Item 1. Business - ------------------
General
In August 1994, Lakeview Financial Corporation, a New Jersey Corporation, (the "Company") became a unitary savings and loan holding company upon the completion of the reorganization of Lakeview Savings Bank ("Lakeview" or the "Savings Bank") into a holding company form of ownership. At that time, the Company acquired all of the outstanding common stock of the Savings Bank. The Savings Bank's common stock was originally issued in connection with the Savings Bank's conversion from mutual to stock form in December 1993. The principal asset of the Company consists of 100% of the issued and outstanding shares of common stock of the Savings Bank. The Savings Bank was founded in 1922 as Lakeview Building and Loan Association.
The principal business of the Savings Bank is the acceptance of savings deposits from the general public and the origination and purchase of mortgage loans for the purpose of constructing, financing or refinancing one- to four-family residences and the purchase of mortgage-backed securities. The Savings Bank also originates home equity loans. Lakeview has eight office locations located in Bergen and Passaic Counties, New Jersey.
On September 10, 1997, the Company and Westwood Financial Corporation ("Westwood"), the holding company of Westwood Savings Bank ("Westwood Bank"), Westwood, New Jersey, signed a definitive agreement providing for the merger of Westwood into the Holding Company and the merger of Westwood Bank into the Savings Bank. It is anticipated that the transaction will close by approximately March 1998 and will be accounted for under the purchase method of accounting.
Competition
The Savings Bank's primary market area consists of Bergen and Passaic counties in northern New Jersey, and is one of many financial institutions serving its market area. The competition for deposit products comes from other insured financial institutions such as commercial banks, thrift institutions and credit unions in the Savings Bank's market area. Deposit competition also includes a number of insurance products sold by local agents and investment products such as mutual funds and other securities sold by local and regional brokers. Loan competition comes from other insured financial institutions such as commercial banks, thrift institutions and credit unions.
Lending Activities
Loan Portfolio Data. The following table sets forth the composition of the Savings Bank's loan portfolio by loan type and security type as of the dates indicated, including a reconciliation of gross loans receivable after consideration of the allowance for loan losses, loans in process, and deferred loan origination fees and costs.
One- to Four-Family Mortgage Loans. The Savings Bank offers first mortgage loans secured by one- to four family residences in the Savings Bank's market area. Typically, such residences are single family homes that serve as the primary residence of the owner. Additionally, this loan category includes a relatively small amount of loans collateralized by mixed use properties which are primarily residential, but have some commercial use as well. The Savings Bank currently offers 15 and 30 year fixed-rate mortgage loans, 15 year balloon mortgage loans with five to seven year maturities, and adjustable rate mortgage ("ARM") loans with one, three or five year adjustment periods and 15 to 30 year maturities. The Savings Bank retains ARM loans, 15 year fixed-rate mortgages and balloon mortgage loans. Fixed-rate loans with more than 15 year maturities are sold in the secondary market.
Monthly payments on balloon loans are based on a 15 year amortization schedule. Renewal of balloon mortgage loans is based on the credit history as well as current qualification of the borrower at time of renewal. The Savings Bank offers balloon mortgages in an effort to make its mortgage loan portfolio more interest rate sensitive. Interest rates charged on fixed-rate loans are competitively priced based on the local competitive market. Loan origination fees on these loans are generally up to 2% of the loan amount depending on the interest rate accepted by the borrower.
Balloon loans pose a different credit risk from 15 year mortgage loans. The balloon loans mature in five to seven years but payments are based on a fifteen year amortization schedule. At the time of the loan's maturity, the borrower must either pay the balloon payment or refinance the loan. If the borrower is ineligible for refinancing at the time of loan maturity and cannot make the large balloon payment, the loan will go into default. In the case of standard mortgage loans, payments are spread out evenly over the term of the loan, thereby decreasing this credit risk.
The Savings Bank currently offers ARM loans with interest rates that adjust every one, three or five years with a maximum rate increase cap of 2% per year, and a lifetime cap of 6%. The interest rate on these mortgages since 1985 has been the U.S. Treasury bill rate plus 3%. As of July 31, 1997, one year, three year, and five year ARM loans originated by the Savings Bank constituted 24%, 26% and 50% of the originated ARM loan portfolio, respectively. ARM loans are originated for a term of up to 30 years. The Savings Bank originates one- to four-family residential mortgage loans in amounts up to 80% of the appraised value of the mortgaged property. The Savings Bank retains the ARM loans it originates for its loan portfolio.
Generally, ARM loans pose credit risks different than the risks inherent in fixed-rate loans, primarily because as interest rates rise, the underlying payments of the borrower rise, thereby increasing the potential for default. At the same time, the marketability of the underlying property may be adversely affected by higher interest rates. The Savings Bank attempts to reduce this credit risk by qualifying ARM loan borrowers based on the first full interest rate adjustment. The Savings Bank does not originate ARM loans which provide for negative amortization.
The Savings Bank also offers 15 year fixed-rate mortgage loans. Interest rates charged on fixed-rate loans are competitively priced based on the Federal Home Loan Mortgage Corporation ("FHLMC") buy rates. Loan origination fees on these loans are generally 2% of the loan amount. The Savings Bank retains these 15 year mortgage loans for its loan portfolio.
Multi-Family and Commercial Real Estate. The Savings Bank originates multi-family real estate loans usually secured by property located in the Savings Bank's primary market area. The Savings Bank's commercial real estate loans are secured by such property as mixed use and office buildings, small retail stores and industrial buildings. The Savings Bank's multi-family and commercial real estate loans are five or seven year balloon mortgages with amortization periods typically of 15 years and loan to value ratios of 80% or less.
Multi-family and commercial real estate may entail significant additional credit risks compared to one- to four family residential lending. Commercial and multi-family real estate mortgage loans may involve large loan balances to single borrowers or groups of related borrowers. In addition, the payment experience on loans secured by income producing properties is typically dependent on the successful operation of the properties and thus may be subject to a greater extent to adverse conditions in the real estate market or in the general economy. The Savings Bank intends to increase its marketing efforts related to these loans in fiscal 1998.
Home Equity, Second Mortgage and Home Improvement Loans. The Savings Bank originates home equity, second mortgage and home improvement loans secured by one-family residences. These loans generally are originated as adjustable rate loans which adjust monthly and have terms of from 15 to 30 years. No loan origination fee is usually charged on these loans. Loans made on owner-occupied, one-family residences are generally subject to a 70% combined loan-to-value limitation, including any other outstanding mortgages or liens, and are made at an adjustable rate of 185 points over the prime rate. Loans on non-owner occupied properties are limited to a 65% loan to value ratio, and are made at an adjustable rate of 210 points over the prime rate. The Savings Bank intends to increase its marketing efforts related to these loans in fiscal 1998.
