SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20429
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ________
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)
(Registrant's telephone number, including area code) (215) 256-8828
--------------------------------------------------------------------------------
(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, 2,294,951 as of May 1, 2001
HARLEYSVILLE SAVINGS FINANCIAL CORPORATION
AND SUBSIDIARY
Index
PAGE(S)
Part I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Financial Condition as of
March 31, 2001 (unaudited) and September 30, 2000 1
Consolidated Statements of Income for the Three and Six
Months Ended March 31, 2001 and 2000 (unaudited) 2
Consolidated Statements of Stockholders' Equity for the Six
Months Ended March 31, 2001 (unaudited) 3
Consolidated Statements of Cash Flows for the Six Months
Ended March 31, 2001 and 2000 (unaudited) 4
Notes to Consolidated Financial Statements 5 - 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9 - 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk 10 - 11
Part II OTHER INFORMATION
Item 1. - 6. 12
Signatures 13
Harleysville Savings Financial Corporation
Consolidated Statements of Financial Condition
March 31, September 30,
2001 2000
------------- -------------
(unaudited)
Assets
Cash and amounts due from depository institutions $ 1,030,180 $ 1,224,634
Interest bearing deposits in other banks 12,830,254 2,855,568
------------- -------------
Total cash and cash equivalents 13,860,434 4,080,202
Investment securities held to maturity (fair value -
March 31, $64,713,000; September 30, $69,463,000) 63,663,860 71,280,841
Investment securities available-for-sale at fair value 7,797,785 3,309,736
Mortgage-backed securities held to maturity (fair value -
March 31, $142,995,000; September 30, $114,182,000) 141,890,232 116,303,730
Mortgage-backed securities available-for-sale at fair value -- 7,440,453
Loans receivable (net of allowance for loan losses -
March 31, $2,038,383; September 30, $2,038,131) 271,029,153 262,774,378
Accrued interest receivable 3,280,710 3,246,714
Federal Home Loan Bank stock - at cost 8,950,200 7,365,200
Office properties and equipment 4,685,709 4,449,921
Deferred income taxes 261,024 306,761
Prepaid expenses and other assets 8,234,805 7,995,955
------------- -------------
TOTAL ASSETS $ 523,653,912 $ 488,553,891
============= =============
Liabilities and Stockholders' Equity
Liabilities:
Deposits $ 325,312,426 $ 309,835,810
Advances from Federal Home Loan Bank 160,703,969 145,134,283
Accrued interest payable 1,083,209 824,672
Advances from borrowers for taxes and insurance 3,187,111 719,591
Accounts payable and accrued expenses 634,821 641,148
------------- -------------
Total liabilities 490,921,536 457,155,504
------------- -------------
Commitments
Stockholders' equity:
Preferred Stock: $.01 par value;
7,500,000 shares authorized; none issued
Common stock: $.01 par value; 15,000,000
shares authorized; issued and outstanding,
March 31, 2001, 2,294,201; September 30, 2000, 2,285,051 22,942 22,851
Paid-in capital in excess of par 7,260,074 7,119,387
Treasury stock, at cost
March 31, 2001, 69,598 shares; September 30, 2000, 49,900 shares (1,008,100) (714,163)
Retained earnings - partially restricted 26,474,675 25,076,313
Accumulated other comprehensive loss (17,215) (106,001)
------------- -------------
Total stockholders' equity 32,732,376 31,398,387
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 523,653,912 $ 488,553,891
============= =============
See notes to unaudited consolidated financial statements.
