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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20429
FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2005
--------------
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 0-29709
HARLEYSVILLE SAVINGS FINANCIAL CORPORATION
------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-3028464
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
271 Main Street, Harleysville, Pennsylvania 19438
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(215) 256-8828
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed
since 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. Yes |X| 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:
Common Stock, $.01 Par Value, 3,880,336 as of May 13, 2005
HARLEYSVILLE SAVINGS FINANCIAL CORPORATION
Index
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PAGE(S)
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Part I FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Condensed Consolidated Statements of Financial Condition as of
March 31, 2005 and September 30, 2004 1
Unaudited Condensed Consolidated Statements of Income for the Three and Six
Months Ended March 31, 2005 and 2004 2
Unaudited Condensed Consolidated Statements of Comprehensive Income for the
Three and Six Months Ended March 31, 2005 and 2004 3
Unaudited Condensed Consolidated Statements of Stockholders' Equity for the Six
Months Ended March 31, 2005 3
Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months
Ended March 31, 2005 and 2004 4
Notes to Unaudited Condensed Consolidated Financial Statements 5 - 11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12 - 14
Item 3. Quantitative and Qualitative Disclosures About Market Risk 14 - 15
Item 4. Controls and Procedures 15 - 16
Part II OTHER INFORMATION
Item 1. - 6 17
Signatures 18
Harleysville Savings Financial Corporation
Unaudited Condensed Consolidated Statements of Financial Condition
March 31, September 30,
2005 2004
------------- -------------
Assets
Cash and amounts due from depository institutions $ 1,635,532 $ 1,679,171
Interest bearing deposits in other banks 1,453,968 3,039,613
------------- -------------
Total cash and cash equivalents 3,089,500 4,718,784
Investment securities held to maturity (fair value -
March 31, $80,810,000; September 30, $69,439,000) 80,437,926 68,161,572
Investment securities available-for-sale at fair value 4,819,045 7,714,840
Mortgage-backed securities held to maturity (fair value -
March 31, $269,484,000; September 30, $262,560,000) 273,099,457 261,291,730
Mortgage-backed securities available-for-sale at fair value 1,412,737 3,795,274
Loans receivable (net of allowance for loan losses -
March 31, $1,971,000; September 30, $1,977,000) 347,554,742 338,584,205
Accrued interest receivable 3,285,909 3,069,038
Federal Home Loan Bank stock - at cost 15,731,900 15,184,100
Office properties and equipment 5,888,157 5,748,975
Deferred income taxes 396,802 385,545
Prepaid expenses and other assets 12,709,229 9,577,465
------------- -------------
TOTAL ASSETS $ 748,425,404 $ 718,231,528
============= =============
Liabilities and Stockholders' Equity
Liabilities:
Deposits $ 411,852,048 $ 405,230,639
Advances from Federal Home Loan Bank 285,214,247 265,952,993
Accrued interest payable 1,240,964 1,126,113
Advances from borrowers for taxes and insurance 3,558,151 1,058,007
Accounts payable and accrued expenses 569,924 550,864
------------- -------------
Total liabilities 702,435,334 673,918,616
------------- -------------
Commitments (Note 9)
Stockholders' equity:
Preferred Stock: $.01 par value;
12,500,000 shares authorized; none issued
Common stock: $.01 par value; 25,000,000
shares authorized; issued Mar. 2005, 3,885,347; Sept. 2004, 2,316,490
and outstanding, Mar. 2005, 3,880,336; Sept. 2004, 2,299,127 38,853 23,165
Paid-in capital in excess of par 7,425,888 7,426,853
Treasury stock, at cost (Mar. 2005, 5,011 shares; Sept. 2004, 17,363 shares) (94,835) (414,430)
Retained earnings - partially restricted 38,656,926 37,244,200
Accumulated other comprehensive (loss) income (36,762) 33,124
------------- -------------
Total stockholders' equity 45,990,070 44,312,912
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 748,425,404 $ 718,231,528
============= =============
See notes to unaudited condensed consolidated financial statements.
page -1-
Harleysville Savings Financial Corporation
Unaudited Condensed Consolidated Statements of Income
For the Three Months Ended For the Six Months Ended
March 31, March 31,
--------------------------- ---------------------------
2005 2004 2005 2004
----------- ----------- ----------- -----------
INTEREST INCOME:
Interest on mortgage loans $ 3,752,988 $ 3,704,170 $ 7,553,501 $ 7,458,747
Interest on mortgage-backed securities 2,937,716 2,548,906 5,784,003 5,051,901
Interest on consumer and other loans 1,111,828 909,407 2,167,557 1,736,774
Interest and dividends on tax-exempt investments 336,487 358,455 673,067 708,285
Interest and dividends on taxable investments 709,526 583,882 1,249,346 1,213,090
----------- ----------- ----------- -----------
Total interest income 8,848,545 8,104,820 17,427,474 16,168,797
----------- ----------- ----------- -----------
Interest Expense:
Interest on deposits 2,474,723 2,254,365 4,870,474 4,555,367
Interest on borrowings 3,028,392 2,750,211 5,983,293 5,620,648
----------- ----------- ----------- -----------
Total interest expense 5,503,115 5,004,576 10,853,767 10,176,015
----------- ----------- ----------- -----------
Net Interest Income 3,345,430 3,100,244 6,573,707 5,992,782
Provision for loan losses -- -- -- --
----------- ----------- ----------- -----------
Net Interest Income after Provision
for Loan Losses 3,345,430 3,100,244 6,573,707 5,992,782
----------- ----------- ----------- -----------
Other Income:
Gain on sales of securities -- 115,262 63,743 225,250
Gain on sale of loans -- 11,250 -- 17,673
Other income 341,204 307,932 691,022 644,812
----------- ----------- ----------- -----------
Total other income 341,204 434,444 754,765 887,735
----------- ----------- ----------- -----------
Other Expenses:
Salaries and employee benefits 1,054,636 1,016,720 2,071,255 1,891,850
Occupancy and equipment 392,896 391,238 762,407 739,689
Deposit insurance premiums 14,441 14,512 29,111 29,094
Other 551,195 465,910 1,109,338 974,239
----------- ----------- ----------- -----------
Total other expenses 2,013,168 1,888,380 3,972,111 3,634,872
----------- ----------- ----------- -----------
Income before Income Taxes 1,673,466 1,646,308 3,356,361 3,245,645
Income tax expense 431,500 411,000 858,901 802,000
----------- ----------- ----------- -----------
Net Income $ 1,241,966 $ 1,235,308 $ 2,497,460 $ 2,443,645
=========== =========== =========== ===========
Basic Earnings Per Share $ 0.32 $ 0.32 $ 0.65 $ 0.64
=========== =========== =========== ===========
Diluted Earnings Per Share $ 0.32 $ 0.32 $ 0.64 $ 0.63
=========== =========== =========== ===========
Dividends Per Share $ 0.15 $ 0.12 $ 0.28 $ 0.24
=========== =========== =========== ===========
See notes to unaudited condensed consolidated financial statements.
