UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the
Registrant x Filed by a
party other than the Registrant ¨
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material under §240.14a12 |
CMS Bancorp, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Fee computed on table below per Exchange Act Rules 14a6(i)(1) and 011 |
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 011 (set forth the amount on which the
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Fee paid previously with preliminary materials. |
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Check box if any part of the fee is offset as provided by Exchange Act Rule 011(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing. |
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Form, Schedule or Registration Statement No.:
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August 18, 2014
Dear Shareholder:
You are cordially invited to
attend the 2014 Annual Meeting of Shareholders of CMS Bancorp, Inc. (CMS Bancorp), the holding company of CMS Bank (formerly known as Community Mutual Savings Bank), which will be held on Wednesday, September 24, 2014 at 3:00 p.m.,
Eastern Time, at the Crowne Plaza Hotel, located at 66 Hale Avenue, White Plains, New York 10601.
The attached Notice of Annual Meeting
of Shareholders and proxy statement describe the formal business that we will transact at the Annual Meeting. In addition to the formal items of business, management will report on the operations and activities of CMS Bancorp and its subsidiary, CMS
Bank, and you will have an opportunity to ask questions.
The Board of Directors of CMS Bancorp has determined that an affirmative vote on
the matters to be considered at the Annual Meeting is in the best interests of CMS Bancorp and its shareholders and unanimously recommends a vote FOR these matters.
Please complete, sign and return the enclosed proxy card promptly, whether or not you plan to attend the Annual Meeting of
Shareholders. Your vote is important regardless of the number of shares you own. Voting by proxy will not prevent you from voting in person at the Annual Meeting, but will assure that your vote is counted if you cannot attend.
On behalf of the Board of Directors and the employees of CMS Bancorp and CMS Bank, we thank you for your continued support and look forward to
seeing you at the 2014 Annual Meeting of Shareholders.
Sincerely yours,
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William M. Mooney, Jr. Chairman of the Board of
Directors |
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John E. Ritacco President and Chief
Executive Officer |
CMS BANCORP, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
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Date: |
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Wednesday, September 24, 2014 |
Time: |
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3:00 p.m., Eastern Time |
Place: |
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Crowne Plaza Hotel 66 Hale
Avenue White Plains, New York 10601 |
You are invited to attend the meeting in person and if you do, you may cast your vote in person at the
meeting. At the 2014 Annual Meeting of Shareholders of CMS Bancorp, Inc. (CMS Bancorp), we will ask you to:
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elect William M. Mooney, Jr., Gerry Ryan, Robert P. Weisz and William V. Cuddy, Jr. to serve as directors for a term of office to expire in 2017 or until their successors are elected and qualified; and
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ratify the appointment of BDO USA, LLP (BDO) as CMS Bancorps independent registered public accounting firm for the fiscal year ending September 30, 2014; and |
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consider an advisory vote regarding compensation paid by CMS Bancorp to its named executive officers, commonly referred to as a Say on Pay proposal; and |
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transact such other business as may properly come before the 2014 Annual Meeting of Shareholders and any adjournment or postponement thereof. Please note that at this time we are not aware of any such business.
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The Board of Directors has fixed Friday, August 15, 2014 as the record date for the determination of shareholders
entitled to notice of and to vote at the 2014 Annual Meeting of Shareholders and any adjournment or postponement thereof. Only shareholders of record at the close of business on August 15, 2014 will be entitled to notice of and to vote at the
2014 Annual Meeting of Shareholders and any adjournment or postponement thereof.
Important Notice Regarding the Availability of Proxy
Materials for the Shareholder Meeting to Be Held on Wednesday, September 24, 2014:
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The attached Proxy Statement and the CMS Bancorp, Inc. Annual Report for the fiscal year ended September 30, 2013 are available at http://www.astproxyportal.com/ast/15310/. |
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CMS Bancorp also makes available on its internet website (www.cmsbk.com) its Annual Reports on Form 10-K, its Quarterly Reports on Form 10-Q, all of its other filings made with the Securities and Exchange Commission,
any Statements of Changes of Beneficial Ownership (Form 4 Reports) filed by its directors and executive officers, the charters of the Audit, Compensation and Nominating Committees of the Board of Directors, and its Code of Ethics. Information
contained on CMS Bancorps website should not be deemed filed with, and is not incorporated by reference into, this proxy statement or any of CMS Bancorps other filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, except to the extent that CMS Bancorp specifically so provides. |
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By Order of the Board of Directors, |
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Stephen E. Dowd Senior Vice President,
Chief Financial Officer and Secretary |
White Plains, New York
August 18, 2014
You are cordially invited to attend the 2014 Annual Meeting of Shareholders. It is important that your
shares be represented regardless of the number of shares you own. The Board of Directors urges you to sign, date and mark the enclosed proxy card promptly and return it in the enclosed envelope. Returning the proxy card will not prevent you from
voting in person if you attend the 2014 Annual Meeting of Shareholders.
CMS BANCORP, INC.
123 Main Street
White
Plains, New York 10601
(914) 422-2700
PROXY STATEMENT FOR THE
2014 ANNUAL MEETING OF SHAREHOLDERS
To Be Held on September 24, 2014
INFORMATION ABOUT THE ANNUAL MEETING
General
CMS Bancorp, Inc. (CMS Bancorp), a Delaware corporation, is registered as a savings and loan holding company with the Board of
Governors of the Federal Reserve System (Federal Reserve) and owns all of the capital stock of CMS Bank (formerly known as Community Mutual Savings Bank). CMS Bancorps common stock is listed on the NASDAQ Capital Market under the
symbol CMSB. As used in this proxy statement, we, us and our refer to CMS Bancorp and its subsidiaries, unless the context requires otherwise. The term Annual Meeting, as used in this proxy
statement, includes the 2014 Annual Meeting of Shareholders and any adjournment or postponement of such meeting.
We have sent you this
proxy statement and enclosed proxy card because the Board of Directors is soliciting your proxy to vote at the Annual Meeting. This proxy statement summarizes the information you will need to know to cast an informed vote at the Annual Meeting. You
do not need to attend the Annual Meeting to vote your shares. You may simply complete, sign and return the enclosed proxy card and your votes will be cast for you at the Annual Meeting. This process is described below in the section entitled
Voting Rights.
We began mailing this proxy statement, the Notice of Annual Meeting of Shareholders and the enclosed proxy
card on or about August 18, 2014 to all shareholders entitled to vote. If you owned common stock of CMS Bancorp at the close of business on August 15, 2014, the record date, you are entitled to vote at the Annual Meeting. On the record
date, there were 1,862,803 shares of CMS Bancorp common stock outstanding, each of which is entitled to one vote.
Voting Rights
If you beneficially own 10% or less of the outstanding common stock of CMS Bancorp as of close of business on August 15, 2014, the record
date, then you are entitled to one vote at the Annual Meeting for each share of common stock that you owned as of the record date.
If you
beneficially own more than 10% of the outstanding common stock of CMS Bancorp as of the record date, then please note that, as set forth in CMS Bancorps Certificate of Incorporation, each share in excess of 10% is deemed an Excess
Share, and that you are entitled to cast only one one-hundredth (1/100) of a vote per Excess Share at the Annual Meeting. You are, however, entitled to one vote per share for each share that is at or below the 10% threshold
that is not deemed an Excess Share.
You may vote your shares at the Annual Meeting in person or by proxy. To vote in
person, you must attend the Annual Meeting and obtain and submit a ballot, which we will provide to you at the Annual Meeting. To vote by proxy, you must complete, sign and return the enclosed proxy card. If you properly complete your proxy card and
send it to us in time to vote, your proxy (one of the individuals named on your proxy card) will vote your shares as you have directed. If you sign the proxy card but do not make specific choices, your proxy will vote your shares
FOR proposals 1, 2, and 3 as identified in the Notice of Annual Meeting of Shareholders.
If any other matter is
presented, your proxy will vote the shares represented by all properly executed proxies on such matters as a majority of the Board of Directors determines. As of the date of this proxy statement, we know of no other matters that may be presented at
the Annual Meeting, other than that listed in the Notice of Annual Meeting of Shareholders.
Vote Required
Proposal 1: Election of Directors. To be elected, a nominee for director must receive a plurality of the votes cast at the Annual
Meeting. If you do not vote for a nominee, or you indicate WITHHOLD AUTHORITY for a nominee on your proxy card, your vote will not count FOR or AGAINST the nominee. You may not vote your shares cumulatively for
the election of the director nominees.
Proposal 2: Ratification of the Appointment of Independent Registered Public Accounting
Firm. Approval of Proposal 2 requires the affirmative vote of the majority of shares present in person or represented by proxy at the Annual Meeting and entitled to vote on the proposal. If you ABSTAIN from voting, it will have
the same effect as if your vote was cast AGAINST this proposal.
Proposal 3: Non-binding Advisory Vote on Executive
Compensation (Say on Pay). Approval of Proposal 3 requires the affirmative vote of the majority of shares present in person or represented by proxy at the Annual Meeting and entitled to vote on the proposal, and will constitute
the shareholders non-binding approval with respect to the compensation paid to our named executive officers. If you ABSTAIN from voting, it will have the same effect as if your vote was cast AGAINST this proposal.
Quorum and Effect of Broker Non-Votes and Abstentions
The presence, in person or by a duly submitted proxy, of the holders of a majority in total number of votes of the issued and outstanding
shares of common stock entitled to vote at the Annual Meeting is necessary to constitute a quorum in order to transact business at such meeting. If you are a stockholder of record and do not vote by proxy card or in person at the Annual Meeting,
your shares will not be voted at the Annual Meeting and will not be included in determining the presence of a quorum at the Annual Meeting.
A broker non-vote occurs when shares held by a bank, broker or other nominee are not voted with respect to a particular proposal because the
nominee does not have discretionary authority to vote on the matter and has not received voting instructions from its clients. If your bank, broker or other nominee holds your shares in its name and you do not instruct your broker how to vote, your
broker will only have discretion to vote your shares on routine matters. Where a proposal is not routine, a bank, broker or other nominee who has not received instructions from its clients does not have discretion to vote its
clients uninstructed shares on that proposal. At our Annual Meeting, only Proposal No. 2 (ratification of the selection of BDO as our independent registered public accounting firm for the fiscal year ended September 30, 2014) is
considered a routine matter. Your bank, broker or other nominee does not have discretion to vote your shares on non-routine matters, such as Proposals 1 and 3, absent direction from you.
Shares represented by abstentions and broker non-votes will be included in determining the presence of a quorum at the Annual Meeting. With
respect to Proposal 1, only votes For, Against, or Withhold Authority will affect the outcome, and abstentions and broker non-votes will have no effect on the outcome. Abstentions with respect to Proposals 2 and 3
will have the same effect as a vote Against these proposals. Broker non-votes will have no effect on the outcome of Proposal 3.
Revoking
Your Proxy
You may revoke your grant of proxy at any time before it is voted by:
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filing a written revocation of the proxy with Stephen E. Dowd, the Secretary of the Annual Meeting; |
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submitting a signed proxy card bearing a later date; or |
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attending the Annual Meeting, filing a written revocation with the Secretary of the Annual Meeting, and thereafter voting in person at the Annual Meeting. |
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If your shares are not registered in your own name, you will need appropriate documentation
from your shareholder of record to vote personally at the Annual Meeting. Examples of such documentation include a brokers statement, letter or other document that will confirm your ownership of shares of CMS Bancorp.
Solicitation of Proxies
CMS Bancorp will
pay the costs of soliciting proxies from its shareholders. Directors, officers or employees of CMS Bancorp and CMS Bank may solicit proxies by mail, telephone and other forms of communication. We will also reimburse banks, brokers, nominees and
other fiduciaries for the expenses they incur in forwarding the proxy materials to you.
Obtaining an Annual Report on Form 10-K
Annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports are available free
of charge from our website, www.cmsbk.com, in the Investor Relations section under SEC Filings. These reports are also available on the U.S. Securities and Exchange Commissions (SEC) website at
www.sec.gov.
If you would like a copy of our Annual Report on Form 10-K for the fiscal year ended September 30, 2013, we
will send you one (without exhibits) free of charge. Please send a request for a copy of the annual report to us at our principal executive offices: CMS Bancorp, Inc., Attn: Corporate Secretary, 123 Main Street, White Plains, New York 10601.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Principal Shareholders of CMS Bancorp
The
following table contains common stock ownership information for persons known to CMS Bancorp to beneficially own 5% or more of CMS Bancorps common stock as of August 15, 2014. In general, beneficial ownership includes those
shares that a person has the power to vote, sell or otherwise dispose of. Beneficial ownership also includes that number of shares that an individual has the right to acquire within 60 days (such as stock options) after August 15, 2014. Two or
more persons may be considered the beneficial owner of the same shares. CMS Bancorp obtained the information provided in the following table from filings with the SEC and from its corporate records.
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Title of Class |
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Name and Address of
Beneficial Owner |
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Amount and Nature of Beneficial Ownership |
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Percent of Class |
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Common Stock, par value $0.01 per share |
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Roger Feldman and Harvey Hanerfeld 1919 Pennsylvania Ave., NW
Suite 725
Washington, DC 20006 |
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170,188 |
(1) |
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9.14 |
% |
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Common Stock, par value $0.01 per share |
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Employee Stock Ownership Plan of CMS Bancorp, Inc.
123 Main Street
White Plains, NY 10601 |
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162,983 |
(2) |
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8.75 |
% |
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Common Stock, par value $0.01 per share |
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Cross River Capital Management LLC 456 Main Street, 2nd Floor
Ridgefield, CT 06877 |
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193,637 |
(3) |
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10.39 |
% |
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Common Stock, par value $0.01 per share |
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M3 Funds, LLC
10 Exchange Place, Suite 510
Salt Lake City, UT 84111 |
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153,102 |
(4) |
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8.22 |
% |
(1) |
Based on information reported by Roger Feldman and Harvey Hanerfeld on a Schedule 13G/A filed with the SEC on February 13, 2009. As sole owners and managing members of West Creek Capital, LLC, a Delaware limited
liability company (formerly West Creek Capital, L.P., a Delaware limited partnership) that is the investment adviser to (i) West Creek Partners Fund L.P., a Delaware limited partnership (Partners Fund), and (ii) WC Select L.P.,
a Delaware limited partnership (Select), Mr. Feldman and Mr. Hanerfeld may be deemed to have the shared power to direct the voting and disposition of the 53,680 shares of Common Stock owned by Partners Fund, and the 114,299
shares of Common Stock owned by Select. In addition to the shared beneficial ownership amount of 167,979 shares, the amount reported in the table above also includes the shares held by each of Roger Feldman and Harvey Hanerfeld individually where
each person has sole dispositive power. Specifically, Roger Feldman has the sole power to vote or direct the voting of and to dispose and to direct the disposition of the 1,104 shares beneficially owned by him as an individual, and Harvey Hanerfeld
has the sole power to vote or direct the voting of and to dispose and to direct the disposition of the 1,105 shares beneficially owned by him as an individual. |
(2) |
Based on information reported by First Bankers Trust Services, Inc. as Trustee of Employee Stock Ownership Plan of CMS Bancorp, Inc. on a Schedule 13G
filed with the SEC on January 23, 2014. The Employee Stock Ownership Plan of CMS Bancorp, Inc. (the ESOP) is a tax qualified employee stock ownership plan under the Employee Retirement Income Security Act of 1974, as amended
(ERISA), with individual accounts for the accrued benefits of participating employees and their beneficiaries. The ESOPs assets are held in trust by First Bankers Trust Services, Inc., as plan trustee (the Plan
Trustee). The number of shares listed as beneficially owned represents the entire number of shares of CMS Bancorp common stock held by the Plan Trustee as of December 31, 2013. As of December 31, 2013, 36,933 shares of CMS Bancorp
common stock had been allocated to individual accounts established for participating employees and their beneficiaries, and 120,050 shares were held, unallocated, for allocation in future years. In general, participating employees and their
beneficiaries have the power and authority to direct the voting |
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of shares of CMS Bancorp common stock allocated to their individual accounts. The ESOP, through the Plan Trustee, has shared voting power over unallocated CMS Bancorp common stock. Any
unallocated CMS Bancorp common stock is generally required to be voted by the Plan Trustee in the same proportion as CMS Bancorp common stock which has been allocated to Participants is directed to be voted. The reporting person, through the Plan
Trustee shares dispositive power over all unallocated CMS Bancorp common stock held by the ESOP. The ESOP, acting through the Plan Trustee shares dispositive power over allocated CMS Bancorp common stock with participating employees and their
beneficiaries, who have the right to determine whether CMS Bancorp common stock allocated to their respective accounts will be tendered in response to a tender offer but otherwise have no dispositive power. Any unallocated CMS Bancorp common stock
is generally required to be tendered by the Plan Trustee in the same proportion as CMS Bancorp common stock which has been allocated to Participants is directed to be tendered. In limited circumstances, ERISA may confer upon the Plan Trustee the
power and duty to control the voting and tendering of CMS Bancorp common stock allocated to the accounts of participating employees and beneficiaries who fail to exercise their voting and/or tender rights. The ESOP disclaims voting power with
respect to such allocated CMS Bancorp common stock. |
(3) |
Based on information reported by Cross River Capital Management LLC, Cross River Partners LP and Richard Murphy on a Schedule 13G/A filed with the SEC on February 14, 2013, which reported shared voting power with
respect to 193,637 shares. |
(4) |
Based on information reported by M3 Funds, LLC on a Schedule 13G filed with the SEC on February 12, 2014. All of the reported shares are owned directly by M3 Partners, L.P., whose general partner is M3 Funds, LLC
and whose investment adviser is M3F, Inc. Jason A. Stock and William C. Waller are the managers of the General Partner and the managing directors of the Investment Adviser, and could be deemed to share such indirect beneficial ownership with the
General Partner, the Investment Adviser and M3 Partners. |
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Security Ownership of Directors and Management
The following table shows the number of shares of CMS Bancorps common stock beneficially owned by each director, each executive officer
appearing in the Summary Compensation Table, and all directors and executive officers of CMS Bancorp as a group, as of August 15, 2014. In general, beneficial ownership includes those shares that a person has the power to vote, sell
or otherwise dispose of. Beneficial ownership also includes that number of shares that an individual has the right to acquire (such as upon the exercise of stock options) within 60 days after August 15, 2014.
Except as otherwise indicated, each person and each group shown in the table has sole voting and investment power with respect to the shares
of common stock listed next to his or her name.
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Title of Class |
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Name of Beneficial Owner
and Position with CMS Bancorp |
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Amount and Nature of Beneficial Ownership(1)(2) |
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Percent of Common Stock Outstanding |
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Common Stock,
par value $0.01 per share |
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William V. Cuddy, Jr., Director |
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42,350 |
(3) |
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2.27 |
% |
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Common Stock,
par value $0.01 per share |
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Stephen E. Dowd, Senior Vice President and Chief Financial Officer |
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42,885 |
(4) |
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2.27 |
% |
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Common Stock,
par value $0.01 per share |
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William P. Harrington, Director |
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15,792 |
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Common Stock,
par value $0.01 per share |
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Susan A. Massaro, Director |
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23,295 |
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1.25 |
% |
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Common Stock,
par value $0.01 per share |
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Cheri R. Mazza, Director |
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16,800 |
(6) |
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* |
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Common Stock,
par value $0.01 per share |
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Matthew G. McCrosson, Director |
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20,104 |
(7) |
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1.08 |
% |
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Common Stock,
par value $0.01 per share |
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William M. Mooney, Jr., Chairman |
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9,019 |
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* |
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Common Stock,
par value $0.01 per share |
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John E. Ritacco, President, Chief Executive Officer and Director |
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85,158 |
(8) |
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4.45 |
% |
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Common Stock,
par value $0.01 per share |
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Gerry Ryan, Director |
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9,533 |
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* |
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Common Stock,
par value $0.01 per share |
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Christopher Strauss, Senior Vice President and Senior Lending Officer |
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39,783 |
(9) |
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2.11 |
% |
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Common Stock,
par value $0.01 per share |
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Robert P. Weisz, Director |
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83,083 |
(10) |
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4.45 |
% |
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Common Stock,
par value $0.01 per share |
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Mauro C. Romita, Director |
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9,647 |
(5) |
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* |
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All Executive Officers and Directors as a Group (12 Persons) |
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397,449 |
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19.81 |
% |
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Less than 1.0% of the total outstanding shares of common stock. |
(1) |
Based on a total of 1,862,803 shares of CMS Bancorps common stock outstanding (including shares held for the CMS Bancorp, Inc. 2007 Recognition and Retention Plan (the RRP) by the trustee) as of
August 15, 2014. |
(2) |
Includes unvested shares of restricted stock awards held in trust as part of the RRP, with respect to which the beneficial owner has voting but not
investment power as follows: Mr. Dowd 1,104 shares; Mr. Harrington, 400 shares; Mr. Weisz 800 shares; Mr. Mooney 1,811 shares; Mr. Ryan 900 shares ; Mr. Romita 900 shares and Mr. Strauss 1,151 shares.
Includes vested options to purchase shares of |
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common stock at $10.12 per share as part of the CMS Bancorp, Inc. 2007 Stock Option Plan as follows: Mr. Cuddy 6,000 shares; Mr. Dowd 22,000 shares; Ms. Massaro
6,000 shares; Ms. Mazza 6,000 shares; Mr. McCrosson 6,000 shares; Mr. Ritacco 51,377 shares; and Mr. Strauss 22,000 shares. Includes vested options to purchase shares of common stock at $7.25
per share as part of the CMS Bancorp, Inc. 2007 Stock Option Plan as follows: Mr. Dowd 2,000 shares; and Mr. Strauss 2,000 shares. Includes vested options to purchase shares of common stock at $8.66 per share as part of the
CMS Bancorp, Inc. 2007 Stock Option Plan as follows: Mr. Dowd 1,500 shares; and Mr. Strauss 1,500 shares. Includes vested options to purchase shares of common stock at $8.35 per share as part of the CMS Bancorp, Inc. 2007
Stock Option Plan as follows: Mr. Harrington 4,800 shares. Includes vested options to purchase shares of common stock at $8.04 per share as part of the CMS Bancorp, Inc. 2007 Stock Option Plan as follows: Mr. Weisz 3,600
shares. Includes vested options to purchase shares of common stock at $8.04 per share as part of the CMS Bancorp, Inc. 2007 Stock Option Plan as follows: Mr. Mooney 4,000 shares and Mr. Ryan 2,400 shares. Includes vested
options to purchase shares of common stock at $8.00 per share as part of the CMS Bancorp, Inc. 2007 Stock Option Plan as follows: Mr. Romita 2,400 shares. |
(3) |
Includes 10,000 shares held in the name of Mr. Cuddys spouse. |
(4) |
Includes 3,000 shares held in an individual retirement account (IRA) for the benefit of Mr. Dowd. |
(5) |
Held in the name of Mauro C. Romita Revocable Trust dated May 13, 2011. Mr. Romita is the sole trustee and has sole voting and investment control over the trust, and can benefit from the trust in its entirety.