1
Harleysville Savings Financial Corporation
Consolidated Statements of Income
For the Three Months Ended For the Six Months Ended
March 31, March 31,
------------------------------- ------------------------------
2001 2000 2001 2000
----------- ----------- ----------- -----------
(unaudited) (unaudited)
INTEREST INCOME:
Interest on mortgage loans $ 4,060,612 $ 3,665,955 $ 8,099,004 $ 7,311,301
Interest on mortgage-backed securities 2,530,112 2,101,994 4,883,899 4,164,588
Interest on consumer and other loans 1,087,845 1,108,944 2,174,863 2,213,008
Interest and dividends on investments 1,411,942 1,271,086 2,831,524 2,527,885
----------- ----------- ----------- -----------
Total interest income 9,090,511 8,147,979 17,989,290 16,216,782
----------- ----------- ----------- -----------
Interest Expense:
Interest on deposits 4,166,432 3,627,276 8,278,512 7,238,102
Interest on borrowings 2,491,209 1,900,420 4,919,914 3,785,856
----------- ----------- ----------- -----------
Total interest expense 6,657,641 5,527,696 13,198,426 11,023,958
----------- ----------- ----------- -----------
Net Interest Income 2,432,870 2,620,283 4,790,864 5,192,824
Provision for loan losses -- -- -- --
----------- ----------- ----------- -----------
Net Interest Income after Provision
for Loan Losses 2,432,870 2,620,283 4,790,864 5,192,824
----------- ----------- ----------- -----------
Other Income:
Gain on sales of securities 133,737 -- 133,737 --
Other income 231,173 121,335 455,281 223,805
----------- ----------- ----------- -----------
Total other income 364,910 121,335 589,018 223,805
----------- ----------- ----------- -----------
Other Expenses:
Salaries and employee benefits 757,958 684,311 1,465,244 1,332,555
Occupancy and equipment 280,644 246,537 543,248 496,769
Deposit insurance premiums 15,028 16,014 30,800 60,719
Other 362,741 367,957 738,956 720,747
----------- ----------- ----------- -----------
Total other expenses 1,416,371 1,314,819 2,778,248 2,610,790
----------- ----------- ----------- -----------
Income before Income Taxes 1,381,409 1,426,799 2,601,634 2,805,839
Income tax expense 349,100 439,400 668,900 870,400
----------- ----------- ----------- -----------
Net Income $ 1,032,309 $ 987,399 $ 1,932,734 $ 1,935,439
=========== =========== =========== ===========
Basic Earnings Per Share $ 0.46 $ 0.44 $ 0.86 $ 0.86
=========== =========== =========== ===========
Diluted Earnings Per Share $ 0.46 $ 0.43 $ 0.86 $ 0.85
=========== =========== =========== ===========
Dividends Per Share $ 0.12 $ 0.11 $ 0.24 $ 0.22
=========== =========== =========== ===========
See notes to unaudited consolidated financial statements.
2
Harleysville Savings Financial Corporation
Statements of Stockholders' Equity
Paid-in Retained Accumulated
Capital Earnings- Other Total
Common in Excess Treasury Partially Comprehensive Stockholders'
Stock of Par Stock Restricted Loss Equity
----------------------------------------------------------------------------------------------------------------------------------
Balance at October 1, 2000 $ 22,851 $ 7,119,387 $ (714,163) $25,076,313 $ (106,001) $31,398,387
=========== =========== =========== =========== =========== ===========
Net Income (unaudited) 1,932,734 1,932,734
Issuance of Common Stock: (unaudited) 91 140,687 140,778
Dividends - $.12 per share (unaudited) (534,372) (534,372)
Treasury stock purchased (unaudited) (293,937) (293,937)
Unrealized holding gain on available-for-
sale securities
net of tax (unaudited) 88,786 88,786
----------- ----------- ----------- ----------- ----------- -----------
Balance at March 31, 2001 (unaudited) $ 22,942 $ 7,260,074 $(1,008,100) $26,474,675 $ (17,215) $32,732,376
=========== =========== =========== =========== =========== ===========
See notes to unaudited consolidated financial statements.