Commercial Loans. On January 12, 1996, the Savings Bank granted to Industry Mortgage Company ("IMC") a line of credit for $7 million with an interest rate of 10%. At July 31, 1997, $6.8 million was outstanding. The Company has a 6.02% investment in IMC. See "-- Subsidiaries".
Loan Maturity Table
The following table sets forth the maturity of the Savings Bank's loan portfolio at July 31, 1997. The table does not include prepayments or scheduled principal repayments. Prepayments and scheduled principal repayments on loans totalled $22.4 million at July 31, 1997. Adjustable-rate mortgage loans are shown as maturing based on contractual maturities.
- ---------- (1) Also includes passbook and student loans.
The following table sets forth the dollar amount of all loans due after July 31, 1998, which have pre-determined interest rates and which have floating or adjustable interest rates.
Loan Approval Authority and Underwriting. Upon receipt of any loan application from a prospective borrower, a credit report and verifications are ordered to confirm specific information relating to the loan applicant's employment, income and credit standing. An appraisal of the real estate intended to secure a first mortgage proposed loan is undertaken by an independent fee appraiser approved by the Board of Directors. In connection with the loan approval process, the Savings Bank's loan officers analyze the loan applications and the property involved. All loans are processed at the Savings Bank's office by the Savings Bank's loan servicing department. The Savings Bank originates residential first mortgage loans that conform to the FHLMC and Federal National Mortgage Association ("FNMA") guidelines, so that such loans can be sold if the Savings Bank desires to do so.
All mortgage loans are underwritten under guidelines and policies issued by the Board of Directors. The Savings Bank's Loan Committee reviews all loans and the full Board of Directors then ratifies the actions of the staff and committee in regard to all loans except consumer loans and passbook loans. Fixed rate loans with terms of 30 years are immediately sold after funding to FHLMC or other private secondary mortgage market purchasers depending on the attractiveness of the pricing.
Loan applicants are promptly notified of the decision of the Savings Bank by a letter setting forth the terms and conditions of the decision. If approved, these terms and conditions include the amount of the loan, interest rate basis, amortization term, a brief description of real estate to be mortgaged to the Savings Bank, and the notice of requirement of insurance coverage to be maintained to protect the Savings Bank's interest. The Savings Bank requires title, fire and casualty insurance for all first mortgage loans, as well as an escrow account for the payment of real estate taxes. Disability insurance is available but not required.
Loan Commitments. The Savings Bank generally grants commitments to fund real estate mortgage loans for periods of up to 90 days at a specified term and interest rate. These are primarily for fixed-rate loans. The total amount of the Savings Bank's commitments to originate loans as of July 31, 1997 was $6.1 million.
Loans to One Borrower. Regulations limit loans-to-one borrowers in an amount equal to 15% of unimpaired capital and unimpaired surplus on an unsecured basis and an additional amount equal to 10% of unimpaired capital and unimpaired surplus if the loan is secured by readily marketable collateral. At July 31, 1997 the Savings Bank's maximum loan-to-one borrower limit was $5.9 million and its largest loan to one borrower was a commercial letter of credit of approximately $6.8 million. This loan was in excess of the Savings Bank's lending limit but was in compliance with regulations applicable at the time the loan was originated. The second largest loan to one borrower relationship is a loan of approximately $3.1 million secured by multi-family properties in Passaic, New Jersey. Both of these loans were performing at July 31, 1997.
Non-Performing Loans and Asset Classification. The Savings Bank's collection policy provides for a late charge to be added to the amount due when a loan is 15 days past due. The borrower is immediately notified of the assessment and payment is requested. Periodic contacts are made at 30 day intervals. At 60 days past due, a letter is sent by the Savings Bank's attorney. At 120 days, the attorney is authorized to take final action up to initiation of foreclosure proceedings, if deemed warranted.
Loans are reviewed on a monthly basis and are placed on a non-accrual status when, in the opinion of management, the collection of additional interest is doubtful. Loans are placed on a non-accrual status when either principal or interest is 90 days or more past due. Interest accrued and unpaid at the time a loan is placed on non-accrual status is charged against interest income. Subsequent payments are either applied to the outstanding principal balance or recorded as interest income, depending on the assessment of the ultimate collectibility of the loan.
The following table sets forth information with respect to the Savings Bank's non-performing assets for the periods indicated. During the periods indicated the Savings Bank had no restructured loans within the meaning of Statement of Financial Accounting Standards No. 15 ("SFAS 15").
- ------------------------ (1) Includes home equity, home improvement and second mortgage loans.
Management of the Savings Bank regularly reviews the loan portfolio in order to identify potential problem loans, and classifies any potential problem loan as a special mention, substandard, doubtful, or loss asset according to the Department classification of asset regulations. The Savings Bank does not accrue interest on any loan that is 90 days or more delinquent. Potential problem loans that had not been recorded as non-accrual as of July 31, 1997, totalled $7.3 million, or 1.4% of total assets. These loans are accruing but classified by the Savings Bank as substandard.
For the year ended July 31, 1997, interest income amounting to approximately $256,000, would have been recognized if interest on loans 90 days or more in arrears had been recorded based on original contract terms.
Classified Assets. OTS regulations provide for a classification system for problem assets of insured institutions. Under this classification system, problem assets of insured institutions are classified as "substandard," "doubtful," or "loss." An asset is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Substandard assets include those characterized by the "distinct possibility" that the insured institution will sustain "some loss" if the deficiencies are not corrected. Assets classified as doubtful have all of the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses present make "collection or liquidation in full," on the basis of currently existing facts, conditions, and values, "highly questionable and improbable." Assets classified as loss are those considered "uncollectible" and of such little value that their continuance as assets without the establishment of a specific loss reserve is not warranted. Assets may be designated "special mention" because of potential weakness that does not currently warrant classification in one of the aforementioned categories.
When an insured institution classifies problem assets as either substandard or doubtful, it may establish general allowances for loan losses in an amount deemed prudent by management. General allowances represent loss allowances which have been established to recognize the inherent risk associated with lending activities, but which, unlike specific allowances, have not been allocated to particular problem assets. When an insured institution classifies problem assets as loss, it is required either to establish a specific allowance for losses equal to 100% of that portion of the asset so classified or to charge off such amount. An institution's determination as to the classification of its assets and the amount of its valuation allowances is subject to review by the OTS, which may order the establishment of additional general or specific loss allowances. A portion of general loss allowances established to cover possible losses related to assets classified as substandard or doubtful may be included in determining an institution's regulatory capital, while specific valuation allowances for loan losses generally do not qualify as regulatory capital.