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(6) |
Includes 4,800 shares held in an IRA for the benefit of Ms. Mazza. |
(7) |
Includes 3,750 shares held in a SEP for the benefit of Mr. McCrosson. |
(8) |
Includes 10,325 shares held in an IRA for the benefit of Mr. Ritacco, 1,390 shares held in an IRA for the benefit of Mr. Ritaccos spouse, 225 shares held in the name of Mr. Ritaccos daughter
and 100 shares held in the name of Mr. Ritaccos son. |
(9) |
Includes 1,230 shares held in an IRA for the benefit of Mr. Strauss and 8,800 shares are pledged as collateral for a loan. |
(10) |
Includes 77,483 shares held in the name of 800-60 Westchester Avenue LLC, a company owned by Mr. Weisz. |
(11) |
Held in the name of Mauro C. Romita Revocable Trust dated May 13, 2011. Mr. Romita is the sole trustee and has sole voting and investment control over the trust, and can benefit from the trust in its entirety.
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PROPOSAL 1
ELECTION OF
DIRECTORS
GENERAL
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NOMINEES |
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TERM TO EXPIRE |
WILLIAM M. MOONEY, JR. |
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2017 |
GERRY RYAN |
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2017 |
ROBERT P. WEISZ |
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2017 |
WILLIAM V. CUDDY JR. |
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2017 |
Directors Mooney, Ryan, Weisz and Cuddy are currently serving on our Board of Directors. If elected, each of
them will continue to hold office until the annual meeting in 2017 or their successors have been elected and qualified. Each of the nominees has consented to being named in this proxy statement, and to serve if elected.
If, for any reason, any of the nominees proves unable or unwilling to stand for election, the Board of Directors will nominate alternates or
reduce the size of the Board of Directors to eliminate the vacancy and, if any of the nominees is unable to serve, your proxy may vote for another nominee proposed by the Board of Directors. The Board of Directors has no reason to believe that any
of its nominees would prove unable to serve if elected.
Nominees and Continuing Directors
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Nominees |
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Age(1) |
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Position with CMS Bancorp |
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Director Since(2) |
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Term Expires |
William M. Mooney, Jr. |
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73 |
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Chairman |
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2011 |
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2014 |
Gerry Ryan |
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49 |
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Director |
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2011 |
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2014 |
Robert P. Weisz |
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60 |
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Director |
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2010 |
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2014 |
William V. Cuddy, Jr. |
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54 |
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Director |
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1994 |
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2014 |
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Continuing Directors |
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William P. Harrington |
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56 |
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Director |
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2009 |
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2015 |
Susan A. Massaro |
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57 |
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Director |
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1998 |
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2015 |
Cheri R. Mazza |
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55 |
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Director |
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2006 |
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2016 |
Matthew G. McCrosson |
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63 |
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Director |
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2004 |
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2015 |
John E. Ritacco |
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59 |
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President, Chief Executive Officer and Director |
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2005 |
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2016 |
Mauro C. Romita |
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74 |
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Director |
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2011 |
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2016 |
(1) |
As of September 30, 2013. |
(2) |
Includes service as a trustee of CMS Bank prior to the formation of CMS Bancorp in 2007, if applicable. |
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DIRECTOR AND OFFICER BIOGRAPHICAL INFORMATION
The principal occupation and business experience of each director are set forth below. Unless otherwise indicated, each of the following
persons has held his or her present position for the last five years. Moreover, unless otherwise indicated, no company or organization at which a director is principally employed is a parent, subsidiary or affiliate of CMS Bancorp.
Nominees
William
M. Mooney, Jr., is President of The Westchester County Association, a business-based membership organization committed to addressing public policy issues with respect to business advocacy and economic development on behalf of the
regions corporate and not-for-profit organizations. Under Mr. Mooneys leadership, The Westchester County Association has been an effective advocate for business on important issues including healthcare reform and property taxes. He
was recently selected by Governor Andrew M. Cuomo to serve on the Mandate Relief Redesign Team. Mr. Mooney has been a director of Debt Resolve, Inc., a NASDAQ-listed company, since April 2003.
Before being elected as President of The Westchester County Association in 2004, Mr. Mooney had a long and distinguished career in the
banking industry, most recently at Independence Community Bank where he was responsible for all business activities in Westchester and Connecticut. Prior to that he held senior executive positions with Union State Bank, where he managed retail
banking activities and business development, and Chase Manhattan Bank and Chemical Bank, where he was responsible for all retail and small business activities in the New York metropolitan area. He also served as President and CEO of Hudson Valley
Bank. He began his banking career with Citibank.
Mr. Mooney is a valued member of the Board of Directors, and as Chairman, his
contributions as an experienced business leader in the banking sector as well as his deep-rooted community ties are invaluable to the Board. In addition to his business leadership experience, Mr. Mooney is deeply committed to the community
through his many philanthropic activities with not-for-profit and educational organizations. He has served as a chairman of the board of numerous organizations including United Way of Westchester and Putnam Counties, St. Thomas Aquinas College, The
Westchester County Association, American Heart Walk, Westchester Partnership for Economic Development, CYO Rockland County, Red Cross Rockland County and Rockland Center for the Arts.
Gerry Ryan is President and Chief Executive Officer of DGC Capital Contracting Corp., a premier contractor serving the retail
and commercial sectors. Based in Mount Vernon, NY, the company provides construction services for a wide range of retail and commercial uses including supermarkets, hotels, offices, department stores, banks, home building supply stores, gyms and
restaurants. The company also provides construction services for institutions including medical centers, public schools, colleges and libraries.
Born and raised in Ireland, Mr. Ryan immigrated to the U.S. in 1985. Over the years, he along with his partners, went on to start several
construction companies. In 1996, they formed Discover General Contracting which later merged with Capital Installation Corp. to create todays DGC Capital Contracting Corp.
Mr. Ryan is actively involved in the local community serving as Chairman of the Mount Vernon Chamber of Commerce. He also serves on the
board of the Mamaroneck International Jazz Festival which debuts this year. In 2002, Mr. Ryan was recognized for his work with the Fulfilling a Dream Fund by being awarded for the second time the prestigious Ernst & Young Entrepreneur
of the Year Award.
The Board of Directors values the depth of Mr. Ryans leadership skills as well as background and diverse
viewpoint regarding real estate construction matters. In particular, Mr. Ryan provides CMS Bancorp and CMS Bank with an extensive knowledge of the real estate construction market, and provides valuable assistance in building relationships with
owners, investors, developers and the corporate community. Mr. Ryan is also valued by the Board of Directors for his marketing and transaction skills.
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Robert Weisz is Chairman and Chief Executive Officer of the RPW Group, Inc., the
largest private owner of Class A office buildings in Westchester County, as well as one of the largest land holders in Westchester, NY. RPW Group, Inc. was founded in 1979 by Mr. Weisz and is a fully integrated real
estate organization providing ownership, in-house management, construction, and maintenance of all of its buildings. Mr. Weisz serves on the Board of Directors of the Westchester County Association, New Rochelle Police Foundation, Arts of
Westchester, and Mount Vernon Chamber of Commerce. He is also Chairman of the Board of Reaching U, a non-profit organization located in the U.S. which works for low-income mothers and children in Uruguay.
In addition to Mr. Weiszs expertise in property development and construction management, the Board of Directors values the
extensive leadership and business experience that Mr. Weisz brings to the Board of Directors, in large part due to Mr. Weiszs current role as Chairman and Chief Executive Officer of the RPW Group, Inc. Mr. Weisz has evaluated
the credit of over 300 tenants and has been involved in acquisitions in excess of half a billion dollars in assets, the knowledge and experience of which is immediately pertinent to the work and focus of the Board of Directors.
William V. Cuddy, Jr. serves as Executive Vice President of CBRE Group, Inc., providing commercial real estate brokerage and
consulting services to regional and national clients for over 29 years. He leads a team of professionals in providing corporate real estate services including tenant representation (regional and national), as well as agency sales and leasing. CB
Group, Inc. has recognized Mr. Cuddy as its top producing broker numerous times and he was awarded the NAIOP Deal of the Year six times for various sales and lease transactions.
Mr. Cuddys present and past leadership positions have included serving as a director of The Burke Hospital Foundation since 2009;
director of The Burke Research Institute since 2006; and Director (2001-2009) and Past President of The Burke Rehabilitation Hospital (2007-2009); Member, Board of Stewards and Past President (2007) with the Friendly Sons of St. Patrick in
Westchester County; Board member at Mercy College (1996-2005); and Director of the Westchester County Association (WCA) since 2010. Mr. Cuddy is also currently serving as Chairman of the WCA Economic Development Task Force.
The Board of Directors values the depth of Mr. Cuddys background and expertise in real estate matters. In particular,
Mr. Cuddy provides CMS Bancorp and CMS Bank with an extensive knowledge of the regional commercial real estate market, and provides valuable assistance in fostering relationships with owners, investors, developers and the corporate community.
Mr. Cuddy is also valued for his marketing and transaction skills.
Continuing Directors
William P. Harrington is a Partner and Chairman of the Management Committee of Bleakley Platt & Schmidt, LLP, a full
service law firm with offices in White Plains, New York and Greenwich, Connecticut. Mr. Harrington has been employed with Bleakley Platt & Schmidt, LLP since August of 1983. He is also the head of the Litigation and Toxic Tort/Complex
Litigation Practice Groups, member of the Environmental Practice Group, and member of the firms Executive Committee. Mr. Harrington is the Chairman of the Westchester County Association and a member of the Board of Trustees of Elizabeth
Seton Pediatric Center, St. Josephs Seminary and College, The Friendly Sons of St. Patrick in the County of Westchester, Inner City Scholarship Fund of the Archdiocese of New York, Dominican Sisters of Hope Health System, Capuchin Franciscans
of the Province of St. Mary, and Knights of St. Patrick. He is also a member of the Board of Directors of TBS International, Ltd (TBSI), a NASDAQ-listed company, and serves as TBSIs Lead Independent Director and the Chair of its
Governance Committee.
The Board of Directors values Mr. Harringtons depth of legal experience as an attorney for over 27 years
representing significant regional and national clients in commercial, environmental, labor and land use litigation, which has provided Mr. Harrington with a strong familiarity with CMS Banks target market, its constituents and potential
clients. Mr. Harringtons extensive participation as a member of the various charitable and business
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organizations mentioned above has enabled Mr. Harrington to develop personal relationships throughout the region with significant business leaders, and has allowed Mr. Harrington to
also develop an enhanced knowledge of the local community which is necessary for CMS Banks growth and success. Mr. Harringtons strong financial analytical skills regarding business management, stability and growth make him a
valuable member of the Board of Directors.
Susan A. Massaro has been Executive Vice President, Professional Services of
Scivantage, Inc. a provider of brokerage solutions, and predecessor company Nova Corporation since 2001; and Senior Vice President, Internet Solutions of Qwest Communications and predecessor company Icon CMT Corp. from 1996 to 2001. Ms. Massaro
also worked for Data General Corporation from 1979 to 1996 in various information technology technical and management capacities, ending as Director of U.S. Professional Services. Ms. Massaro is an information technology professional with
extensive executive-level business and financial operations leadership and management experience in IT service delivery and consulting services.
The Board of Directors values Ms. Massaros experience in leveraging software solutions and technologies to practically, efficiently
and economically manage and grow business, which enables her to advise CMS Bancorp in the areas of operations, compliance and IT security. With her significant experience in managing large organizations, corporate compensation, staff evaluation and
human resources, Ms. Massaro provides leadership to the Board of Directors Compensation Committee. Combining these skills with her experience in working with emerging company environments and in leading due diligence efforts for potential
acquisitions with several completed transactions and assimilations, Ms. Massaro contributes considerably to the strategic matters and risk management issues that are subjects of focus for the Board of Directors.
Cheri R. Mazza, Ph.D. is an Associate Professor of Accounting for the John F. Welch School of Business at Sacred Heart
University in Fairfield, CT. Prior to joining Sacred Heart, she was a professor at Fordham University (2000-2009) and a project manager (1994-2000) for the Financial Accounting Standards Board (FASB). Dr. Mazza also has experience in the
corporate taxation area of public accounting. She is a Certified Public Accountant (CPA) and a Certified Management Accountant (CMA).
Dr. Mazzas research encompasses issues in contemporary financial reporting, standard setting, and quality of earnings. She has
published numerous articles in academic and professional journals including The Accounting Review, Accounting Horizons, Journal of Behavioral Finance, Journal of Accountancy, Financial Analysts Journal, and The Journal of Corporate Accounting
and Finance. In addition, she co-authored three financial accounting portfolios for The Bureau of National Affairs.
Dr. Mazza is a
highly educated and experienced accounting professional who brings a wealth of knowledge to the Board of Directors in the financial accounting area. Her extensive experience in teaching, research, and standard setting provides CMS Bancorp and CMS
Bank with a high level of expertise in matters related to financial reporting and the application of generally accepted accounting principles all of which enhance her leadership as Chairperson of the Audit Committee. The Board of Directors
particularly values Dr. Mazzas significant experience gained through, among other qualifications, six years with FASB in standard setting, her Ph.D. in accounting, and academic experience in both teaching and research.
Matthew G. McCrosson is a partner in charge of consulting for OConnor, Davies, Munns & Dobbins LLP
(ODMD) Accountants and Consultants, where he has been employed since 2000. Mr. McCrosson provides performance improvement based advisory services in addition to organizational and operational reviews. He has assisted many clients in
reviewing their technology platforms in terms of alternative systems and system selection and implementation coordination. He also leads ODMD Internal Audit practice initiatives. Prior to joining ODMD in 2000, Mr. McCrosson was with KPMG
Consulting, in the firms Public Services line of business. Earlier in his career, Mr. McCrosson served as chief financial officer or chief operating officer of several national and regional not-for-profit organizations. He holds a BS in
accounting and MBA in finance with a second MBA concentration in information systems from Manhattan College, where he serves in the Mentor
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Program. Mr. McCrosson serves on the Boards of the Business Council of Westchester and Westchester Community College Foundation. He is Chairman of the Westchester Community Foundation.
The Board of Directors values Mr. McCrossons financial expertise and diversity of business experience in the technological arena,
among other qualities. Mr. McCrosson is one of two directors on the Board of Directors designated as an audit committee financial expert, as that term is defined by SEC regulations. The Board of Directors particularly values
Mr. McCrossons unique combination of financial and accounting expertise and knowledge of technology matters.
John E.
Ritaccos banking career spans more than three decades serving in various management and executive positions for major financial institutions. Mr. Ritacco has served as the President and Chief Executive Officer of CMS Bank
since 2005 and serves as a member of the Board of Directors of both CMS Bancorp and CMS Bank. Mr. Ritacco is actively involved in numerous Westchester County charitable organizations, having served on the Board of the March of Dimes and Junior
Achievement of Hudson Valley where he was the Chairman of the Board from 2003-2005. Currently Mr. Ritacco serves on the Board of the Westchester County Association, the largest business association in Westchester County. Mr. Ritacco is a
graduate of the University of Rhode Island where he earned a Bachelor of Arts Degree in History/Political Science in 1976.
Mr. Ritacco possesses a far-ranging depth of experience in the financial services industry, having worked for several financial
institutions in various capacities including retail banking, small business and corporate lending, corporate finance and sales management. His extensive knowledge of the industry and strong leadership skills provide CMS Bancorp and CMS Bank with
invaluable leadership, insight and guidance into the business and regulatory requirements of todays banking environment.
Mauro C. Romita is President and Chief Operating Officer of Castle Oil Corporation (Castle). He joined Castle in
1968 after practicing law in New York City. The company is the largest independent owner-operator of petroleum terminals and distributor of fuel oil in the New York metropolitan area. Mr. Romita oversees the operations of all domestic and
international areas of Castle and its subsidiaries, including product supply and marketing, sales, terminals, trucking operations, service, and administrative functions. Mr. Romita earned his Bachelor of Arts degree in 1961 from Iona College,
where he majored in Spanish language and literature with a minor concentration in Italian literature. In 1965, he received his Juris Doctor degree from New York Law School, and is registered to practice law in the State of New York. In addition to
his responsibilities at Castle, Mr. Romita is a dedicated participant in diverse educational and charitable organizations and has been a recipient of numerous awards and accolades.
Mr. Romitas vast business experience and contacts in Westchester County, the primary target area for CMS Bancorp, and his high
level of participation in numerous charitable, educational and civic organizations have enabled Mr. Romita to develop personal relationships throughout the region with significant business leaders, and have allowed Mr. Romita to also
develop an enhanced knowledge of the local community which is necessary for CMS Banks growth and success. Mr. Romitas strong financial analytical skills regarding business management, stability and growth make him a valued member of
the Board of Directors.
Executive Officers Who are Not Directors
Biographical information (including age, as of September 30, 2013) and the business experience of each non-director executive officer of
CMS Bancorp are set forth below.
Stephen Dowd, age 59, has served as Senior Vice President and Chief Financial Officer of
CMS Bancorp and CMS Bank since October 2005. Mr. Dowd has extensive experience in finance, having served as the chief financial officer of a technology consulting firm from 1999 to 2005. From 1990 to 1999, Mr. Dowd held various accounting
and finance positions at ASARCO, a publicly held international mining company. Prior to that, Mr. Dowd was a senior manager at Ernst and Young, in the New York and White Plains offices, where he served clients in numerous industries, including
banking.
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Christopher Strauss, age 70, has served as Senior Vice
President and Senior Lending Officer, and Compliance Officer of CMS Bancorp and CMS Bank since October 2005. Mr. Strauss was promoted to the position of Executive Vice President of CMS Bank in June 2011. From March 2004 to September 2005,
Mr. Strauss was Vice President of Credit Administration at Union State Bank, where he managed the credit underwriting process in the banks Westchester Loan Center originating commercial and industrial and commercial real estate loans.
From 2001 to March 2004, Mr. Strauss was Senior Vice President and Senior Lending Officer at Reliance Bank in White Plains, New York, where he managed all aspects of the banks lending, including underwriting and credit decisions on all
new and renewing loans, pricing and structuring on new and renewing loans, loan servicing, credit grading, and loan collection. In addition, he served as Reliance Banks Compliance Officer, managing the banks compliance program to include
all lending, branch operations and BSA requirements.
INFORMATION ABOUT THE BOARD OF DIRECTORS
General
CMS Bancorps Board of
Directors currently consists of ten members. CMS Bancorps charter provides that the Board of Directors is divided into three classes, as nearly equal in number as possible. The Board of Directors oversees our business and monitors the
performance of our management. In accordance with our corporate governance procedures, the Board of Directors does not involve itself in our day-to-day operations. Our executive officers and management oversee our day-to-day operations. Our
directors fulfill their duties and responsibilities by attending meetings of the Board of Directors. Our directors also discuss business and other matters with the Chairman of the Board of Directors, other key executives, and our principal external
advisers, including legal counsel, auditors, financial advisors, and other consultants.
Meetings of the Board of Directors
The Board of Directors held a total of 10 regular meetings during the fiscal year ended September 30, 2013. Each incumbent director
attended at least 75% of the meetings of the Board of Directors held during the time in which he or she served as director, plus meetings of committees on which that particular director served during this period.
Independent Directors
CMS Bancorp uses
The NASDAQ Stock Markets (NASDAQ) definition of independence to determine the independence of its directors. The Board of Directors has determined that each person who served as a director during fiscal year 2013 except
for Mr. Ritacco qualified as an independent director under NASDAQs rules during his or her term of service. In making determinations regarding director independence, the Board of Directors considers the corporate governance
standards for independence set forth in NASDAQ Listing Rules (including the more stringent requirements for audit committee members) and all relevant facts and circumstances related to the director, including any transactions between CMS Bancorp or
CMS Bank and the director or a related interest of the director, including the following:
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whether the director has accepted, or has a family member who has accepted, any compensation from CMS Bancorp or CMS Bank in excess of $120,000 within the preceding three years; and |
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whether the director is, or has a family member who is, a partner in, or a controlling shareholder or an executive officer of, any organization to which CMS Bancorp or CMS Bank made, or from which CMS Bancorp or CMS
Bank received, payments for property or services in the current or any of the past three fiscal years that exceed 5% of CMS Bancorps or CMS Banks consolidated gross revenues for that year, or $200,000, whichever is more.
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Consistent with NASDAQs rules, independent directors meet in regularly scheduled executive sessions without
Mr. Ritacco. The independent directors selected William M. Mooney, Jr. to serve as the presiding director at the executive sessions during the 2013 fiscal year. The presiding director takes a lead role in the Board of Directors
self-evaluation process.
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NASDAQ and SEC rules impose additional independence standards for all members of the Audit
Committee. CMS Bancorps Board of Directors has determined that the current members of the Audit Committee meet these additional, more stringent standards for independence.
Committees of the Board of Directors
The
CMS Bancorp Board of Directors has established the following committees:
Executive Committee. The Executive Committee of our
Board of Directors exercises the powers of the Board of Directors between board meetings. Directors Mooney (chair), Cuddy, Massaro, Mazza, Weisz and Ritacco (ex officio) serve on the Executive Committee.
Audit Committee. Directors Massaro, Mazza (chair) and McCrosson serve on the Audit Committee. The Audit Committee oversees and
monitors our financial reporting process and internal control system, reviews and evaluates the audit performed by our independent auditors, and internal auditors, and reports any substantive issues found during the audits to the Board of Directors.
The Audit Committee is directly responsible for the appointment, compensation, and oversight of the work of our independent auditors. The Audit Committee reviews and approves all transactions with affiliated parties. The Board of Directors has
adopted a written charter for the Audit Committee. Each of Directors Mazza and McCrosson qualifies as an audit committee financial expert, as that term is defined by SEC regulations, and the Board of Directors has designated them as
such. A copy of the current Audit Committee charter is available on our website at www.cmsbk.com, under the Investor Relations tab. The Committee met six times in the fiscal year ended September 30, 2013.
Compensation Committee. The Compensation Committee of the Board of Directors assesses the structure of the management team and
the overall performance of CMS Bancorp and CMS Bank. The Compensation Committee recommends the compensation of the Chief Executive Officer for approval by the Board of Directors, approves the compensation of other officers who are senior managers
and determines compensation and benefits to be paid to employees of CMS Bancorp and CMS Bank. The committee also recommends, for approval by the Board of Directors, the compensation to be paid to directors. The Compensation Committee is chaired by
Director Massaro with Directors Cuddy, Mooney and Weisz serving as members. In addition, Mr. Ritacco advises the Compensation Committee with respect to executive compensation matters other than his compensation as Chief Executive Officer.
Mr. Ritacco does not participate in the Compensation Committees deliberations regarding executive compensation nor does he serve on the Compensation Committee. The Compensation Committees functions are generally non-delegable. The
Compensation Committee met four times in the fiscal year ended September 30, 2013.