3
Harleysville Savings Financial Corporation
Consolidated Statements of Cash Flows
Six Months Ended March 31,
--------------------------
2001 2000
---- ----
(unaudited)
Operating Activities:
Net Income $ 1,932,734 $ 1,935,439
Adjustments to reconcile net income to net cash provided by
(used by) operating activities:
Depreciation 232,834 221,109
Decrease (increase) in deferred income taxes 52,789 (107,664)
Amortization of deferred loan fees (77,776) (65,080)
Gain on sale of mortgage backed securities available for sale 133,737
Changes in assets and liabilities which provided (used) cash:
Decrease in accounts payable and accrued
expenses and income taxes payable (6,327) (45,494)
Decrease in prepaid expenses and other assets (238,850) (188,515)
(Increase) decrease in accrued interest receivable (33,996) 90,199
Increase in accrued interest payable 258,537 281,806
------------ ------------
Net cash provided by operating activities 2,253,682 2,121,800
------------ ------------
Investing Activities:
Purchase of investment securities held to maturity (8,383,745) (5,984,732)
Proceeds from maturities of investment securities held to maturity 16,000,726 1,525,000
Proceeds from sale of mortgage-backed securities available for sale 7,331,055
Purchase of investment securities available for sale (4,469,715) (1,879,410)
Purchase of FHLB stock (1,585,000) (407,500)
Long-term loans originated or acquired (35,113,654) (25,055,092)
Purchase of mortgage-backed securities held to maturity (34,195,264) (6,589,900)
Principal collected on long-term loans & mortgage-backed securities 35,584,477 27,876,136
Purchases of premises and equipment (468,622) (92,177)
------------ ------------
Net cash used in investing activities (25,299,742) (10,607,675)
------------ ------------
Financing Activities:
Net increase (decrease) in demand deposits, NOW accounts
and savings accounts 6,788,392 (5,525,957)
Net increase in certificates of deposit 8,688,224 10,340,451
Cash dividends (534,371) (498,322)
Net increase in FHLB advances 15,569,686 3,696,179
Purchase of treasury stock (293,937) (141,250)
Net proceeds from issuance of stock 140,778 131,446
Net increase in advances from borrowers for taxes & insurance 2,467,520 1,641,982
------------ ------------
Net cash provided by financing activities 32,826,292 9,644,529
------------ ------------
INCREASE IN CASH AND CASH EQUIVALENTS 9,780,232 1,158,654
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 4,080,202 3,955,818
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 13,860,434 $ 5,114,472
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Income taxes $ 523,353 $ 871,500
Interest expense 12,939,889 10,742,152
See notes to unaudited consolidated financial statements.
4
Notes to Unaudited Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation - The accompanying unaudited 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
generally accepted accounting principles. 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, 2001 are not necessarily indicative
of the results which may be expected for the entire fiscal year or any other
period.
Comprehensive Income -Comprehensive income for the three month periods ended
March 31, 2001 and 2000, was approximately $1.1 million and $883,000,
respectively. For the six month periods ended March 31, 2001 and 2000,
comprehensive income was approximately $2.0 million and $1.7 million,
respectively.
2. INVESTMENT SECURITIES HELD TO MATURITY
A comparison of cost and approximate fair value of investment securities, by
maturities, is as follows:
March 31, 2001
-----------------------------------------------------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Approximate
Cost Gain Losses Fair Value
-----------------------------------------------------------------------------------------------------------------------
U.S. Government agencies
Due after 2 years through 5 years $ 6,500,000 $ 9,000 $ 6,509,000
Due after 5 years through 10 years 21,982,567 154,640 $ (20,207) 22,117,000
Due after 10 years through 15 years 11,433,579 94,239 (38,818) 11,489,000
Tax Exempt Obligations
Due after 5 years through 10 years 658,978 8,022 667,000
Due after 10 years through 15 years 19,407,372 681,628 20,089,000
Due after 15 years 3,681,364 160,636 3,842,000
------------ ------------ ------------ ------------
Total Investment Securities $ 63,663,860 $ 1,108,165 $ (59,025) $ 64,713,000
============ ============ ============ ============
September 30, 2000
-----------------------------------------------------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Approximate
Cost Gain Losses Fair Value
-----------------------------------------------------------------------------------------------------------------------
U.S. Government agencies
Due after 3 years through 5 years $ 16,500,000 $ (386,000) $ 16,114,000
Due after 5 years through 10 years 21,980,911 $ 38,090 (971,001) 21,048,000
Due after 10 years through 15 years 17,418,624 43,263 (703,887) 16,758,000
Tax Exempt Obligations
Due after 15 years 15,381,306 232,610 (70,916) 15,543,000
------------ ------------ ------------ ------------
Total Investment Securities $ 71,280,841 $ 313,963 $ (2,131,804) $ 69,463,000
============ ============ ============ ============
U.S. Government Agencies include structured note securities with periodic
interest rate adjustments and are called periodically by the issuing agency.