In accordance with its classification of assets policy, the Savings Bank regularly reviews the problem assets in its portfolio to determine whether any assets require classification in accordance with applicable regulations. On the basis of management's review of its assets, at July 31, 1997, the Savings Bank had classified $1.9 million as special mention, $11.6 million as substandard, and $1.4 million as doubtful.
The following is a summary of the Savings Bank's potential problem loans with balances in excess of $1,000,000 as of July 31, 1997. There can be no assurance that additional reserves will not be required or additional losses will not be incurred on these loans.
Ski Resort in Vernon, New Jersey. The outstanding loan balance of $2.4 million at July 31, 1997, represents Lakeview's 50 percent participation in a $5.0 million loan. The loan consists of a March 1989 refinancing of a $2.3 million mortgage (originally made by Lakeview in July 1986) and an additional $2.7 million of working capital. The loan is secured by a first lien on the ski resort as well as all equipment and rental inventory utilized in the operation of the premises. Another unrelated lender has a second mortgage of $19.6 million on the property. The borrower corporation and its parent corporation filed for protection under Chapter 11 of the Bankruptcy Code on April 2, 1996. As of July 31, 1997, the loan was current as a result of payments being received from an individual guarantor of the loan. Both the borrower corporation and its parent corporation have experienced operating losses in recent years. As of July 31, 1997, the loan was classified substandard and continues to be monitored by management.
Mortgage Loans Purchased from Capital Resources. At July 31, 1997, the Savings Bank had approximately $3.6 million of residential real estate second mortgage loans that were acquired from Capital Resources, a now defunct mortgage company. Of this total amount, $910,000 was classified as non-accrual loans and $2.7 million was classified as performing loans. However, based upon management's review, $548,000 of these performing loans were considered potential problem loans. At July 31, 1997, the Savings Bank allocated $911,000 of the loss allowance to the mortgage loans purchased from Capital Resources.
Real Estate Owned. Real estate acquired by the Savings Bank as a result of foreclosure or by deed in lieu of foreclosure is classified as real estate owned until it is sold. Real estate acquired in settlement of loans is initially recorded at fair value at the date of foreclosure establishing a new cost basis. After foreclosure, valuations are periodically performed by management and the real estate is carried at the lower of cost or fair value, minus estimated cost to sell.
The Savings Bank records loans as in-substance foreclosures if the borrower has little or no equity in the property based upon its documented current fair value, the Savings Bank can only expect repayment of the loan to come from the sale of the property and if the borrower has effectively abandoned control of the collateral or has continued to retain control of the collateral but because of the current financial status of the borrower, it is doubtful the borrower will be able to repay the loan in the foreseeable future. There may be significant other expenses incurred such as legal and other extraordinary servicing costs involved with in substance foreclosures.
Allowances for Loan Losses. It is management's policy to provide for losses on unidentified loans in its loan portfolio. A provision for loan losses is charged to operations based on management's evaluation of the potential losses that may be incurred in the Savings Bank's loan portfolio. Such evaluation, which includes a review of all loans of which full collectibility of interest and principal may not be reasonably assured, considers the Association's past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower's ability to repay, estimated value of any underlying collateral, and current economic conditions.
The following table sets forth the allocation of the Savings Bank's allowance for loan losses by loan category and the percent of loans in each category to total loans receivable at the dates indicated. The portion of the loan loss allowance allocated to each loan category does not represent the total available for future losses that may occur within the loan category because the total loan loss allowance is a valuation reserve applicable to the entire loan portfolio.
Analysis of the Allowances for Losses on Loans and Real Estate Owned
The following tables set forth information with respect to the Savings Bank's allowance for loan losses and REO at the dates indicated:
Analysis of the Allowance for Loan Losses
The following table sets forth the allocation of the allowance by category, which management believes can be allocated only on an approximate basis. The allocation of the allowance to each category is not necessarily indicative of future loss and does not restrict the use of the allowance to absorb losses in any category:
(1) Includes residential construction, home equity, second mortgage and home improvement loans.
Investment Activities and Mortgage-Backed Securities
General. Income from investment securities provides a significant source of income for the Savings Bank. The Savings Bank maintains a portfolio of investment securities such as U.S. government and agency securities, non-governmental securities, and interest-bearing deposits, in addition to the Savings Bank's mortgage-backed securities held to maturity portfolio. The amount of short-term investments reflects management's response to the significantly increasing percentage of savings deposits with short maturities. It is the intention of management to maintain shorter maturities in the Savings Bank's investment portfolio in order to better match the interest rate sensitivities of its assets and liabilities. However, during periods of rapidly declining interest rates, such investments also decline at a faster rate than does the yield on long-term investments.
Investment decisions are made within policy guidelines established by the Board of Directors. The investment policy of the Savings Bank established by the Board of Directors is based on its asset/liability management goals. The intent of the policy is to establish a portfolio of high quality, diversified investments in order to optimize net interest income within acceptable limits of safety and liquidity.
Purchases of securities other than equity securities are generally made with the intent of holding them to maturity. Currently, the policy is to invest in instruments with an expected average life of five to ten years, to be held to maturity. Investments and mortgage-backed securities held to maturity are recorded at amortized cost. Premiums are amortized and discounts accreted on a level yield method over the life of the investment.
The Savings Bank maintains a portfolio of investments available for sale and trading to enhance total return on investments and reduce interest rate and credit risk. These investments are accounted at market value. The Savings Bank's Investment Policy designates what securities may be maintained in this portfolio. The Savings Bank's trading portfolio is comprised of U.S. agency securities. As of July 31, 1997, these were no trading securities outstanding and the available for sale portfolio was comprised of mortgage-backed securities, U.S. agency securities, and equity securities.