The Compensation Committee believes that its
processes and oversight should be directed toward attracting, retaining and motivating employees and non-employee directors to promote and advance the interests and strategic goals of CMS Bancorp. When requested by the Compensation Committee, the
Chief Executive Officer will provide information and may participate in discussions regarding compensation of other executive officers. The Compensation Committee from time to time utilizes the services of the outside compensation consulting firm of
Towers Perrin to assist in determining compensation, but also considers other general industry information and trends, if available. The committee did not consult with Towers Perrin during fiscal year 2013. A copy of the current Compensation
Committee charter is available on our website at www.cmsbk.com, under the Investor Relations tab.
The Compensation Committee acts
as the ESOP Committee, and meets to review CMS Bancorps ESOP. The Compensation Committee also acts as the Stock Option Plan Committee and the Retention and Recognition Plan Committee in administering the CMS Bancorp,
Inc. 2007 Stock Option Plan and the CMS Bancorp, Inc. 2007 Recognition and Retention Plan, respectively.
Nominating
Committee. The Nominating Committee meets to recommend the nomination of Directors to the full Board of Directors to fill the terms for the upcoming year or to fill vacancies during a term. The Nominating Committee will consider
recommendations from shareholders if submitted in a timely manner in
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accordance with the procedures established in the Bylaws and will apply the same criteria to all persons being considered. Directors Mooney (chair), Harrington, McCrosson, Romita and Weisz serve
on the Nominating Committee. A copy of the current Nominating Committee charter is available on our website at www.cmsbk.com, under the Investor Relations tab.
CMS Bancorps Bylaws prescribe the procedures and timeframes that a shareholder must follow to nominate directors for election.
Nominations of individuals for election to the Board of Directors at an annual meeting of shareholders may be made by any shareholder of record of CMS Bancorp entitled to vote for the election of directors at such meeting who provides timely notice
in writing to the Secretary of CMS Bancorp as set forth in Article II, Section 12 of CMS Bancorps Bylaws. To be timely, a shareholders notice must be delivered to or received by the Secretary no later than the following dates:
(i) with respect to an election of directors to be held at an annual meeting of shareholders, by November 25, 2014; and (ii) with respect to an election to be held at an annual meeting of shareholders held at a time other than within
30 days of the anniversary of the previous years annual meeting, or at a special meeting of shareholders for the election of directors, the close of business on the 10th day following the date on which notice (as defined in the Bylaws) of such
meeting is first given to shareholders. The Bylaws further prescribe certain information that must be contained in the shareholders notice in order to be considered properly submitted. CMS Bancorp may also require any proposed director nominee
to furnish such other information as may reasonably be required to determine the eligibility of such proposed nominee to serve as a director of CMS Bancorp.
In assessing nominees for the Board of Directors, the Nominating Committee, in its judgment, considers a variety of relevant factors,
including the current composition of the Board of Directors, the need for specific functional expertise and the evaluations of other prospective nominees. In addition, in evaluating prospective nominees, the Nominating Committee also takes into
consideration the diversity of the nominees, including cultural, geographic, gender and ethnic diversity, as well as differences of viewpoint, skills, education, and professional experience. The Nominating Committee does not have a formal policy
with respect to diversity; however, the Board of Directors and the Nominating Committee believe it is essential that members of the Board of Directors represent diverse viewpoints. In considering candidates for the Board of Directors, the Nominating
Committee considers the entirety of each candidates credentials in the context of these standards. Further, the Nominating Committee may, but is not required to, utilize third-party firms to assist in the identification and/or screening of
prospective candidates. The Nominating Committee met once during the fiscal year ended September 30, 2013.
Each of CMS
Bancorps committees listed above other than the Executive Committee is composed entirely of directors who are independent as that term is defined by NASDAQs corporate governance listing standards. In addition, all of the members of our
audit committee meet the additional and more stringent independence standards established by Rule 10A-3(m) of the Securities Exchange Act of 1934, as amended.
The Board also has a Strategic Planning and Budget Committee, Corporate Governance & Compliance Committee, and an Asset Liability
Management Committee.
Boards Leadership Structure
The Bylaws of CMS Bancorp provide that the positions of Chairman of the Board and Chief Executive Officer shall be held by different persons.
In addition, the Board believes that the Chairman should not be an employee. Under CMS Bancorps Corporate Governance Guidelines, the Chairman of the Board is responsible for coordinating the Boards activities, including the scheduling of
meetings of the full Board of Directors, scheduling of executive sessions of the non-employee directors, and setting relevant items on the Boards agenda in consultation with the Chief Executive Officer as necessary or appropriate. The Board
believes this leadership structure has enhanced the Boards oversight of, and independence from, CMS Bancorps management; the ability of the Board of Directors to carry out its roles and responsibilities on behalf of the shareholders; and
the overall corporate governance compared to a combined Chairman/Chief Executive Officer leadership structure.
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Further, the Board believes this structure is a more effective method of monitoring and evaluating the Chief Executive Officers performance, thereby making the Chief Executive Officer more
accountable.
Board and Committee Oversight of Risk
Both the full Board of Directors and its Committees oversee the various risks faced by CMS Bancorp. Management is responsible for the
day-to-day management of CMS Bancorps risks and provides periodic reports to the Board of Directors and its Committees relating to those risks and risk-mitigation efforts. On a regular basis, all committees report on the risk categories they
oversee to the full Board of Directors.
The Audit Committee oversees CMS Bancorps risk identification and mitigation processes and
specifically oversees management of the financial, legal and regulatory risks faced by CMS Bancorp. Members of CMS Bancorps management, including our Chief Financial Officer and Head of Internal Audit, report to the Audit Committee on a
quarterly basis regarding the on-going risk management process and on the specific risks overseen the by Audit Committee, including CMS Bancorps internal controls over financial reporting.
The Compensation Committee oversees CMS Bancorps risks relating to its compensation programs and philosophy. The Compensation Committee
ensures that our compensation programs, including those applicable to our executives, do not encourage excessive risk taking. The Compensation Committee works as deemed necessary with compensation consultants to ensure that our executive
compensation plans are appropriately balanced and incentivize management to act in the best interest of CMS Bancorps stakeholders.
The Asset Liability Management Committee (ALCO) oversees CMS Bancorps risks relating to liquidity, investments, capital and
interest rate sensitivity. The Strategic Planning and Budget Committee, as well as the Board of Directors as a whole, reviews the annual budget pursuant to which CMS Bancorps operating strategy is developed. As with other risks, management is
responsible for the day-to-day management of the risks relating to operating strategy, while the Board of Directors takes an oversight role with respect those risks.
The Nominating Committee and Corporate Governance & Compliance Committee oversee CMS Bancorps risks relating to governance
matters and board and committee composition. The Corporate Governance & Compliance Committee oversees CMS Bancorps compliance and ethics program, including implementation of revisions to our Code of Business Conduct and Ethics, and
compliance by directors and management with the corporate governance and ethics standards of CMS Bancorp.
Shareholder Communications with Our Board of
Directors
Shareholders may contact our Board of Directors or our non-management directors as a group by sending written correspondence
to Stephen E. Dowd, Senior Vice President, Chief Financial Officer & Secretary, CMS Bancorp, Inc., 123 Main Street, White Plains, New York 10601. All comments will be forwarded directly to the Board of Directors, or to the non-management
directors as a group, as appropriate.
Code of Ethics
CMS Bancorp has adopted a Code of Ethics that is applicable to all officers, directors and employees of CMS Bancorp and its affiliates. The
Code of Ethics is available on our website, www.cmsbk.com, under the Management Team tab. You may also send a request for a free copy of the Code of Ethics to our principal executive office located at: CMS Bancorp, Inc., Attn: Corporate
Secretary, 123 Main Street, White Plains, New York 10601.
Annual Meeting Attendance Policy
The 2014 Annual Meeting of Shareholders is the seventh annual meeting held by CMS Bancorp following the conversion and stock offering completed
on April 4, 2007. It is the policy of CMS Bancorp that all directors and nominees should attend the Annual Meeting. At the 2013 Annual Meeting of Shareholders, all of the then directors and nominees were in attendance.
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Compensation Committee Interlocks and Insider Participation
During the fiscal year ended September 30, 2013, there were no interlocks between members of the Compensation Committee or our executive
officers and corporations with respect to which such persons are affiliated.
Directors Compensation
Meeting Fees. Each non-employee director of CMS Bancorp receives a fee of $1,000 for attendance at each board meeting and $400
for attendance at each meeting of a committee of which they are members. The Chairman of the Board of Directors also receives an annual retainer of $25,000. Effective, January 1, 2011 each Committee Chairperson receives annual retainers as
follows: Audit, $10,000; Loan, $5,000; Compensation, $5,000; Strategic Planning and Budget, $2,500; and Corporate Governance & Compliance, $2,500. Committee Chairpersons did not receive annual retainers prior to January 1, 2011.
Mr. Ritacco, while serving as President and Chief Executive Officer, does not receive any additional compensation for serving as a director.
The following table sets forth information regarding compensation earned by the non-employee directors of CMS Bancorp during the last fiscal
year.
DIRECTOR COMPENSATION TABLE FOR FISCAL YEAR ENDED SEPTEMBER 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name |
|
Fees Earned or Paid in Cash ($)(1) |
|
|
Stock Awards ($)(2) |
|
|
Option Awards ($)(3) |
|
|
Total ($) |
|
William V. Cuddy, Jr. |
|
|
19,400 |
|
|
|
|
|
|
|
|
|
|
|
19,400 |
|
William P. Harrington |
|
|
13,300 |
|
|
|
|
|
|
|
|
|
|
|
13,300 |
|
Susan A. Massaro |
|
|
19,400 |
|
|
|
|
|
|
|
|
|
|
|
19,400 |
|
Cheri R. Mazza |
|
|
24,800 |
|
|
|
|
|
|
|
|
|
|
|
24,800 |
|
Matthew G. McCrosson |
|
|
19,600 |
|
|
|
|
|
|
|
|
|
|
|
19,600 |
|
William M. Mooney, Jr. (Chairman) |
|
|
37,800 |
|
|
|
|
|
|
|
|
|
|
|
83,172 |
|
Gerry Ryan |
|
|
10,400 |
|
|
|
|
|
|
|
|
|
|
|
10,400 |
|
Robert Weisz |
|
|
11,600 |
|
|
|
|
|
|
|
|
|
|
|
11,600 |
|
Mauro C. Romita |
|
|
9,200 |
|
|
|
|
|
|
|
|
|
|
|
9,200 |
|
(1) |
Includes retainer payments, meeting fees, and committee and/or chairmanship fees earned during the fiscal year, whether such fees were paid currently or deferred. |
(2) |
The amounts shown in this column represent the aggregate grant date fair value of the awards computed in accordance with FASB ASC Topic 718, excluding the effect of estimated forfeitures, based on the number of shares
of restricted stock granted and the per share price on the date of grant. Each grant of restricted stock vests over five years. At 9/30/2013, the aggregate amount of outstanding restricted stock granted on 11/15/2007 to each of the following
Directors was as follows: Ms. Massaro2,000 shares; Ms. Mazza2,000; Mr. Cuddy2,000 shares; and Mr. McCrosson2,000 shares. At 9/30/2013, the aggregate amount of outstanding restricted stock granted on
5/27/2010 to Mr. Harrington was 2,000 shares and the aggregate amount of outstanding restricted stock granted to Mr. Weisz on 9/28/2011 was 2,000 shares. At 9/30/2013, the aggregate amount of outstanding restricted stock granted during the
fiscal year ended 9/30/2013 to Messrs. Mooney, Ryan and Romita was 3,019, 1,500 and 1,500 shares, respectively. |
(3) |
The amounts shown in this column represent the aggregate grant date fair value of awards computed in accordance with FASB ASC Topic 718, excluding the
effect of estimated forfeitures. For more information concerning the assumptions used in these calculations, please refer to Note 14 to the audited financial statements included in the 2013 Annual Report. Options vest over five years. At 9/30/2013,
the aggregate amount of outstanding stock options granted on 11/15/2007 to each of the following Directors was as follows: Ms. Massaro6,000; Ms. Mazza6,000; Mr. Cuddy6,000; and Mr. McCrosson6,000 shares.
|
-17-
|
At 9/30/2013, the aggregate amount of outstanding stock options granted on 5/27/2010 to Mr. Harrington was 6,000 shares and the aggregate amount of outstanding stock options granted on
9/28/2011 to Mr. Weisz was 6,000 shares. At 9/30/2013, the aggregate amount of outstanding stock options granted during the fiscal year ended 9/30/2013 to Messrs. Mooney, Ryan and Romita was 10,000 shares, 6,000 shares and 6,000 shares,
respectively. |
Executive Compensation
The compensation programs of CMS Bancorp are designed to attract, motivate and retain our named executive officers, who are critical to our
success, by offering a combination of base salary and annual and long-term incentives that are closely aligned to the annual and long-term performance objectives of CMS Bancorp and our subsidiary, CMS Bank. We believe that the effectiveness of our
compensation programs is demonstrated by the accomplishments of management over the last fiscal year, such as progress in CMS Banks branch renovation and relocation program; level of profitability; overall growth in assets and loans; and
improvement in the interest rate spread and net interest margin. In addition, CMS Banks past due and non-performing loans continue to be within industry norms, and CMS Bank continues to be well capitalized.
The Board of Directors recognizes the importance of aligning executive compensation with shareholder interests and economic conditions faced
by CMS Bancorp and CMS Bank, which have been challenging in recent years. Accordingly, various actions taken by the Board of Directors in response to such considerations have included suspension of the non-equity compensation program, limited salary
increases, reduced 401(k) contributions and suspension of benefit accruals in the pension plan.
The Board of Directors believes that CMS
Bancorps compensation programs are well-tailored to attract, motivate, and retain our executive officers and are closely aligned with shareholder interests because they are designed to reward our named executive officers for their
contributions to CMS Bancorps achievement of specific annual corporate goals intended to enhance shareholder value.
The following
table provides information about the compensation paid in fiscal years 2013 and 2012 to CMS Bancorp and CMS Banks President and Chief Executive Officer; Senior Vice President and Chief Financial Officer; and Senior Vice President and Senior
Lending Officer (collectively, the named executive officers). CMS Bancorp has no other executive officers.
-18-
SUMMARY COMPENSATION TABLE FOR FISCAL YEARS
ENDED SEPTEMBER 30, 2013 AND 2012
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Principal Positions |
|
Year |
|
|
Salary(1) ($) |
|
|
Bonus(1) ($) |
|
|
All Other Compensation(2) ($) |
|
|
Total ($) |
|
John E. Ritacco, |
|
|
2013 |
|
|
|
325,000 |
|
|
|
170,000 |
(3) |
|
|
33,856 |
|
|
|
528,856 |
|
President and Chief Executive Officer |
|
|
2012 |
|
|
|
325,000 |
|
|
|
130,000 |
(4) |
|
|
32,042 |
|
|
|
487,042 |
|
|
|
|
|
|
|
Stephen Dowd, |
|
|
2013 |
|
|
|
167,900 |
|
|
|
41,975 |
(3) |
|
|
9,921 |
|
|
|
219,796 |
|
Senior Vice President and Chief Financial Officer |
|
|
2012 |
|
|
|
167,900 |
|
|
|
33,500 |
(4) |
|
|
10,316 |
|
|
|
213,153 |
|
|
|
|
|
|
|
Christopher Strauss, |
|
|
2013 |
|
|
|
162,840 |
|
|
|
40,710 |
(3) |
|
|
9,503 |
|
|
|
213,053 |
|
Senior Vice President and Senior Lending Officer |
|
|
2012 |
|
|
|
162,840 |
|
|
|
32,600 |
(6) |
|
|
10,073 |
|
|
|
205,513 |
|
(1) |
The figures shown for salary and bonus represent amounts earned for the fiscal year, whether paid as of September 30, of such year, or accrued as of September 30, and paid thereafter. |
(2) |
For 2013, amounts represent (a) 401(k) contributions made by CMS Bank for Mr. Ritacco, Mr. Dowd and Mr. Strauss in the amounts of $8,750, $6,716, and $6,388, respectively; (b) the allocation of
shares of CMS Bancorps common stock under the ESOP to the accounts of Mr. Ritacco, Mr. Dowd and Mr. Strauss in the amounts of $4,713, $3,205, and $3,115, respectively; and (c) the $20,393 representing the value of the
company car provided to Mr. Ritacco. For 2012, amounts represent (a) 401(k) contributions made by CMS Bank for Mr. Ritacco, Mr. Dowd and Mr. Strauss in the amounts of $8,500, $6,794, and $6,514, respectively; (b) the
allocation of shares of CMS Bancorps common stock under the ESOP to the accounts of Mr. Ritacco, Mr. Dowd and Mr. Strauss in the amounts of $4,053, $3,522, and $3,559, respectively; and (c) $19,489 representing the value of
the company car provided to Mr. Ritacco. The named executive officers also participate in certain group life, health, disability insurance and medical reimbursement plans, not disclosed in the Summary Compensation Table, that are generally
available to salaried employees and do not discriminate in scope, terms and operation. We provide certain non-cash perquisites and personal benefits to each named executive officer that, except as noted above, do not exceed $10,000 in the aggregate
for any individual, and are not included in the reported figures. |
(3) |
Includes bonuses awarded in January, February and July 2014 by the Compensation Committee for calendar year 2013 performance. See discussion in Non-Equity Incentive Compensation Plans for additional
information. |
(4) |
Includes bonus awarded in December 2012 by the Compensation Committee for calendar year 2012 performance. |
Mr. Ritacco, President and Chief Executive Officer of CMS Bancorp and CMS Bank, is the only executive officer who is subject to an
employment agreement. On December 29, 2010, CMS Bancorp and CMS Bank each entered into separate, parallel, amended and restated employment agreements (the Employment Agreements) with Mr. Ritacco. The Employment Agreements,
effective as of January 1, 2011, amended and restated employment agreements between each of CMS Bancorp and CMS Bank and Mr. Ritacco that were entered into on July 30, 2008, effective as of January 1, 2008.
The Employment Agreements are substantially similar to the employment agreements they replaced, except that the Employment Agreements:
(i) provide that CMS Bancorp and CMS Bank will employ Mr. Ritacco until December 31, 2013, subject to one-year extensions as described below, (ii) provide for Mr. Ritacco to receive an annual base salary of $325,000 while
maintaining the same bonus structure whereby Mr. Ritacco will receive an annual bonus of $45,000 and be eligible to receive an additional bonus if he achieves certain performance objectives set by CMS Bank, and (iii) provide for one year
extensions of each agreements term only through affirmative action by the Board of Directors of each of CMS Bancorp and CMS Bank on or before March 31st of the year in which expiration
would otherwise occur, provided that automatic extension for an additional year will occur if Mr. Ritacco notifies each Board of Directors between March 1st and March 15th of the year in which the agreements term is scheduled to end, and the Board does not notify Mr. Ritacco by March 31st of such
year that the Board is renewing or not renewing the agreement.
-19-
The following table provides information about the outstanding equity awards held by the named
executive officers as of September 30, 2013.
Outstanding Equity Awards at September 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name |
|
Grant Date of Award |
|
|
Number of securities underlying unexercised options(1) |
|
|
Option exercise price ($) |
|
|
Option expiration date |
|
|
Number of shares or units of stock
that have not vested (#)(2) |
|
|
Market value of shares of units of stock that have not vested ($) |
|
John E. Ritacco |
|
|
11/28/07 |
|
|
|
51,379 |
|
|
$ |
10.12 |
|
|
|
11/28/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen Dowd |
|
|
11/28/07 11/23/09
1/26/11 4/27/11 |
|
|
|
22,000 2,500
2,500 |
|
|
$ $
$ |
10.12 7.25
8.66 |
|
|
|
11/28/2017 11/23/2019
4/27/2021 |
|
|
|
500
531 750 |
|
|
|
4,290
4,556 6,435 |
|
|
|
|
|
|
|
|
Christopher Strauss |
|
|
11/28/07 11/23/09
1/26/11 4/27/11 |
|
|
|
22,000 2,500
2,500 |
|
|
$ $
$ |
10.12 7.25
8.66 |
|
|
|
11/28/2017 11/23/2019
4/27/2021 |
|
|
|
500
602 750 |
|
|
|
4,290
5,165 6,435 |
|
(1) |
Stock option awards reported in this column are the total options awarded to each named executive officer on the date specified in the previous column. Stock option awards are subject to a vesting schedule of
20% per year, starting one year after the award date. At 9/30/ 2013, the vesting date of unvested options awarded to Messrs. Ritacco, Dowd and Strauss on 11/28/2007 is 11/28/2012. At 9/30/2013, the vesting dates of unvested options awarded to
Messrs. Dowd and Strauss on 11/23/2009 are 11/23/2013 and 11/23/2014. At 9/30/2013, the vesting dates of unvested options awarded to Messrs. Dowd and Strauss on 4/27/2011 are 4/27/2014, 4/27/2015 and 4/27/2016. |
(2) |
Restricted stock reported in this column represent the unvested shares of restricted stock awarded to each named executive officer on the date specified in the second column. The restricted stock is subject to a vesting
schedule of 20% per year, starting one year after the award date. At 9/30/2013, the vesting date of the unvested restricted stock awarded to Messrs. Ritacco, Dowd and Strauss on 11/28/2007 is 11/28/2012. At 9/30/2013, the vesting dates of the
unvested restricted stock awarded to Messrs. Dowd and Strauss on 11/23/2009 are 11/23/2013, and 11/23/2014. At 9/30/ 2013, the vesting dates of the unvested restricted stock awarded to Messrs. Dowd and Strauss on 1/26/2011 are 1/26/2014, 1/26/2015
and 1/26/2016. At 9/30/ 2013, the vesting dates of the unvested restricted stock awarded to Messrs. Dowd and Strauss on 4/27/2011 are 4/27/2014, 4/27/2015 and 4/27/2016. |
Pension Benefits
Tax Qualified
Defined Benefit Pension Plan. CMS Bank maintains a tax-qualified defined benefit pension plan that covers substantially all employees hired on or before June 30,
2008(1) who are age 18 or older and had at least one year of service at the time of qualification for participation in the plan. The following table shows the estimated aggregate benefits payable
under the tax-qualified pension plan upon retirement at age 65 with various years of service and average compensation combinations.
|
|
|
|
|
|
|
|
|
|
|
Average Compensation(3) |
|
Years of Benefit Service(2) |
|
10 |
|
15 |
|
20 |
|
25 |
|
30 |
$ 125,000 |
|
41,667 |
|
62,500 |
|
62,500 |
|
62,500 |
|
62,500 |
150,000 |
|
50,000 |
|
75,000 |
|
75,000 |
|
75,000 |
|
75,000 |
175,000 |
|
58,333 |
|
87,500 |
|
87,500 |
|
87,500 |
|
87,500 |
200,000 |
|
66,667 |
|
100,000 |
|
100,000 |
|
100,000 |
|
100,000 |
225,000 |
|
68,333 |
|
102,500 |
|
102,500 |
|
102,500 |
|
102,500 |
250,000 |
|
68,333 |
|
102,500 |
|
102,500 |
|
102,500 |
|
102,500 |
-20-
(1) |
Employees hired after June 30, 2008 are not eligible for the plan. |
(2) |
Benefit service after February 28, 2010 is not recognized for purposes of calculation of benefits. |
(3) |
Average compensation is average base salary, as reported in the Salary column of the Summary Compensation Table, for the highest three consecutive years of employment within the final 10 years of employment.