These structured notes were comprised of step-up bonds with par values of
$999,000 at March 31, 2001 and September 30, 2000.
The Bank has the positive intent and the ability to hold these securities to
maturity. At March 31, 2001, neither a disposal, nor conditions that could lead
to a decision not to hold these securities to maturity were reasonably foreseen.
5
3. INVESTMENT SECURITIES AVAILABLE-FOR-SALE
A comparison of cost and approximate fair value of investment securities is as
follows:
March 31, 2001
----------------------------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Approximate
Cost Gain Losses Fair Value
----------------------------------------------------------------------------------------------
ARM Mutual Funds $7,823,869 $ -- $ (26,084) $7,797,785
---------- ------- ---------- ----------
Total Investment Securities $7,823,869 $ -- $ (26,084) $7,797,785
========== ======= ========== ==========
September 30, 2000
----------------------------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Approximate
Cost Gain Losses Fair Value
----------------------------------------------------------------------------------------------
ARM Mutual Funds $3,354,154 $ -- $ (44,418) $3,309,736
---------- ------- ---------- ----------
Total Investment Securities $3,354,154 $ -- $ (44,418) $3,309,736
========== ======= ========== ==========
4. MORTGAGE-BACKED SECURITIES HELD TO MATURITY
A comparison of cost and approximate fair value of mortgage-backed securities is
as follows:
March 31, 2001
--------------------------------------------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Approximate
Cost Gain Losses Fair Value
--------------------------------------------------------------------------------------------------------------
Collateralized mortgage obligations $ 46,508,490 $ 421,807 $ (244,297) $ 46,686,000
FHLMC pass-through certificates 11,770,169 -- 261,831 12,032,000
FNMA pass-through certificates 23,346,292 133,343 (27,635) 23,452,000
GNMA pass-through certificates 60,265,281 573,447 (13,728) 60,825,000
------------ ------------ ------------ ------------
Total Mortgage-backed Securities $141,890,232 $ 1,128,597 $ (23,829) $142,995,000
============ ============ ============ ============
September 30, 2000
--------------------------------------------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Approximate
Cost Gain Losses Fair Value
--------------------------------------------------------------------------------------------------------------
Collateralized mortgage obligations $ 52,482,502 $ 138,918 $ (996,420) $ 51,625,000
FHLMC pass-through certificates 9,935,756 26,355 (110,111) 9,852,000
FNMA pass-through certificates 21,402,545 33,968 (565,513) 20,871,000
GNMA pass-through certificates 32,482,927 1,654 (650,581) 31,834,000
------------ ------------ ------------ ------------
Total Mortgage-backed Securities $116,303,730 $ 200,895 $ (2,322,625) $114,182,000
============ ============ ============ ============
5. MORTGAGE-BACKED SECURITIES AVAILABLE-FOR-SALE
A comparison of cost and approximate fair value of mortgage-backed securities
is as follows:
September 30, 2000
--------------------------------------------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Approximate
Cost Gain Losses Fair Value
--------------------------------------------------------------------------------------------------------------
FHLMC pass-through certificates $ 2,835,053 $ -- $ (93,580) $ 2,741,473
GNMA pass-through certificates 4,721,589 -- (22,609) 4,698,980
----------- ----------- ----------- -----------
Total Mortgage-backed Securities $ 7,556,642 $ -- $ (116,189) $ 7,440,453
=========== =========== =========== ===========
6
6. LOANS RECEIVABLE
Loans receivable consist of the following:
March 31, 2001 September 30, 2000
-------------- ------------------
Residential Mortgages $ 214,664,471 $ 207,928,146
Commercial Mortgages 796,331 807,156
Construction 8,345,881 6,579,523
Education 3,229,196 1,414,011
Savings Account 580,660 618,884
Home Equity 44,330,376 44,727,366
Automobile and other 462,429 639,693
Line of Credit 8,907,286 7,888,612
------------- -------------
Total 281,316,630 270,603,391
Undisbursed portion of loans in process (6,222,954) (3,844,612)
Deferred loan fees (2,026,140) (1,946,270)
Allowance for loan losses (2,038,383) (2,038,131)
------------- -------------
Loans receivable - net $ 271,029,153 $ 262,774,378
============= =============
The total amount of loans being serviced for the benefit of others was
approximately $6 million and $6.6 million at March 31, 2001 and September 30,
2000, respectively.