Mortgage-Backed Securities. The Savings Bank's mortgage-backed securities, or pass-through certificates, represent a participation interest in a pool of single-family mortgages, the principal and interest payments on which are passed from the mortgage originators, through intermediaries (generally quasi-governmental agencies) that pool and repackage the participation interest in the form of securities, to investors such as the Bank. Such quasi-governmental agencies that guarantee the payment of principal and interest to investors include the FHLMC, Government National Mortgage Association ("GNMA"), or the Federal National Mortgage Association ("FNMA"). Pass-through certificates typically are issued with stated principal amounts, and the securities are backed by pools of mortgages that have loans with interest rates and maturities that are within a specified range. The underlying pool of mortgages can be composed of either fixed rate mortgage loans or ARM loans. Mortgage-backed securities are generally referred to as mortgage participation certificates or pass-through certificates. As a result, the interest rate risk characteristics of the underlying pool of mortgages, (i.e., fixed rate or adjustable rate) as well as prepayment risk, are passed on to the certificate holder. The life of a mortgage-backed pass-through security is equal to the life of the underlying mortgages. Mortgage-backed securities issued by FHLMC, FNMA and GNMA make up a majority of the pass-through market. Generally, the Bank purchases mortgage-backed securities guaranteed by GNMA and FNMA and participation certificates issued by the
FHLMC. GNMA mortgage-backed securities are certificates issued and backed by the GNMA and are secured by interests in pools of mortgages which are fully insured by the Federal Housing Administration ("FHA") or partially guaranteed by the Veterans' Administration ("VA"). FHLMC mortgage-backed securities are participation certificates issued and guaranteed by the FHLMC and secured by interests in pools of conventional mortgages originated by savings associations.
Mortgage-backed securities provide for monthly payments of principal and interest and generally have contractual maturities ranging from five to thirty years. However, due to expected repayment terms being significantly less than the underlying mortgage loan pool contractual maturities, the estimated lives of these securities could be significantly shorter.
The Savings Bank also purchases mortgage-backed securities and collateralized mortgage obligations ("CMOs") issued by government agencies, private issuers and financial institutions, some of which are qualified under the Internal Revenue Code of 1986, as amended (the "Code") as Real Estate Mortgage Investment Conduits ("REMICs"). CMOs and REMICs (collectively CMOs) have been developed in response to investor concerns regarding the uncertainty of cash flows associated with the prepayment option of the underlying mortgagor and are typically issued by governmental agencies, governmental sponsored enterprises and special purpose entities, such as trusts, corporations or partnerships, established by financial institutions or other similar institutions. Some CMO instruments are most like traditional debt instruments because they have stated principal amounts and traditionally defined interest-rate terms. Purchasers of certain other CMO instruments are entitled to the excess, if any, of the issuer's cash inflows, including reinvestment earnings, over the cash outflows for debt service and administrative expenses. These mortgage related instruments may include instruments designated as residual interests, which represent an equity ownership interest in the underlying collateral, subject to the first lien of the investors in the other classes of the CMO. Certain residual CMO interests may be riskier than many regular CMO interests to the extent that they could result in the loss of a portion of the original investment. Moreover, cash flows from residual interests are very sensitive to prepayments and, thus, contain a high degree of interest-rate risk.
At July 31, 1997, the Savings Bank's investment in CMOs did not include any residual interests or interest-only or principal-only securities. As a matter of policy, the Savings Bank does not invest in residual interests of CMOs or interest-only and principal-only securities. The CMOs held by the Savings Bank at July 31, 1997 consisted of floating rate and fixed rate tranches. The interest rate of a majority of the Savings Bank's floating-rate securities adjusts monthly and provides the institution with net interest margin protection in an increasing market interest rate environment. The securities are backed by mortgages on one-to-four family residential real estate and have contractual maturities up to 30 years. The securities are primarily PACs and TACs (Planned and Targeted Amortization Classes) are designed to provide a specific principal and interest cash-flow.
Private issued CMOs tend to have greater prepayment and credit risk than those issued by government agencies or government sponsored enterprises (e.g., FHLMC, FNMA, and GNMA) generally because they often are secured by jumbo loans (i.e., loans with aggregate outstanding balances above the limit for purchases by FHLMC or FNMA). At July 31, 1997, the Savings Bank had CMOs with an aggregate carrying amount (including discounts and premiums) of $40.6 million, of which $9.3 million, or 22.9%, were privately issued. To minimize the risk of private issued CMOs, the Savings Bank only purchases those CMOs rated AA or better by one of the rating agencies.
Mortgage-backed securities generally yield less than the loans which underlie such securities because of their payment guarantees or credit enhancements which offer nominal credit risk. In addition, mortgage-backed and related securities are more liquid than individual mortgage loans and may be used to collateralize borrowings of the Savings Bank in the event that the Savings Bank determined to utilize borrowings as a source of funds. Mortgage-backed securities issued or guaranteed by the GNMA, FNMA or the FHLMC (except interest-only securities or the residual interests in CMOs) are weighted at no more than 20.0% for risk-based capital purposes, compared to a weight of 50.0% to 100.0% for residential loans.
Investment Portfolio
The following table sets forth the carrying value of the Company's investment portfolio, short-term investments, and Federal Home Loan Bank ("FHLB") stock at the dates indicated. At July 31, 1997, the market value of the investment securities that are held to maturity was $144.3 million and the market value of investment securities available for sale was $105.6 million, with a cost basis of $83.2 million.
- --------------------- (1) Carried at market value. (2) In 1996, equity securities restricted for sale were carried at cost due to restrictions on the sale or transfer of these securities. During the fourth quarter ended July 31, 1997, the restrictions were changed and the securities were reclassified to the available for sale portfolio and such securities are carried at market value.
The following table sets forth certain information regarding the carrying values, weighted average yields and maturities of the Savings Bank's investment securities portfolio at July 31, 1997 by contractural maturity. The expected maturities may differ from contractural maturities due to the terms of the securities which may have callable or prepayment obligations.
- ------------------ (1) Equity securities and other securities have been classified as maturing in one year or less, since they have no stated maturity. (2) Excluding dividend yield on equity and other securities.
Sources of Funds
General. Deposits are the major source of the Savings Bank's funds for lending and other investment purposes. In addition to deposits, the Savings Bank derives funds from loan and mortgage-backed securities principal repayments, and maturities of investment securities. Loan and mortgage-backed securities payments are a relatively stable source of funds, while deposit inflows are significantly influenced by general interest rates and money market conditions.
Deposits. The Savings Bank offers a wide variety of deposit accounts, although a majority of such deposits are in fixed-term, market-rate certificate accounts. Deposit account terms vary, primarily as to the required minimum balance amount, the amount of time that the funds must remain on deposit and the applicable interest rate. The Savings Bank's deposits are typically obtained from the area in which its offices are located. The Savings Bank had no brokered certificates of deposits as of July 31, 1997.
Deposit Portfolio. Deposits in the Savings Bank as of July 31, 1997, were represented by various types of savings programs described below.
Certificates of Deposit with Balances Greater Than $100,000. The following table indicates the amount of the Savings Bank's certificates of deposit of $100,000 or more by time remaining until maturity as of July 31, 1997.