Tax laws impose a limit ($250,000 for individuals retiring in 2012 and $255,000 for individuals retiring in 2013) on the average compensation that may be counted in computing benefits under the tax-qualified pension plan. Compensation after
February 28, 2010 is not recognized for purposes of calculation of average compensation. |
The benefits shown in the
preceding table are annual benefits payable in the form of a single life annuity and are not subject to any deduction for Social Security benefits or other offset amounts.
401(k) Plan. CMS Bank maintains a tax-qualified 401(k) defined contribution plan for employees who have attained age 18
and have at least one year of service. Eligible employees may make pre-tax contributions to the plan through salary reduction elections from annual compensation, subject to limitations of the Internal Revenue Code (the Code) (the limit
is $17,000 for 2012 and $17,500 for 2013), for participants under the age of 50. CMS Bank may make a discretionary matching contribution to the plan equal to a fixed percentage of annual compensation contributed to the plan on a pre-tax basis by the
eligible employee.
Employee Stock Ownership Plan (ESOP). CMS Bank also maintains an employee stock ownership
plan. This plan is a tax-qualified plan that covers substantially all employees who have at least one year of service and have attained age 18. Although contributions to this plan are discretionary, CMS Bank intends to contribute enough money each
year to make the required principal and interest payments on the loan from CMS Bancorp. The loan is for a term of up to 30 years and calls for level annual payments of principal plus interest. The plan initially pledged the shares it purchases as
collateral for the loan and holds them in a suspense account.
The employee stock ownership plan does not distribute the pledged shares
right away. Instead, it releases a portion of the pledged shares annually. The employee stock ownership plan allocates the shares released each year among the accounts of participants in proportion to their salary for the year. For example, if a
participants salary for a year represents 1.0% of the total salaries of all participants for the year, the plan allocates to that participant 1.0% of the shares released for the year. Participants direct the voting of shares allocated to their
accounts. Shares in the suspense account will usually be voted in a way that mirrors the votes which participants cast for shares in their individual accounts.
The employee stock ownership plan may purchase additional shares in the future, and may do so using borrowed funds, cash dividends, periodic
employer contributions or other cash flow.
Non-Equity Incentive Compensation Plans
The Company did not have a formal non-equity incentive compensation plan for calendar years 2012 and 2013. However, the Compensation Committee
may make discretionary bonus payments to Messrs. Ritacco, Dowd and Strauss based on CMS Bancorps, CMS Banks and individual performance during the calendar year. In December 2012, the Compensation Committee determined that the relevant
performance measures for calendar year 2012 were satisfied, and CMS Bancorp paid awards of $130,000 to Mr. Ritacco, $33,500 to Mr. Dowd and $32,600 to Mr. Strauss in recognition of their achievement of these goals. These amounts are
recorded as bonuses received for 2012 under the Summary Compensation Table above. In January, February and July 2014, the Compensation Committee determined that the relevant performance measures for calendar year 2013 were satisfied, and CMS Bancorp
paid awards of $170,000 to Mr. Ritacco, $41,975 to Mr. Dowd and $40,710 to Mr. Strauss in recognition of their achievement of these goals. These amounts are recorded as bonuses received for 2013 under the Summary Compensation Table
above. The Compensation Committee may make awards to the aforementioned individuals consistent with past practice based on CMS Bancorps, CMS Banks and individual performance for the calendar year 2014 evaluation period and future years.
-21-
Equity Compensation Plans
CMS Bancorp, Inc. 2007 Stock Option Plan. CMS Bancorp has a Stock Option Plan in effect that was approved by the shareholders and
became effective on November 9, 2007. The purpose of the Stock Option Plan is to encourage the retention of key employees and directors by facilitating their purchase of a stock interest in CMS Bancorp. The Stock Option Plan is not subject to
ERISA and is not a tax-qualified plan. CMS Bancorp has reserved an aggregate of 205,516 shares of common stock for issuance upon the exercise of stock options granted under the plan. Such shares may be unissued shares or shares previously issued and
subsequently reacquired by CMS Bancorp. Any shares subject to grants under the plan which expire or are terminated, forfeited or canceled without having been exercised or vested in full shall be available for new option grants. In September 2011,
stock options to purchase 6,000 shares of common stock were granted to a director and in September 2012, stock options to purchase 22,000 shares of common stock were granted to three directors. As of August 15, 2014, 19,037 options remain
available for future grant. Options are granted based on the conclusions of the Compensation Committee, after considering factors including, but not limited to the persons individual performance, level of achievement of personal goals,
contribution to corporate performance and achievement of corporate goals, overall compensation compared to a peer group and other factors.
CMS Bancorp, Inc. 2007 Recognition and Retention Plan. CMS Bancorps Recognition and Retention Plan was approved by
shareholders and became effective on November 9, 2007. Like the Stock Option Plan, the Recognition and Retention Plan functions as a long-term incentive compensation program for eligible officers, employees and outside directors of CMS Bancorp
and CMS Bank. The Recognition and Retention Plan is not subject to ERISA and is not a tax-qualified plan. The members of the Board of Directors Compensation Committee administer the Recognition and Retention Plan, and CMS Bancorp pays all
costs and expenses of administering the Recognition and Retention Plan. In September 2012 6,019 shares of restricted stock were granted to directors. As of August 16, 2013, no shares of restricted stock remain available for future grants. CMS
Bancorp has established a trust and contributed $856,001 to the trust during the year ended September 30, 2008, enabling the trust to purchase 82,206 shares of common stock authorized under the Recognition and Retention Plan. No contribution by
participants is permitted. Stock is granted based on the conclusions of the Compensation Committee, after considering factors including, but not limited to the persons individual performance, level of achievement of personal goals,
contribution to corporate performance and achievement of corporate goals, overall compensation compared to a peer group and other factors.
Termination and Change in Control Benefits
Employment Agreement. On December 29, 2010, CMS Bank entered into an amended and restated employment agreement with
Mr. Ritacco, effective January 1, 2011. The agreement has an initial term of two years, ending December 31, 2012, and will be reviewed on the one-year anniversary of the agreement, upon such time the Board may extend the agreement for
one additional year. Upon termination for Good Reason, without Cause, or upon a Change of Control (as each term is defined in the employment agreement), Mr. Ritacco would be entitled to: (1) the unpaid portion of any compensation earned up
until the date of termination; (2) any benefits to which he is entitled to as a former employee under the employee benefit plans and programs maintained by CMS Bank; (3) continued health and welfare benefits until the earliest date he
becomes eligible for such benefits maintained by a subsequent employer or the date of the remaining unexpired employment period; (4) a lump sum payment equal to the greater of his annual salary at the rate in effect immediately prior to his
termination of employment, or the salary that he would have earned through the Remaining Unexpired Employment Term (as defined in the employment agreement); and (5) an amount equal to the highest annual cash bonus achieved during the three
years preceding the year of termination. The employment agreement with CMS Bank does not provide for 280G indemnification.
On December 29, 2010, CMS Bancorp entered into a parallel and amended and restated employment agreement with Mr. Ritacco with terms
substantially identical to the employment agreement between CMS Bank and Mr. Ritacco. However, under the employment agreement with CMS Bancorp, the Remaining Unexpired Employment Term shall be deemed to equal three (3) years for the
purpose of determining the severance
-22-
payments that would be payable to Mr. Ritacco upon a termination of employment following a Change in Control. Additionally, if upon a Change in Control Mr. Ritacco receives any
severance payments under the employment agreement that would constitute an excess parachute payment within the meaning of Section 280G of the Internal Revenue Code, then CMS Bancorp will provide him with an additional payment to make him whole
for any excise taxes that may be imposed under that Code Section.
Change of Control Agreements. CMS Bank has entered into
two-year change of control agreements with Mr. Dowd, Mr. Strauss, Diane Cocozzo and Laura Caruolo. Mr. Dowd and Mr. Strauss are officers of CMS Bancorp and CMS Bank, while Ms. Cocozzo and Ms. Caruolo are officers of CMS
Bank only. These agreements are guaranteed by CMS Bancorp. The term of these agreements is perpetual until CMS Bank gives notice of non-extension, at which time the term is fixed for two years.
Generally, CMS Bank may terminate the employment of any officer covered by these agreements, with or without cause, at any time prior to a
change of control without obligation for severance benefits. However, if CMS Bancorp or CMS Bank sign a merger or other business combination agreement, or if a third party makes a tender offer or initiates a proxy contest, it could not terminate an
officers employment without cause without liability for severance benefits. The severance benefits would generally be equal to the value of the cash compensation and fringe benefits that the officer would have received if he or she had
continued working for an additional two years. CMS Bank would pay the same severance benefits if the officer resigns after a change of control following a loss of title or office, material reduction in duties, functions, compensation or
responsibilities, involuntary relocation of his or her principal place of employment to a location over 35 miles from CMS Banks principal office on the day before the change of control and over 35 miles from the officers principal
residence or other material breach of contract which is not cured within 30 days. These agreements also provide for continuation of participation in health and welfare plans.
If CMS Bancorp and CMS Bank experience a change in ownership, a change in effective ownership or control or a change in the ownership of a
substantial portion of their assets as contemplated by Section 280G of the Internal Revenue Code, a portion of any severance payments under the change of control agreements might constitute an excess parachute payment under current
federal tax laws. Under the change in control agreements, any severance payments made which are subject to Section 280G of the Code would be reduced to the extent necessary to avoid the imposition of an excise tax and related non-deductibility
under Section 280G of the Internal Revenue Code.
PRINCIPAL ACCOUNTING FEES AND SERVICES
During the fiscal years ended September 30, 2013 and 2012, CMS Bancorp retained BDO USA, LLP (2013) and ParenteBeard LLC
(2012) to provide audit and other services and incurred fees as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Audit Fees(1) |
|
|
Audit-Related Fees |
|
|
Tax Fees(2) |
|
|
All Other Fees |
|
|
Total |
|
2013 |
|
$ |
114,700 |
|
|
|
|
|
|
$ |
15,000 |
|
|
|
|
|
|
$ |
129,700 |
|
2012 |
|
$ |
108,423 |
|
|
|
|
|
|
$ |
14,100 |
|
|
$ |
20,027 |
(3) |
|
$ |
142,550 |
|
(1) |
Includes (a) professional services rendered for the audit of CMS Bancorps annual financial statements and review of financial statements included in Forms 10-Q and (b) services provided annually in
connection with statutory and regulatory filings, including filing of Forms 10-K and 10Q. Also includes reimbursable expenses. |
(2) |
Tax fees consisted of fees related to the preparation of CMS Bancorps income tax returns. |
(3) |
Fees for assistance with required XBRL financial statement filing with the Securities and Exchange Commission. |
Preapproval Policies and Procedures
The
Audit Committee, or a designated member of the Audit Committee, shall pre-approve all auditing services and permitted non-audit services (including the fees and terms) to be performed for CMS Bancorp by its independent auditor, subject to the de
minimis exceptions for non-audit services that are approved by the Audit
-23-
Committee prior to completion of the audit, provided that: (1) the aggregate amount of all such services provided constitutes no more than five percent of the total amount of revenues paid
by CMS Bancorp to its auditor during the fiscal year in which the services are provided; (2) such services were not recognized by CMS Bancorp at the time of the engagement to be non-audit services; and (3) such services are promptly
brought to the attention of the Audit Committee and approved prior to the completion of the audit by the Audit Committee or by one or more members of the Audit Committee who are members of the Board of Directors to whom authority to grant such
approvals has been delegated by the Audit Committee. Of the services set forth in the table above, all were pre-approved by the Audit Committee.
AUDIT
COMMITTEE REPORT
CMS Bancorps Audit Committee has reviewed and discussed the audited financial statements of CMS Bancorp for the
fiscal year ended September 30, 2013 with management and BDO USA, LLP, CMS Bancorps independent registered public accounting firm for the fiscal year ended September 30, 2013. CMS Bancorps Audit Committee has discussed the
matters required by Statement on Auditing Standards No. 61 (as amended) as adopted by the Public Company Accounting Oversight Board in Rule 3200T, other standards of the Public Company Accounting Oversight Board, rules of the SEC, and other
applicable regulations, with BDO USA, LLP.
The Audit Committee has received the written disclosures and the letter from BDO USA, LLP
required by Independence Standards Board Standard No. 1 regarding BDO USA, LLPs communications with the Audit Committee concerning independence and has discussed BDO USA, LLPs independence with respect to CMS Bancorp with BDO USA,
LLP.
Based on the review and discussions referred to in this Audit Committee Report, the Audit Committee recommended to the Board of
Directors that the audited financial statements be included in CMS Bancorps Annual Report on Form 10-K for the fiscal year ended September 30, 2013 for filing with the SEC.
Audit Committee of CMS Bancorp, Inc.
Cheri R. Mazza, Chairperson
Sue A. Massaro
Matthew G. McCrosson
-24-
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE AND TRANSACTIONS WITH CERTAIN RELATED PERSONS
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires CMS Bancorps directors and executive officers, and
persons who own more than 10% of CMS Bancorps common stock, to report to the SEC their initial ownership of CMS Bancorps common stock, on Form 3, and any subsequent changes in that ownership, on Form 4. Reports on Form 3 must be filed
within 10 days of becoming a beneficial owner, director or officer. Reports on Form 4 must be filed before the end of the second business day following the day on which the transaction effecting a change in ownership occurred. CMS Bancorp is
required to disclose in this annual report any late filings or failures to file.
To CMS Bancorps knowledge, based solely on its
review of the copies of such reports furnished to CMS Bancorp and written representations that no other reports were required during the fiscal year ended September 30, 2013, all Section 16(a) filing requirements applicable to CMS
Bancorps executive officers and directors during fiscal year 2013 were met.
Transactions with Certain Related Persons
CMS Banks authority to extend credit to insiders, which specifically include its directors, executive officers and principal
shareholders, as well as to entities controlled by such persons, is subject to the requirements of Sections 22(g) and 22(h) of the Federal Reserve Act, and Regulation O issued by the Federal Reserve. Pursuant to CMS Banks written Insider Loan
Policy, the bank will not extend credit to any insider unless: (a) the loan is made on substantially the same terms (including interest rates, collateral, repayment and loan maturity) as those prevailing at the time for comparable transactions
to persons not covered by this regulation and (b) the extension does not involve more than the normal risk of repayment or present other unfavorable features. Any extension of credit to an insider or related interest must be preceded by the
submission of a detailed financial statement. The policy further provides that if a loan request involving an insider exceeds the lesser of $20,000 or one-half of one percent of CMS Banks net worth, the extension of credit must be approved in
advance by a majority of the Board of Directors, with the interested party abstaining from participating directly or indirectly in the voting, and such abstention will be noted in the meeting minutes of the Board of Directors. The insider is
precluded from participating in discussion or any attempt to influence the voting by the Board of Directors. CMS Bank will treat any transactions with an insider or their related interest at arms length.
As of September 30, 2013, CMS Bank had $1,263,000 in loans outstanding to William P. Harrington, a director and a company with which he
is affiliated, and $1,041,000 in loans to Gerry Ryan, a director and a company with which he is affiliated. CMS Bank did not have any other outstanding loans to directors and officers at September 30, 2013, however, we do have outstanding loans
to members of certain of these individuals families, as well as to certain employees. These loans are made in the ordinary course of our business and are made on substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable loans to customers who do not have a personal or familial relationship with us. Such loans do not involve more than the normal risk of collectibility or present other unfavorable features to CMS Bank.
William P. Harrington, a director, is a partner with Bleakley Platt & Schmidt, LLP (Bleakley Platt), a law firm which
provides legal services to CMS Bank from time to time, principally involving employment and transactional matters. For the fiscal year ended September 30, 2013, Bleakley Platt received $6,300 for legal services it rendered to CMS Bank. The fees
received by Bleakley Platt for professional services rendered to CMS Bank during the year ended September 30, 2013 did not exceed 5% of the firms gross revenues.
Gerry Ryan, a director, is an owner of DGC Capital contracting Corp. (DGC), a contracting firm which provides construction
services to CMS Bank from time to time. For the fiscal year ended September 30, 2013, DGC received $13,684 for services it rendered to CMS Bank. The fees received by DGC for professional services rendered to CMS Bank during the year ended
September 30, 2013 did not exceed 5% of the firms gross revenues.
-25-
The Board of Directors unanimously recommends a vote FOR all of the nominees for
election as directors of CMS Bancorp, Inc.
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
The Audit
Committee has appointed BDO USA, LLP (BDO) to act as our independent registered public accounting firm for the fiscal year ending September 30, 2014, and we are asking shareholders to ratify the appointment.
Representatives of BDO are expected to be present at the Annual Meeting to respond to appropriate questions and to make a statement at the
meeting if they so desire.
The affirmative vote of the majority of shares present in person or represented by proxy at the Annual Meeting
and entitled to vote on the proposal is required for ratification.
The Board of Directors unanimously recommends a vote FOR the ratification of the
appointment of BDO as the independent registered public accounting firm for CMS Bancorp, Inc. for the 2013 fiscal year.
PROPOSAL 3
NON-BINDING ADVISORY VOTE ON
EXECUTIVE COMPENSATION
(SAY ON PAY)
As required
under Section 14A of the Securities Exchange Act and implementing regulations of the SEC, our Board of Directors is submitting for shareholder approval, on an advisory basis, the compensation paid to our executive officers as described in this
proxy statement in accordance with the SECs rules. This vote is being held on an annual basis, which is the frequency that was recommended by the Board of Directors and approved by the shareholders at the 2011 annual meeting of shareholders.
Because your vote is advisory, it will not be binding on the Board or CMS Bancorp. However, the Board will review the voting results and will take them into consideration when making future decisions regarding executive compensation.
As noted above, CMS Bancorp has three named executive officers, Messrs. Ritacco, Dowd, and Strauss, who also generally serve in the same
positions at CMS Bank (Mr. Strauss is an Executive Vice President at CMS Bank). The compensation programs of CMS Bancorp are designed to attract, motivate and retain our named executive officers, who are critical to our success, by offering a
combination of base salary and annual and long-term incentives that are closely aligned to the annual and long-term performance objectives of CMS Bancorp and our subsidiary, CMS Bank. We believe that the effectiveness of our compensation programs is
demonstrated by the accomplishments of management over the last fiscal year, such as progress in CMS Banks branch renovation and relocation program; level of profitability; overall growth in assets and loans; and improvement in the interest
rate spread and net interest margin. In addition, CMS Banks past due and non-performing loans continue to be within industry norms, and CMS Bank continues to be well capitalized.
-26-
The Board of Directors recognizes the importance of aligning executive compensation with
shareholder interests and economic conditions faced by CMS Bancorp and CMS Bank, which have been challenging in recent years. Accordingly, various actions taken by the Board of Directors in response to such considerations have included suspension of
the non-equity compensation program, limited salary increases, reduced 401(k) contributions and suspension of benefit accruals in the pension plan.
The Board of Directors believes that CMS Bancorps compensation programs are well-tailored to attract, motivate, and retain our executive
officers and are closely aligned with shareholder interests because they are designed to reward our named executive officers for their contributions to CMS Bancorps achievement of specific annual corporate goals intended to enhance shareholder
value. Accordingly, in this Proposal 3 we are asking you to support our named executive officer compensation as described in this proxy statement. This vote is not intended to address any specific item of compensation, but rather the overall
compensation of our named executive officers, as described in this proxy statement pursuant the rules set forth by the SEC. In considering this proposal, we ask that you approve the following resolution:
RESOLVED, that the shareholders of CMS Bancorp, Inc. hereby approve, on an advisory basis, the compensation of the named executive
officers of CMS Bancorp, Inc., as disclosed in this proxy statement pursuant to the compensation disclosure rules of the Securities and Exchange Commission, specifically Item 402(m) through 402(q) of Regulation S-K.
The Board of Directors unanimously recommends a vote FOR the approval of CMS
Bancorps executive compensation as described in this proxy statement.
ADDITIONAL INFORMATION
Information About Shareholder Proposals
If you wish to submit proposals to be included in our proxy statement for the 2015 Annual Meeting of Stockholders, we must receive them on or
before April 20, 2015 (unless required earlier pursuant to CMS Bancorps Certificate of Incorporation or Bylaws), pursuant to the proxy soliciting regulations of the SEC. SEC rules contain standards as to what shareholder proposals are
required to be in the proxy statement. All shareholder proposals for inclusion in our proxy materials shall be subject to the requirements of the proxy rules adopted under the Securities Exchange Act of 1934, as amended, and as with any shareholder
proposal (regardless of whether it is included in our proxy materials), our Certificate of Incorporation and Bylaws, and Delaware law.
By Order of the Board of Directors,
Stephen E. Dowd
Senior Vice President, Chief Financial Officer
and Secretary
White
Plains, New York
August 18, 2014
TO ASSURE THAT YOUR SHARES
ARE REPRESENTED AT THE ANNUAL MEETING, PLEASE COMPLETE, SIGN, DATE AND
PROMPTLY RETURN THE ACCOMPANYING PROXY CARD IN THE POSTAGE-PAID ENVELOPE
PROVIDED.
-27-
2013 Annual Report
Exhibit 13.1
CMS Bancorp, Inc.
To the Stockholders of
CMS Bancorp, Inc.:
On December 20, 2013, we announced our decision to not further extend the termination date of the Agreement and
Plan of Merger dated August 10, 2012 by and between CMS Bancorp, Inc. (the Company) and Customers Bancorp, Inc. (Customers), as amended effective April 22, 2013. As we have informed Customers, the decision of the
Companys Board of Directors to not further extend the Merger Agreement beyond the December 31, 2013 termination date was due to delays in the receipt of regulatory approvals by Customers to purchase the Company and CMS Bank. The Company
will proceed to terminate the Merger Agreement in its normal course on December 31, 2013, pursuant to the terms of the Merger Agreement. Once the termination occurs, as an independent company, the Company plans to forge ahead in executing its
business strategy to operate the Bank as a well-capitalized, profitable and community-oriented savings bank.
In the year ended
September 30, 2013, we continued our conservative and prudent use of the assets and capital of CMS Bank. While total assets decreased from $264.7 million as of September 30, 2012 to $258.3 million as of September 30, 2013, our loans
grew from $201.5 million in 2012 to $208.0 million in 2013, an increase of $6.5 million, or 3.2%, funded primarily from security maturities and calls. Our loan growth occurred in multi-family mortgage, non-residential mortgage and commercial sectors
of our portfolio which generally carry higher interest rates and shorter maturities than the one-to-four-family component of our loan portfolio. This growth in high quality loans continued during a period of economic uncertainty and marginal demand.