page -2-
Harleysville Savings Financial Corporation
Unaudited Condensed Consolidated Statement of Comprehensive Income
Three Months Ended
2005 2004
- -------------------------------------------------------------------------------------------------------------------
Net Income $ 1,241,966 $ 1,235,308
Other Comprehensive Income
Unrealized (loss) gain on securities net of tax (benefit) expense
(79,953) 42
----------- -----------
Total Comprehensive Income $ 1,162,013 $ 1,235,350
=========== ===========
Six Months Ended
2005 2004
- -------------------------------------------------------------------------------------------------------------------
Net Income $ 2,497,460 $ 2,443,645
Other Comprehensive Income
Unrealized (loss) gain on securities net of tax (benefit) expense
(69,886)(1) 37,751
----------- -----------
Total Comprehensive Income $ 2,427,574 $ 2,481,396
=========== ===========
(1) Disclosure of reclassification amount, net of tax for the six months ended: 2005 2004
----------- -----------
Net unrealized (loss) gain arising during the six months ended $ (27,816) $ 115,262
Less: Reclassification adjustment for net gains included in net income 42,070 77,511
----------- -----------
Net unrealized gain on securities $ (69,886) $ 37,751
=========== ===========
Page 3
Harleysville Savings Financial Corporation
Unaudited Condensed Consolidated Statement of Stockholders' Equity
Paid-in Retained Accumulated
Capital Earnings- Other Total
Common in Excess Treasury Partially Comprehensive Stockholders'
Stock of Par Stock Restricted Income (Loss) Equity
----------- ----------- ----------- ----------- ------------- -------------
Balance at October 1, 2004 $ 23,165 $ 7,426,853 $ (414,430) $37,244,200 $ 33,124 $44,312,912
Net Income 2,497,460 2,497,460
Issuance of Common Stock 246 155,152 155,398
Stock Split 15,442 (15,442)
Dividends - $.28 per share (1,084,734) (1,084,734)
Treasury stock purchased (204,100) (204,100)
Treasury stock delivered under
Dividend Reinvestment Plan 19,028 104,356 123,384
Treasury stock delivered under
employee stock plan (159,703) 419,339 259,636
Unrealized holding loss on available -
for - sale securities, net of tax (69,886) (69,886)
----------- ----------- ----------- ----------- ----------- -----------
Balance at March 31, 2005 $ 38,853 $ 7,425,888 $ (94,835) $38,656,926 $ (36,762) $45,990,070
=========== =========== =========== =========== =========== ===========
See notes to unaudited condensed consolidated financial statements.
page -3-
Harleysville Savings Financial Corporation
Unaudited Condensed Consolidated Statements of Cash Flows
Six Months Ended March 31,
--------------------------
2005 2004
------------ ------------
Operating Activities:
Net Income $ 2,497,460 $ 2,443,645
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 159,805 184,341
Amortization of deferred loan fees (120,257) (302,358)
Gain on sale of loans -- 17,673
Proceeds from the sale of loans held for sale -- 1,166,114
Gain on sale of securities (63,743) (225,250)
Changes in assets and liabilities which provided (used) cash:
Increase (decrease) in accounts payable and accrued
expenses 19,060 (301,039)
Decrease (increase) in deferred income taxes (6,754) 47,126
Increase in prepaid expenses and other assets (631,764) (5,492)
Increase bank owned life insurance (2,500,000)
Increase in accrued interest receivable (216,871) (130,558)
Increase (decrease) in accrued interest payable 114,851 (23,968)
------------ ------------
Net cash (used in) provided by operating activities (748,213) 2,870,234
------------ ------------
Investing Activities:
Purchase of investment securities held to maturity (21,500,000) (3,989,750)
Proceeds from maturities of investment securities held to maturity 11,237,653 12,431,453
Purchase of investment securities available for sale (1,804,598) (2,374,949)
Proceeds from sale of investment securities available for sale 4,539,544 1,250,537
Purchase of FHLB stock (547,800) (634,800)
Long-term loans originated or acquired (49,426,495) (66,742,376)
Purchase of mortgage-backed securities available for sale -- (5,010,238)
Purchase of mortgage-backed securities held to maturity (40,210,279) (74,968,993)
Principal collected on long-term loans & mortgage-backed securities 69,497,500 95,958,853
Purchases of premises and equipment (298,987) (30,515)
------------ ------------
Net cash used in investing activities (28,513,462) (44,110,778)
------------ ------------
Financing Activities:
Net (decrease) increase in demand deposits, NOW accounts
and savings accounts (1,822,436) 6,649,081
Net increase in certificates of deposit 8,443,845 7,968,365
Cash dividends (1,084,734) (910,667)
Net increase in FHLB advances 19,261,254 22,489,745
Use of treasury stock 383,020 383,172
Purchase of treasury stock (204,100) (251,580)
Net proceeds from issuance of stock 155,398 --
Net increase in advances from borrowers for taxes & insurance 2,500,144 2,215,771
------------ ------------
Net cash provided by financing activities 27,632,391 38,543,887
------------ ------------
DECREASE IN CASH AND CASH EQUIVALENTS (1,629,284) (2,696,657)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 4,718,784 6,401,598
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,089,500 $ 3,704,941
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Income taxes $ 621,112 $ 659,262
Interest expense 10,968,618 10,199,983
See notes to unaudited condensed consolidated financial statements.
page -4-
Harleysville Savings Financial Corporation
Notes to Unaudited Condensed Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation - The accompanying unaudited condensed consolidated
financial statements have been prepared in accordance with the instructions for
Form 10-Q and therefore do not include information or footnotes necessary for a
complete presentation of financial condition, results of operations and cash
flows in conformity with accounting principles generally accepted in the United
States of America. However, all adjustments (consisting only of normal recurring
adjustments) which, in the opinion of management, are necessary for a fair
presentation have been included. The results of operations for the three and six
months ended March 31, 2005 are not necessarily indicative of the results which
may be expected for the entire fiscal year or any other period. The financial
information should be read in conjunction with the annual report on Form 10-K.