Borrowings. Although deposits are the Savings Bank's primary source of funds, the Savings Bank's policy has been to utilize borrowings as an alternative or less costly source of funds. The Savings Bank obtains advances from the FHLB of New York. Such advances are made pursuant to several different credit programs, each of which has its own interest rate and range of maturities. The maximum amount that the FHLB of New York will advance to member institutions, including the Savings Bank, for purposes other than meeting withdrawals, fluctuates from time to time in accordance with the policies of the FHLB of New York. The maximum amount of FHLB of New York advances to a member institution generally is reduced by borrowings from any other source.
The Savings Bank has in the past utilized the Regular Advance Program of the FHLB of New York under an advances, collateral, pledge and security agreement. The program offers a wide range of interest rates and maturities on advances that are collateralized by various assets. At July 31, 1997, the Savings Bank had $39.0 million outstanding under the Regular Advance Program. The Savings Bank will continue to use this program in the future to meet long term operating needs.
The Savings Bank's primary method of borrowing since August 1991 is through the FHLB Overnight Line of Credit Program. The line of credit has a variable rate of interest and matures daily. The maximum amount that can be borrowed under this program is approximately $57 million. The line of credit has a term of one year and expired in August 1997. This program has the same collateral requirement as the Regular Advance Program. At July 31, 1997, the Savings Bank had $20.3 million outstanding under this program.
The Savings Bank has a blanket pledge with the FHLB of New York and has pledged all of its stock in the FHLB, federal funds sold, U.S. agency securities, certain qualifying loans, and mortgage-backed securities.
The following tables set forth certain information regarding borrowings by the Savings Bank.
Subsidiaries
Branchview, Inc. ("Branchview")
Branchview, a New Jersey corporation, owned by the Company has a 6.02% interest in IMC. IMC is a mortgage banking company involved in the origination and securitization of equity mortgage products. See "-- Investment Portfolio".
Lakeview Mortgage Depot, Inc. ("LMD")
LMD, a New Jersey mortgage corporation, is 90% owned by the Company and was formed in October 1995. For the year ended July 31, 1997, the Company recorded net consolidated income before taxes of $229,000. LMD has opened two additional offices during the year, one in South Jersey and one in Pennsylvania. Additional expansion is planned for New York during the 1998 fiscal year.
Lakeview Investment Services, Inc. ("LISI")
LISI was organized by the Savings Bank to provide brokerage and insurance services to the Savings Bank's customers, utilizing the services of Cross Marketing, Inc., a registered broker dealer. LISI is not a significant source of revenues or expenses.
Lakeview Credit Card Services, Inc. ("LCCS")
LCCS, a wholly owned subsidiary of the Savings Bank was formed in January 1996. On October 1, 1996, LCCS entered into a joint venture agreement with IMC Credit Card, Inc., ("IMCC") a wholly owned subsidiary of IMC, to market secured credit cards through IMCC's retail loan centers and correspondents. To date, no revenues have been generated.
North Properties, Inc. ("North Properties")
North Properties, a wholly owned subsidiary of the Savings Bank, was formed in May 1997 to hold real estate owned properties.
Asset/Liability Management
General. The difference between an institution's interest-earning assets and interest-bearing liabilities that mature or reprice within a specified time period, based on certain estimates and assumptions, is called its "gap." At July 31, 1997, the Savings Bank's cumulative one-year gap as a percentage of total assets was a negative 6.5%, making the Savings Bank vulnerable to increases in interest rates. A negative gap position in a period of rising interest rates generally results in a decrease in net interest income. Management of the Savings Bank believes that interest rates may continue to rise and that this could have a material impact on net interest income. When interest rates rise, interest income increases may only occur through the addition of new interest-earning assets at current rates and/or, to the extent that existing assets can be repriced, principally through prepayment and repayment of loan principal with reinvestment in higher rates. Because a higher volume of existing liabilities reprice relative to the assets, interest expense increases more rapidly than interest income. The opposite effect is realized on net interest margin and earnings when interest rates fall. Generally, the rates paid on existing interest-earning assets decrease more slowly than the rate on interest-bearing liabilities due to the difference in shorter repricing terms, with the result that net interest margin and earnings improve.
The Savings Bank, like many other thrift institutions, is subject to interest rate risk as a result of the difference in the maturity on interest-bearing liabilities and interest-earning assets and the volatility of interest rates. Because most deposit accounts react more quickly to market interest rate movements than do traditional mortgage loans because of their shorter terms to maturity, sharp increases in interest rates will generally adversely affect the Savings Bank's earnings. Conversely, this mismatch will generally benefit the Savings Bank during periods of declining or stable interest rates. To reduce the potential volatility of the Savings Bank's earnings, management has adopted a strategy designed to improve the match between asset and liability maturities and rates, while maintaining an acceptable interest rate spread. Pursuant to this strategy, the Savings Bank has been actively originating for retention in its portfolio fixed-rate and balloon mortgage loans with terms to maturity of five, seven and 15 years, and one, three and five year adjustable-rate mortgage loans. At July 31, 1997, approximately $114.0 million or 52.7% of the Savings Bank's loan portfolio consisted of adjustable-rate loans. All 30 year fixed-rate mortgage loans originated by the Savings Bank are sold into the secondary mortgage market.
The Savings Bank's strategy is designed to maintain a mix of adjustable-rate, and 15-year or less fixed-rate mortgage loans in its loan portfolio. In addition, the Savings Bank has purchased five and seven year balloon mortgage-backed securities and has increased its emphasis on making home equity loans which have 15 year terms to maturity and provide for adjustable interest rates.
Gap Analysis. As rates on sources of funds have become deregulated and subject to competitive pressures, savings associations have become increasingly concerned with the extent to which they are able to match maturities of interest-earning assets and interest-bearing liabilities. Such matching is facilitated by examining the extent to which such assets and liabilities are "interest rate sensitive" and by monitoring an institution's interest rate sensitivity "gap." An asset or liability is considered to be interest rate sensitive if it will mature or reprice within a specific time period. The interest rate sensitivity gap is defined as the difference between the amount of interest-earning assets maturing or repricing within a specific time period over interest-bearing liabilities maturing or repricing within that time period. A gap is considered positive when the amount of interest rate sensitive assets exceeds the amount of interest rate sensitive liabilities. A gap is considered negative when the amount of interest rate sensitive liabilities exceeds the amount of interest rate sensitive assets. During a period of rising interest rates, a negative gap theoretically would tend to adversely affect net interest income. Conversely, during a period of falling interest rates, a negative gap position would theoretically tend to result in an increase in net interest income. Based upon the assumptions used in the following table, at July 31, 1997, the Company's total interest-bearing liabilities maturing or repricing within one year exceed its total interest-earning assets maturing or repricing in the same time period by $33.3 million, representing a one-year cumulative "gap," as a percentage of total assets of negative 6.5%. As a result, the Company has limited vulnerability to increases in interest rates.