Credit quality issues continue to challenge the banking industry as a whole. However we made significant progress in this area during the
year ended September 30, 2013. Our impaired loans declined from $11.4 million at September 30, 2012 to $8.0 million as of September 30, 2013 representing a decrease of $3.4 million, or 29.7%. Loans classified as substandard showed
similar improvement decreasing from $8.8 million at September 30, 2012 to $5.2 million as of September 30, 2013. Non-accrual loans declined by $1.4 million or 23.0% to $4.8 million at September 30, 2013 and now represent only 1.85% of
total assets. These factors, among others, led to a decrease in the provision for loan losses from $891,000 in the year ended September 30, 2012 to $443,000 in the year ended September 30, 2013.
In a period during which many banks experienced declines in retail deposits, our retail deposits were essentially unchanged during the year
ended September 30, 2013 and total deposits rose from $203.5 million as of September 30, 2012 to $212.3 million as of September 30, 2013 as a result of CDARS deposits which were used to reduce advances from the Federal Home Loan Bank
of NY (FHLB). Retail deposit mix continued to improve with increases in lower cost money market, savings and demand accounts, offset by decreases in higher cost retail time deposits. Advances from the FHLB decreased by $17.2 million
during the year ended September 30, 2013 and in fiscal 2014 $9.1 million of high cost long term borrowings from FHLB will mature.
In
the year ended September 30, 2013, our net interest income increased to $9.1 million from $8.3 million in 2012, representing an increase of $751,000, or 9.0%. This was due in part to actions we took last year to reduce long term high cost
borrowing, our continued emphasis on diversifying the loan portfolio into higher yield, shorter maturity sectors and changes in the interest rate environment. Despite the continued low interest rate environment, we were able to more than offset the
decline in interest income caused by lower market rates through loan growth and changes in the mix of our loan portfolio. Lower interest rates reduced our net interest income by $196,000 while changes in volume and mix added $947,000 to net interest
income in the year ended September 30, 2013 compared to 2012.
Our non-interest expense decreased by $1.7 million in 2013 from 2012,
primarily due to the non-recurrence of items from 2012 which included professional fees related to the merger agreement, the cost of converting to a New York savings bank charter and the expense of prepaying high cost borrowings and deposits and
reflected the
1
reimbursement by Customers Bancorp, Inc. of $300,000 for merger agreement related costs in 2013. Exclusive of these items, non-interest expense declined in the year ended September 30, 2013
compared to 2012 by approximately $350,000 due to cost reduction initiatives implemented by management.
As a result of these factors, our
net income attributable to common shareholders was $906,000 in the year ended September 30, 2013 compared to a loss of $639,000 in the year ended September 30, 2012. We believe that the future remains bright for our stockholders, customers
and employees as the Company looks to leverage the capital, size and profitability that we have achieved this year.
Thank you to our
shareholders for your confidence and support!
|
|
|
|
|
|
John E. Ritacco, President and CEO |
|
William M. Mooney, Jr., Chairman of the Board |
The following information is derived from the audited consolidated financial statements of CMS Bancorp, Inc., (the
Company). For additional information about the Company and CMS Bank (the Bank), please see the detailed presentation contained in Managements Discussion and Analysis of Financial Condition and Results of
Operations and the consolidated financial statements and footnotes of the Company which are included in this Annual Report.
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Financial Condition Data |
|
At September 30, |
|
(in thousands) |
|
2013 |
|
|
2012 |
|
|
2011 |
|
Total assets |
|
$ |
258,255 |
|
|
$ |
264,666 |
|
|
$ |
253,776 |
|
Loans receivable, net |
|
|
207,996 |
|
|
|
201,462 |
|
|
|
178,796 |
|
Investment securities |
|
|
40,420 |
|
|
|
48,361 |
|
|
|
59,762 |
|
Cash and cash equivalents |
|
|
2,477 |
|
|
|
1,841 |
|
|
|
4,304 |
|
Deposits |
|
|
212,312 |
|
|
|
203,516 |
|
|
|
194,742 |
|
FHLB Advances |
|
|
19,889 |
|
|
|
37,130 |
|
|
|
34,421 |
|
Stockholders equity |
|
|
22,735 |
|
|
|
21,958 |
|
|
|
22,215 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Operating Data |
|
Years Ended September 30, |
|
(in thousands, except per share data) |
|
2013 |
|
|
2012 |
|
|
2011 |
|
Interest income |
|
$ |
11,332 |
|
|
$ |
11,320 |
|
|
$ |
11,453 |
|
Interest expense |
|
|
2,256 |
|
|
|
2,995 |
|
|
|
3,667 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
9,076 |
|
|
|
8,325 |
|
|
|
7,786 |
|
Provision for loan losses |
|
|
443 |
|
|
|
891 |
|
|
|
86 |
|
Non-interest income |
|
|
439 |
|
|
|
1,159 |
|
|
|
430 |
|
Non-interest expense |
|
|
7,681 |
|
|
|
9,407 |
|
|
|
7,999 |
|
Income tax expense (benefit) |
|
|
452 |
|
|
|
(175 |
) |
|
|
(98 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
939 |
|
|
|
(639 |
) |
|
|
229 |
|
Preferred stock dividends |
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to common shareholders |
|
$ |
906 |
|
|
$ |
(639 |
) |
|
$ |
229 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share basic and diluted |
|
$ |
0.52 |
|
|
$ |
(0.37 |
) |
|
$ |
0.13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Financial Ratios and Other Data |
|
At or for the Years Ended September 30, |
|
|
|
2013 |
|
|
2012 |
|
|
2011 |
|
Performance Ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
Return on average assets |
|
|
0.36 |
% |
|
|
(0.25 |
)% |
|
|
0.09 |
% |
Return on average equity |
|
|
4.04 |
% |
|
|
(2.93 |
)% |
|
|
1.06 |
% |
Yield on average interest-earning assets |
|
|
4.44 |
% |
|
|
4.58 |
% |
|
|
4.79 |
% |
Net interest rate spread |
|
|
3.37 |
% |
|
|
3.14 |
% |
|
|
3.01 |
% |
Net interest margin |
|
|
3.55 |
% |
|
|
3.37 |
% |
|
|
3.26 |
% |
Average interest-earning assets to average interest-bearing liabilities |
|
|
1.21 |
|
|
|
1.19 |
|
|
|
1.16 |
|
|
|
|
|
Capital Ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
Average stockholders equity to average assets |
|
|
8.56 |
% |
|
|
8.60 |
% |
|
|
8.78 |
% |
Tier 1 core ratio |
|
|
8.49 |
% |
|
|
7.36 |
% |
|
|
7.65 |
% |
Total risk based capital ratio |
|
|
12.91 |
% |
|
|
11.77 |
% |
|
|
15.45 |
% |
|
|
|
|
Asset Quality Ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses to gross loans |
|
|
0.44 |
% |
|
|
0.48 |
% |
|
|
0.67 |
% |
Non-performing loans to total assets |
|
|
1.85 |
% |
|
|
2.34 |
% |
|
|
1.70 |
% |
Managements Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
This Annual Report contains
forward-looking statements, which may be identified by the use of such words as believe, expect, anticipate, should, planned, estimated, potential and
similar expressions that are intended to identify forward-looking statements. Examples of forward-looking statements include, but are not limited to, estimates with respect to our financial condition, results of operations and business that are
subject to various factors including those set forth in Part 1, Item 1Description of BusinessRisk Factors of our Form 10-K for the year ended September 30, 2013, which could cause actual results to differ materially from these
estimates. These factors include, but are not limited to:
|
|
|
risks relating to the pending Merger Agreement with Customers Bancorp, Inc. and collecting the termination fee owed to CMS; |
|
|
|
changes in interest rates; |
|
|
|
our allowance for loan losses may not be sufficient to cover actual loan losses; |
|
|
|
the risk of loss associated with our loan portfolio; |
|
|
|
lower demand for loans; |
|
|
|
changes in our asset quality; |
|
|
|
other-than-temporary impairment charges for investments; |
|
|
|
the soundness of other financial institutions; |
|
|
|
changes in the real estate market or local economy; |
|
|
|
operational challenges or increased costs we may experience in the course of full transition to our new regulators as a result of the complete transfer of the OTSs functions under the Dodd-Frank Act and the
subsequent conversion of CMS Banks charter to that of a New York state-chartered savings bank; |
|
|
|
our ability to retain our executive officers and other key personnel; |
3
|
|
|
competition in our primary market area; |
|
|
|
risk of noncompliance with laws and regulations, including changes in laws and regulations to which we are subject; |
|
|
|
changes in the Federal Reserves monetary or fiscal policies; |
|
|
|
our ability to maintain effective internal controls over financial reporting; |
|
|
|
the inclusion of certain anti-takeover provisions in our organizational documents; |
|
|
|
the low trading volume in our stock; |
|
|
|
recent developments affecting the financial markets, including the actual and threatened downgrade of U.S. government securities; and |
|
|
|
risks related to use of technology and cybersecurity. |
Forward-looking statements speak only as of the date
they are made. Any or all of our forward-looking statements in this Report and in any other public statements we make may turn out to be wrong. They can be affected by inaccurate assumptions we might make or by known or unknown risks and
uncertainties. Consequently, no forward-looking statement can be guaranteed. We disclaim any obligation to subsequently revise 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. Based upon changing conditions, should any one or more of the above risks or uncertainties materialize, or should any of our underlying beliefs or assumptions prove incorrect, actual results may
vary materially from those described in any forward-looking statement.
References in this Report to we, our, us and
other similar references are to CMS Bancorp, Inc. unless otherwise expressly stated or the context requires otherwise.
General
The results of operations of the Company depend primarily on its net interest income, which is the difference between the interest income it earns on its
loans, investments and other interest-earning assets and the interest it pays on its deposits, borrowings and other interest-bearing liabilities. Net interest income is affected by the relative amounts of interest-earning assets and interest-bearing
liabilities and the interest rates earned or paid on these balances. The Companys operations are also affected by non-interest income, the provision for loan losses and non-interest expenses such as salaries and employee benefits, occupancy
costs, and other general and administrative expenses. In general, financial institutions such as the Company are significantly affected by economic conditions, competition, and the monetary and fiscal policies of the federal government. Lending
activities are influenced by the demand for and supply of housing, competition among lenders, interest rate conditions, and funds availability. The Companys operations and lending activities, which are primarily conducted through the Bank, are
principally concentrated in Westchester County, New York, and its operations and earnings are influenced by the economics of the communities in which it operates. Deposit balances and cost of funds are influenced by prevailing market rates on
competing investments, customer preferences, and levels of personal income and savings in the Companys primary market area.
Executive Overview
The purpose of this overview is to provide a summary of the items management focuses on when evaluating the condition of the Company and our success
in implementing our business and shareholder value strategies. The Companys business strategy is to operate the Bank as a well-capitalized, profitable and community-oriented savings bank.
The profitability of the Company depends primarily on its level of net interest income, which is the difference between interest earned on the Companys
interest-earning assets and the interest paid on interest-bearing
4
liabilities. The Companys net interest income may be affected by market interest rate changes. Local market conditions and liquidity needs of other financial institutions can have a
dramatic impact on the interest rates offered to attract deposits. In recent periods, interest rates have declined to historically low levels and changes in short-term interest rates did not result in corresponding changes in long-term interest
rates, and local market conditions resulted in relatively high certificate of deposit interest rates and lower interest rates on loans. The effect of this interest rate environment did, and could in the future, continue to decrease the
Companys ability to invest deposits and reinvest proceeds from loan and investment repayments at higher interest rates. The primary goals of the Companys interest rate management strategy are to determine the appropriate level of risk
given the business strategy and then manage that risk so as to reduce the exposure of the Companys net interest income to fluctuations in interest rates.
Despite the challenges of the ever-changing banking and regulatory environment, we have continued to manage our assets through increases in our local
deposits, particularly non-interest bearing commercial demand deposits and higher levels of non-residential loan originations. In order to grow and diversify, the Company seeks to continue to increase its multi-family, non-residential, construction,
home equity and commercial loans by targeting these markets in Westchester County and the surrounding areas as a means to increase the yield on and diversify its loan portfolio as well as build transactional deposit account relationships. In
addition, depending on market conditions, the Company may sell the fixed-rate residential real estate loan originations to a third party in order to diversify its loan portfolio, increase non-interest income and reduce interest rate risk.
As a result of these ongoing efforts, we were able to increase our net interest income by maximizing the yield on interest earning assets while minimizing the
cost of our interest bearing liabilities through our consistent in-depth market analysis and constant oversight of our liquidity and cash flow position.
To the extent the Company increases its investment in construction or development, consumer and commercial loans, which are considered greater risks than
one-to-four-family residential loans, the Companys provision for loan losses may increase to reflect this increased risk, which could cause a reduction in the Companys income.
Pending Merger Agreement with Customers Bancorp
On
August 10, 2012, the Company announced that it entered into a definitive merger agreement (Merger Agreement) with Customers Bancorp, Inc. (Customers), whereby through a series of transactions, the Company would be merged with
and into Customers, and the Bank would be merged into Customers wholly-owned bank subsidiary, Customers Bank. On April 24, 2013, the Company and Customers announced an amendment to the Merger Agreement which, among other things, extended from
April 30, 2013 to December 31, 2013 the initial date at which, if the merger of the Company with and into Customers has not closed, the Merger Agreement may be terminated, subject to payment of a termination fee by Customers if the reason for
failure to close the merger by that date is due to non-receipt of the required regulatory approvals by Customers; however, the termination date may be extended to March 31, 2014 under certain specified circumstances. The Merger Agreement, as
amended, also called for a $1.5 million preferred stock investment in the Company by Customers.
On May 22, 2013, the Company and Customers
consummated the contemplated investment in the Company by Customers of $1.5 million of the Companys Preferred Stock, whereby the Company issued and sold 1,500 shares of Series A Preferred Stock to Customers. The issuance price was $1,000.00
per share, for an aggregate purchase price of $1,500,000, less a 3% discount. The shares of Series A Preferred Stock sold to Customers were issued in reliance on an exemption from registration pursuant to Section 4(a)(2) of the Securities Act
of 1933, as amended, and Regulation D, as promulgated by the SEC.
5
On May 21, 2013, the Company filed a Certificate of Designations (Certificate) with the
Secretary of State of the State of Delaware establishing the designations, powers, preferences, limitations, restrictions, and relative rights of the Series A Preferred Stock. In accordance with the Certificate, among other terms, the Series A
Preferred Stock:
|
|
|
consists of 1,500 authorized shares with a par value of $0.01 per share and an original issuance price of $1,000 per share; |
|
|
|
is designated as Series A Noncumulative Perpetual Preferred Stock; |
|
|
|
is nonvoting and holders shall not have any conversion rights; |
|
|
|
ranks, with respect to rights on dividends, distributions, liquidation, dissolution and winding up, senior to all classes of the Companys common stock, $0.01 par value per share, and junior to all the
Companys indebtedness and other non-equity claims on the Company; |
|
|
|
when and if declared by the Board of Directors of the Company, may pay dividends semi-annually in arrears on June 30 and December 31 of each year at the rate of six percent (6%) per annum. Such dividends
are discretionary and noncumulative; |
|
|
|
provides for optional redemption under certain circumstances at the sole option of the Company; and |
|
|
|
upon liquidation, dissolution, or winding up of the Company, the holders of Series A Preferred Stock shall be entitled to be paid out of the assets of the Company available for distribution to holders of the
Companys capital stock of all classes, before any sums shall be paid or any assets distributed among the holders of the Common Stock, an amount of $1,000 per share, together with any declared but unpaid dividends thereon. |
Additional information specific to the Series A Preferred Stock is included in a Form 8-K filed with the SEC on May 24, 2013.
On December 20, 2013, the Company announced its decision to not further extend the termination date of the Merger Agreement, as amended, which had called
for a termination date by December 31, 2013 if the contemplated merger of the Company and Customers is not completed by that time. Customers would have had a right to extend the termination date to a later date of March 31, 2014 if certain
conditions were satisfied, including that Customers shall have made all regulatory filings that are required to obtain regulatory approval for the purchase of the Company and CMS by December 31, 2013. To date, this condition has not been
satisfied and it is our understanding that Customers will not satisfy this condition. As the Company had informed Customers, the decision of the Companys Board of Directors to not further extend the Merger Agreement beyond the
December 31, 2013 termination date was due to delays in the receipt of regulatory approvals by Customers to purchase the Company and CMS. Due to the continued delay and uncertainty in the timing of receipt of regulatory approvals by Customers,
the Company determined that not further extending the Merger Agreement, which allows the Merger Agreement to be terminated, is in the Companys best interest.
On December 20, 2013, Customers issued its own press release announcing termination of the Merger Agreement. The press release contained a misstatement
that the Merger Agreement had been terminated by mutual consent of the parties, thereby releasing Customers of its obligation to pay a One Million Dollar ($1,000,000) termination fee to the Company that the parties had specifically previously agreed
to if the merger cannot close due to Customers failure to receive the required regulatory approvals.
The Company did not waive its right to the
termination fee, nor did it agree to any terms of termination with Customers, and views Customers attempt to evade its obligation to pay the termination fee as being an intentional breach of the Merger Agreement and demonstrates an absence of
good faith. Customers did not have, nor does it currently have, any unilateral right to terminate the Merger Agreement. The Company will proceed to terminate the Merger Agreement in its normal course on December 31, 2013, pursuant to the terms
of the Merger Agreement, as amended. Customers public misstatements about termination of the Merger Agreement prior to
6
December 31, 2013 by mutual consent, and its non-liability for the $1,000,000 terminate fee owed to the Company, are not only false and misleading, but also will constitute an intentional
breach of the Merger Agreement if Customers does not pay the termination fee within the timeframe specified in the Merger Agreement, as amended, in which case the Company may need to initiate litigation to enforce payment by Customers of the
termination fee. While the Company believes it will succeed on the merits to collect the termination fee from Customers, litigation is subject to inherent risk, and therefore, the Companys success as the outcome of litigation cannot be
guaranteed. For additional discussion about this risk factor, see Item 1A. Risk Factors of the Companys Annual Report on Form 10-K for the fiscal year ended September 30, 2013, filed with the U.S. Securities and Exchange
Commission on December 23, 2013.
Business Strategy
The Company seeks to differentiate itself from its competition by providing superior, highly personalized and prompt service, local decision making and
competitive fees and rates to its customers. Historically, the Bank has been a community-oriented retail savings bank offering residential mortgage loans and traditional deposit products and, to a lesser extent, commercial real estate, small
business and consumer loans in Westchester County and the surrounding areas. The Company has adopted a strategic plan that focuses on growth in the loan portfolio into higher yield multi-family, non-residential, construction and commercial loan
markets. The Companys strategic plan also calls for increasing deposit relationships and broadening its product lines and services. The Company believes that this business strategy complements its existing commitment to high quality customer
service.
Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act)
All financial institutions, including the Company and the Bank, continue to experience the impact of major financial reform legislation, known as the
Dodd-Frank Act, that was signed into law by the President on July 21, 2010. Among other things, the Dodd-Frank Act impacts the rules governing the provision of consumer financial products and services, and implementation of the many
requirements of the legislation requires new mandatory and discretionary rulemakings by numerous federal regulatory agencies over the next several years. Many of the provisions of the Dodd-Frank Act affecting the Company and Bank have effective
dates ranging from immediately upon enactment of the legislation to several years following enactment of the Dodd-Frank Act.
Critical Accounting
Policies
The consolidated financial statements included in this Report have been prepared in conformity with accounting principles generally accepted
in the United States of America (GAAP). In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the dates of the
statements of financial condition and revenues and expenses for the periods then ended. Actual results could differ significantly from those estimates.
It is managements opinion that accounting estimates covering certain aspects of the business have more significance than others due to the relative
importance of those areas to overall performance, or the level of subjectivity required in making these estimates. Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan
losses, the determination of other-than-temporary impairment on securities, and the assessment of whether deferred tax assets are more likely than not to be realized.
Management believes that the allowance for loan losses represents its best estimate of losses known and inherent in the loan portfolio that are both probable
and reasonable to estimate. While management uses available information to recognize losses on loans, future additions to the allowance for loan losses may be necessary based on changes in market and economic conditions in the Companys market
area. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Companys
7
allowance for loan losses. Such agencies may require the Company to recognize additions to the allowance for loan losses based on their judgments about information available to them at the time
of their examination. Managements determination of whether investments are impaired is based on their assessment of the ultimate recoverability of their cost rather than by recognizing temporary declines in value. Managements assessment
as to the amount of deferred tax assets that are more likely than not to be realized is based upon future taxable income, which is subject to revision upon receipt of updated information.
Average Balances, Interest and Average Yields
The
following tables set forth certain information relating to the Companys average balance sheets and reflect the average annual yield on interest-earning assets and average annual cost of interest-bearing liabilities, interest earned and
interest expensed for the periods indicated. Such yields and costs are derived by dividing annualized income or expense by the average balance of interest-earning assets or interest-bearing liabilities, respectively, for the periods presented.