Use of Estimates in Preparation of Financial Statements - The preparation of
consolidated financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statement and the reported amounts of income and expenses during
the reporting period. The most significant of these estimates is the allowance
for loan losses. Actual results could differ from those estimates.
Accounting for Stock Options - In December 2002, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards
("SFAS") No. 148, Accounting for Stock-Based Compensation --Transition and
Disclosure, an amendment of FASB Statement No. 123. SFAS No. 148 amends SFAS No.
123 to provide alternative methods of transition for a voluntary change to the
fair value based method of accounting for stock-based employee compensation. In
addition, this Statement amends the disclosure requirements of SFAS No. 123 to
require prominent disclosures in both annual and interim financial statements
about the method of accounting for stock-based employee compensation and the
effect of the method used on reported results. Harleysville Savings Financial
Corporation (the "Company") has elected to continue application of APB Opinion
No. 25 and related interpretations for stock options and, accordingly no
compensation expense has been recorded in the condensed consolidated financial
statements. Effective for the annual reporting period that begins after June 15,
2005, the FASB will require that the Company recognize compensation expense for
the fair value of stock options that are granted or vest after that date. FASB
set forth these rules in Statement No. 123(R), Share-Based Payment, which became
final December 16, 2004. Management is currently evaluating the effects the
adoption will have on the Company's financial statements of the Company. The
following table illustrates the effect on net income and earnings per share if
the Company had applied the fair value recognition provisions of SFAS No. 123 to
stock-based employee compensation.
For the Three Months Ended For the Six Months Ended
March 31, 2005 March 31, 2004 March 31, 2005 March 31, 2004
-------------- -------------- -------------- --------------
Net income $1,241,966 $1,235,308 $2,497,460 $2,443,645
Less: Stock based compensation expense 41,693 37,773 41,693 37,773
---------- ---------- ---------- ----------
Proforma net income $1,200,273 $1,197,535 $2,455,767 $2,405,872
Earnings per share:
Basic - as reported $ 0.32 $ 0.32 $ 0.65 $ 0.64
Basic - pro forma 0.31 0.31 0.64 0.64
Diluted - as reported $ 0.32 $ 0.32 $ 0.64 $ 0.63
Diluted - pro forma 0.31 0.31 0.63 0.62
Recent Accounting Pronouncements - In March 2004, the FASB Emerging Issues Task
Force ("EITF") reached a consensus regarding EITF 03-1, The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain Investments. The
consensus provides guidance for evaluating whether an investment is
other-than-temporarily impaired and was effective for other-than-temporary
impairment evaluations made in reporting periods beginning after June 15, 2004.
However, the guidance contained in paragraphs 10-20 of this Issue has been
delayed by FASB Staff Position ("FSP") EITF Issue 03-1-1, "Effective Date of
Paragraphs 10-20 of EITF Issue No. 03-1, The Meaning of Other-Than-Temporary
Impairment and Its Application to Certain Investments," posted September 30,
2004. The delay of the effective date for paragraphs 10-20 will be superseded
concurrent with the final issuance of proposed FSP EITF Issue 03-1-a,
"Implication Guidance For the Application of Paragraph 16 of EITF Issue No.
03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to
Certain Investments." The proposed FSP would provide implementation guidance
with respect to debt securities that are impaired solely due to interest rates
and/or sector spreads and analyzed for other-than-temporary impairment. The
disclosures continue to be effective for the Company's consolidated financial
statements for fiscal years ending after December 15, 2003, for investments
accounted for under SFAS No. 115 and No. 124. For all other investments within
the scope of this Issue, the disclosures continue to be effective for fiscal
years ending after June 15, 2004. The additional disclosures for cost method
investments continue to be effective for fiscal years ending after June 15,
2004.
page -5-
2. INVESTMENT SECURITIES HELD TO MATURITY
A comparison of amortized cost and approximate fair value of investment
securities with gross unrealized gains and losses, by maturities, is as follows:
March 31, 2005
Gross Gross
Amortized Unrealized Unrealized Approximate
Cost Gains Losses Fair Value
- --------------------------------------------------------------------------------------------------------------
U.S. Government Agencies
Due after 1 years through 5 years $ 8,999,790 $ (144,790) $ 8,855,000
Due after 5 years through 10 years 13,991,246 $ 101,094 (134,340) 13,958,000
Due after 10 years through 15 years 32,441,716 (814,716) 31,627,000
Tax Exempt Obligations
Due after 10 years through 15 years 8,922,332 481,668 9,404,000
Due after 15 years 16,082,842 883,158 16,966,000
----------- ----------- ----------- -----------
Total Investment Securities $80,437,926 $ 1,465,920 $(1,093,846) $80,810,000
=========== =========== =========== ===========
A summary of investment with unrealized losses, aggregated by category, at March
31, 2005 is as follows:
Less than 12 Months 12 Months or Longer Total Total
Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses
---------- ----------------- ---------- ----------------- ---------- -----------------
US Government agencies $38,923,605 $ (544,055) $10,423,140 $ (549,791) $49,346,745 $(1,093,846)
----------- ----------- ----------- ----------- ----------- -----------
Total $38,923,605 $ (544,055) $10,423,140 $ (549,791) $49,346,745 $(1,093,846)
=========== =========== =========== =========== =========== ===========
At March 31, 2005, investment securities in a gross unrealized loss position for
twelve months or longer consisted of 18 agencies that at such date had an
aggregate depreciation of 2.2% from the Company's amortized cost basis.
