Add
ONFC to Portfolio
Set Alert
Email to a
Friend
| |||
|
|
Quotes & Info
|
| ONFC > SEC Filings for ONFC > Form 10-Q on 13-Nov-2009 | All Recent SEC Filings |
13-Nov-2009
Quarterly Report
This section presents Management's discussion and analysis of and changes to the Company's consolidated financial results of operations and condition and should be read in conjunction with the Company's financial statements and notes thereto included herein.
When used in this quarterly report the words or phrases "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project" or similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties, including, among other things, changes in economic conditions in the Company's market area, changes in policies by regulatory agencies, fluctuations in interest rates, demand for loans in the Company's market area and competition, that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The Company wishes to advise readers that the factors listed above could affect the Company's financial performance and could cause the Company's actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements.
The Company does not undertake, and specifically declines any obligation, to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.
GENERAL
Oneida Financial Corp. is the parent company of Oneida Savings Bank ("the Bank"). The Company conducts no business other than holding the common stock of the Bank and general investment activities resulting from the capital it holds. Consequently, the net income of the Company is primarily derived from its investment in the Bank. The Bank's results of operations are primarily dependent on its net interest income, which is the difference between interest income earned on its investments in loans, investment securities and mortgage-backed securities and its cost of funds consisting of interest paid on deposits and borrowings. The Bank's net income is also affected by its provision for loan losses, as well as by the amount of other income, including income from fees and service charges, revenue derived from the insurance agency and employee benefit services provided by subsidiaries of the Bank, net gains and losses on sales of investments and loans, and operating expenses such as employee compensation and benefits, occupancy and equipment costs and income taxes. Earnings of the Bank are also affected significantly by general economic and competitive conditions, particularly changes in market interest rates, which tend to be highly cyclical, and government policies and actions of regulatory authorities, which events are beyond the control of the Bank. The Company has four primary business segments; it's banking franchise, insurance activities, benefit consulting activities and risk management activities. However, only the banking franchise is deemed material to the Bank's financial condition and results of operations. Consequently, segment disclosures are not presented in the Management's Discussion and Analysis. At December 31, 2008 and September 30, 2009 the Company had 7,745,660 and 7,790,352 respectively of shares outstanding of which 4,309,750 were held by Oneida Financial MHC, the Company's mutual holding company parent.
RECENT DEVELOPMENTS
The Company announced a semi-annual cash dividend as of July 28, 2009 of $0.24 per share which was paid to its shareholders on August 11, 2009. Oneida Financial MHC waived its receipt of dividends.
As an FDIC-insured institution, the Bank is required to pay deposit insurance premiums to the FDIC. Because the FDIC's deposit insurance fund fell below prescribed levels in 2008, the FDIC has announced increased premiums for all insured depository institutions, including the Bank, in order to begin recapitalizing the fund. Insurance assessments range from 0.12% to 0.50% of total deposits for the first calendar quarter 2009 assessment. Effective April 1, 2009, insurance assessments were increased from 0.07% to 0.78%, depending on an institution's risk classification and other factors. In addition, on May 22, 2009 the FDIC adopted a final rule that imposed a 5 basis point special assessment on insured depository institutions to be paid on September 30, 2009, based on assets less tier 1 capital as of September 30, 2009. These changes have resulted, and will continue to result, in increased deposit insurance expense for the Bank in 2009. These increases will be reflected in other expenses in the Bank's income statement in the period of enactment. FDIC insurance premium expense was $878,000 for the nine months ended September 30, 2009 as compared with $41,000 for the nine months ended September 30, 2008.
On September 29, 2009, the Federal Deposit Insurance Corporation issued a proposed rule pursuant to which all insured depository institutions would be required to prepay their estimated assessments for the fourth quarter of 2009, and for all of 2010, 2011 and 2012. Under the proposed rule, this prepayment would be due on December 31, 2009. Under the proposed rule, the assessment rate for the fourth quarter of 2009 and for 2010 would be based on each institution's total base assessment rate for the third quarter of 2009, modified to assume that the assessment rate in effect on September 30, 2009 had been in effect for the entire third quarter, and the assessment rate for 2011 and 2012 would be equal to the modified third quarter assessment rate plus an additional 3 basis points. In addition, each institution's base assessment rate for each period would be calculated using its third quarter assessment base, adjusted quarterly for an estimated 5% annual growth rate in the assessment base through the end of 2012.