The following table sets forth the amount of interest-earning assets and interest-bearing liabilities outstanding at July 31, 1997, which are expected to reprice or mature in each of the future time periods shown. The amount of assets or liabilities shown which reprice or mature during a particular period were determined in accordance with the contractual terms of the asset or liability and assumed loan prepayments and deposit withdrawals. The Savings Bank's analysis of its interest-rate sensitivity, which is prepared quarterly by the Savings Bank, incorporates certain assumptions developed by the Savings Bank based on its actual experience concerning the amortization and prepayment of loans and other interest-earning assets and the withdrawal of deposits. Adjustable rate loans, and adjustable rate mortgage-backed securities will reprice at contractual repricing intervals. Fixed rate mortgage-backed securities are assumed to have an annual prepayment rate of 8%. For fixed-rate mortgage loans with the following types of security, the following annual prepayment rates are assumed: 10% for loans secured by one- to four family, 8% for loans secured by multi-family residential, and 8% for nonresidential and commercial property. For other residential loans and all non-residential loans, an annual prepayment rate of 9% was assumed. Decay Rates for NOW, money market accounts, and savings accounts were established at 4% to 30%, 12.5% to 25%, and 4% to 30%, respectively. These assumptions change over time based upon the current economic outlook. Management believes that these assumptions approximate actual experience and considers them appropriate and reasonable. However, the interest rate sensitivity of the Savings Bank's assets and liabilities illustrated in the following table would vary substantially if different assumptions were used or if actual experience differs from that indicated by such assumptions. No consideration has been provided for the impact of future commitments and loans in process.
Certain shortcomings are inherent in the methods of analysis presented in the following table setting forth the maturing and repricing of interest-earning assets and interest-bearing liabilities. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates while interest rates on other types of assets may lag behind changes in market rates. Additionally, certain assets, such as adjustable-rate loans, have features which restrict changes in interest rates both on a short-term basis and over the life of the asset. Further, in the event of a change in interest rates, prepayment and early withdrawal levels would likely deviate significantly from those assumed in calculating the table. Finally, the ability of many borrowers to make scheduled payments on their adjustable-rate loans may decrease in the event of an interest rate increase. As a result, the actual effect of changing interest rates may differ from that presented in the following table.
- ------------------- (1) Includes investment in stock of Federal Home Loan Bank of New York totaling $3.6 million. (2) Includes equity securities.
Net Interest Income
The Savings Bank's earnings depend primarily on its net interest income. Net interest income is affected by (i) the amount of interest-earning assets and interest-bearing liabilities, (ii) rates of interest earned on interest-earning assets and rates paid on interest-bearing liabilities and (iii) the difference ("interest rate spread") between rates of interest earned on interest-earning assets and rates paid on interest-bearing liabilities. When interest-earning assets approximate or exceed interest-bearing liabilities, any positive interest rate spread will generate net interest income.
Average Balance Sheet
The following table sets forth certain information relating to the Savings Bank's average balance sheet and reflects the average yield on assets and average cost of liabilities for the periods indicated and the average yields earned and rates paid. Such yields and costs are derived by dividing income or expense by the average balance of assets or liabilities, respectively, for the periods presented. Average balances are derived from month-end balances. Management does not believe that the use of month-end balances instead of daily average balances has caused any material differences in the information presented.
- --------------------------------- (1) Average balances include non-accrual loans. (2) Includes interest-bearing deposits in other financial institutions and Federal Home Loan Bank of New York stock. (3) Interest-rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities. (4) Net yield on interest-earning assets represents net interest income as a percentage of average interest-earning assets. (5) Annualized (where appropriate) for purposes of comparability with year-end data. (6) At market value.
Rate/Volume Analysis
The table below sets forth certain information regarding changes in interest income and interest expense of the Savings Bank for the periods indicated. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (i) changes in volume (changes in average volume multiplied by old rate); (ii) changes in rates (changes in rate multiplied by old average volume); (iii) changes in rate-volume (changes in rate multiplied by the change in average volume).
Employees
At July 31, 1997, the Savings Bank had 69 full-time and 36 part-time employees. None of the Savings Bank's employees are represented by a collective bargaining group. The Savings Bank believes that its relationship with its employees is good.
REGULATION
Set forth below is a brief description of certain laws which related to the regulation of the Holding Company and the Savings Bank. The description does not purport to be complete and is qualified in its entirety by reference to applicable laws and regulations.
Company Regulation
General. The Holding Company is a unitary savings and loan holding company subject to regulatory oversight by the OTS. As such, the Holding Company is required to register and file reports with the OTS and is subject to regulation and examination by the OTS. In addition, the OTS has enforcement authority over the Holding Company and its non-savings association subsidiaries, should such subsidiaries be formed, which also permits the OTS to restrict or prohibit activities that are determined
to be a serious risk to the subsidiary savings association. This regulation and oversight is intended primarily for the protection of the depositors of the Association and not for the benefit of stockholders of the Holding Company.
Qualified Thrift Lender Test. As a unitary savings and loan holding company, the Holding Company generally is not subject to activity restrictions, provided the Association satisfies the Qualified Thrift Lender ("QTL") test. If the Holding Company acquires control of another savings association as a separate subsidiary, it would become a multiple savings and loan holding company, and the activities of the Holding Company and any of its subsidiaries (other than the Association or any other SAIF-insured savings association) would become subject to restrictions applicable to bank holding companies unless such other associations each also qualify as a QTL and were acquired in a supervisory acquisition. See "-- Regulation of the Savings Bank - Qualified Thrift Lender Test."
Regulation of the Savings Bank
Insurance of Deposit Accounts. The Savings Bank's deposit accounts are insured by the SAIF to a maximum of $100,000 for each insured member (as defined by law and regulation). Insurance of deposits may be terminated by the FDIC upon a finding that the institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC or the institution's primary regulator. The FDIC may also prohibit an insured depository institution from engaging in any activity the FDIC determines to pose a serious threat to the SAIF.
The FDIC charges an annual assessment for the insurance of deposits based on the risk a particular institution poses to its deposit insurance fund, depending upon the institution's risk classification. This risk classification is based on an institution's capital group and supervisory subgroup assignment. In addition, the FDIC is authorized to increase deposit insurance rates on a semi-annual basis if it determines that such action is necessary to cause the balance in the SAIF to reach the designated reserve ratio of 1.25% of SAIF-insured deposits within a reasonable period of time. The FDIC may impose special assessments on SAIF members to repay amounts borrowed from the U.S. Treasury or for any other reason deemed necessary by the FDIC. Prior to September 30, 1996, savings associations paid within a range of .23% to .31% of domestic deposits and the SAIF was substantially underfunded. By comparison, prior to September 30, 1996, members of the Bank Insurance Fund ("BIF"), predominantly commercial banks, were required to pay substantially lower, or virtually no, federal deposit insurance premiums.