Management believes that the estimated fair value of the securities disclosed
above is primarily dependent upon the movement in market interest rates. The
Company has the ability and intent to hold these securities until the
anticipated recovery of fair value occurs. Management does not believe any
individual unrealized loss as of March 31, 2005 represents an
other-than-temporary impairment.
September 30, 2004
Gross Gross
Amortized Unrealized Unrealized Approximate
Cost Gains Losses Fair Value
- --------------------------------------------------------------------------------------------------------------
U.S. Government Agencies
Due after 1 years through 5 years $ 999,347 $ (347) $ 999,000
Due after 5 years through 10 years 15,278,032 $ 186,208 (21,240) 15,443,000
Due after 10 years through 15 years 26,918,369 22,286 (402,655) 26,538,000
Tax Exempt Obligations
Due after 10 years through 15 years 6,932,105 453,895 7,386,000
Due after 15 years 18,033,719 1,039,281 19,073,000
----------- ----------- ----------- -----------
Total Investment Securities $68,161,572 $ 1,701,670 $ (424,242) $69,439,000
=========== =========== =========== ===========
At March 31,2005 and September 30, 2004, U.S. Government Agencies include
structured note securities with periodic interest rate adjustments and are
callable periodically by the issuing agency. At March 31,2005 and September 30,
2004, these structured notes were comprised of step-up bonds with par values of
$32.7 million and $38.7 million, respectively. The Company has the positive
intent and the ability to hold these securities to maturity.
page -6-
3. INVESTMENT SECURITIES AVAILABLE-FOR-SALE
A comparison of amortized cost and approximate fair value of investment
securities with gross unrealized gains and losses, by maturities, is as follows:
March 31, 2005
Gross Gross
Amortized Unrealized Unrealized
Cost Gain Losses Fair Value
- --------------------------------------------------------------------------------------------------------------
Equities $ 1,070,024 $ 23,501 $ (63,635) $ 1,029,890
Mutual Funds 3,789,155 3,789,155
----------- ----------- ----------- -----------
Total Investment Securities $ 4,859,179 $ 23,501 $ (63,635) $ 4,819,045
=========== =========== =========== ===========
A summary of investment with unrealized losses, aggregated by category, at March
31,2005 is as follows:
Less than 12 Months 12 Months or Longer Total Total
Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses
---------- ----------------- ---------- ----------------- ---------- -----------------
Equities $730,640 $(63,635) $ -- $ -- $730,640 $(63,635)
-------- -------- -------- -------- -------- --------
Total $730,640 $(63,635) $ -- $ -- $730,640 $(63,635)
======== ======== ======== ======== ======== ========
Management evaluates securities for other than temporary impairment at least on
a quarterly basis, and more frequently when economic or market concerns warrant
such evaluation. Consideration is given to the intent and ability of the Company
to retain its investment in the issuer for a period of time sufficient to allow
for any anticipated recovery in fair value. Management believes that the
securities are temporarily impaired.
September 30, 2004
Gross Gross
Amortized Unrealized Unrealized
Cost Gain Losses Fair Value
- -----------------------------------------------------------------------------------------------
Equities $ 971,110 $ 58,377 $ -- $ 1,029,487
Mutual Funds 6,685,353 6,685,353
----------- ----------- ----------- -----------
Total Investment Securities $ 7,656,463 $ 58,377 $ -- $ 7,714,840
=========== =========== =========== ===========
page -7-
4. MORTGAGE-BACKED SECURITIES HELD TO MATURITY
A comparison of amortized cost and approximate fair value of mortgage-backed
securities with gross unrealized gains and losses, by maturities, is as follows:
March 31, 2005
Gross Gross
Amortized Unrealized Unrealized Approximate
Cost Gains Losses Fair Value
- --------------------------------------------------------------------------------------------------------------
Collateralized mortgage obligations $16,561,899 $ 67,159 $ (261,058) $16,368,000
FHLMC pass-through certificates 127,534,584 224,495 (1,950,079) 125,809,000
FNMA pass-through certificates 120,581,656 226,047 (2,292,703) 118,515,000
GNMA pass-through certificates 8,421,318 370,682 8,792,000
----------- ----------- ----------- -----------
Total Mortgage-Backed Securities $273,099,457 $ 888,383 $(4,503,840) $269,484,000
=========== =========== =========== ===========
A summary of investment with unrealized losses, aggregated by category, at March
31,2005 is as follows:
Less than 12 Months 12 Months or Longer Total Total
Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses
---------- ----------------- ---------- ----------------- ---------- -----------------
Mortgage-backed securities
held to maturity $188,521,987 $ (2,996,695) $ 49,048,904 $ (1,507,145) $237,570,891 $ (4,503,840)
------------ ------------ ------------ ------------ ------------ ------------
Total $188,521,987 $ (2,996,695) $ 49,048,904 $ (1,507,145) $237,570,891 $ (4,503,840)
============ ============ ============ ============ ============ ============
At March 31, 2005, mortgage-related securities in a gross unrealized loss
position for twelve months or longer consisted of 84 securities that at such
date had an aggregate depreciation of 1.9% from the Company's amortized cost
basis. Management does not believe any individual unrealized loss as of March
31, 2005 represents an other-than-temporary impairment. The unrealized losses
reported for mortgage-related securities relate primarily to securities issued
by the Federal National Mortgage Association, the Federal Home Loan Mortgage
Corporation and private institutions. The majority of the unrealized losses
associated with mortgage-related securities are primarily attributable to
changes in interest rates and not due to the deterioration of the
creditworthiness of the issuer. The Company has the ability and intent to hold
these securities until the securities mature.