FINANCIAL CONDITION
ASSETS. Total assets at September 30, 2009 were $574.1 million, an increase of $34.0 million from $540.1 million at December 31, 2008. Mortgage-backed securities increased $1.3 million reflecting purchases of $37.4 million of mortgage-backed securities partially offset by the principal collected on and proceeds from sales and maturities of mortgaged-backed securities. Investment securities increased $28.2 million reflecting purchases of $47.3 million of investment securities partially offset by the principal collected on and proceeds from sales and maturities of investment securities. The increase in investment and mortgage-backed securities is primarily the result of the increase in collateral required for pledging against municipal deposit accounts and a decrease in loans receivable partially offset by a decrease in borrowings. Securities held to maturity were purchases in 2009 that are collateral required for pledging against municipal deposits where management has the intent to hold until the contractual maturity of the securities. Loans receivable, including loans held for sale, decreased $6.8 million to $298.3 million at September 30, 2009 compared with $305.1 million at December 31, 2008. Residential loans decreased by $6.8 million since December 31, 2008, after the sale of $48.7 million of fixed-rate residential real estate loans in the secondary market during the nine month period. At September 30, 2009, total commercial real estate loans increased by $4.0 million while commercial business loans decreased by $1.7 million from December 31, 2008. At September 30, 2009 total consumer loans decreased by $2.5 million from December 31, 2008. As a result of the decrease in loans receivable and increase in deposit accounts, cash and cash equivalents increased $13.6 million from $13.3 million at December 31, 2008 to $26.9 million at September 30, 2009. Goodwill and other intangibles totaled $24.9 million as of September 30, 2009 and $25.1 million as of December 31, 2008. Additional goodwill in the amount of $136,000 was recorded for the contingent purchase payment made to Benefit Consulting Group LLC. Under the terms of the agreement, contingent purchase payments based on future performance levels may be made over a five-year period starting with the year ended December 31, 2006. Offsetting this payment was the amortization expense recorded on a monthly basis.
The allowance for loan losses was $2.9 million and $2.6 million at September 30, 2009 and December 31, 2008, respectively. The allowance for loan losses is a valuation allowance for probable incurred credit losses. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. Management estimates the allowance required by using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors. Allocation of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management's judgment, should be charged-off. Quarterly, management evaluates the adequacy of the allowance and determines the appropriate provision for loan losses by applying a range of estimated loss percentages to each category of performing loans and classified loans. The allowance adjustment is based upon the net change in each portfolio category, as well as adjustments related to impaired loans, since the prior quarter. Management monitors and modifies the level of the allowance for loan losses to maintain it at a level which it considers adequate to provide for probable incurred loan losses. A loan is considered impaired, based on current information and events, if it is probable that the Bank will be unable to collect the scheduled payments of principal and interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. The measurement of impaired loans is generally based on the present value of expected future cash flows discounted at the historical effective interest rate, except that all collateral-dependent loans are measured for impairment based on the estimated fair value of the collateral. During the current quarter the Company identified an impaired unsecured commercial loan and established a specific reserve for the loan. To date the borrower of the impaired loan has made all payments as agreed. At September 30, 2009 the allowance for loan losses as a percentage of net loans receivable was 0.97% as compared to 0.87% as of December 31, 2008.
LIABILITIES. Total liabilities increased by $31.7 million to $517.0 million at September 30, 2009 from $485.3 million at December 31, 2008. The increase is primarily the result of an increase in interest-bearing deposits of $52.5 million and an increase in non-interest bearing deposits of $800,000. Contributing to the increase in total deposits has been an increase in municipal deposits offered through Oneida Savings Bank's limited purpose commercial banking subisidiary, State
Bank of Chittenango. Municipal deposits increased $27.9 million to $82.8 million at September 30, 2009 from $54.9 million at December 31, 2008. The increase in total deposits also enabled the Bank to reduce borrowings outstanding by $21.8 million to $31.0 million at September 30, 2009 compared with $52.8 million at December 31, 2008.
STOCKHOLDERS' EQUITY. Total stockholders' equity increased by $2.3 million to $57.1 million at September 30, 2009 as compared to $54.8 million at December 31, 2008. Stockholders' equity increased $886,000 as a result of the valuation adjustment made for the Company's available for sale investment and mortgage-backed securities. In addition, stockholders' equity decreased by $1.7 million due to the payment of semiannual cash dividends of $0.24 partially offset by the addition of after-tax net income of $2.9 million for the nine months ended September 30, 2009.
Net interest income represents the difference between income on interest-earning assets and expense on interest-bearing liabilities. Net interest income also depends on the relative amounts of interest-earning assets and interest-bearing liabilities and the interest rates earned or paid on the assets or liabilities.
AVERAGE BALANCE SHEET. The following tables set forth certain information relating to the Company for the three and nine months ended September 30, 2009 and 2008 and for the year ended December 31, 2008. For the periods indicated, the dollar amount of interest income from average interest-earning assets and the resultant yields, as well as the interest expense on average interest-bearing liabilities is expressed in thousands of dollars and percentages. The average yields and rates are annualized where appropriate. No tax equivalent adjustments were made. The average balance is computed based upon an average daily balance.
