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 December 31, 2000
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission file number 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, 2,287,301 as of February 9, 2001
Index
PAGE(S)
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Part I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Financial Condition as of
December 31, 2000 (unaudited) and September 30, 2000 1
Consolidated Statements of Income for the Three
Months Ended December 31, 2000 and 1999 (unaudited) 2
Consolidated Statements of Stockholders' Equity for the Three
Months Ended December 31, 2000 (unaudited) 3
Consolidated Statements of Cash Flows for the Three Months
Ended December 31, 2000 and 1999 (unaudited) 4
Notes to (unaudited) 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
December 31, September 30,
2000 2000
--------------------- ----------------------
(unaudited)
Assets
Cash and amounts due from depository institutions $ 1,126,808 $ 1,224,634
Interest bearing deposits in other banks 5,110,530 2,855,568
--------------------- ----------------------
Total cash and cash equivalents 6,237,338 4,080,202
Investment securities held to maturity (fair value -
December 31, $73,751,000; September 30, $69,463,000) 73,591,200 71,280,841
Investment securities available-for-sale at fair value 3,723,991 3,309,736
Mortgage-backed securities held to maturity (fair value -
December 31, $132,641,000; September 30, $114,182,000) 133,038,061 116,303,730
Mortgage-backed securities available-for-sale at fair value 7,488,573 7,440,453
Loans receivable (net of allowance for loan losses -
December 31, $2,038,131; September 30, $2,038,131) 264,502,419 262,774,378
Accrued interest receivable 3,371,793 3,246,714
Federal Home Loan Bank stock - at cost 8,268,400 7,365,200
Office properties and equipment 4,463,390 4,449,921
Deferred income taxes 264,444 306,761
Prepaid expenses and other assets 7,596,838 7,995,955
--------------------- ----------------------
TOTAL ASSETS $ 512,546,447 $ 488,553,891
===================== ======================
Liabilities and Stockholders' Equity
Liabilities:
Deposits $ 312,835,076 $ 309,835,810
Advances from Federal Home Loan Bank 163,797,717 145,134,283
Accrued interest payable 1,130,205 824,672
Advances from borrowers for taxes and insurance 2,253,169 719,591
Accounts payable and accrued expenses 568,911 641,148
--------------------- ----------------------
Total liabilities 480,585,078 457,155,504
--------------------- ----------------------
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,
December 31, 2000, 2,285,801; September 30, 2000, 2,285,051 22,858 22,851
Paid-in capital in excess of par 7,126,636 7,119,387
Treasury stock, at cost (66,659 shares and 49,900 respectively) (945,460) (714,163)
Retained earnings - partially restricted 25,708,902 25,076,313
Accumulated other comprehensive gain (loss) 48,433 (106,001)
--------------------- ----------------------
Total stockholders' equity 31,961,369 31,398,387
--------------------- ----------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 512,546,447 $ 488,553,891
===================== ======================
See notes to unaudited consolidated financial statements.
Page 1
Harleysville Savings Financial Corporation
Consolidated Statements of Income
For the Three Months Ended
December 31,
----------------------------------
2000 1999
---- ----
(unaudited)
INTEREST INCOME:
Interest on mortgage loans $ 4,038,391 $ 3,645,346
Interest on mortgage-backed securities 2,353,786 2,062,594
Interest on consumer and other loans 1,087,018 1,104,063
Interest and dividends on investments 1,419,582 1,256,799
---------- -----------
Total interest income 8,898,777 8,068,802
---------- -----------
Interest Expense:
Interest on deposits 4,112,080 3,610,825
Interest on borrowings 2,428,705 1,885,437
---------- -----------
Total interest expense 6,540,785 5,496,262
---------- -----------
Net Interest Income 2,357,992 2,572,540
Provision for loan losses - -
---------- -----------
Net Interest Income after Provision
for Loan Losses 2,357,992 2,572,540
---------- -----------
Other Income:
Other income 224,108 102,470
---------- -----------
Total other income 224,108 102,470
---------- -----------
Other Expenses:
Salaries and employee benefits 707,287 648,245
Occupancy and equipment 262,604 250,231
Deposit insurance premiums 15,772 44,705
Other 376,213 352,789
---------- -----------
Total other expenses 1,361,876 1,295,970
---------- -----------
Income before Income Taxes 1,220,224 1,379,040
Income tax expense 319,800 431,000
---------- -----------
Net Income $ 900,424 $ 948,040
========== ===========
Basic Earnings Per Share $ 0.40 $ 0.42
========== ===========
Diluted Earnings Per Share $ 0.40 $ 0.42
========== ===========
Dividends Per Share $ 0.12 $ 0.11
========== ===========
See notes to unaudited consolidated financial statements.