September 30, 2004
Gross Gross
Amortized Unrealized Unrealized Approximate
Cost Gains Losses Fair Value
- ------------------------------------------------------------------------------------------------------------
Collateralized mortgage obligations $ 8,733,300 $ 42,446 $ (71,746) $ 8,704,000
FHLMC pass-through certificates 118,448,507 717,032 (189,539) 118,976,000
FNMA pass-through certificates 123,234,413 831,713 (641,126) 123,425,000
GNMA pass-through certificates 10,875,510 579,490 11,455,000
------------ ------------ ------------ ------------
Total Mortgage-Backed Securities $261,291,730 $ 2,170,681 $ (902,411) $262,560,000
============ ============ ============ ============
page -8-
5. MORTGAGE-BACKED SECURITIES AVAILABLE-FOR-SALE
A comparison of amortized cost and approximate fair value of mortgage-backed
securities with gross unrealized gains and losses, by maturities, is as follows:
March 31, 2005
Gross Gross
Amortized Unrealized Unrealized Approximate
Cost Gains Losses Fair Value
- --------------------------------------------------------------------------------------------------------------
FNMA pass-through certificates $ 1,428,303 $ -- $ (15,566) $ 1,412,737
----------- ----------- ----------- -----------
Total Mortgage-Backed Securities $ 1,428,303 $ -- $ (15,566) $ 1,412,737
=========== =========== =========== ===========
A summary of investment with unrealized losses, aggregated by category, at March
31,2005 is as follows:
Less than 12 Months 12 Months or Longer Total Total
Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses
---------- ----------------- ---------- ----------------- ---------- -----------------
Mortgage-backed securities
available for sale $1,412,737 $ (15,566) $ -- $ -- $1,412,737 $ (15,566)
---------- ---------- ---------- ---------- ---------- ----------
Total $1,412,737 $ (15,566) $ -- $ -- $1,412,737 $ (15,566)
========== ========== ========== ========== ========== ==========
Management evaluates securities for other than temporary impairment at least on
a quarterly basis, and more frequently when economic or market concerns warrant
such evaluation. Consideration is given to the intent and ability of the Company
to retain its investment in the issuer for a period of time sufficient to allow
for any anticipated recovery in fair value. Management believes that the
securities are temporarily impaired.
September 30 ,2004
Gross Gross
Amortized Unrealized Unrealized Approximate
Cost Gains Losses Fair Value
- --------------------------------------------------------------------------------------------------------------
FNMA pass-through certificates $ 3,803,463 $ 2,518 $ (10,706) $ 3,795,274
----------- ----------- ----------- -----------
Total Mortgage-Backed Securities $ 3,803,463 $ 2,518 $ (10,706) $ 3,795,274
=========== =========== =========== ===========
6. LOANS RECEIVABLE
Loans receivable consist of the following:
March 31, 2005 September 30, 2004
-------------- ------------------
Residential Mortgages $ 260,925,802 $ 256,512,743
Commercial Mortgages 1,701,541 2,141,481
Construction 9,036,100 7,970,663
Savings Account 804,822 811,032
Home Equity 52,283,283 46,256,556
Automobile and other 759,170 732,062
Line of Credit 32,842,995 32,329,416
------------- -------------
Total 358,353,713 346,753,953
Undisbursed portion of loans in process (7,972,790) (5,237,847)
Deferred loan fees (854,766) (955,052)
Allowance for loan losses (1,971,415) (1,976,849)
------------- -------------
Loans receivable - net $ 347,554,742 $ 338,584,205
============= =============
The total amount of loans being serviced for the benefit of others was
approximately $4.2 million and $4.5 million at March 31,2005 and September 30,
2004, respectively.
The following schedule summarizes the changes in the allowance for loan losses:
Six Months Ended Year Ended
March 31, 2005 September 30, 2004
-------------- ------------------
Balance, beginning of period $ 1,976,849 $ 1,990,672
Provision for loan losses --
Amounts charged-off (8,080) (15,394)
Loan recoveries 2,646 1,571
----------- -----------
Balance, end of period $ 1,971,415 $ 1,976,849
=========== ===========
page -9-
7. OFFICE PROPERTIES AND EQUIPMENT
Office properties and equipment are summarized by major classification as
follows:
March 31, 2005 September 30, 2004
-------------- ------------------
Land and buildings $ 6,549,448 $ 6,489,050
Furniture, fixtures and equipment 3,401,822 3,102,835
Automobiles 24,896 24,896
------------- -------------
Total 9,976,166 9,616,781
Less accumulated depreciation (4,088,009) (3,867,806)
------------- -------------
Net $ 5,888,157 $ 5,748,975
============= =============
8. DEPOSITS
Deposits are summarized as follows:
March 31, 2005 September 30, 2004
-------------- ------------------
Non-interest bearing checking $ 8,729,271 $ 8,335,991
NOW accounts 19,888,153 19,838,879
Checking accounts 3,889,526 3,431,273
Money Market Demand accounts 97,973,111 100,448,760
Passbook and Club accounts 3,799,610 4,047,204
Certificate accounts 277,572,377 269,128,532
------------- -------------
Total deposits $ 411,852,048 $ 405,230,639
============= =============
The aggregate amount of certificate accounts in denominations of more than
$100,000 at March 31, 2005 and September 30, 2004 amounted to approximately
$31.7 million and $28.1 million, respectively. Amounts in excess of $100,000 may
not be federally insured.
9. COMMITMENTS
At March 31,2005, the following commitments were outstanding:
Origination of fixed-rate mortgage loans $ 8,819,130
Origination of adjustable-rate mortgage loans 753,000
Unused line of credit loans 38,474,794
Loans in process 7,972,790
-----------
Total $56,019,714
===========
10. CASH DIVIDEND AND STOCK SPLIT
On January 26, 2005, the Board of Directors declared a declared a cash dividend
of $.25 ($.15 post split) per share and a five for three stock split payable on
February 23, 2005 to the stockholders of record at the close of business on
February 9, 2005. The number of shares and per share information has been
restated to reflect the five for three stock split. The shares of Harleysville
Savings Financial Corporation traded on February 24, 2005 on a post split
page -10-
11. EARNINGS PER SHARE
The following average shares were used for the computation of earnings per
share:
For the Three Months Ended For the Six Months Ended
March 31, March 31,
---------------------------------------------------------------
2005 2004 2005 2004
--------- --------- --------- ---------
Basic 3,854,294 3,813,177 3,857,206 3,797,643
Diluted 3,926,205 3,897,528 3,915,365 3,888,740
The difference between the number of shares used for computation of basic
earnings per share and diluted earnings per share represents the dilutive effect
of stock options.