Average balances are derived from daily balances over the periods indicated. The average balances for loans are net of allowance for loan losses.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At September 30, 2013 |
|
|
For the Year Ended September 30, 2013 |
|
|
|
Actual Balance |
|
|
Yield/ Rate |
|
|
Average Balance |
|
|
Interest Income Expense |
|
|
Yield/ Rate |
|
|
|
(Dollars in thousands) |
|
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable(1) |
|
$ |
207,996 |
|
|
|
5.23 |
% |
|
$ |
206,957 |
|
|
$ |
10,406 |
|
|
|
5.03 |
% |
Securities(2) |
|
|
40,420 |
|
|
|
2.27 |
% |
|
|
44,715 |
|
|
|
840 |
|
|
|
1.88 |
% |
Other interest-earning assets(3) |
|
|
1,857 |
|
|
|
3.57 |
% |
|
|
3,773 |
|
|
|
86 |
|
|
|
2.28 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-earning assets |
|
|
250,273 |
|
|
|
4.74 |
% |
|
|
255,445 |
|
|
|
11,332 |
|
|
|
4.44 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest earning assets |
|
|
7,982 |
|
|
|
|
|
|
|
6,238 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
258,255 |
|
|
|
|
|
|
$ |
261,683 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing-liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposits |
|
$ |
50,275 |
|
|
|
0.30 |
% |
|
$ |
48,908 |
|
|
|
166 |
|
|
|
0.34 |
% |
Savings and club accounts |
|
|
43,050 |
|
|
|
0.25 |
% |
|
|
42,357 |
|
|
|
106 |
|
|
|
0.25 |
% |
Certificates of deposit |
|
|
90,499 |
|
|
|
1.37 |
% |
|
|
92,541 |
|
|
|
1,200 |
|
|
|
1.30 |
% |
Borrowed money(4) |
|
|
21,110 |
|
|
|
3.45 |
% |
|
|
27,110 |
|
|
|
784 |
|
|
|
2.89 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities |
|
|
204,934 |
|
|
|
1.09 |
% |
|
|
210,916 |
|
|
|
2,256 |
|
|
|
1.07 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest bearing deposits |
|
|
28,488 |
|
|
|
|
|
|
|
27,606 |
|
|
|
|
|
|
|
|
|
Other |
|
|
2,098 |
|
|
|
|
|
|
|
756 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-interest bearing liabilities |
|
|
30,586 |
|
|
|
|
|
|
|
28,362 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
235,520 |
|
|
|
|
|
|
|
239,278 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity |
|
|
22,735 |
|
|
|
|
|
|
|
22,403 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity |
|
$ |
258,255 |
|
|
|
|
|
|
$ |
261,681 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate spread |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
9,076 |
|
|
|
3.37 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest-earning assets/net interest margin |
|
$ |
45,339 |
|
|
|
|
|
|
$ |
44,529 |
|
|
|
|
|
|
|
3.55 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of interest-earning assets to interest-bearing liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.21x |
|
|
|
|
|
(1) |
Includes all loans, including non-accrual loans, net of allowance for loan losses and net deferred costs and fees. |
(2) |
Available for sale securities included at fair value. |
8
(3) |
Includes stock of the FHLB and loans held for sale, which are held for a short period of time. |
(4) |
Includes mortgage escrow funds. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended September 30, 2012 |
|
|
For the Year Ended September 30, 2011 |
|
|
|
Average Balance |
|
|
Interest Income Expense |
|
|
Yield/ Rate |
|
|
Average Balance |
|
|
Interest Income Expense |
|
|
Yield/ Rate |
|
|
|
(Dollars in thousands) |
|
Interest-earning assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable(1) |
|
$ |
187,835 |
|
|
$ |
10,268 |
|
|
|
5.47 |
% |
|
$ |
178,102 |
|
|
$ |
10,347 |
|
|
|
5.81 |
% |
Securities(2) |
|
|
51,670 |
|
|
|
946 |
|
|
|
1.83 |
% |
|
|
53,378 |
|
|
|
967 |
|
|
|
1.81 |
% |
Other interest-earning assets(3) |
|
|
7,501 |
|
|
|
106 |
|
|
|
1.41 |
% |
|
|
7,555 |
|
|
|
139 |
|
|
|
1.84 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-earning assets |
|
|
247,006 |
|
|
|
11,320 |
|
|
|
4.58 |
% |
|
|
239,035 |
|
|
|
11,453 |
|
|
|
4.79 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest earning assets |
|
|
6,655 |
|
|
|
|
|
|
|
|
|
|
|
6,427 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
253,661 |
|
|
|
|
|
|
|
|
|
|
$ |
245,462 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing-liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposits |
|
$ |
34,417 |
|
|
|
184 |
|
|
|
0.53 |
% |
|
$ |
29,997 |
|
|
|
218 |
|
|
|
0.73 |
% |
Savings and club accounts |
|
|
41,652 |
|
|
|
136 |
|
|
|
0.33 |
% |
|
|
41,019 |
|
|
|
158 |
|
|
|
0.39 |
% |
Certificates of deposit |
|
|
103,419 |
|
|
|
1,592 |
|
|
|
1.54 |
% |
|
|
99,610 |
|
|
|
1,576 |
|
|
|
1.58 |
% |
Borrowed money(4) |
|
|
28,475 |
|
|
|
1,083 |
|
|
|
3.80 |
% |
|
|
35,894 |
|
|
|
1,715 |
|
|
|
4.78 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities |
|
|
207,963 |
|
|
|
2,995 |
|
|
|
1.44 |
% |
|
|
206,520 |
|
|
|
3,667 |
|
|
|
1.78 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest bearing deposits |
|
|
22,687 |
|
|
|
|
|
|
|
|
|
|
|
16,222 |
|
|
|
|
|
|
|
|
|
Other |
|
|
1,188 |
|
|
|
|
|
|
|
|
|
|
|
1,178 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-interest bearing liabilities |
|
|
23,872 |
|
|
|
|
|
|
|
|
|
|
|
17,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
231,835 |
|
|
|
|
|
|
|
|
|
|
|
223,920 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity |
|
|
21,826 |
|
|
|
|
|
|
|
|
|
|
|
21,542 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity |
|
$ |
253,661 |
|
|
|
|
|
|
|
|
|
|
$ |
245,462 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate spread |
|
|
|
|
|
$ |
8,325 |
|
|
|
3.14 |
% |
|
|
|
|
|
$ |
7,786 |
|
|
|
3.01 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest-earning assets/net interest margin |
|
$ |
39,043 |
|
|
|
|
|
|
|
3.37 |
% |
|
$ |
32,515 |
|
|
|
|
|
|
|
3.26 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of interest-earning assets to interest-bearing liabilities |
|
|
|
|
|
|
1.19x |
|
|
|
|
|
|
|
|
|
|
|
1.16x |
|
|
|
|
|
(1) |
Includes all loans, including non-accrual loans, net of allowance for loan losses and net deferred costs and fees. |
(2) |
Held to maturity securities included at amortized cost and available for sale securities included at fair value. |
(3) |
Includes stock of the FHLB and loans held for sale, which are held for a short period of time. |
(4) |
Includes mortgage escrow funds. |
9
Rate/Volume Analysis. The following tables analyze the dollar amount of changes in interest income and
interest expense for major components of interest-earning assets and interest-bearing liabilities. It shows the amount of the change in interest income or expense caused by either changes in outstanding balances (volume) or changes in interest
rates. The effect of a change in volume is measured by applying the average rate during the first period to the volume change between the two periods. The effect of changes in rate is measured by applying the change in rate between the two periods
to the average volume during the first period. Changes attributable to both rate and volume which cannot be segregated have been allocated proportionately to the absolute value of the change due to volume and the change due to rate.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30, 2013 Compared to 2012 |
|
|
|
Volume |
|
|
Rate |
|
|
Net |
|
|
|
(In thousands) |
|
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable |
|
$ |
1,000 |
|
|
$ |
(862 |
) |
|
$ |
138 |
|
Securities |
|
|
(131 |
) |
|
|
25 |
|
|
|
(106 |
) |
Other interest-earning assets |
|
|
(67 |
) |
|
|
47 |
|
|
|
(20 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-earning assets |
|
|
802 |
|
|
|
(790 |
) |
|
|
12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposits |
|
|
61 |
|
|
|
(79 |
) |
|
|
(18 |
) |
Savings and club accounts |
|
|
2 |
|
|
|
(32 |
) |
|
|
(30 |
) |
Certificates of deposit |
|
|
(158 |
) |
|
|
(234 |
) |
|
|
(392 |
) |
Borrowed money |
|
|
(50 |
) |
|
|
(249 |
) |
|
|
(299 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities |
|
|
(145 |
) |
|
|
(594 |
) |
|
|
(739 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
$ |
947 |
|
|
$ |
(196 |
) |
|
$ |
751 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30, 2012 Compared to 2011 |
|
|
|
Volume |
|
|
Rate |
|
|
Net |
|
|
|
(In thousands) |
|
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable |
|
$ |
547 |
|
|
$ |
(626 |
) |
|
$ |
(79 |
) |
Securities |
|
|
(31 |
) |
|
|
10 |
|
|
|
(21 |
) |
Other interest-earning assets |
|
|
(1 |
) |
|
|
(32 |
) |
|
|
(33 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-earning assets |
|
|
515 |
|
|
|
(648 |
) |
|
|
(133 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposits |
|
|
30 |
|
|
|
(64 |
) |
|
|
(34 |
) |
Savings and club accounts |
|
|
2 |
|
|
|
(24 |
) |
|
|
(22 |
) |
Certificates of deposit |
|
|
58 |
|
|
|
(42 |
) |
|
|
16 |
|
Borrowed money |
|
|
(317 |
) |
|
|
(315 |
) |
|
|
(632 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities |
|
|
(227 |
) |
|
|
(445 |
) |
|
|
(672 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
$ |
742 |
|
|
$ |
(203 |
) |
|
$ |
539 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comparison of Financial Condition at September 30, 2013 to September 30, 2012
Total assets decreased by $6.4 million, or 2.4%, to $258.3 million at September 30, 2013 from $264.7 million at September 30, 2012. Increases in
loans and decreases in FHLB advances were funded by securities maturities and increases in CDARS deposits.
Cash and cash equivalents increased by
$636,000 to $2.5 million as of September 30, 2013 from $1.8 million at September 30, 2012.
10
Securities available for sale decreased by $7.9 million or 16.4% to $40.4 million as of September 30, 2013
from $48.4 million at September 30, 2012 as a result of maturities and calls of available for sale securities. Available for sale securities consist principally of notes, bonds and mortgage-backed securities of U.S. Government Agencies, and
corporate and municipal bonds.
Loans receivable were $208.0 million and $201.5 million at September 30, 2013 and 2012, respectively, representing an
increase of $6.5 million, or 3.2%. The increase in loans resulted principally from additions of $4.5 million of multi-family mortgage loans, $7.3 million of non-residential mortgage loans, additions to commercial loans of $2.5 million, net of a
reduction in residential real estate mortgage loans of $6.3 million.
The banking industry as a whole has seen increases in loan delinquencies and
defaults in recent years. As of September 30, 2013 and September 30, 2012, the Bank had $4.8 million and $6.2 million of non-performing loans, respectively, substantially all of which were in process of foreclosure and have been placed on
non-accrual status. At September 30, 2013 and 2012, the Bank had $8.0 million and $11.4 million of loans classified as impaired. At September 30, 2013, none of these impaired loans required specific loss allowances. At September 30,
2012, $1.5 million of impaired loans required specific loss allowances of $48,000. The remaining $9.9 million of impaired loans did not require specific loss allowances. The impaired loans were primarily the result of continued difficult general
economic conditions, continued unemployment and continued declines in the local real estate market. As of September 30, 2013 and 2012, the allowance for loan losses was 0.44% and 0.48% of loans outstanding, respectively. The allowance for loan
losses contains two components; the specific allowance for impaired loans individually evaluated, and the allowance for loans collectively evaluated for impairment. The specific allowance for loans individually evaluated for impairment was none at
September 30, 2013, compared to $48,000 at September 30, 2012. The allowance for loans collectively evaluated for impairment was $923,000 at September 30, 2013 compared to $919,000 at September 30, 2012. The allowance allocation,
or loss percentages are based on one to five year historical charge offs, adjusted for the trend of losses, current economic conditions including unemployment, real estate markets and other factors. Allowance allocation percentages can also be
adjusted for trends as evidenced by the Federal Deposit Insurance Corporation Uniform Bank Performance Report (UBPR) loss experience for the Banks Peer Group. While the economy nationally as well as in our primary market area has
shown signs of improvement during the year ended September 30, 2013, changes in the mix and volume of the loan portfolio, weak economic conditions, unemployment, declines in real estate values in the Banks primary market area, and lower
commercial real estate cash flows, resulted in provisions for loan losses of $443,000 and $891,000 in the years ended September 30, 2013 and 2012, respectively.
Deposits increased by $8.8 million, or 4.3%, from $203.5 million as of September 30, 2012, to $212.3 million as of September 30, 2013, principally
from higher CDARS deposits. Retail deposits declined by $985,000 while CDARS deposits increased by $9.8 million. The $5.0 million brokered time deposit from fiscal 2012, which was scheduled to mature in 2026 with interest at 3.54% was prepaid during
fiscal 2012. The Bank participates in the Certificate of Deposit Account Registry Service, or CDARS network. Under this network, the Bank can transfer deposits into the network (a one way sell transaction), request that the network
deposit funds at the Bank (a one way buy transaction), or deposit funds into the network and receive an equal amount of deposits from the network (a reciprocal transfer). The network provides the Bank with an investment vehicle in the case of a one
way sell, a liquidity or funding source in the case of a one way buy and the ability to access additional FDIC insurance for customers in the case of a reciprocal transfer. As of September 30, 2013, the Bank had $9.8 million of CDARS deposits.
Advances from FHLB declined by $17.2 million from $37.1 million at September 30, 2012 to $19.9 million at September 30, 2013. Higher use of
less expensive CDARS deposits, and decreases in securities were used to fund the decrease in FHLB advances.
11
Stockholders equity increased from $22.0 million at September 30, 2012 to $22.7 million at
September 30, 2013 as a result of net income attributable to common shareholders of $906,000, the $1.5 million sale of preferred stock and by additions to equity resulting from accounting for stock-based compensation and the employee stock
ownership plan, or ESOP, net of the other comprehensive loss of $1.7 million.
Comparison of Operating Results for the Fiscal Years Ended
September 30, 2013 and 2012
General. The Company had net income attributable to common shareholders of $906,000 for the year ended
September 30, 2013, compared to net loss of $639,000 for the year ended September 30, 2012. Net interest income improved in the year ended September 30, 2013 compared to 2012 by $751,000 or 9.0% due to reductions in interest expense.
In the year ended September 30, 2012, the Company realized $782,000 in gains on the sale of securities, which did not recur in the year ended September 30, 2013, and recorded a provision for loan losses in 2013 of $443,000, compared to
$891,000 in 2012. In the year ended September 30, 2012, the Company incurred expenses of $300,000 in connection with the merger agreement with Customers which were reimbursed by Customers during the year ended September 30, 2013. In the
year ended September 30, 2012, the Company incurred $173,000 of expenses relating to the charter conversion and $614,000 of expenses for the early repayment of high cost borrowings and brokered deposits, none of which recurred in 2013. Aside
from these expense items, non-interest expense decreased by $344,000 in the year ended September 30, 2013 compared to 2012, principally in the area of salaries and benefits.
Interest Income. Total interest income increased $12,000, or 0.1%, to $11.3 million for the year ended September 30, 2013 compared to the year
ended September 30, 2012. The increase in interest income was due to an increase of $138,000 in interest income from loans, net of decreases of $126,000 in interest income from securities and other interest-earning assets. Higher
interest-earning asset balances contributed to an $802,000 increase in total interest income, while the impact of lower yields on interest-earning assets reduced interest income by $790,000.
Interest income from loans increased by $138,000, or 1.3%, to $10.4 million for the year ended September 30, 2013 compared to the year ended
September 30, 2012. The increase was due to an increase in the average balance of loans to $207.0 million in the year ended September 30, 2013 from $187.8 million in the year ended September 30, 2012, partially offset by a 44 basis
point decrease in the average yields to 5.03% in the 2013 fiscal year from 5.47% in the 2012 fiscal year, reflecting lower market rates, decreases in interest rates on adjustable rate loans and the prepayments of loans in the low interest rate
environment. The impact of lower yields reduced interest on loans by $862,000, while higher average balances contributed additional interest income of $1 million.
Interest income from securities decreased by $106,000 in the year ended September 30, 2013 compared to the year ended September 30, 2012. The yield
on securities rose by 5 basis points, from 1.83% in the year ended September 30, 2012 to 1.88% in the year ended September 30, 2013 as a result of changes in the mix and maturities of the portfolio and short term fluctuations in market
rates. The average balance of securities declined from $51.7 million in the year ended September 30, 2012 to $44.7 million in the year ended September 30, 2013 as securities were used to fund loan growth. Higher yields on investments
contributed $25,000 of additional interest income, while lower average balances reduced interest income from investments by $131,000 in the year ended September 30, 2013 compared to 2012. Interest income from other interest-earning assets
decreased by $20,000 for the year ended September 30, 2013, due to the impact of lower average balances, partially offset by higher interest rates caused by changes in the mix of these assets. Other interest-earning assets consist of the
investment in the FHLB, loans held for sale and cash equivalents.
Interest Expense. Total interest expense decreased by $739,000, or 24.7%, to
$2.3 million in the year ended September 30, 2013 compared to $3.0 million in 2012. Interest on demand deposits decreased $18,000 as a result of the impact of lower market interest rates in the 2013 fiscal year, offset in part by the impact of
higher average balances which increased by $14.5 million, or 42.1% in the year ended September 30, 2013, compared to 2012. Interest on savings and club accounts decreased by $30,000 as a result of lower market interest rates in the year
12
ended September 30, 2013 compared to 2012, offset in part by an increase in the average balances of $705,000 in the year ended September 30, 2013 compared to 2013. Interest expense on
certificates of deposit decreased by $392,000 as a result of a $10.9 million decrease in the average balance in the year ended September 30, 2013, compared to 2012, and of a reduction in overall market interest rates on certificates of deposit
from 1.54% in the year ended September 30, 2012 to 1.30% in 2013. Interest expense on borrowed money decreased by $299,000 in the year ended September 30, 2013 compared to 2012 as a result of prepaying high cost FHLB borrowings during 2012
and lower market interest rates, as well as a reduction in the average balances borrowed from $28.5 million in the year ended September 30, 2012 to $27.1 million in 2013.
Overall declines in market interest rates and the prepayment of high cost FHLB borrowings reduced the average interest rate on interest-bearing liabilities
from 1.44% in the year ended September 30, 2012 to 1.07% in 2013. Of the $739,000 decrease in interest expense, lower interest rates caused interest expense to decrease by $594,000, and changes in the mix of other interest-bearing liabilities
caused the expense to decrease by $145,000.
Net Interest Income. Net interest income increased $751,000, or 9.0%, to $9.1 million for the year
ended September 30, 2013 from $8.3 million for the year ended September 30, 2012. Increases in average interest-earning assets and lower rates on interest-bearing liabilities in the year ended September 30, 2013 as compared to 2012
were partially offset by increases in the volume of interest-bearing liabilities, and the impact of lower yields on interest-earning assets.
Provision
for Loan Losses. The allowance for loan losses was $923,000, or 0.44% of gross loans outstanding, at September 30, 2013 compared to $967,000 or 0.48% of gross loans outstanding at September 30, 2012. During the year ended
September 30, 2013, the Company charged $443,000 to expense to provide for loan losses, recovered $82,000 of previously written off loans and wrote off $569,000 of loans against the allowance. The level of the allowance for loan losses is based
on estimates and ultimate losses may vary from these estimates. Management reviews the level of the allowance for loan losses on a quarterly basis, at a minimum, and establishes the provision for loan losses based on the composition of the loan
portfolio, delinquency levels, loss experience, economic conditions, and other factors related to the collectibility of the loan portfolio. Management regularly evaluates various risk factors related to the loan portfolio, such as type of loan,
underlying collateral and payment status, and the corresponding allowance allocation percentages. As of September 30, 2013 and September 30, 2012, the Bank had $4.8 million and $6.2 million of non-performing loans, substantially all of
which were in process of foreclosure and have been placed on non-accrual status. At September 30, 2013 and 2012, the Bank had $8.0 million and $11.4 million of loans classified as impaired. At September 30, 2013, none of these impaired
loans required specific loss allowances. At September 30, 2012, $1.5 million of impaired loans required specific loss allowances of $48,000. The impaired loans were primarily the result of continued difficult general economic conditions,
increased unemployment and continued declines in the local real estate market.
The weak economy nationally as well as in our primary market area
contributed to an increase in our aggregate loss experience in the years ended September 30, 2013 and 2012, and as a result of changes in the mix and volume of the loan portfolio, weak economic conditions, unemployment, declines in real estate
values in the Banks primary market area, and lower commercial real estate cash flows, $443,000 and $891,000 was provided for loan losses in the years ended September 30, 2013 and 2012, respectively. The Bank has allocated the allowance
for loan losses among categories of loan types as well as classification status at each period end date.
Non-interest Income. Non-interest income
of $1.2 million in the year ended September 30, 2012 included $782,000 of gains on sale of securities, which did not occur in 2013. Gains on sale of loans in the 2013 fiscal year were $267,000, compared to $183,000 in fiscal 2012 due to a
higher volume of loans sold.
Non-interest Expenses. Non-interest expenses were $7.7 million for the year ended September 30, 2013 compared to
$9.4 million in 2012. Non-interest expense in 2012 included $300,000 of legal fees relating to merger agreement activities, $614,000 in prepayment charges for the early repayment of high cost FHLB
13
borrowings and brokered time deposits and $173,000 for the charter conversion, none of which recurred in 2013. Non-interest expense in 2013 included a $300,000 reimbursement of the merger
agreement related legal expenses from Customers Bank. Aside from the foregoing, non-interest expenses decreased $344,000 from the prior year.
Salaries
and benefits decreased by $320,000, or 7.2%, from $4.5 million in the year ended September 30, 2012 to $4.1 million in the year ended September 30, 2013 as a result of lower employee headcount, lower pension and health plan costs and lower
stock based compensation costs in 2013 compared to 2012.
Professional fees were $346,000 in the year ended September 30, 2013 and $872,000 in the
year ended September 30, 2012, a decrease of $526,000, principally due to merger agreement activities in 2012 and the reimbursement of $300,000 of the merger agreement related legal expenses from Customers Bank in 2013. The other components of
non-interest expense were comparable between the two years.
Income Tax Expense (Benefit). Income tax expense was $452,000 in the year ended
September 30, 2013 compared to a benefit of $175,000 in 2012. The tax expense (benefit) is recorded based on pretax income or (loss), at the statutory rate for federal tax purposes and the higher of the statutory rate or minimum tax rate for
state purposes. The effective tax rate in the years ended September 30, 2013 and 2012 was different than the statutory rate as a result of certain non-taxable income and expense items, including non-taxable merger related costs and
reimbursements.
Management of Market Risk
As a
financial institution, the Companys primary component of market risk is interest rate volatility. Fluctuations in interest rates will ultimately impact both the level of income and expense recorded on a significant portion of its assets and
liabilities. Fluctuations in interest rates will also affect the market value of interest-earning assets and liabilities, other than those which possess a short-term maturity. Interest rates are highly sensitive to factors that are beyond the
Companys control, including general economic conditions, inflation, changes in the slope of the interest rate yield curve, monetary and fiscal policies of the federal government and the regulatory policies of government authorities. Due to the
nature of the Companys operations, it is not subject to foreign currency exchange or commodity price risk. Instead, the Companys loan portfolio, concentrated in Westchester County, New York, is subject to the risks associated with the
economic conditions prevailing in its market area.
The primary goals of the Companys interest rate management strategy are to determine the
appropriate level of risk given the business strategy and then manage that risk so as to reduce the exposure of the Companys net interest income to fluctuations in interest rates. Historically, the Companys lending activities have been
dominated by one-to-four family real estate mortgage loans, and in more recent periods, such activities have included increases in non-residential real estate mortgage loans, multi-family and secured commercial loans. The primary source of funds has
been deposits, FHLB borrowings, CDARS transactions and brokered certificates of deposit, which have substantially shorter terms to maturity than the loan portfolio. As a result, the Company has employed certain strategies to manage the interest rate
risk inherent in the asset/liability mix, including but not limited to limiting terms of fixed rate one-to-four-family mortgage loan originations which are retained in the Companys portfolio, selling most of the one-to-four family mortgage
originations in the secondary market and focusing on investments with short and intermediate term maturities and borrowing term funds from the FHLB.
In
addition, the actual amount of time before mortgage loans are repaid can be significantly impacted by changes in mortgage prepayment rates and market interest rates. Mortgage prepayment rates will vary due to a number of factors, including the
regional economy in the area where the underlying mortgages were originated, seasonal factors, demographic variables and the assumability of the underlying mortgages. However, the major factors affecting prepayment rates are prevailing interest
rates, related mortgage refinancing opportunities and competition. The Company monitors interest rate sensitivity so that it can make adjustments to its asset and liability mix on a timely basis.