Effective September 30, 1996, federal law was revised to mandate a one-time special assessment on SAIF members such as the Savings Bank of approximately .657% of deposits held on March 31, 1995. The Savings Bank recorded a $2.2 million pre-tax expense for this assessment at September 30, 1996. Beginning January 1, 1997, deposit insurance assessments for SAIF members were reduced to approximately .064% of deposits on an annual basis; this rate may continue through the end of 1999. During this same period, BIF members are expected to be assessed approximately .013% of deposits. Thereafter, assessments for BIF and SAIF members should be the same and the SAIF and BIF may be merged. It is expected that these continuing assessments for both SAIF and BIF members will be used to repay outstanding Financing Corporation bond obligations. As a result of these changes, beginning January 1, 1997, the rate of deposit insurance assessed the Savings Bank declined by approximately 70% from rates in effect prior to September 30, 1996.
Capital Requirements. Under FDIC regulations, the Savings Bank is required to maintain a minimum leverage capital requirement consisting of a ratio of Tier 1 capital to total risk-weighted assets of 4%. For institutions other than those most highly rated by the FDIC, an additional "cushion" of at least 100 to 200 basis points is required. Tier 1 capital is the sum of common stockholders' equity, noncumulative perpetual preferred stock (including any related surplus) and minority investments in certain subsidiaries, less certain intangible assets, deferred tax assets, certain identified losses and certain investments in securities subsidiaries. As a SAIF-insured, state-chartered bank, the Savings Bank must currently also deduct from Tier 1 capital an amount equal to its investments in, and extensions of credit to, subsidiaries engaged in certain activities not permissible for national banks.
In addition to the leverage ratio, the Savings Bank must maintain a minimum ratio of qualifying total capital to risk-weighted assets of at least 8.0%, of which at least four percentage points must be Tier 1 capital. Qualifying total capital consists of Tier 1 capital plus Tier 2 or supplementary capital items which include allowances for loan losses in an amount of up to 1.25% of risk-weighted assets, cumulative preferred stock and preferred stock with a maturity of over 20 years and certain other capital instruments. The includable amount of Tier 2 capital cannot exceed the institution's Tier 1 capital. Qualifying total capital is further reduced by the amount of the bank's investments in banking and finance subsidiaries that are not consolidated for regulatory capital purposes, reciprocal cross-holdings of capital securities issued by other banks and certain other deductions. Under the FDIC risk-weighted system, all of a bank's balance sheet assets and the credit equivalent amounts of certain off-balance sheet items are assigned to risk weight categories. The aggregate dollar amount of each category is multiplied by the risk weight assigned to that category. The sum of these weighted values equals the bank's risk-weighted assets.
Pursuant to New Jersey banking law the minimum leverage capital for a depository institution is a ratio of Tier 1 capital to total risk-weighted assets of four percent. However, the Commissioner of the Department may require a higher ratio for a particular depository institution.
New Jersey banking law requires that a depository institution maintain qualifying capital of at least eight percent of its risk weighted assets. At least four percent of this qualifying capital shall be in the form of Tier 1 capital. For purposes of New Jersey banking law, risk weighted assets, Tier 1 capital, and total assets are defined in the same manner as in the FDIC regulations.
The Savings Bank was in compliance with both the FDIC and New Jersey capital requirements at July 31, 1997.
Capital Distributions. Earnings of the Savings Bank appropriated to bad debt reserves and deducted for Federal income tax purposes are not available for payment of cash dividends or other distributions to stockholders without payment of taxes at the then current tax rate by the Savings Bank on the amount of earnings removed from the reserves for such distributions.
Dividends payable by the Savings Bank to the Company and dividends payable by the Company to stockholders are subject to various additional limitations imposed by federal and state laws, regulations and policies adopted by federal and state regulatory agencies. The Savings Bank is required by federal law to obtain FDIC approval for the payment of dividends if the total of all dividends declared by the Savings Bank in any year exceed the total of the Savings Bank's net profits (as defined) for that year and the retained net profits (as defined) for the preceding two years, less any required transfers to surplus. Under New Jersey law, the Savings Bank may not pay dividends unless, following payment, the capital stock of the Savings Bank would be unimpaired and (a) the Savings Bank will have a surplus of not less than 50% of its capital stock, or, if not, (b) the payment of such dividends will not reduce the surplus of the Savings Bank.
Under applicable regulations, the Savings Bank would be prohibited from making any capital distributions if, after making the distribution, the Savings Bank would have: (i) a total risk-based capital ratio of less than 8.0%; (ii) a Tier 1 risk-based capital ratio of less than 4.0%; or (iii) a leverage ratio of less than 4.0%, unless a higher ratio is required by the Commissioner of the Department.
New Jersey banking regulations require that a depository institution maintain qualifying capital of at least 8% of its risk weighted assets. At least 4% of this qualifying capital shall be in the form of Tier 1 capital. For purposes of New Jersey banking law, risk weighted assets, Tier 1 capital, and total assets are defined in the same manner as in the FDIC regulations.
The Savings Bank was in compliance with both the FDIC and New Jersey capital requirements at July 31, 1997.
Federal Home Loan Bank System. The Savings Bank is a member of the FHLB of New York, which is one of 12 regional FHLBs that administers the home financing credit function of savings institutions. Each FHLB serves as a reserve or central bank for its members within its assigned region. The FHLB of New York is funded primarily from proceeds derived from the sale of consolidated obligations of the FHLB System. The FHLB of New York makes loans to members (i.e., advances) in accordance with policies and procedures established by the Board of Directors of the FHLB.
As a member, the Savings Bank is required to purchase and maintain stock in the FHLB of New York in an amount equal to at least 1% of its aggregate unpaid residential mortgage loans, home purchase contracts or similar obligations at the beginning of each year.
Qualified Thrift Lender Test. The Savings Bank must maintain an appropriate level of certain investments ("Qualified Thrift Investments") and otherwise qualify as a "Qualified Thrift Lender" ("QTL"), in order to continue to enjoy full borrowing privileges from the FHLB of New York. The required percentage of Qualified Thrift Investments is 65% of portfolio assets. In addition, savings banks may include shares of stock of the Federal Home Loan Banks, FNMA and FHLMC as qualifying QTL assets. Compliance with the QTL test is measured on a monthly basis in nine out of every 12 months. As of July 31, 1997, the Savings Bank was in compliance with its QTL requirement.