12. ADVANCES FROM FEDERAL HOME LOAN BANK
Advances from the Federal Home Loan Bank consists of the following:
March 31, September 30,
2005 2004
Weighted Weighted
Interest Interest
Maturing Period Amount Rate Amount Rate
- --------------------------------------------------------------------------------
1 to 12 months $ 35,533,859 3.67% $ 40,428,147 3.40%
13 to 24 months 26,267,609 3.83% 9,545,900 3.55%
25 to 36 months 38,602,269 4.27% 28,476,845 3.59%
37 to 48 months 62,381,142 4.35% 54,582,988 5.08%
49 to 60 months 17,898,942 4.37% 34,950,243 3.77%
61 to 72 months 30,000,000 5.67% 15,000,000 6.08%
73 to 84 months 32,530,426 4.41% 25,968,870 4.89%
85 to 120 months 42,000,000 4.34% 57,000,000 4.43%
---------------------------------------------------------
Total $285,214,247 4.35% $265,952,993 4.34%
=========================================================
The advances are collateralized by Federal Home Loan Bank ("FHLB") stock and
substantially all first mortgage loans. The Company has a line of credit with
the FHLB of which $22.0 million out of $30.0 was used at March 31, 2005 and
$19.1 million was used as of September 30, 2004. Included in the table above at
March 31, 2005 and September 30, 2004 are convertible advances whereby the FHLB
has the option at a predetermined strike rate to convert the fixed interest rate
to an adjustable rate tied to London Interbank Offered Rate ("LIBOR"). The
Company then has the option to repay these advances if the FHLB converts the
interest rate. These advances are included in the periods in which they mature.
The Company has a total FHLB borrowing capacity of $541.0 million of which
$285.2 million was used as of March 31, 2005.
13. REGULATORY CAPITAL REQUIREMENTS
Harleysville Savings Bank (the "Bank") is subject to various regulatory capital
requirements administered by the federal Banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory - and possibly
additional discretionary - actions by regulators that, if undertaken, could have
a direct material effect on the Bank's consolidated financial statements. Under
capital adequacy guidelines and the regulatory framework for prompt corrective
action, the Bank must meet specific capital guidelines that involve quantitative
measures of the Bank's assets, liabilities and certain off-balance-sheet items
as calculated under regulatory accounting practices. The Bank's capital amounts
and classification are also subject to qualitative judgments by the regulators
about components, risk weightings, and other factors. Quantitative measures
established by regulation to ensure capital adequacy require the Bank to
maintain minimum amounts and ratios (set forth in the table below) of total Tier
1 capital (as defined in the regulations) to risk weighted assets (as defined),
and of Tier 1 capital (as defined) to assets (as defined). Management believes,
as of March 31, 2005, that the Bank meets all capital adequacy requirements to
which it is subject.
As of March 31, 2005, the most recent notification from the Federal Deposit
Insurance Corporation categorized the Bank as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as well
capitalized, the Bank must maintain minimum total risk-based, Tier 1 risk-based,
and Tier 1 leverage ratios as set forth in the table. There are no conditions or
events since that notification that management believes have changed the Bank's
category.
The Bank's actual capital amounts and ratios are also presented in the table.
To Be Considered Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
Amount Ratio Amount Ratio Amount Ratio
- ----------------------------------------------------------------------------------------------------------------------------
As of March 31, 2005
Tier 1 Capital (to assets) $45,862,363 6.22% $29,491,175 4.00% $36,863,968 5.00%
Tier 1 Capital (to risk weighted assets) 45,862,363 13.46% 13,632,175 4.00% 20,448,262 6.00%
Total Capital (to risk weighted assets) 47,833,363 14.04% 27,264,349 8.00% 34,080,436 10.00%
As of September 30, 2004
Tier 1 Capital (to assets) $44,124,545 6.20% $28,480,960 4.00% $35,601,200 5.00%
Tier 1 Capital (to risk weighted assets) 44,124,545 13.69% 12,890,920 4.00% 19,336,380 6.00%
Total Capital (to risk weighted assets) 46,127,545 14.31% 25,781,840 8.00% 32,227,300 10.00%
page -11-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This report contains certain forward-looking statements and information relating
to the Company that are based on the beliefs of management as well as
assumptions made by and information currently available to management. In
addition, in those and other portions of this document, the words "anticipate,"
"believe," "estimate," "intend," "should" and similar expressions, or the
negative thereof, as they relate to the Company or the Company's management, are
intended to identify forward-looking statements. Such statements reflect the
current views of the Company with respect to future-looking events and are
subject to certain risks, uncertainties and assumptions. Should one or more of
these risks or uncertainties materialize or should underlying assumptions prove
incorrect, actual results may vary materially from those described herein as
anticipated, believed, estimated, expected or intended. The Company does not
intend to update these forward-looking statements.
The Company's primary business consists of attracting deposits from the general
public through a variety of deposit programs and investing such deposits
principally in first mortgage loans secured by residential properties in the
Company's primary market area. The Company also originates a variety of consumer
loans, predominately home equity loans and lines of credit also secured by
residential properties in the Company's primary lending area. The Company serves
its customers through its full-service branch network as well as through remote
ATM locations, the internet and telephone banking.
Critical Accounting Policies and Judgments
- ------------------------------------------
The Company's consolidated financial statements are prepared based on the
application of certain accounting policies. Certain of these policies require
numerous estimates and strategic or economic assumptions that may prove
inaccurate or subject to variations and may significantly affect the Company's
reported results and financial position for the period or in future periods.
Changes in underlying factors, assumptions, or estimates in any of these areas
could have a material impact on the Company's future financial condition and
results of operations.
Analysis and Determination of the Allowance for Loan Losses - The allowance for
loan losses is a valuation allowance for probable losses inherent in the loan
portfolio. The Company evaluates the need to establish allowances against losses
on loans on a monthly basis. When additional allowances are necessary, a
provision for loan losses is charged to earnings.
Our methodology for assessing the appropriateness of the allowance for loan
losses consists of three key elements: (1) specific allowances for certain
impaired or collateral-dependent loans; (2) a general valuation allowance on
certain identified problem loans; and (3) a general valuation allowance on the
remainder of the loan portfolio. Although we determine the amount of each
element of the allowance separately, the entire allowance for loan losses is
available for the entire portfolio.