14
Interest Rate Risk
The Company uses a simulation model to monitor interest rate risk. This model reports the net interest income and net economic value at risk under different
interest rate environments. Specifically, an analysis is performed of changes in net interest income assuming changes in interest rates, both up and down, from current rates over the five year period following the current financial statements. The
changes in interest income and interest expense due to changes in interest rates reflect the interest rate sensitivity of the Companys interest-earning assets and interest-bearing liabilities. The table below sets forth the latest available
estimated changes in net interest income, as of June 30, 2013, that would result from various basis point changes in interest rates over a 12 month period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Interest Rates In Basis Points (Rate Shock) |
|
|
Net Interest Income |
|
|
|
|
Amount |
|
|
Dollar Change |
|
|
Percent Change |
|
|
|
|
(Dollars in thousands) |
|
|
300 |
|
|
$ |
9,502 |
|
|
$ |
(350 |
) |
|
|
3.6 |
% |
|
200 |
|
|
|
9,606 |
|
|
|
(246 |
) |
|
|
2.5 |
% |
|
100 |
|
|
|
9,739 |
|
|
|
(113 |
) |
|
|
1.1 |
% |
|
0 |
|
|
|
9,852 |
|
|
|
|
|
|
|
0.0 |
% |
|
100 |
|
|
|
9,706 |
|
|
|
(146 |
) |
|
|
1.5 |
% |
Liquidity and Capital Resources
Liquidity. The Company is required to maintain levels of liquid assets sufficient to ensure the Companys safe and sound operation. Liquidity is
the ability to meet current and future financial obligations of a short-term nature. The Company adjusts its liquidity levels in order to meet funding needs for deposit outflows, payment of real estate taxes from escrow accounts on mortgage loans,
repayment of borrowings and loan funding. The Company also adjusts its liquidity level as appropriate to meet its asset/liability objectives.
The
Companys primary sources of funds are deposits, the Certificate of Deposit Account Registry Service, or CDARS network, brokered certificates of deposit, amortization and prepayments of loans, FHLB advances, repayments and maturities of
investment securities and funds provided from operations. While scheduled loan and mortgage-backed securities amortization and maturing investment securities are a relatively predictable source of funds, deposit flow and loan and mortgage-backed
securities repayments are greatly influenced by market interest rates, economic conditions and competition. The Companys liquidity, represented by cash and cash equivalents and investment securities, is a product of its operating, investing
and financing activities. Liquidity management is both a daily and long-term function of business management. Excess liquidity is generally invested in short-term investments, such as federal funds, available-for-sale securities or cash equivalents
and other interest-earning assets. If the Company requires funds beyond its ability to generate them internally, the Company can acquire brokered certificates of deposit, CDARS deposits and draw upon existing borrowing agreements with the FHLB and
the Federal Reserve which provide an additional source of funds. At September 30, 2013 and 2012, the Company had $19.9 million and $37.1 million of advances from the FHLB, respectively, CDARS deposits of $9.8 million and none, respectively, and
no brokered deposits as of either date.
The Company anticipates that it will have sufficient funds available to meet its current loan and other
commitments. As of September 30, 2013, the Company had cash and cash equivalents of $2.5 million and available for sale securities of $40.4 million. At September 30, 2013, the Company has outstanding commitments to originate loans of $3.9
million and $11.2 million of undisbursed funds from approved lines of credit, including a homeowners equity line of credit lending program. Certificates of deposit scheduled to mature in one year or less at September 30, 2013, totaled
$38.9 million. Historically, the Companys deposit flow history has been that a significant portion of such deposits remain with the Company.
15
Capital Resources. In the year ended September 30, 2013, net cash provided by operating activities
was $7.7 million, compared to cash used of $1.3 million in 2012. In the years ended September 30, 2013 and 2012, the net income of $939,000 and net loss of $639,000, respectively, included non-cash expenses (consisting of depreciation,
amortization, provision for loan losses, deferred taxes and stock-based compensation) of $1.4 million and $2.1 million, respectively. Loans originated for resale provided $2.1 million and used $226,000 of cash in 2013 and 2012, respectively.
In the year ended September 30, 2013, investing activities used $430,000 of cash, compared to $12.7 million used in 2012. In the year ended
September 30, 2013, net securities investment activities provided $5.9 million of cash compared to $11.9 million in 2012. Net loan activities used $7.5 million of cash in the year ended September 30, 2013 compared to $23.7 million of cash
in 2012.
Net cash used by financing activities was $6.6 million compared to $11.6 million provided by financing activities in the years ended
September 30, 2013 and 2012, respectively. In the 2013 and 2012 fiscal years, increases in deposits provided $8.8 million of cash, in each year. In the year ended September 30, 2013, net advances from FHLB used $17.2 million while net
advances from FHLB provided $2.7 million in the year ended September 2012. In the year ended September 30, 2013, the Company sold $1.5 million of preferred stock to Customers Bank.
The Company has a borrowing agreement with the FHLB, of which $20.0 million was in use at September 30, 2013. The Companys overall credit exposure
at the FHLB cannot exceed 50% of its total assets, subject to certain limitations based on the underlying loans and securities pledged as collateral.
The
following table sets forth the Banks capital position at September 30, 2013, compared to the minimum regulatory capital requirements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual |
|
|
For Capital Adequacy Purposes |
|
|
To be Well Capitalized under Prompt Corrective Action Provisions |
|
|
|
Amount |
|
|
Ratio |
|
|
Amount |
|
|
Ratio |
|
|
Amount |
|
|
Ratio |
|
|
|
(Dollars in thousands) |
|
Total capital (to risk-weighted assets) |
|
$ |
22,869 |
|
|
|
12.91 |
% |
|
$ |
³ 14,176 |
|
|
|
³ 8.00 |
% |
|
$ |
³ 17,720 |
|
|
|
³ 10.00 |
% |
Core (Tier 1) capital (to risk-weighted assets) |
|
|
21,946 |
|
|
|
12.39 |
|
|
|
|
|
|
|
|
|
|
|
³ 10,632 |
|
|
|
³ 6.00 |
|
Core (Tier 1) capital (to total adjusted assets) |
|
|
21,946 |
|
|
|
8.49 |
|
|
|
³ 10,342 |
|
|
|
³ 4.00 |
|
|
|
³ 12,928 |
|
|
|
³ 5.00 |
|
Tangible capital (to total adjusted assets) |
|
|
21,946 |
|
|
|
8.49 |
|
|
|
³ 3,878 |
|
|
|
³ 1.50 |
|
|
|
|
|
|
|
|
|
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Companys
financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
Recent Accounting Pronouncements
There are currently no
recent accounting pronouncements that are considered significant to the Companys consolidated financial statements.
Impact of Inflation and
Changing Prices
The consolidated financial statements and related notes of the Company have been prepared in accordance with GAAP which generally
requires the measurement of financial position and operating results in terms of historical dollars without consideration for changes in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the
increased cost of the Companys operations. Unlike industrial companies, the Companys assets and liabilities are primarily monetary in nature. As a result, the effect of changes in interest rates will have a more significant impact on the
Companys performance than will the effect of changing prices and inflation in general.
16
Report of Independent Registered Public
Accounting Firm
To the Stockholders and Board of Directors
CMS Bancorp, Inc.
White Plains, New York
We have audited the accompanying consolidated statement of financial condition of CMS Bancorp, Inc. and subsidiaries (collectively the
Company) as of September 30, 2013, and the related consolidated statements of operations, comprehensive income (loss), changes in stockholders equity and cash flows for the year then ended. These consolidated financial
statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of CMS Bancorp, Inc. and subsidiaries as of September 30, 2013, and the consolidated results of their operations and their cash flows for the year then ended, in
conformity with accounting principles generally accepted in the United States of America.
Woodbridge, New Jersey
December 23, 2013
17
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
CMS Bancorp, Inc.
White Plains, New York
We have audited the
accompanying consolidated statement of financial condition of CMS Bancorp, Inc. and subsidiaries (collectively the Company) as of September 30, 2012, and the related consolidated statements of income, comprehensive income, changes
in stockholders equity and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial
statements referred to above present fairly, in all material respects, the consolidated financial position of CMS Bancorp, Inc. and subsidiaries as of September 30, 2012, and the consolidated results of their operations and their cash flows for
the year then ended, in conformity with accounting principles generally accepted in the United States of America.
Clark, New Jersey
December 28, 2012
18
CMS Bancorp, Inc.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
|
2013 |
|
|
2012 |
|
|
|
(Dollars in thousands, except per share data) |
|
ASSETS |
|
|
|
|
Cash and amounts due from depository institutions |
|
$ |
2,219 |
|
|
$ |
1,340 |
|
Interest-bearing deposits |
|
|
258 |
|
|
|
501 |
|
|
|
|
|
|
|
|
|
|
Total cash and cash equivalents |
|
|
2,477 |
|
|
|
1,841 |
|
Securities available for sale |
|
|
40,420 |
|
|
|
48,361 |
|
Loans held for sale |
|
|
337 |
|
|
|
2,426 |
|
Loans receivable, net of allowance for loan losses of $923 and $967, respectively |
|
|
207,996 |
|
|
|
201,462 |
|
Premises and equipment |
|
|
2,742 |
|
|
|
3,054 |
|
Federal Home Loan Bank of New York stock, at cost |
|
|
1,262 |
|
|
|
2,032 |
|
Accrued interest receivable |
|
|
954 |
|
|
|
1,006 |
|
Other assets |
|
|
2,067 |
|
|
|
4,484 |
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
258,255 |
|
|
$ |
264,666 |
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY |
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
Deposits |
|
$ |
212,312 |
|
|
$ |
203,516 |
|
Advances from Federal Home Loan Bank of New York |
|
|
19,889 |
|
|
|
37,130 |
|
Advance payments by borrowers for taxes and insurance |
|
|
1,221 |
|
|
|
844 |
|
Other liabilities |
|
|
2,098 |
|
|
|
1,218 |
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
235,520 |
|
|
|
242,708 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies |
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity: |
|
|
|
|
|
|
|
|
Preferred stock, $.01 par value, 1,000,000 shares authorized, 1,500 shares issued and outstanding at September 30, 2013
(liquidation preference value $1,000 per share) |
|
|
|
|
|
|
|
|
Common stock, $.01 par value, authorized shares: 7,000,000; shares issued: 2,055,165; shares outstanding: 1,862,803 |
|
|
21 |
|
|
|
21 |
|
Additional paid-in capital |
|
|
20,283 |
|
|
|
18,728 |
|
Retained earnings |
|
|
7,007 |
|
|
|
6,101 |
|
Treasury stock, 192,362 shares |
|
|
(1,660 |
) |
|
|
(1,660 |
) |
Unearned Employee Stock Ownership Plan (ESOP) shares |
|
|
(1,288 |
) |
|
|
(1,343 |
) |
Accumulated other comprehensive income (loss) |
|
|
(1,628 |
) |
|
|
111 |
|
|
|
|
|
|
|
|
|
|
Total stockholders equity |
|
|
22,735 |
|
|
|
21,958 |
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity |
|
$ |
258,255 |
|
|
$ |
264,666 |
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
19
CMS Bancorp, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
Years Ended September 30, |
|
|
|
2013 |
|
|
2012 |
|
|
|
(Dollars in thousands,
except per share data) |
|
Interest income: |
|
|
|
|
Loans, including fees |
|
$ |
10,406 |
|
|
$ |
10,268 |
|
Securities, taxable |
|
|
840 |
|
|
|
946 |
|
Other interest-earning assets |
|
|
86 |
|
|
|
106 |
|
|
|
|
|
|
|
|
|
|
Total interest income |
|
|
11,332 |
|
|
|
11,320 |
|
|
|
|
|
|
|
|
|
|
Interest expense: |
|
|
|
|
|
|
|
|
Deposits |
|
|
1,472 |
|
|
|
1,912 |
|
Mortgage escrow funds |
|
|
52 |
|
|
|
31 |
|
Borrowings, short-term |
|
|
36 |
|
|
|
23 |
|
Borrowings, long-term |
|
|
696 |
|
|
|
1,029 |
|
|
|
|
|
|
|
|
|
|
Total interest expense |
|
|
2,256 |
|
|
|
2,995 |
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
9,076 |
|
|
|
8,325 |
|
Provision for loan losses |
|
|
443 |
|
|
|
891 |
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for loan losses |
|
|
8,633 |
|
|
|
7,434 |
|
|
|
|
|
|
|
|
|
|
Non-interest income: |
|
|
|
|
|
|
|
|
Fees and service charges |
|
|
159 |
|
|
|
168 |
|
Net gain on sale of loans |
|
|
267 |
|
|
|
183 |
|
Net gain on sale and call of securities |
|
|
|
|
|
|
782 |
|
Other |
|
|
13 |
|
|
|
26 |
|
|
|
|
|
|
|
|
|
|
Total non-interest income |
|
|
439 |
|
|
|
1,159 |
|
|
|
|
|
|
|
|
|
|
Non-interest expenses: |
|
|
|
|
|
|
|
|
Salaries and employee benefits |
|
|
4,139 |
|
|
|
4,459 |
|
Net occupancy |
|
|
1,282 |
|
|
|
1,238 |
|
Equipment |
|
|
754 |
|
|
|
762 |
|
Professional fees |
|
|
346 |
|
|
|
872 |
|
Advertising |
|
|
29 |
|
|
|
69 |
|
Federal insurance premiums |
|
|
223 |
|
|
|
209 |
|
Directors fees |
|
|
213 |
|
|
|
268 |
|
Cost of early repayment of borrowings and brokered time deposits |
|
|
|
|
|
|
614 |
|
Charter conversion |
|
|
5 |
|
|
|
173 |
|
Other |
|
|
690 |
|
|
|
743 |
|
|
|
|
|
|
|
|
|
|
Total non-interest expenses |
|
|
7,681 |
|
|
|
9,407 |
|
|
|
|
|
|
|
|
|
|
Income (loss) before income tax (benefit) |
|
|
1,391 |
|
|
|
(814 |
) |
Income tax (benefit) |
|
|
452 |
|
|
|
(175 |
) |
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
939 |
|
|
$ |
(639 |
) |
Preferred stock dividends |
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to common shareholders |
|
|
906 |
|
|
|
(639 |
) |
|
|
|
|
|
|
|
|
|
Net income (loss) per common share - basic and diluted |
|
$ |
0.52 |
|
|
$ |
(0.37 |
) |
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
|
1,734,007 |
|
|
|
1,710,121 |
|
|
|
|
|
|
|
|
|
|
Diluted |
|
|
1,735,252 |
|
|
|
1,710,121 |
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
20
CMS Bancorp, Inc.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
|
|
|
|
|
|
|
|
|
|
|
Years Ended September 30, |
|
|
|
2013 |
|
|
2012 |
|
|
|
(Dollars in thousands,
except per share data) |
|
Net income (loss) |
|
$ |
939 |
|
|
$ |
(639 |
) |
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
Gross unrealized holding gains (losses) on securities available for sale, net of deferred income tax of $792,000 and $(342,000),
respectively |
|
|
(1,202 |
) |
|
|
511 |
|
Gross unrealized holding gains transferred to income on sale or call of securities, net of deferred income tax of $313,000 |
|
|
|
|
|
|
(469 |
) |
Retirement plan (loss) gain, net of deferred income tax of $361,000 and $(21,000), respectively |
|
|
(548 |
) |
|
|
33 |
|
Retirement plan amortization, net of deferred income tax of $(7,000) and $(12,000), respectively |
|
|
11 |
|
|
|
18 |
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss) |
|
|
(1,739 |
) |
|
|
93 |
|
|
|
|
|
|
|
|
|
|
Comprehensive (loss) |
|
$ |
(800 |
) |
|
$ |
(546 |
) |
|
|
|
|
|
|
|
|
|
(a) |
Net gains on sale of available for sale securities and the related income tax are reflected in the consolidated statement of operations within the net gain on sale of securities and income tax expense (benefit) lines,
respectively. |
(b) |
Retirement plan amortization and related income tax are reflected in the consolidated statement of operations within the salaries and benefits and income tax expense (benefit) lines, respectively. |
See notes to consolidated financial statements.
21
CMS Bancorp, Inc.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
Years Ended September 30, 2013 and 2012
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock |
|
|
Common Stock |
|
|
Additional Paid-in Capital |
|
|
Retained Earnings |
|
|
Treasury Stock |
|
|
Unearned ESOP Shares |
|
|
Accumulated Other Comprehensive Income (Loss) |
|
|
Total |
|
Balance October 1, 2011 |
|
$ |
|
|
|
$ |
21 |
|
|
$ |
18,494 |
|
|
$ |
6,740 |
|
|
$ |
(1,660 |
) |
|
$ |
(1,398 |
) |
|
$ |
18 |
|
|
$ |
22,215 |
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(639 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(639 |
) |
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
93 |
|
|
|
93 |
|
ESOP shares committed for release |
|
|
|
|
|
|
|
|
|
|
(12 |
) |
|
|
|
|
|
|
|
|
|
|
55 |
|
|
|
|
|
|
|
43 |
|
Stock option expense |
|
|
|
|
|
|
|
|
|
|
100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100 |
|
Restricted stock award expense |
|
|
|
|
|
|
|
|
|
|
146 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
146 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance September 30, 2012 |
|
|
|
|
|
|
21 |
|
|
|
18,728 |
|
|
|
6,101 |
|
|
|
(1,660 |
) |
|
|
(1,343 |
) |
|
|
111 |
|
|
|
21,958 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
939 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
939 |
|
Other comprehensive (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,739 |
) |
|
|
(1,739 |
) |
ESOP shares committed for release |
|
|
|
|
|
|
|
|
|
|
(7 |
) |
|
|
|
|
|
|
|
|
|
|
55 |
|
|
|
|
|
|
|
48 |
|
Stock option expense |
|
|
|
|
|
|
|
|
|
|
53 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53 |
|
Restricted stock award expense |
|
|
|
|
|
|
|
|
|
|
54 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54 |
|
Preferred stock dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(33 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(33 |
) |
Proceeds of sale of preferred stock |
|
|
|
|
|
|
|
|
|
|
1,455 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,455 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance September 30, 2013 |
|
$ |
|
|
|
$ |
21 |
|
|
$ |
20,283 |
|
|
$ |
7,007 |
|
|
$ |
(1,660 |
) |
|
$ |
(1,288 |
) |
|
$ |
(1,628 |
) |
|
$ |
22,735 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
22
CMS Bancorp, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
Years Ended September 30, |
|
|
|
2013 |
|
|
2012 |
|
|
|
(In thousands) |
|
Cash flows from operating activities: |
|
|
|
|
Net income (loss) |
|
$ |
939 |
|
|
$ |
(639 |
) |
Adjustments to reconcile net income (loss) to net cash used by operating activities: |
|
|
|
|
|
|
|
|
Depreciation of premises and equipment |
|
|
357 |
|
|
|
387 |
|
Amortization and accretion, net |
|
|
125 |
|
|
|
512 |
|
Provision for loan losses |
|
|
443 |
|
|
|
891 |
|
Deferred income taxes |
|
|
314 |
|
|
|
53 |
|
ESOP expense |
|
|
48 |
|
|
|
43 |
|
Stock option expense |
|
|
53 |
|
|
|
100 |
|
Restricted stock award expense |
|
|
54 |
|
|
|
146 |
|
Net gain on sale of securities |
|
|
|
|
|
|
(782 |
) |
Net gain on sale of loans |
|
|
(267 |
) |
|
|
(183 |
) |
Loans originated for resale |
|
|
(8,050 |
) |
|
|
(8,575 |
) |
Proceeds from loans sold |
|
|
10,406 |
|
|
|
8,532 |
|
Decrease in interest receivable |
|
|
52 |
|
|
|
58 |
|
Decrease (increase) in other assets |
|
|
3,250 |
|
|
|
(1,560 |
) |
Increase (decrease) in accrued interest payable |
|
|
37 |
|
|
|
(174 |
) |
Decrease in other liabilities |
|
|
(50 |
) |
|
|
(148 |
) |
|
|
|
|
|
|
|
|
|
Net cash provided by (used by) operating activities |
|
|
7,711 |
|
|
|
(1,339 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Proceeds from sale of securities available for sale |
|
|
|
|
|
|
23,482 |
|
Purchases of securities available for sale |
|
|
|
|
|
|
(50,242 |
) |
Principal repayments, calls and maturities on securities available for sale |
|
|
5,853 |
|
|
|
38,647 |
|
Net (increase) in loans receivable |
|
|
(7,525 |
) |
|
|
(23,702 |
) |
Proceeds from sale of other real estate owned |
|
|
518 |
|
|
|
|
|
Additions to premises and equipment |
|
|
(45 |
) |
|
|
(734 |
) |
Redemption (purchase) of FHLB stock |
|
|
770 |
|
|
|
(128 |
) |
|
|
|
|
|
|
|
|
|
Net cash used by investing activities |
|
|
(429 |
) |
|
|
(12,677 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Net increase in deposits |
|
|
8,796 |
|
|
|
8,774 |
|
Net (decrease) increase in short-term advances from Federal Home Loan Bank of N.Y. |
|
|
(12,740 |
) |
|
|
17,300 |
|
Proceeds of long-term advances from Federal Home Loan Bank of N.Y. |
|
|
1,250 |
|
|
|
5,575 |
|
Repayment of long-term advances from Federal Home Loan Bank of N.Y. |
|
|
(5,751 |
) |
|
|
(20,166 |
) |
Net increase in payments by borrowers for taxes and insurance |
|
|
377 |
|
|
|
70 |
|
Proceeds of sale of preferred stock |
|
|
1,455 |
|
|
|
|
|
Dividend on preferred stock |
|
|
(33 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used by) provided by financing activities |
|
|
(6,646 |
) |
|
|
11,553 |
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
|
|
636 |
|
|
|
(2,463 |
) |
Cash and cash equivalents-beginning |
|
|
1,841 |
|
|
|
4,304 |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents-ending |
|
$ |
2,477 |
|
|
$ |
1,841 |
|
|
|
|
|
|
|
|
|
|
Supplemental information |
|
|
|
|
|
|
|
|
Cash paid during the period for |
|
|
|
|
|
|
|
|
Interest |
|
$ |
2,219 |
|
|
$ |
3,169 |
|
Income taxes |
|
$ |
14 |
|
|
$ |
10 |
|
Other: |
|
|
|
|
|
|
|
|
Other real estate owned acquired in settlement of loans |
|
$ |
518 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
23
CMS Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1Principles of Consolidation
The consolidated
financial statements include the accounts of CMS Bancorp, Inc. (the Company) and its wholly owned subsidiary, CMS Bank (the Bank). The Companys business is conducted principally through the Bank. All significant
intercompany accounts and transactions have been eliminated in consolidation. Certain prior period amounts have been reclassified in the consolidated financial statements to conform to the current presentation.
Note 2Description of Business, Nature of Operations and Pending Merger Agreement with Customers Bancorp, Inc.