Page 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)/Gain Equity
------------------------------------------------------------------------------------------------------------------ ---------------
Balance at October 1, 2000 $ 22,851 $ 7,119,387 $ (714,163) $ 25,076,313 $ (106,001) $ 31,398,387
============ ============== ============ ============== ============= ===============
Net Income (unaudited) 900,424 900,424
Issuance of Common Stock: (unaudited) 7 7,249 7,256
Dividends - $.12 per share (unaudited) (267,835) (267,835)
Treasury stock purchased
(66,659 shares) (unaudited) (231,297) (231,297)
Unrealized holding gain on available-for-
sale securities net of tax (unaudited) 154,434 154,434
------------ -------------- ------------ -------------- ------------- ---------------
Balance at December 31, 2000 (unaudited) $ 22,858 $ 7,126,636 $ (945,460) $ 25,708,902 $ 48,433 $ 31,961,369
============ ============== ============ ============== ============= ===============
See notes to unaudited consolidated financial statements.
Page 3
Harleysville Savings Financial Corporation
Consolidated Statements of Cash Flows
Three Months Ended December 31,
2000 1999
---- ----
Operating Activities: (unaudited)
Net Income $ 900,424 $ 948,040
Adjustments to reconcile net income to net cash provided by
(used by) operating activities:
Depreciation 116,559 107,089
Decrease (increase) in deferred income taxes 49,369 (83,038)
Amortization of deferred loan fees (47,182) (37,990)
Changes in assets and liabilities which provided (used) cash:
(Decrease) increase in accounts payable and accrued
expenses and income taxes payable (72,237) 291,362
Decrease in prepaid expenses and other assets 399,117 134,143
(Increase) decrease in accrued interest receivable (125,079) 7,339
Increase in accrued interest payable 305,533 149,109
----------- -----------
Net cash provided by operating activities 1,526,504 1,516,054
----------- -----------
Investing Activities:
Purchase of investment securities held to maturity (2,310,359) (3,435,032)
Proceeds from maturities of investment securities held to maturity 995,829
Purchase of investment securities available for sale (404,230) (1,879,410)
Purchase of FHLB stock (903,200) (407,500)
Long-term loans originated or acquired (16,692,876) (9,475,757)
Purchase of mortgage-backed securities held to maturity (20,206,247) (3,589,499)
Principal collected on long-term loans & mortgage-backed securities 18,573,210 13,076,125
Purchases of premises and equipment (130,068) (20,150)
------------ ------------
Net cash used in investing activities (22,073,770) (4,735,394)
------------ ------------
Financing Activities:
Net increase (decrease) increase in demand deposits, NOW accounts
and savings accounts 3,473,707 (4,417,877)
Net (decrease) increase in certificates of deposit (474,441) 4,749,482
Cash dividends (267,835) (248,683)
Net increase in FHLB advances 18,663,434 7,955,541
Purchase of treasury stock (231,297) -
Net proceeds from issuance of stock 7,256 53,935
Net increase in advances from borrowers for taxes & insurance 1,533,578 1,241,581
------------ ------------
Net cash provided by financing activities 22,704,402 9,333,979
------------ ------------
INCREASE IN CASH AND CASH EQUIVALENTS 2,157,136 6,114,639
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 4,080,202 3,955,818
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 6,237,338 $10,070,457
============ ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Income taxes $ 3,028 $ 6,500
Interest expense 6,235,252 5,347,153
See notes to unaudited consolidated financial statements.