Specific Allowance Required for Certain Impaired or Collateral-Dependent Loans:
We establish a allowance for certain impaired loans for the amounts by which the
collateral value or observable market price are lower than the carrying value of
the loan. Under current accounting guidelines, a loan is defined as impaired
when, based on current information and events, it is probable that a creditor
will be unable to collect all amounts due under the contractual terms of the
loan agreement. At March 31, 2005, no loans were considered impaired.
General Valuation Allowance on Certain Identified Problem Loans - We also
establish a general allowance for classified loans that do not have an
individual allowance. We segregate these loans by loan category and assign
allowance percentages to each category based on inherent losses associated with
each type of lending and consideration that these loans, in the aggregate,
represent an above-average credit risk and that more of these loans will prove
to be uncollectible compared to loans in the general portfolio.
General Valuation Allowance on the Remainder of the Loan Portfolio - We
establish another general allowance for loans that are not classified to
recognize the inherent losses associated with lending activities, but which,
unlike specific allowances, has not been allocated to particular problem assets.
This general valuation allowance is determined by segregating the loans by loan
category and assigning allowance percentages based on our historical loss
experience, delinquency trends and management's evaluation of the collectibility
of the loan portfolio. The allowance may be adjusted for significant factors
that, in management's judgment, affect the collectibility of the
page -12-
portfolio as of the evaluation date. These significant factors may include
changes in lending policies and procedures, changes in existing general economic
and business conditions affecting our primary lending areas, credit quality
trends, collateral value, loan volumes and concentrations, seasoning of the loan
portfolio, recent loss experience in particular segments of the portfolio,
duration of the current business cycle and bank regulatory examination results.
The applied loss factors are reevaluated monthly to ensure their relevance in
the current economic environment.
Changes in Financial Position for the Six Month Period Ended March 31, 2005
- ---------------------------------------------------------------------------
Total assets at March 31, 2005 were $748.4 million, an increase of $30.2 million
or 4.20% for the six month period. This increase was attributable to an increase
in investment securities held to maturity, mortgage-backed securities held to
maturity, loans receivable, other assets and Federal Home Loan Bank stock of
approximately $12.3 million, $11.8 million, $9 million, $3.1 million and
$548,000, respectively. This growth is one of the ways the Company manages its
capital based on its business plan. These increases were partially offset by
decreases in investment securities available for sale, mortgage backed
securities available for sale and cash and cash equivalents of approximately
$2.9 million, $2.4 million and $1.6 million, respectively.
During the six-month period ended March 31, 2005, total deposits increased by
$6.6 million to $411.9 million. Advances from borrowers for taxes and insurance
also increased by $2.5 million. This is a seasonal increase as the majority of
taxes the Company escrows for are disbursed in the month of August. There was
also an increase in advances from Federal Home Loan Bank of $19.3 million, which
was used to fund the purchase of investment securities held to maturity and
originate residential loans.
Comparisons of Results of Operations for the Three and Six Month Period Ended
- -----------------------------------------------------------------------------
March 31, 2005 with the Three and Six Month Period Ended March 31, 2004.
- ------------------------------------------------------------------------
Net Interest Income
- -------------------
The increase in the net interest income for the three and six month periods
ended March 31, 2005 when compared to the same periods in 2004 can be attributed
to the increase in the net interest spread from 1.66% and 1.62% to 1.71% and
1.70%, respectively. This is attributed to the fact that the yield on interest
earning assets rose more than the cost of the interest bearing liabilities.
Total interest income was $8.8 million for the three-month period ended March
31, 2005 compared to $8.1 million for the comparable period in 2004. For the six
month period ended March 31, 2005, total interest income was $17.4 million
compared to $16.2 million for the comparable period in 2004. The increase is the
result of the increased average yield for the interest-earning assets to 4.95%
and 4.92% for the three and six-month period ended March 31, 2005, respectively,
from 4.79% and 4.82% for the comparable periods in 2004.
Total interest expense increased to $5.5 million for the three-month period
ended March 31, 2005 from $5.0 million for the comparable period in 2004. For
the six-month period ended March 31, 2005, total interest expense increased to
$10.9 million from $10.2 million for the comparable period in 2004. These
increases occurred as a result of a increase in the average balance and a
increase in the average rate paid on interest-bearing liabilities to 3.24% and
3.22% for the three and six month periods ended March 31, 2005, respectively,
from 3.13% and 3.20% for the comparable period ended March 31, 2004.
Other Income
- ------------
Other income decreased to $341,000 for the three-month period ended March 31,
2005 from $434,000 for the comparable period in 2004. For the six-month period
ended March 31, 2005, other income decreased to $755,000 from $888,000 for the
comparable period in 2004. The three and six-month decrease is due to an
decrease in the sale of loans and investments available for sale.
Other Expenses
- --------------
During the quarter ended March 31, 2005, other expenses increased by $125,000 or
6.6% to $2.0 million when compared to the same period in 2004. For the six month
period ended March 31, 2005, other expenses increased by $337,000 or 9.3%
compared to the comparable period in 2004. Management believes these are normal
increases in the cost of operations after considering the effects of inflation
and the impact of the 5.2% growth in the assets of
page -13-
the Company when compared to the same periods in 2004. The annualized ratio of
expenses to average assets for the three and six month periods ended March 31,
2005 was 1.09%.
Income Taxes
- ------------
The Company made provisions for income taxes of $432,000 and $859,000 for the
three and six-month periods ended March 31, 2005, respectively, compared to
$411,000 and $802,000 for the comparable periods in 2004. These provisions are
based on the levels of taxable income.
Liquidity and Capital Recourses
- -------------------------------
As of March 31, 2005, the Company had $56.0 million in commitments to fund loan
originations, disburse loans in process and meet other obligations. Management
anticipates that the majority of these commitments will be funded within the
next six months by means of normal cash flows, FHLB borrowings and new deposits.
The amount of certificate accounts, which are scheduled to mature during the 12
months ending March 31, 2006, is $78.4 million. Management expects that a
substantial portion of these maturing deposits will remain as accounts in the
Company. The Company invests excess funds in overnight deposits and other
short-term interest-earning assets, which provide liquidity to meet lending
requirements. The Company also has available borrowings with the Federal Home
Loan Bank of Pittsburgh up to the Company's maximum borrowing capacity, which
was $541.0 million at March 31, 2005 of which $285.2 million was outstanding at
March 31, 2005.
