Statewide Financial Corporation Reports Quarter, Fiscal Year Results and Changes in Accounting Year; Third Quarter Net Income was $.5 million; Abbreviated Fiscal Year Net Income was $1.6 million; Changed Fiscal Year End from March to December; Restructured Balance Sheet under FASB Provision; Increased Third Quarter Loan Production by 29%

Business Wire, Jan 30, 1996

JERSEY CITY, N.J.--(BUSINESS WIRE)--Jan. 30, 1996--Statewide Financial Corporation (NASDAQ: SFIN), holding company for Statewide Savings Bank, S.L.A., announced third fiscal quarter net income of $.5 million, down from $1.1 million for the same period last year. Results of the period include (net of tax) charges of $637,000 from security sales and prepayment of loans partially offset by the collection of $354,000 in unaccrued interest. The abbreviated fiscal year, which was a nine month period, had net income of $1.6 million, down from $3.3 million for the same period last year. At its November Board meeting, Statewide changed its fiscal year from March 31 to December 31, which shortened the 1995 fiscal year to nine months.

The Company completed its initial public offering of 5,269,752 shares of Common Stock on September 29, 1995, raising $46.5 million of net proceeds. Earnings per share information did not exist prior to the public offering and is not meaningful for this period.

Victor M. Richel, chairman and chief executive officer, said that the Company has completed the restructuring of its management team and launched aggressive marketing efforts in the company's franchise area -- all with the purpose of enhancing shareholder value and reducing costs.

During the past quarter, loan production increased $5.7 million, or 29%, from loans booked during the September 1995 quarter. In addition, this quarter's loan production was up $22.0 million over that produced during the quarter ended December 1994.

"Virtually all of these loans are variable-rate based," Richel added. "We also finalized plans for a new branch office in Hoboken, N.J., opened a supermarket branch in Passaic County, N.J., and saw our deposits grow nearly 2%. We are taking firm hold of the reins of this Company in a market that is undergoing major changes through mergers and acquisitions, and we are confident of our ability to compete successfully. These actions reflect the Company's implementation of its strategic plan."

Richel noted that spreads on new interest earning assets have been negatively impacted by the continuation of a flat yield curve. As a result of promotional interest rates offered during entry into new markets, spreads also reflect higher interest costs than the Company traditionally incurred.

The last quarter reflects a restructuring of the balance sheet as a result of the window of opportunity provided when the Financial Accounting Standards Board (FASB) announced that it was suspending, for a brief period, the transfer provisions of Financial Accounting Statement (FAS) No. 15, Accounting for Certain Investments in Debt and Equity Securities. Within this window, the Company transferred $230.1 million, representing all of its investments previously classified as "Held-To-Maturity," to the "Available-For-Sale" category.

"This action has enhanced the Company's ability to maintain market net interest margins and control interest rate risk," Richel stated. "The Company is in a significantly better position to manage its business in changing market conditions by providing enhanced asset/liability management flexibility, such as the ability to make the portfolio responsive to interest rate environments."

During the last quarter, and in reaction to the current interest rate environment, the Company sold $30.8 million of securities which were yielding significantly lower returns than market, incurring a pre-tax loss of $340,000. In addition, the Company incurred $643,000 in penalties when it prepaid $23.9 million of FHLB advances, with fiscal maturities between 1997-2000, which would have carried an estimated average cost of 7.8% in 1996. These charges were partially offset by the collection of $545,000 of unaccrued interest.

The Company's total assets were $559.1 million as of December 31, 1995, compared to $475.2 million at March 31, 1995, the end of its most recent prior fiscal year. This $83.9 million (17.7%) increase consisted principally of $26.8 million in loans and $56.4 million in mortgage-backed securities. These increases were primarily funded by $46.5 million raised in the Company's September 29, 1995, initial public offering, and by growth in deposits of $30.3 million.

The results for the three and nine-months ended December 1995 continue to reflect the adverse effect of higher interest rates over those experienced during similar periods last year, and the efforts of the Company to position itself for future growth. Interest expense increased as a result of the Bank aggressively pricing its longer term certificates of deposits during the last nine months, as a part of both system wide, and new supermarket branch marketing campaigns. Interest income also increased during the quarter as a result of the increase in interest earning assets as noted above, but it was not sufficient to offset the increased cost of certificates of deposit. However, the decision to prepay $23.9 million of high cost intermediate term debt and replace it with lower cost borrowings will improve net interest spreads.