Page 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 months ended December 31, 2000 are not necessarily indicative of
the results which may be expected for the entire fiscal year.
Comprehensive Income - Comprehensive income for the three month periods ended
December 31, 2000 and 1999, was approximately $1,054,858 and $867,000,
respectively.
2. INVESTMENT SECURITIES HELD TO MATURITY
A comparison of cost and approximate fair value of investment securities, by
maturities, is as follows:
December 31, 2000
-----------------------------------------------------------------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Approximate
Cost Gain Losses Fair Value
-----------------------------------------------------------------------------------------------------------------------------------
U.S. Government agencies
Due after 2 years through 5 years $ 16,500,000 $ (107,000) $ 16,393,000
Due after 5 years through 10 years 21,981,696 $ 108,020 (348,716) 21,741,000
Due after 10 years through 15 years 17,426,118 67,044 (211,162) 17,282,000
Tax Exempt Obligations
Due after 5 years through 10 years 828,750 10,250 839,000
Due after 10 years through 15 years 15,340,267 532,565 (4,832) 15,868,000
Due after 15 years 1,514,369 - 113,631 1,628,000
-------------------- ------------------ ------------------ -------------------
Total Investment Securities $ 73,591,200 $ 717,879 $ (558,079) $ 73,751,000
==================== ================== ================== ===================
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 December 31, 2000 and September 30, 2000.
The Bank has the positive intent and the ability to hold these securities to
maturity. At December 31, 2000, neither a disposal, nor conditions that could
lead to a decision not to hold these securities to maturity were reasonably
foreseen.
Page 5
3. INVESTMENT SECURITIES AVAILABLE-FOR-SALE
A comparison of cost and approximate fair value of investment securities is as
follows:
December 31, 2000
----------------------------------------------------------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Approximate
Cost Gain Losses Fair Value
----------------------------------------------------------------------------------------------------------------------------
Mutual Funds $ 3,758,383 $ - $ (34,392) $ 3,723,991
------------------ ------------------ ----------------- ------------------
Total Investment Securities $ 3,758,383 $ - $ (34,392) $ 3,723,991
================== ================== ================= ==================
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:
December 31, 2000
----------------------------------------------------------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Approximate
Cost Gain Losses Fair Value
----------------------------------------------------------------------------------------------------------------------------
Collateralized mortgage obligations $47,388,860 $ 141,866 $ (510,726) $47,020,000
FHLMC pass-through certificates 11,298,100 104,457 (15,557) 11,387,000
FNMA pass-through certificates 23,224,121 65,770 (203,891) 23,086,000
GNMA pass-through certificates 51,126,980 231,995 (210,975) 51,148,000
------------------ ------------------ ----------------- ------------------
Total Mortgage-backed Securities $133,038,061 $ 544,088 $ (941,149) $132,641,000
================== ================== ================= ==================
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:
December 31, 2000
----------------------------------------------------------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Approximate
Cost Gain Losses Fair Value
----------------------------------------------------------------------------------------------------------------------------
FHLMC pass-through certificates $ 2,774,113 $ 18,296 $ - $ 2,755,817
GNMA pass-through certificates 4,643,923 88,833 4,732,756
------------------ ------------------ ----------------- ------------------
Total Mortgage-backed Securities $ 7,418,036 $ 88,833 $ - $ 7,488,573
================== ================== ================= ==================
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
================== ================== ================= ==================
Page 6
6. LOANS RECEIVABLE
Loans receivable consist of the following:
December 31, 2000 September 30, 2000
----------------- ------------------
Residential Mortgages $ 209,606,386 $ 207,928,146
Commercial Mortgages 801,743 807,156
Construction 8,564,104 6,579,523
Education 1,667,201 1,414,011
Savings Account 590,430 618,884
Home Equity 43,902,042 44,727,366
Automobile and other 565,003 639,693
Line of Credit 8,293,288 7,888,612
-------------- --------------
Total 273,990,197 270,603,391
Undisbursed portion of loans in process (5,459,238) (3,844,612)
Deferred loan fees (1,990,409) (1,946,270)
Allowance for loan losses (2,038,131) (2,038,131)
-------------- --------------
Loans receivable - net $ 264,502,419 $ 262,774,378
============== ==============
The total amount of loans being serviced for the benefit of others was
approximately $6.3 million and $6.6 million at December 31, 2000 and September
30, 2000, respectively.