The Bank's net income for the six months ended March 31, 2005 of $2,497,000
increased the Bank's stockholders' equity to $46.0 million or 6.1% of total
assets. This amount is well in excess of the Bank's minimum regulatory capital
requirement.
Item 3.Quantitative and Qualitative Disclosures About Market Risk
The Company has instituted programs designed to decrease the sensitivity of its
earnings to material and prolonged increases in interest rates. The principal
determinant of the exposure of the Company's earnings to interest rate risk is
the timing difference between the repricing or maturity of the Company's
interest-earning assets and the repricing or maturity of its interest-bearing
liabilities. If the maturities of such assets and liabilities were perfectly
matched, and if the interest rates borne by its assets and liabilities were
equally flexible and moved concurrently, neither of which is the case, the
impact on net interest income of rapid increases or decreases in interest rates
would be minimized. The Company's asset and liability management policies seek
to increase the interest rate sensitivity by shortening the repricing intervals
and the maturities of the Company's interest-earning assets. Although management
of the Company believes that the steps taken have reduced the Company's overall
vulnerability to increases in interest rates, the Company remains vulnerable to
material and prolonged increases in interest rates during periods in which its
interest rate sensitive liabilities exceed its interest rate sensitive assets.
The authority and responsibility for interest rate management is vested in the
Company's Board of Directors. The Chief Executive Officer implements the Board
of Directors' policies during the day-to-day operations of the Company. Each
month, the Chief Financial Officer presents the Board of Directors with a
report, which outlines the Company's asset and liability "gap" position in
various time periods. The "gap" is the difference between interest-earning
assets and interest-bearing liabilities which mature or reprice over a given
time period. He also meets weekly with the Company's other senior officers to
review and establish policies and strategies designed to regulate the Company's
flow of funds and coordinate the sources, uses and pricing of such funds. The
first priority in structuring and pricing the Company's assets and liabilities
is to maintain an acceptable interest rate spread while reducing the effects of
changes in interest rates and maintaining the quality of the Company's assets.
The following table summarizes the amount of interest-earning assets and
interest-bearing liabilities outstanding as of March 31, 2005, which are
expected to mature, prepay or reprice in each of the future time periods shown.
Except as stated below, the amounts of assets or liabilities shown which mature
or reprice during a particular period were determined in accordance with the
contractual terms of the asset or liability. Adjustable and floating-rate
page -14-
assets are included in the period in which interest rates are next scheduled to
adjust rather than in the period in which they are due, and fixed-rate loans and
mortgage-backed securities are included in the periods in which they are
anticipated to be repaid.
The passbook accounts, negotiable order of withdrawal ("NOW") accounts, interest
bearing accounts, and money market deposit accounts, are included in the "Over 5
Years" categories based on management's beliefs that these funds are core
deposits having significantly longer effective maturities based on the Company's
retention of such deposits in changing interest rate environments.
Generally, during a period of rising interest rates, a positive gap would result
in an increase in net interest income while a negative gap would adversely
affect net interest income. Conversely, during a period of falling interest
rates, a positive gap would result in a decrease in net interest income while a
negative gap would positively affect net interest income. However, the following
table does not necessarily indicate the impact of general interest rate
movements on the Company's net interest income because the repricing of certain
categories of assets and liabilities is discretionary and is subject to
competitive and other pressures. As a result, certain assets and liabilities
indicated as repricing within a stated period may in fact reprice at different
rate levels.
1 Year 1 to 3 3 to 5 Over 5
Or less Years Years Years Total
--------- --------- --------- --------- ---------
Interest-earning assets
Mortgage loans $ 42,208 $ 62,416 $ 44,761 $ 111,541 $ 260,926
Mortgage-backed securities 68,059 74,326 47,566 84,561 274,512
Consumer and other loans 54,191 20,486 8,291 14,459 97,427
Investment securities and other investments 27,367 4,272 13,340 67,277 112,256
--------- --------- --------- --------- ---------
Total interest-earning assets 191,825 161,500 113,958 277,838 745,121
--------- --------- --------- --------- ---------
Interest-bearing liabilities
Passbook and Club accounts -- -- -- 3,800 3,800
NOW and checking accounts -- -- -- 32,507 32,507
Money Market Deposit accounts 31,055 -- -- 50,151 81,206
Choice Savings 4,192 12,575 16,767
Certificate accounts 78,407 127,085 72,080 -- 277,572
Borrowed money 57,523 84,285 44,460 98,946 285,214
--------- --------- --------- --------- ---------
Total interest-bearing liabilities 171,177 211,370 116,540 197,979 697,066
--------- --------- --------- --------- ---------
Repricing GAP during the period $ 20,648 $ (49,870) $ (2,582) $ 79,859 $ 48,055
========= ========= ========= ========= =========
Cumulative GAP $ 20,648 $ (29,222) $ (31,804) $ 48,055
========= ========= ========= =========
Ratio of GAP during the period to total assets 3.00% -7.26% -0.38% 11.62%
========= ========= ========= =========
Ratio of cumulative GAP to total assets 3.00% -4.25% -4.63% 6.99%
========= ========= ========= =========
Item 4. Controls and Procedures
Our management evaluated, with the participation of our Chief Executive Officer
and Chief Financial Officer, the effectiveness of our disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
page -15-
Securities Exchange Act of 1934) as of the end of the period covered by this
report. Based on such evaluation, our Chief Executive Officer and Chief
Financial Officer have concluded that our disclosure controls and procedures are
designed to ensure that information required to be disclosed by us in the
reports that we file or submit under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported within the time periods specified
in the SEC's rules and regulations and are operating in an effective manner.
No change in our internal control over financial reporting (as defined in Rules
13a-15(f) and 15(d)-15(f) under the Securities Exchange Act of 1934) occurred
during the most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.
page -16-
Part II OTHER INFORMATION
Item 1,2,3,4 and 5. Not applicable.
---------------
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
None
page -17-