Federal Reserve System. The FRB requires all depository institutions to maintain non-interest bearing reserves at specified levels against their transaction accounts (primarily checking, NOW and Super NOW checking accounts) and non-personal time deposits. The balances maintained to meet the reserve requirements imposed by the FRB may be used to satisfy the liquidity requirements that are imposed by the NJDB. At July 31, 1997, the Savings Bank met these reserve requirements.
State-chartered savings banks have authority to borrow from the Federal Reserve Bank "discount window," but Federal Reserve policy generally requires savings banks to exhaust all reasonable alternative sources before borrowing from the Federal Reserve System. The Savings Bank had no discount window borrowings at July 31, 1997.
Item 2.
Item 2. Properties and Equipment - ----------------------------------
The Company and the Savings Bank operate from their main office and 7 branch offices. The Savings Bank leases three branch offices. The remainder of the branch offices are owned by the Savings Bank.
Item 3.
Item 3. Legal Proceedings - --------------------------
There are various claims and lawsuits in which the Company or the Savings Bank are periodically involved, such as claims to enforce liens, condemnation proceedings on properties in which the Savings Bank holds security interests, claims involving the making and servicing of real property loans, and other issues incident to the Savings Bank's business. In the opinion of management, no material loss is expected from any of such pending claims or lawsuits.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders - ------------------------------------------------------------
None.
PART II
Item 5.
Item 5. Market for Common Equity and Related Stockholder Matters - -----------------------------------------------------------------
The information contained in the section captioned "Market For Common Stock" in the Management Discussion and Analysis of Financial Condition and Results of Operations of the Company's Annual Report to Shareholders for fiscal year ended July 31, 1997 (the "Annual Report") is incorporated herein by reference.
Item 6.
Item 6. Selected Financial Data - --------------------------------
The information contained in the section captioned "Selected Financial Data" of the Annual Report is incorporated herein by reference.
Item 7.
Item 7. Management's Discussion and Analysis or Plan of Operation - ------------------------------------------------------------------
The information contained in the section captioned "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Annual Report is incorporated herein by reference.
Item 8.
Item 8. Financial Statements - -----------------------------
The Company's financial statements listed under Item 14 are incorporated herein by reference.
Item 9.
Item 9. Change In and Disagreements with Accountants on Accounting and Financial - -------------------------------------------------------------------------------- Disclosure - ----------
Not applicable.
PART III
Item 10.
Item 10. Directors and Executive Officers - ------------------------------------------
The information contained under the sections captioned "Section 16(a) Beneficial Ownership Reporting Compliance," "I - Information with Respect to Nominees for Director, Directors Continuing in Office, and Executive Officers" and "Biographical Information" in the Proxy Statement is incorporated herein by reference.
Item 11.
Item 11. Executive Compensation - ---------------------------------
The information contained under the section captioned "Director and Executive Compensation" in the Proxy Statement is incorporated herein by reference.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management - ------------------------------------------------------------------------
(a) Security Ownership of Certain Beneficial Owners
Information required by this item is incorporated herein by reference to the first chart in the section captioned "I - Information with Respect to Nominees for Director, Directors Continuing in Office, and Executive Officers" in the Proxy Statement.
(b) Security Ownership of Management
Information required by this item is incorporated herein by reference to the first chart in the section captioned "I - Information with Respect to Nominees for Director, Directors Continuing in Office, and Executive Officers" in the Proxy Statement.
(c) Management of the Registrant knows of no arrangements, including any pledge by any person of securities of the Registrant, the operation of which may at a subsequent date result in a change in control of the Registrant.
Item 13.
Item 13. Certain Relationships and Related Transactions - --------------------------------------------------------
The information contained under the section captioned "Certain Relationships and Related Transactions" in the Proxy Statement is incorporated herein by reference.
Item 14.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K - --------------------------------------------------------------------------
(a) Listed below are all financial statements and exhibits filed as part of this report.
(1) The consolidated balance sheets of Lakeview Financial Corp. and subsidiaries as of July 31, 1997 and 1996 and the related consolidated statements of income, changes in stockholders' equity and cash flows for each of the years in the three year period ended July 31, 1997, together with the related notes and the independent auditors' report of KPMG Peat Marwick LLP, independent certified public accountants.
(2) Schedules omitted as they are not applicable.
(3) Exhibits
The following exhibits are filed as part of this report.
3.1 Certificate of Incorporation of Lakeview Financial Corp.* 3.2 Bylaws of Lakeview Financial Corp.* 4 Stock Certificate of Lakeview Financial Corp.* 10.1 Form of Lakeview Savings Bank 1993 Stock Option Plans* 10.2 Lakeview Savings Bank Management Stock Bonus Plan and Trust Agreement* 10.3 Employment Agreements** 10.4 Supplemental Retirement Plan for Senior Officers*** 11 Statement re Computation of Earnings Per Share 13 Portions of the 1997 Annual Report to Stockholders 21 Subsidiaries of the Registrant (See - "Part I - Business"). 23 Independent Auditors' Consent 27 Financial Data Schedule (electronic filing only)
* Incorporated herein by reference to the registration statement on Form S-4 (File No. 33-77646). ** Incorporated herein by reference to the Form 10-K for fiscal year ended July 31, 1994. *** Incorporated herein by reference to the Form 10-K for fiscal year ended July 31, 1996.
(b) On September 10, 1997, the Company filed a Form 8-K reporting the announcement of the definitive merger agreement with Westwood Financial Corporation.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized as of October 28, 1997.
LAKEVIEW FINANCIAL CORP.
By: /s/ Kevin J. Coogan ------------------------------------- Kevin J. Coogan President, Chief Executive Officer and Director
Pursuant to the requirement of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities as of October 28, 1997.
By: /s/ Kevin J. Coogan By: /s/ Leo J. Dean ------------------------------------- ----------------------------------- Kevin J. Coogan Leo J. Dean President, Chief Executive Officer Director and Director
By: /s/ Leo J. Costello By: /s/ Michael R. Rowe ------------------------------------- ---------------------------------- Leo J. Costello Michael R. Rowe Chairman of the Board Director
By: /s/ Robert J. Davenport By: /s/ Dennis D. Pedra ------------------------------------- ---------------------------------- Robert J. Davenport Dennis D. Pedra Director Director
By: /s/ Vincent A. Scola By: /s/ Anthony G. Gallo ------------------------------------- ---------------------------------- Vincent A. Scola Anthony G. Gallo Director Vice President and Chief Financial Officer