The following schedule summarizes the changes in the allowance for loan losses:
Three Months Ended December 31,
-------------------------------
2000 1999
---- ----
Balance, beginning of period $ 2,038,131 $ 2,040,000
Provision for loan losses - -
Amounts charged off, net - -
- -
Balance, end of period $ 2,038,131 $ 2,040,000
============ ===========
7. OFFICE PROPERTIES AND EQUIPMENT
Office properties and equipment are summarized by major classification as
follows:
December 31, 2000 September 30, 2000
----------------- ------------------
Land and buildings $ 4,152,207 $ 4,176,671
Construction in progress 109,192 -
Furniture, fixtures and equipment 2,943,401 2,898,061
Automobiles 56,164 56,164
----------- -----------
Total 7,260,964 7,130,896
Less accumulated depreciation (2,797,574) (2,680,975)
------------ -----------
Net $ 4,463,390 $ 4,449,921
============ ===========
8. DEPOSITS
Deposits are summarized as follows:
December 31, 2000 September 30, 2000
----------------- ------------------
NOW accounts $ 11,417,301 $ 10,748,610
Checking accounts 6,689,743 5,780,503
Money Market Demand accounts 52,081,574 49,928,562
Passbook and Club accounts 2,138,641 2,395,877
Certificate accounts 240,507,817 240,982,258
------------ ------------
Total deposits $312,835,076 $309,835,810
============ ============
The aggregate amount of certificate accounts in denominations of more than
$100,000 at December 31, 2000 amounted to approximately $14.7 million.
Page 7
9. COMMITMENTS
At December 31, 2000, the following commitments were outstanding:
Origination of fixed-rate mortgage loans $ 1,076,936
Origination of adjustable-rate mortgage loans 1,535,740
Unused line of credit loans 3,469,168
Loans in process 5,459,238
-----------
Total $11,541,082
===========
10. DIVIDEND
On January 24, 2001, the Board of Directors declared a cash dividend of $.12 per
share payable on February 21, 2001 to the stockholders' of record at the close
of business on February 7, 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 three months ended December 31,
2000 and 1999.
The following average shares were used for the computation of earnings per
share:
For the Three Months Ended
December 31,
--------------------------
2000 1999
---- ----
Basic 2,252,308 2,260,080
Diluted 2,275,764 2,284,072
Page 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 Three Month Period Ended December 31, 2000
Total assets at December 31, 2000 were $512.5 million, an increase of $24.0
million or 4.9% for the three
month period. This increase was primarily the result of an increase in
mortgage-backed and investment securities of approximately $16.7 and $2.3
million respectively. The remainder was due to an increase in loans and Federal
Home Loan Bank stock of approximately $1.7 and $1.0 million respectively.
During the three month period ended December 31, 2000, total deposits increased
by $3.0 million to $312.8 million. Advances from borrowers for taxes and
insurance also increased by $1.5 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 $18.7
million, which was used to fund the purchase of investment securities and fund
loans.
Comparisons of Results of Operations for the Three Month Period Ended December
31, 2000 with the Three Month Period Ended December 31, 1999.
Net Interest Income
The decrease in the net interest income for the three month period ended
December 31, 2000 when compared to the same period in 1999 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 December 31, 1999 to 1.67% for the
comparable period ended December 31, 2000.
Total interest income was $8.9 million for the three month period ended December
31, 2000 compared to $8.1 million for the comparable period in 1999. The
increase in the average balance of interest-earning assets was enhanced by an
increase in the average yield for the interest-earning assets to 7.33% for the
three month period ended December 31, 2000 from 7.07% for the comparable period
in 1999.
