nine-month period in 1999. The increase in deposits was primarily attributable to the Bank's supermarket banking expansion during 1999. The increase in average balance was primarily due to certificate account balances which increased by $197.6 million, or 20.8% to $1.15 billion for the nine months ended September 30, 2000 from $950.8 million for the comparable nine-month period in 1999. Interest expense on certificate accounts increased by $12.0 million, or 32.1% to $49.4 million for the nine months ended September 30, 2000 from $37.4 million in the same period in 1999. The average cost of certificate accounts was 5.74% for the nine months ended September 30, 2000 compared to 5.24% for the nine months ended September 30, 1999, primarily due to the general rise in market interest rates between the periods. The overall average cost of deposits was 4.07% for the nine months ended September 30, 24 2000 compared to 3.91% for the nine months ended September 30, 1999. Interest expense on borrowed funds increased by $6.4 million, or 24.8% to $32.3 million for the nine months ended September 30, 2000 from $25.9 million for the comparable nine-month period in 1999. Borrowed funds on an average basis increased by $55.2 million between the periods due primarily to the addition of short-term FHLB advances and securities sold under agreements to repurchase in order to complement deposit growth as a funding mechanism for mortgage loan originations during the first quarter of 2000. Subsequent to the sale of parts of the residential mortgage origination division and the reorganization of the remainder of the division during the first quarter, deposit inflows and other cash flows have been used to pay down borrowings and to purchase AFS securities as part of the leverage strategy related to Haven Capital Trust II which was issued in May 1999. The average rate paid on borrowings increased to 6.29% for the nine months ended September 30, 2000 from 5.48% for the prior year period due to an increase in market interest rates during 1999 and the first nine months of 2000. PROVISION FOR LOAN LOSSES. The Bank provided $1.7 million for loan losses for the nine months ended September 30, 2000 compared to $2.6 million for the comparable nine-month period in 1999. The provision for loan losses is established based on management's periodic review and evaluation of the loan portfolio and reflects the decrease in non-performing loans. NON-INTEREST INCOME. Non-interest income increased by $1.9 million, or 7.6% for the nine months ended September 30, 2000 to $26.3 million from $24.5 million for the comparable nine-month period in 1999. Retail banking fees increased by $5.2 million, or 45.3% to $16.6 million for the nine months ended September 30, 2000 compared to $11.4 million for the same period last year. The supermarket branches generated savings and checking fees of $13.0 million for the nine months ended September 30, 2000 compared to $8.6 million for the same period last year. Insurance, annuity and mutual fund fees for the nine months ended September 30, 2000 increased by $431,000, or 6.8% to $6.8 million from $6.4 million for the same period last year. Non-interest income for the nine months ended September 30, 2000 included $1.3 million of mortgage banking income compared to mortgage banking income of $3.0 million in the same period of 1999. The decrease in mortgage banking income is due to a decrease in the Bank's loans held for sale volume as a result of the wind-down and reorganization of the Bank's residential mortgage origination operation. The net gain realized on sales of interest-earning assets was $271,000 for the nine months ended September 30, 2000 compared to $1.7 million for the same period last year. 25 NON-INTEREST EXPENSE. Non-interest expense increased by $167,000, or 0.3% for the nine months ended September 30, 2000 to $60.3 million from $60.2 million for the comparable nine-month period in 1999. The increase was primarily the result of restructuring charges, net of recoveries, totaling $6.9 million. Excluding the restructuring charges, non-interest expense decreased by $6.7 million, or 11.2%, for the nine months ended September 30, 2000 from the prior year period. Compensation and benefits costs decreased by $4.9 million, or 15.0% for the nine months ended September 30, 2000 to $28.0 million from $32.9 million for the prior year period due to the reduction in staff and wind-down of the residential mortgage division previously discussed. Data processing expenses for the nine months ended September 30, 2000 increased by $741,000, or 28.8%, to $3.3 million, from $2.6 million for the comparable period in the prior year. The increase is primarily attributable to the growth in the