TABLE 1. Average Balance Sheet.
TABLE 1. Average Balance Sheet.
Three Months Ended September 30, Twelve Months Ended Dec. 31,
-------------------------------- ----------------------------
2009 2008 2008
Average Interest Average Interest Average Interest
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Assets Balance Paid Rate Balance Paid Rate Balance Paid Rate
------ ----------- ---- ---- ------- ---- ---- ------- ---- ----
Interest-earning Assets: (Dollars in Thousands)
------------------------
Loans Receivable $296,541 $4,418 5.96% $298,448 $4,634 6.21% $293,499 $18,535 6.32%
Investment and 160,851 1,701 4.23% 151,614 1,862 4.91% 143,987 7,379 5.12%
Mortgage-Backed
Securities
Federal Funds 12,621 7 0.22% 3,216 19 2.36% 7,342 169 2.30%
Equity Securities 6,496 108 6.65% 12,962 136 4.20% 12,814 651 5.08%
-------- ------ ----- -------- ------ ----- ------- ------ -----
Total 476,509 6,234 5.23% 466,240 6,651 5.71% 457,642 26,734 5.84%
-------- ------ ----- -------- ------ ----- ------- ------ -----
Interest-earning Assets
Non interest-earning
Assets:
Cash and due from banks 13,395 12,020 11,725
Other assets 74,417 75,544 74,999
-------- -------- --------
Total $564,321 $553,804 $544,366
======== ======== ========
assets
Liabilities and
Stockholders' Equity
Interest-bearing
Liabilities:
Money Market Deposits $124,357 $398 1.27% $88,816 $433 1.94% $83,115 $1,654 1.99%
Savings Accounts 83,050 127 0.61% 79,718 161 0.80% 77,266 603 0.78%
Interest-bearing 46,978 37 0.31% 40,652 56 0.55% 40,459 238 0.59%
Checking
Time Deposits 150,335 863 2.28% 162,388 1,431 3.51% 159,933 6,020 3.76%
Borrowings 31,145 367 4.68% 57,306 645 4.48% 56,194 2,561 4.56%
Notes Payable 0 0 0.00% 70 1 5.68% 88 5 5.68%
------- ----- ---- ------- ----- ---- ------- ------ ----
Total 435,865 1,792 1.63% 428,950 2,727 2.53% 417,055 11,081 2.66%
------- ----- ---- ------- ----- ---- ------- ------ ----
Interest-bearing
Liabilities
Non-interest-bearing
Liabilities:
Demand deposits 62,623 65,681 63,711
Other liabilities 10,122 4,274 7,559
------- -------- --------
Total liabilities $508,610 $498,905 $488,325
-------- -------- --------
Stockholders' equity 55,711 54,899 56,041
-------- -------- --------
Total liabilities and $564,321 $553,804 $544,366
======== ======== ========
stockholders' equity
Net Interest Income $4,442 $3,924 $15,653
======= ====== =======
Net Interest Spread 3.60% 3.18% 3.18%
==== ==== ====
Net Earning Assets $40,644 $37,290 $40,587
Net yield on average ======= ======= =======
Interest-earning 3.73% 3.37% 3.42%
assets ==== ==== ====
Average
interest-earning
assets to average
Interest-bearing 109.32% 108.69% 109.73%
liabilities ====== ====== ======
|
Nine Months Ended September 30, Twelve Months Ended Dec. 31,
----------------------------------------------- ----------------------------
2009 2008 2008
Average Interest Average Interest Average Interest
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Assets Balance Paid Rate Balance Paid Rate Balance Paid Rate
------ ----------- ---- ---- ------- ---- ---- ------- ---- ----
Interest-earning Assets: (Dollars in Thousands)
------------------------
Loans Receivable $298,389 $13,309 5.95% $290,150 $13,857 6.37% $293,499 $18,535 6.32%
Investment and 149,593 5,029 4.48% 143,993 5,410 5.01% 143,987 7,379 5.12%
Mortgage-Backed
Securities
Federal Funds 13,307 32 0.32% 7,787 160 2.74% 7,342 169 2.30%
Equity Securities 5,980 320 7.13% 14,891 668 5.98% 12,814 651 5.08%
-------- ------ ---- ------- ------ ---- ------- ------ ----
Total 467,269 18,690 5.33% 456,821 20,095 5.87% 457,642 26,734 5.84%
-------- ------ ---- ------- ------ ---- ------- ------ ----
Interest-earning Assets
Non interest-earning
Assets:
Cash and due from banks 12,976 12,408 11,725
Other assets 75,382 74,847 74,999
-------- -------- --------
Total $555,627 $544,076 $544,366
======== ======== ========
assets
Liabilities and
Stockholders' Equity
Interest-bearing
Liabilities:
Money Market Deposits $112,661 $1,169 1.39% $79,888 $1,223 2.04% $83,115 $1,654 1.99%
Savings Accounts 80,325 365 0.61% 77,097 459 0.80% 77,266 603 0.78%
Interest-bearing 45,707 111 0.32% 40,104 184 0.61% 40,459 238 0.59%
Checking
Time Deposits 153,123 2,922 2.55% 161,931 4,757 3.92% 159,933 6,020 3.76%
Borrowings 37,979 1,331 4.69% 56,781 1,954 4.60% 56,194 2,561 4.56%
Notes Payable 1 0 0.00% 106 4 5.04% 5 88 5.68%