The following schedule summarizes the changes in the allowance for loan losses:
Six Months Ended March 31,
--------------------------
2001 2000
----------- -----------
Balance, beginning of period $ 2,038,131 $ 2,040,000
Provision for loan losses -- --
Amounts charged off -- (1,932)
Loan recoveries 252 --
----------- -----------
Balance, end of period $ 2,038,383 $ 2,038,068
=========== ===========
7. OFFICE PROPERTIES AND EQUIPMENT
Office properties and equipment are summarized by major classification as
follows:
March 31, 2001 September 30, 2000
-------------- ------------------
Land and buildings $ 4,040,126 $ 4,176,671
Construction in progress 540,387
Furniture, fixtures and equipment 2,962,841 2,898,061
Automobiles 56,164 56,164
----------- -----------
Total 7,599,518 7,130,896
Less accumulated depreciation (2,913,809) (2,680,975)
----------- -----------
Net $ 4,685,709 $ 4,449,921
=========== ===========
8. DEPOSITS
Deposits are summarized as follows:
March 31, 2001 September 30, 2000
-------------- ------------------
NOW accounts $ 12,109,323 $ 10,748,610
Checking accounts 6,646,521 5,780,503
Money Market Demand accounts 54,583,711 49,928,562
Passbook and Club accounts 2,302,389 2,395,877
Certificate accounts 249,670,482 240,982,258
------------ ------------
Total deposits $325,312,426 $309,835,810
============ ============
The aggregate amount of certificate accounts in denominations of more than
$100,000 at March 31, 2001 amounted to approximately $15.2 million.
7
9. COMMITMENTS
At March 31, 2001, the following commitments were outstanding:
Origination of fixed-rate mortgage loans $ 7,352,279
Origination of adjustable-rate mortgage loans 791,250
Unused line of credit loans 12,152,932
Loans in process 6,222,954
----------
Total $26,519,415
===========
10. DIVIDEND
On April 18, 2001, the Board of Directors declared a cash dividend of $.12 per
share payable on May 23, 2001 to the stockholders' of record at the close of
business on May 9, 2001.
11. EARNINGS PER SHARE
The calculations of earnings per share were based on the number of common stock
and common stock equivalents outstanding for the six months ended March 31, 2001
and 2000.
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,
------------------------------ ------------------------------
2001 2000 2001 2000
--------- --------- --------- ---------
Basic 2,222,695 2,268,324 2,226,339 2,238,379
Diluted 2,251,235 2,290,210 2,252,742 2,300,738
8
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.