Total interest expense increased to $6.5 million for the three month period
ended December 31, 2000 from $5.5 million for the comparable period in 1999.
This increase occurred as a result of an increase in the average
interest-bearing liabilities from $428.5 million for the three month period
ended December 31, 1999 to $462.4 million for the comparable period ended
December 31, 2000 while the average cost for the respective periods increased
from 5.13% for the three month period ended December 31, 1999 to 5.66% for the
comparable period ended December 31, 2000.
page 9
Other Income
Other income increased to $224,000 for the three month period ended December 31,
2000 from $102,000 for the comparable period in 1999. The increase is due to
additional income from Bank Owned Life Insurance.
Other Expenses
During the quarter ended December 31, 2000, other expenses increased by $66,000
or 5.1% to $1.4 million. Management believes these are normal increases in the
cost of operations after considering the effects of inflation and the impact of
the 8.9% growth in the assets of the Company when compared to the same period in
1999. The annualized ratio of expenses to average assets for the three month
period ended December 31, 2000 was 1.11%.
Income Taxes
The Company made provisions for income taxes of $320,000 for the three month
period ended December 31, 2000 compared to $431,000 for the comparable period in
1999. These provisions are based on the lower level of taxable income due to the
purchase of tax-free investments.
Liquidity and Capital Resources
The Company's net income for the quarter ended December 31, 2000 of $900,000
increased stockholder's equity to $32.0 million or 6.2% 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 $31,985 6.2% $34,023 15.3%
Minimum required regulatory capital 20,501 4.0% 17,793 8.0%
------- ---- ------- -----
Excess capital $11,389 2.2% $16,230 7.3%
The liquidity of the Company's operations, measured by the ratio of the cash and
securities balances to total assets, equaled 43.7% at December 31, 2000 compared
to 41.4% at September 30, 2000.
As of December 31, 2000, the Company had $11.5 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 December 31, 2001, is $150.7 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.
page 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 December 31, 2000, 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 $ 43,152 $ 35,701 $ 25,797 $ 104,892 $ 209,542
Mortgage-backed securities 47,082 22,944 13,769 56,732 140,527
Consumer and other loans 25,338 16,052 9,122 6,039 56,551
Investment securities and other investments 20,371 6,500 10,000 62,074 98,945
------------ ------------- ------------- --------------- --------------
Total interest-earning assets 135,943 81,197 58,688 229,737 505,565
------------ ------------- ------------- --------------- --------------
Interest-bearing liabilities
Passbook and Club accounts - - - 2,139 2,139
NOW accounts - - - 18,107 18,107
Money Market Deposit accounts - - - 24,804 24,804
Choice Savings 6,820 - - 20,459 27,279
Certificate accounts 150,509 83,418 6,580 - 240,507
Borrowed money 57,952 61,629 21,916 22,301 163,798
------------ ------------- ------------- --------------- --------------
Total interest-bearing liabilities 215,281 145,047 28,496 87,810 476,634
------------ ------------- ------------- --------------- --------------
Repricing GAP during the period $ (79,338) $ (63,850) $ 30,192 $ 141,927 $ 28,931
============ ============= ============= =============== ==============
Cumulative GAP $ (79,338) $ (143,188) $ (112,996) $ 28,931
============ ============= ============= ===============
Ratio of GAP during the period to total assets -15.69% -12.63% 5.97% 28.07%
============ ============= ============= ===============
Ratio of cumulative GAP to total assets -15.69% -28.32% -22.35% 5.72%
============ ============= ============= ===============
page 11
Part II OTHER INFORMATION
Item 1-5. Not applicable.
Item 6. Exhibits and Reports on Form 8-K
None
page 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: February 12, 2001 By: /s/ Edward J. Molnar
-----------------------------------------
Edward J. Molnar
President and Chief Executive Officer
Date: February 12, 2001 By: /s/ Brendan J. McGill
-----------------------------------------
Brendan J. McGill
Senior Vice President
Treasurer and Chief Financial Officer