-------- ------ ---- ------- ------ ---- ------- ------ ----
Total 429,796 5,898 1.83% 415,907 8,581 2.76% 11,081 417,055 2.66%
-------- ------ ---- ------- ------ ---- ------- ------ ----
Interest-bearing
Liabilities
Non-interest-bearing
Liabilities:
Demand deposits 60,524 64,227 63,711
Other liabilities
10,567 6,248 7,559
-------- -------- --------
Total liabilities $500,887 $486,382 $488,325
Stockholders' equity 54,740 57,695 56,041
-------- -------- --------
Total liabilities and $555,627 $544,077 $544,366
======== ======== ========
stockholders' equity
Net Interest Income $12,792 $11,514 $15,653
======= ======= =======
Net Interest Spread 3.50% 3.11% 3.18%
Net Earning Assets $37,473 $40,914 $40,587
Net yield on average ======= ======= =======
Interest-earning 3.65% 3.36% 3.42%
assets ==== ==== ====
Average
interest-earning
assets to average
Interest-bearing 108.72% 109.84% 109.73%
liabilities ====== ====== ======
|
RESULTS OF OPERATIONS
GENERAL. Net income for the three months ended September 30, 2009 was $696,000, an increase of $5.3 million from a net loss of $4.6 million for the three months ended September 30, 2008. Net income for the nine months ended September 30, 2009 was $2.9 million, an increase of $6.2 million from a net loss of $3.4 million for the nine months ended September 30, 2008. The increase in net income was primarily the result of the 2008 periods being negatively affected by the significant decline in carrying value of Federal Home Loan Mortgage Corporation (`Freddie Mac") perpetual preferred stock Page 29 of 37 following the announcement by the United States Treasury and the Federal Housing Finance Agency ("the FHFA") that Freddie Mac was placed under conservatorship during September 2008.
INTEREST INCOME. Interest and dividend income decreased by $417,000 or 6.3%, to $6.2 million for the three months ended September 30, 2009 from $6.7 million for three months ended September 30, 2008. The decrease in interest income was the result of a decrease in the yield of 48 basis points on interest earning assets partially offset by an increase in the average balances of interest-earning assets of $10.3 million during the 2009 period. For the nine months ended September 30, 2009, interest and dividend income decreased by $1.4 million or 7.0%, to $18.7 million from $20.1 million for the nine months ended September 30, 2008.
Interest on loans decreased $216,000 to $4.4 million for the three months ended September 30, 2009 from $4.6 million for the three months ended September 30, 2008. The decrease in interest income on loans is a result of a decrease of 25 basis points in the average yield to 5.96% for the three months ended September 30, 2009 from 6.21% for the three months ended September 30, 2008 as well as an increase of $1.9 million in the average balance of loans receivable for the three months ended September 30, 2009 as compared with the same period in 2008. For the nine months ended September 30, 2009, interest on loans decreased $548,000 or 4.0%, from $13.9 million for the same period in 2008. The average balance of loans for the nine month period increased $8.2 million while the average yield decreased 42 basis points to 5.95% during the 2009 period from 6.37% during the 2008 period. The decrease in yield reflected the decrease in market interest rates and the reduction of 200 basis points in the federal funds target rate.
Interest on investments and mortgage-backed securities decreased $161,000 as a result of a decrease in the average yield of 68 basis points from 4.91% for the three months ended September 30, 2008 to 4.23% for the three months ended September 30, 2009 partially offset by an increase in the average balance of investment securities and mortgage-backed securities of $9.2 million for the three months period ending September 30, 2009 as compared with the same period in 2008. For the nine months ended September 30, 2009, interest on investments and mortgage-backed securities decreased $381,000 as compared with the same period in 2008 due to a decrease in the average yield of 53 basis points offset by an increase in the average balance of investments and mortgage-backed securities of $5.6 million. The increase in investment and mortgage-backed securities is primarily the result of the increase in collateral required for pledging against municipal deposit accounts.
. . .
|
|