Changes in Financial Position for the Six Month Period Ended March 31, 2001
---------------------------------------------------------------------------
Total assets at March 31, 2001 were $523.7 million, an increase of $35.1 million
or 7.18% for the six month period. This increase was primarily the result of an
increase in mortgage-backed securities, loans receivable and cash and cash
equivalents of approximately $25.6 million, $8.3 million and $9.8million
respectively. The remainder was due to an increase in investment securities
available for sale and Federal Home Loan Bank stock of approximately $4.5
million and $1.6 million, respectively. These increases were offset by decreases
in investment securities and mortgage-backed securities available for sale of
$7.6 and $7.4 million, respectively.
During the six month period ended March 31, 2001, total deposits increased by
$15.5 million to $325.3 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 $15.6 million, which
was used to fund the purchase of investment securities and fund loans.
Comparisons of Results of Operations for the Three and Six Month Period Ended
-----------------------------------------------------------------------------
March 31, 2001 with the Three and Six Month Period Ended March 31, 2000.
------------------------------------------------------------------------
Net Interest Income
-------------------
The decrease in the net interest income for the three and six month periods
ended March 31, 2001 when compared to the same periods in 2000 can be attributed
to the decrease in the interest rate spread. The interest rate spread decreased
from 1.95% for the three-month period ended March 31, 2000 to 1.65% for the
comparable period ended March 31, 2001. For the six-month period ended March 31,
2000, the interest rate spread decreased from 1.95% to 1.66% for the comparable
period ended March 31, 2001.
Total interest income was $9.1 million for the three-month period ended March
31, 2001 compared to $8.1 million for the comparable period in 2000. For the six
month period ended March 31, 2001, total interest income was $18.0 million
compared to $16.2 million for the comparable period in 2000. The increase is the
result of the increased average balance of interest-earning assets and increased
average yield for the interest-earning assets to 7.20% and 7.27% for the three
and six-month period ended March 31, 2001, respectively from 7.09% and 7.08% for
the comparable periods in 2000.
Total interest expense increased to $6.7 million for the three-month period
ended March 31, 2001 from $5.5 million for the comparable period in 2000. For
the six-month period ended March 31, 2001, total interest expense increased to
$13.2 million from $11.0 million for the comparable period in 2000. These
increases occurred as a result of an increase in the average interest-bearing
liabilities from $430.6 million and $429.3 million for the three and six month
periods ended March 31, 2000, respectively, to $479.5 million and $471.1 million
for the comparable period ended March 31, 2001.
9
Other Income
------------
Other income increased to $365,000 for the three-month period ended March 31,
2001 from $121,000 for the comparable period in 2000. For the six-month period
ended March 31, 2001, other income increased to $589,000 from $224,000 for the
comparable period in 2000. The three and six-month increase is due to an
increase in the fee generating services offered by the Company and additional
income from Bank Owned Life Insurance.
Other Expenses
--------------
During the quarter ended March 31, 2001, other expenses increased by $101,000 or
7.7% to $1.4 million when compared to the same period in 2000. For the six month
period ended March 31, 2001, other expenses increased by $167,000 or 6.4%
compared to the comparable period in 2000. Management believes these are normal
increases in the cost of operations after considering the effects of inflation
and the impact of the growth in the assets of the Company when compared to the
same periods in 2000. The annualized ratio of expenses to average assets for the
three and six month periods ended March 31, 2001 was 1.09%.
Income Taxes
------------
The Company made provisions for income taxes of $349,000 and $669,000 for the
three and six-month periods ended March 31, 2001, respectively, compared to
$439,000 and $870,000 for the comparable periods in 2000. These provisions are
based on the levels of taxable income.
Liquidity and Capital Resources
The Company's net income for the quarter ended March 31, 2001 of $1,032,000
increased stockholder's equity to $32.7 million or 6.3% of total assets. This
amount is well in excess of the Company's minimum regulatory capital
requirements as illustrated below:
(in thousands)
Leveraged Risk-based
----------------- -----------------
Actual regulatory capital $32,733 6.3% $34,771 15.0%
Minimum required regulatory capital 20,916 4.0% 18,513 8.0%
------- --- ------- ----
Excess capital $11,817 2.3% $16,258 7.0%
The liquidity of the Company's operations, measured by the ratio of the cash and
securities balances to total assets, equaled 43.4% at March 31, 2001 compared to
41.4% at September 30, 2000.