supermarket banking program. The costs incurred for the federal deposit insurance premiums decreased by $430,000, or 56.4% to $333,000 for the nine months ended September 30, 2000 from $763,000 for the same period last year due to a legislative change effective January 1, 2000. The assessment booked for the first nine months of 2000 represented the Bank's share of interest due on the Financing Corporation bonds. The Bank is no longer subject to a quarterly premium for the SAIF fund due to its current risk classification. Other operating costs decreased by $1.7 million, or 12.0% to $12.1 million for the nine months ended September 30, 2000 from $13.7 million for the same period last year, due primarily to the reduction in staff and wind-down of the residential mortgage division previously discussed. INCOME TAX EXPENSE. Income tax expense was $8.5 million for an effective tax rate of 37.3% for the nine months ended September 30, 2000 compared to income tax expense of $5.5 million for an effective tax rate of 38.3% for the comparable period in 1999. The decrease in the effective tax rate was due to additional tax savings realized from the formation of the Bank's wholly-owned subsidiary, CFS Investments New Jersey, Inc., a New Jersey Investment Company, during the fourth quarter of 1999. FORWARD LOOKING STATEMENTS SAFE HARBOR PROVISIONS OF THE PRIVATE LITIGATION REFORM ACT OF 1995 Statements made herein that are forward-looking in nature within the meaning of the Private Securities Litigation Reform Act of 1995, are subject to risks and uncertainties that could cause actual results to differ materially. Such risks and uncertainties include, but are not limited to, those related to overall business conditions, particularly in the consumer financial services, mortgage and insurance markets in which Haven operates, fiscal and monetary policy, competitive products and pricing, credit risk management, changes in regulations affecting financial institutions and other risks and uncertainties discussed in Haven's SEC filings, 26 including its Annual Report on Form 10-K for 1999. Haven disclaims any obligation to publicly announce future events or developments, which may affect the forward-looking statements contained herein. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK In management's opinion, there has not been a material change in market risk from December 31, 1999 as reported in Item 7A of the Company's Annual Report on Form 10-K for 1999. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS In February, 1983, a burglary of the contents of safe deposit boxes occurred at a branch office of the Bank. At September 30, 2000, the Bank has a lawsuit related thereto pending, whereby the plaintiffs are seeking recovery of approximately $12.4 million in actual damages and an additional $12.4 million of unspecified damages. The Bank's ultimate liability, if any, which might arise from the disposition of these claims cannot presently be determined. Management believes it has meritorious defenses against this action and has and will continue to defend its position. Accordingly, no provision for any liability that may result upon adjudication has been recognized in the accompanying consolidated financial statements. The Company is involved in various other legal actions arising in the ordinary course of business, which, in the aggregate, are believed by management to be immaterial to the financial position of the Company. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 27.1 Financial Data Schedule. (b) Reports on Form 8-K (i) The Company filed a Form 8-K on October 19, 2000, which reported information under Item 5 - "Other Events." 27 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. HAVEN BANCORP INC. (Registrant) Date: November 14, 2000 By: /s/ Philip S. Messina --------------------------- Philip S. Messina Chairman of the Board and Chief Executive Officer Date: November 14, 2000 By: /s/ Catherine Califano --------------------------- Catherine Califano Senior Vice President and Chief Financial Officer 28 EX-27 2 0002.txt
9 This schedule contains summary financial information extracted from the Consolidated Statement of Financial Condition at September 30, 2000 and the Consolidated Statement of Operations for the nine months ended September 30, 2000 and is qualified in its entirety by reference to such financial statements. 1,000 9-MOS DEC-31-2000 SEP-30-2000 52,308 2,027,522 0 0 903,750 0 0 1,881,936 17,586 2,958,876 2,159,499 201,514 23,561 450,714 0 0 100 123,488 2,958,876 103,328 52,567 0 155,895 65,175 97,474 58,421 1,746 271 60,327 22,652 22,652 0 0 14,197 1.58 1.51 7.31 6,268 0 569 2,872 16,699 1,268 409 17,586 17,586 0 0
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