As of March 31, 2001, the Company had $26.5 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 and net new deposits. In addition,
the amount of certificate accounts which are scheduled to mature during the 12
months ending March 31, 2002 is $150 million. Management expects that a
substantial portion of these maturing deposits will remain as accounts in the
Company.
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.
10
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 Executive 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, 2001, 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 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 following table does not necessarily indicate the impact of general interest
rate movements on Harleysville Savings' 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 $ 45,175 $ 35,690 $ 26,436 $ 106,678 $ 213,979
Mortgage-backed securities 46,320 23,114 13,549 58,907 141,890
Consumer and other loans 27,663 16,185 9,204 6,098 59,150
Investment securities and other investments 61,504 7,433 -- 32,557 101,494
--------- --------- --------- --------- ---------
Total interest-earning assets 180,662 82,422 49,189 204,240 516,513
--------- --------- --------- --------- ---------
Interest-bearing liabilities
Passbook and Club accounts -- -- -- 2,302 2,302
NOW accounts -- -- -- 18,756 18,756
Money Market Deposit accounts 7,262 -- -- 47,321 54,583
Certificate accounts 150,045 92,065 7,561 -- 249,671
Borrowed money 49,471 54,311 19,905 37,017 160,704
--------- --------- --------- --------- ---------
Total interest-bearing liabilities 206,778 146,376 27,466 105,396 486,016
--------- --------- ---------
Repricing GAP during the period $ (26,116) $ (63,954) $ 21,723 $ 98,844 $ 30,497
========= ========= ========= ========= =========
Cumulative GAP $ (26,116) $ (90,070) $ (68,347) $ 30,497
========= ========= ========= =========
Ratio of GAP during the period to total assets -5.06% -12.38% 4.21% 19.14%
========= ========= ========= =========
Ratio of cumulative GAP to total assets -5.06% -17.44% -13.23% 5.90%
========= ========= ========= =========
11
Part II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
(a) The annual meeting of Stockholders was held on
January 24, 2001.
(c) There were 2,231,662 shares
of Common Stock of the
Company eligible to be
voted at the Annual Meeting
and 1,845,405 shares were
represented at the meeting
by the holders thereof,
which constituted a quorum.
The items voted upon at the
Annual Meeting and the vote
for each proposal were as
follows:
1. Election of directors for a three-year term:
FOR WITHHELD
--------- --------
Sanford L. Alderfer 1,831,456 13,949
Mark R. Cummins 1,843,471 1,934
Ronald B. Geib 1,843,471 1,934
Name of each director whose term of office
continued:
George W. Meschter
David J. Friesen
Paul W. Barndt
Phillip A. Clemens
Edward J. Molnar
2. Proposal to ratify the appointment by the
board of Deloitte & Touche, LLP as the Bank's
independent auditors for the year ending
September 30, 2001
FOR AGAINST ABSTAIN
--- ------- -------
1,843,299 - 2,106
3. Proposal to adopt Harleysville Savings
Financial Corporation 2000 Stock Option Plan.
FOR AGAINST ABSTAIN
--- ------- -------
1,780,596 43,264 21,545
Each of the proposals were adopted by the
stockholders of the Bank.
Item 1-5. Not applicable.
---------------
Item 6. Exhibits and Reports on Form 8-K
---------------------------------
None
12
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the Bank
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
HARLEYSVILLE SAVINGS FINANCIAL CORPORATION
Date: May 8, 2001 By: /s/ Edward J. Molnar
---------------------------------------
Edward J. Molnar
President and Chief Executive Officer
Date: May 8, 2001 By: /s/ Brendan J. McGill
---------------------------------------
Brendan J. McGill
Senior Vice President
Treasurer and Chief Financial Officer
13