The Bank was originally chartered in 1887 as Community Savings and Loan, a New York State-chartered savings and loan association. In 1980, it converted to a
New York State-chartered savings bank and changed its name to Community Mutual Savings Bank of Southern New York. In 1983, Community Mutual Savings Bank of Southern New York changed its name to Community Mutual Savings Bank. In 2007, the Bank
reorganized to a federally-chartered mutual savings bank and simultaneously converted from a federally-chartered mutual savings bank to a federally-chartered stock savings bank, with the concurrent formation of the Company. The Company, a stock
holding company for the Bank, conducted a public offering of its common stock in connection with the conversion. After the 2007 conversion and offering, all of the Banks stock became owned by the Company. In June 2012, the Bank completed its
conversion from a federally-chartered savings bank to a New York state-chartered savings bank after receiving approval from the New York State Department of Financial Services (NYSDFS) and non-objection from the Office of the Comptroller
of the Currency (OCC), and changed its name to CMS Bank. The Company will continue to be regulated as a savings and loan holding company by the Federal Reserve Bank of Philadelphia as long as the Bank continues to meet the requirements
to remain a qualified thrift lender under the Home Owners Loan Act.
The Bank is a community and customer-oriented retail savings bank
offering residential mortgage loans and traditional deposit products and commercial real estate, small business and consumer loans in Westchester County, New York, and the surrounding areas. The Bank also invests in various types of assets,
including securities of various government-sponsored enterprises, corporations, municipalities and mortgage-backed securities. The Banks revenues are derived principally from interest on loans, interest and dividends received from its
investment securities and fees for bank services. The Banks primary sources of funds are deposits, scheduled amortization and prepayments of loan principal and mortgage-backed securities, maturities and calls of investment securities, funds
provided by operations and borrowings from the Federal Home Loan Bank of New York (FHLB).
On August 10, 2012, the Company announced that it
entered into a definitive merger agreement (Merger Agreement) with Customers Bancorp, Inc. (Customers), whereby through a series of transactions, the Company would be merged with and into Customers, and the Bank would be
merged into Customers wholly-owned bank subsidiary, Customers Bank. On April 24, 2013, the Company and Customers announced an amendment to the Merger Agreement which, among other things, extended from April 30, 2013 to December 31, 2013 the
initial date at which, if the merger of the Company with and into Customers has not closed, the Merger Agreement may be terminated, subject to payment of a termination fee by Customers if the reason for failure to close the merger by that date is
due to non-receipt of the required regulatory approvals by Customers; however, the termination date may be extended to March 31, 2014 under certain specified circumstances. The Merger Agreement, as amended, also called for a $1.5 million preferred
stock investment in the Company by Customers.
On May 22, 2013, the Company and Customers consummated the contemplated investment in the Company by
Customers of $1.5 million of the Companys Preferred Stock, whereby the Company issued and sold 1,500
24
shares of Series A Preferred Stock to Customers. The issuance price was $1,000.00 per share, for an aggregate purchase price of $1,500,000, less a 3% discount. The shares of Series A Preferred
Stock sold to Customers were issued in reliance on an exemption from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, and Regulation D, as promulgated by the SEC.
On May 21, 2013, the Company filed a Certificate of Designations (Certificate) with the Secretary of State of the State of Delaware
establishing the designations, powers, preferences, limitations, restrictions, and relative rights of the Series A Preferred Stock. In accordance with the Certificate, among other terms, the Series A Preferred Stock:
|
|
|
consists of 1,500 authorized shares with a par value of $0.01 per share and an original issuance price of $1,000 per share; |
|
|
|
is designated as Series A Noncumulative Perpetual Preferred Stock; |
|
|
|
is nonvoting and holders shall not have any conversion rights; |
|
|
|
ranks, with respect to rights on dividends, distributions, liquidation, dissolution and winding up, senior to all classes of the Companys common stock, $0.01 par value per share, and junior to all the
Companys indebtedness and other non-equity claims on the Company; |
|
|
|
when and if declared by the Board of Directors of the Company, may pay dividends semi-annually in arrears on June 30 and December 31 of each year at the rate of six percent (6%) per annum. Such dividends
are discretionary and noncumulative; |
|
|
|
provides for optional redemption under certain circumstances at the sole option of the Company; and |
|
|
|
upon liquidation, dissolution, or winding up of the Company, the holders of Series A Preferred Stock shall be entitled to be paid out of the assets of the Company available for distribution to holders of the
Companys capital stock of all classes, before any sums shall be paid or any assets distributed among the holders of the Common Stock, an amount of $1,000 per share, together with any declared but unpaid dividends thereon. |
Additional information specific to the Series A Preferred Stock is included in a Form 8-K filed with the SEC on May 24, 2013.
On December 20, 2013, the Company announced its decision to not further extend the December 31, 2013 termination date of the Merger
Agreement, as amended. See Note 19Subsequent Events for information about the current status of the pending Merger Agreement with Customers.
Note 3Summary of Significant Accounting Policies
Basis of Financial Statement Presentation
The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America
(GAAP). In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the dates of the statements of financial condition and
revenues and expenses for the periods then ended. Actual results could differ significantly from those estimates.
It is managements opinion that
accounting estimates covering certain aspects of the business have more significance than others due to the relative importance of those areas to overall performance, or the level of subjectivity required in making these estimates. Material
estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses, the potential impairment of FHLB stock, the determination of other-than-temporary impairment on securities, and the
assessment of whether deferred taxes are more likely than not to be realized. Management believes that the allowance for loan losses represents its best
25
estimate of losses known and inherent in the loan portfolio that are both probable and reasonable to estimate. While management uses available information to recognize losses on loans, future
additions to the allowance for loan losses may be necessary based on changes in market and economic conditions in the Companys market area. In addition, various regulatory agencies, as an integral part of their examination process,
periodically review the Companys allowance for loan losses. Such agencies may require the Company to recognize additions to the allowance for loan losses based on their judgments about information available to them at the time of their
examination.
Managements determination of whether investments, including FHLB stock, are impaired is based on their assessment of the ultimate
recoverability of their cost rather than by recognizing temporary declines in value. Managements assessment as to the amount of deferred taxes more likely than not to be realized is based upon estimates of future taxable income, which is
subject to revision upon receipt of updated information.
The Company follows Financial Accounting Standards Board (FASB) guidance on
subsequent events, which establishes general standards for accounting for and disclosure of events that occur after the balance sheet date but before the financial statements are issued. This guidance sets forth the period after the balance sheet
date during which management of the reporting entity should evaluate events or transactions that occur for potential recognition in the financial statements. This guidance identifies the circumstances under which an entity should recognize events or
transactions occurring after the balance sheet date in its financial statements, and the disclosure that should be made about events or transactions that occur after the balance sheet date. In preparing these consolidated financial statements, the
Company evaluated the events that occurred after September 30, 2013 and through the date these consolidated financial statements were issued.
Cash and Cash Equivalents
Cash
and cash equivalents include cash and amounts due from depository institutions, interest-earning deposits and federal funds sold, all with original maturities of three months or less.
Securities
Investments in debt
securities that the Company has the positive intent and ability to hold to maturity are classified as held to maturity securities and reported at amortized cost. Debt securities that are bought and held principally for the purpose of selling them in
the near term are classified as trading securities and reported at fair value, with unrealized holding gains and losses included in earnings. Debt securities not classified as trading securities or as held to maturity securities, are classified as
available for sale securities and reported at fair value, with unrealized holding gains and losses, net of applicable income taxes, reported in accumulated other comprehensive income (loss), as a separate component of stockholders equity. The
Company has no securities classified as held to maturity or trading securities.
Premiums and discounts on all debt securities are amortized or accreted
to income by use of the interest method over the estimated remaining period to contractual maturity, or the security call date.
Gains or losses on sales
of securities are recognized on the specific identification method.
Individual securities are considered impaired when the fair value of such security is
less than its amortized cost. The Company evaluates all securities with unrealized losses quarterly to determine if such impairments are temporary or other-than-temporary in accordance with applicable accounting guidance. The Company
accounts for temporary impairments based upon security classification as either available for sale or held to maturity. Temporary impairments on available for sale securities are recognized on a tax-effected basis, through other comprehensive income
(loss) with offsetting entries adjusting the carrying value of the securities and the balance of deferred income taxes. Temporary impairments of held to maturity securities are not recognized in the consolidated financial statements; however
information concerning the amount and duration of impairments on held to maturity securities is disclosed in the notes to the consolidated financial statements.
26
Other-than-temporary impairments on securities that the Company has decided to sell or will more likely than not
be required to sell prior to the full recovery of their fair value to a level to or exceeding amortized cost are recognized in earnings. Otherwise, the other-than-temporary impairment is bifurcated into credit related and noncredit-related
components. The credit related impairment generally represents the amount by which the present value of the cash flows expected to be collected on a debt security falls below its amortized cost. The noncredit-related component represents the
remaining portion of the impairment not otherwise designated as credit-related. Credit-related other-than-temporary impairments are recognized in earnings while noncredit-related other-than-temporary impairments are recognized, net of deferred
income taxes, in other comprehensive income (loss).
The Company reviews its investment portfolio on a quarterly basis for indications of impairment. This
review includes analyzing the length of time and the extent to which the fair value has been lower than the cost, and the financial condition and near-term prospects of the issuer, including any specific events which may influence the operations of
the issuer. The Company also assesses its intent with regard to selling or holding each security as well as any conditions which may require it to sell the security prior to the recovery of fair value to a level which equals or exceeds amortized
cost.
Loans Receivable
Loans
receivable are carried at unpaid principal balances and net deferred loan origination costs less the allowance for loan losses.
The Company defers loan
origination fees and certain direct loan origination costs and accretes net amounts as an adjustment of yield over the contractual lives of the related loans. Unamortized net fees and costs are written off if the loan is repaid before its stated
maturity.
Recognition of interest income is discontinued and existing accrued interest receivable is reversed on loans that are more than ninety days
delinquent and where management, through its loan review process, feels such loan should be classified as non-accrual. Income is subsequently recognized only to the extent that cash payments are received until the obligation has been brought
current, has performed in accordance with the contractual terms for a reasonable period of time (generally six months) and the ultimate collectability of the total contractual principal and interest is no longer in doubt, in which case the loan is
returned to an accrual status. The past due status of all classes of loans receivable is determined based on the contractual due dates for loan payments.
Allowance for Loan Losses
An
allowance for loan and lease losses (ALLL) is maintained to absorb losses from the loan portfolio. The ALLL is based on managements continuing evaluation of the risk characteristics and credit quality of the loan portfolio,
assessment of current economic conditions, diversification and size of the portfolio, adequacy of collateral, past and anticipated loss experience, and the amount of non-performing loans.
The Banks methodology for determining the ALLL is based on the requirements of the FASBs Accounting Standards Codification (ASC)
Sub-Topic 450-20 for loans collectively evaluated for impairment, ASC Section 310-10-35 for loans individually evaluated for impairment, as well as the Interagency Policy Statement on the Allowance for Loan and Lease Losses, and other bank
regulatory guidance. The total of the two components represents the Banks ALLL.
Loans that are collectively evaluated for impairment are
analyzed with general allowances being made as appropriate. For general allowances, historical loss trends and current Federal Deposit Insurance Corporation Uniform Bank Performance Report (UBPR) loss experience for the Banks
Peer Group are used in the estimation of losses in the current portfolio. These historical loss amounts are modified by other qualitative factors.
27
The classes described below, which are based on the Consolidated Reports of Condition and Income (Call Report)
classifications, provide the starting point for the ALLL analysis. Management tracks the historical net charge-off activity at the reporting class level. A historical charge-off factor is calculated utilizing a rolling one year to five
year average. In addition, the UBPR Peer Group charge-off factor is determined. The Bank uses Bank specific charge-off experience adjusted for recent loss trends and economic conditions as well as Peer Group charge-off experience to establish its
historical charge-off factor.
Pass rated credits are segregated from Classified credits for the application of qualitative
factors. Management has identified a number of additional qualitative factors that it uses to supplement the historical charge-off factor because these factors are likely to cause estimated credit losses associated with the existing loan pools to
differ from historical loss experience. The additional factors that are evaluated quarterly and updated using information obtained from internal, regulatory, and governmental sources are: national and local economic trends and conditions;
levels of and trends in delinquency rates and non-accrual loans; trends in volumes and terms of loans; effects of changes in lending policies; experience, ability, and depth of lending staff; value of underlying collateral; and concentrations of
credit from a loan type, industry and/or geographic standpoint.
An allowance for loan losses is maintained at a level that represents managements
best estimate of losses known and inherent in the loan portfolio that are both probable and estimable. The allowance is decreased by loan charge-offs, increased by subsequent recoveries of loans previously charged off, and then adjusted, via either
a charge or credit to operations, to an amount determined by management to be necessary. Loans or portions thereof are charged off when, after collection efforts are exhausted, they are determined to be uncollectible. Management of the Company, in
determining the allowance for loan losses, considers the losses inherent in its loan portfolio and changes in the nature and volume inherent in its loan activities, along with the general economic and real estate market conditions. The Company
utilizes a two tier approach: (1) identification of impaired loans and establishment of specific loss allowances on such loans; and (2) establishment of general valuation allowances on the remainder of its loan portfolio. The Company
maintains a loan review system which allows for a periodic review of its loan portfolio and the early identification of potential impaired loans.
Such
system takes into consideration, among other things, delinquency status, size of loans, and type of collateral and financial condition of the borrowers. Specific loan loss allowances are established for identified loans based on a review of such
information and/or appraisals of the underlying collateral. General loan losses are determined based upon a combination of factors including, but not limited to, actual loan loss experience, composition of the loan portfolio, current economic
conditions and managements judgment. Although management believes that specific and general loan losses are established in accordance with managements best estimate, actual losses are dependent upon future events and, as such, further
additions to the level of loan loss allowances may be necessary.
The segments of the Banks loan portfolio are disaggregated to a level that allows
management to monitor risk and performance. Loans secured by real estate consist of one-to-four-family, multi-family, non-residential, construction and home equity and second mortgage loans. Substantially all of the commercial loans are secured
and consumer loans are principally secured.
Management uses a six category internal risk rating system to monitor the credit quality of the overall loan
portfolio that generally follows bank regulatory definitions. Pass graded loans are considered to have average or better than average risk characteristics. They demonstrate satisfactory debt service capacity and coverage along with a generally
stable financial position. These loans are performing in accordance with the terms of their loan agreement. The Watch category, a non bank regulatory category, includes assets that, while performing, demonstrate above average risk through a pattern
of declining earning trends, strained cash flow, increasing leverage, and/or weakening market fundamentals. The Special Mention category includes assets that are currently protected but exhibit potential credit weakness or a downward trend which, if
not checked or corrected, will weaken the Banks asset or inadequately protect the Banks position. Loans in the Substandard category have a well-defined weakness that jeopardizes the orderly liquidation of the debt. For loans in this
category, normal repayment from the borrower is in jeopardy and there is a distinct possibility that a partial loss of interest
28
and/or principal will occur if the deficiencies are not corrected. All loans greater than 90 days past due are considered Substandard. Loans in the Doubtful category have weaknesses
inherent in those classified Substandard with the added provision that the weakness makes collection of debt in full, on the basis of current existing facts, conditions, and values, highly questionable and improbable. The portion of any loan that
represents a specific allocation of the allowance for loan losses is placed in the special valuation category. Loans that are deemed incapable of repayment where continuance as an active asset of the Bank is not warranted are charged off as a
Loss. The classification does not mean that the loan has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off the asset even though partial recovery may be achieved in the future.
To help ensure that risk ratings are accurate and reflect the present and future capacity of borrowers to repay a loan as agreed, the Bank has a structured
loan rating process with several layers of internal and external oversight. Generally, consumer and residential mortgage loans are included in the Pass categories unless a specific action, such as delinquency, bankruptcy, repossession, or death
occurs to raise awareness of a possible credit event. The Banks Senior Lending Officer is responsible for the timely and accurate risk rating of the loans in the portfolios at origination and on an ongoing basis. The Bank has an
experienced outsourced Loan Review function that on a quarterly basis, reviews and assesses loans within the portfolio and the adequacy of the Banks allowance for loan losses. Detailed reviews, including plans for resolution, are
performed on loans classified as Substandard or Doubtful on a quarterly basis. Loans in the Special Mention and Substandard categories that are collectively evaluated for impairment are given separate consideration in the determination of the
allowance.
Management evaluates individual loans in all of the segments for possible impairment if the loan is either in nonaccrual status, or is risk
rated Substandard or Doubtful. Loans are considered to be impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to
the contractual terms of the loan agreement. Factors considered by management in evaluating impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when
due. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the
reasons for the delay, the borrowers prior payment record, and the amount of any shortfall in relation to the principal and interest owed.
Once the
determination has been made that a loan is impaired, the determination of whether a specific allocation of the allowance is necessary is measured by comparing the recorded investment in the loan to the fair value of the loan using one of three
methods: (a) the present value of expected future cash flows discounted at the loans effective interest rate; (b) the loans observable market price; or (c) the fair value of the collateral less selling costs. The
method is selected on a loan-by-loan basis, with management primarily utilizing the fair value of collateral method. The evaluation of the need and amount of a specific allocation of the allowance and whether a loan can be removed from
impairment status is made on a quarterly basis. The Banks policy for recognizing interest income on impaired loans does not differ from its overall policy for interest recognition. A loan evaluated for impairment is deemed to be impaired
when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. The amount of loan impairment is measured based on the present value
of expected future cash flows discounted at the loans effective interest rate or, as a practical expedient, at the loans observable market price or the fair value of the collateral if the loan is collateral dependent. All loans
identified as impaired are evaluated independently. The Company does not aggregate such loans for evaluation purposes. A reserve for losses related to unfunded lending commitments is also maintained. This reserve represents managements
estimate of losses inherent in unfunded credit commitments.
Federal Home Loan Bank of New York Stock
The Companys required investment in the common stock of the FHLB is carried at cost as of September 30, 2013 and 2012.
29
Management periodically evaluates this common stock for impairment based on assessment of the ultimate
recoverability of the cost of the stock rather than by recognizing temporary declines in value. The determination of whether a decline affects the ultimate recoverability of the cost of the stock is influenced by criteria such as (1) the
significance of the decline in net assets of the FHLB as compared to the capital stock amount for the FHLB and the length of time this situation has persisted, (2) commitments by the FHLB to make payments required by law or regulation and the
level of such payments in relation to the operating performance of the FHLB, (3) the impact of legislative and regulatory changes on institutions and, accordingly, on the customer base of the FHLB, and (4) the liquidity position of the
FHLB. Management believes no impairment charge was necessary related to the FHLB stock as of September 30, 2013 or 2012.
Transfer of Financial Assets
Transfers of financial assets are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to be
surrendered when (1) the assets have been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of the right) to pledge or exchange the transferred assets, and
(3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.
Concentration of Risk
The
Companys lending activities are concentrated in loans secured by real estate located in Westchester County, New York and surrounding areas.
Premises and Equipment
Premises
and equipment are comprised of land, at cost, and buildings, building improvements, furnishings and equipment and leasehold improvements, at cost less accumulated depreciation and amortization. Depreciation and amortization charges are computed
using the straight-line method over the following estimated useful lives:
|
|
|
|
|
Years |
Buildings and improvements |
|
10 50 |
Furnishings and equipment |
|
3 10 |
Leasehold improvements |
|
The lesser of useful life or term of lease |
Significant renewals and betterments are charged to the property and equipment account. Maintenance and repairs are charged to
expense in the year incurred. Rental income is netted against occupancy expenses in the consolidated statements of income.
Advertising
Advertising expense
is recognized as incurred.
Income Taxes
The Company and the Bank file a consolidated federal income tax return. Federal income taxes are allocated to the Company and the Bank based upon the
contribution of their respective income or loss to the consolidated return. The Company and the Bank file a combined state income tax return.
Federal and
state income taxes have been provided on the basis of reported income. The amounts reflected on the income tax returns differ from these provisions due principally to temporary differences in the treatment of
30
certain items for financial statement and income tax reporting purposes. Deferred income taxes have been recorded to recognize such temporary differences. The realization of deferred tax assets
is assessed and a valuation allowance is provided, when necessary, for that portion of the asset which more likely than not will not be realized.
The
Company follows the FASBs guidance regarding accounting for uncertainty in income taxes recognized in an enterprises financial statements. This guidance prescribes a recognition threshold and measurement attribute for a tax position
taken or expected to be taken in a tax return, and also provides guidance on derecognizing, classification, interest and penalties, accounting in interim periods, disclosure and transition. As a result of the Companys evaluation of the
implementation of this guidance, no significant income tax uncertainties were identified. Therefore, the Company recognized no adjustment for unrecognized income tax benefits for the years ended September 30, 2013 and 2012. The Companys
policy is to recognize interest and penalties on unrecognized tax benefits in income tax expense in the consolidated statement of income. The Company did not recognize any interest and penalties for the years ended September 30, 2013 and 2012.
The tax years subject to examination by the taxing authorities are the years ended September 30, 2013 and 2012, and December 31, 2011 and 2010.
Benefit Plans
The Company has a
non-contributory defined benefit pension plan covering all eligible employees. The Company also has a 401(k) retirement plan and an ESOP, both of which are defined contribution plans.
The benefits for the pension plan are based on years of service and employees compensation. Prior service costs for the pension plan generally are
amortized over the estimated remaining service periods of employees. The Company uses the corridor approach in the valuation of the pension plan which defers all actuarial gains and losses resulting from differences between actual results and
economic estimates or actuarial assumptions. For the pension plan, these unrecognized gains and losses are amortized to income when net gains and losses exceed 10% of the greater of the market-value of plan assets or the projected benefit obligation
at the beginning of the plan year.
In accordance with FASBs guidance regarding accounting for defined benefit and other postretirement plans, the
Company recognizes the over-funded or under-funded status of the defined benefit pension plans as an asset or liability in the consolidated statement of financial condition, with the changes in the funded status recorded through other comprehensive
income (loss) in the year in which the change occurs.
Net Income (Loss) Per Share
Basic net income (loss) per share was computed by dividing the net income (loss) available to common stockholders by the weighted average number of shares of
common stock outstanding, adjusted for unearned shares of the Companys employee stock ownership plan, or ESOP. Stock options granted are considered common stock equivalents and are therefore considered in diluted net income per
share calculations, if dilutive, using the treasury stock method. 178,179 of the 186,479 stock options outstanding were anti-dilutive and therefore excluded from the computation of diluted net income per share for the year ended September 30,
2013. All outstanding stock options were anti-dilutive and therefore excluded from the computation of diluted net (loss) per share for the year ended September 30, 2012. Unallocated common shares held by the ESOP are not included in the
weighted average number of common shares outstanding for purposes of calculating both basic and diluted net income per share until they are committed to be released.
Off-Balance Sheet Credit-Related Financial Instruments
In the ordinary course of business, the Company enters into commitments to extend credit, including commitments under lines of credit. Such financial
instruments are recorded when they are funded.
31
Reclassification
Amounts in the prior years financial statements have been reclassified whenever necessary to conform to the current years presentation. Such
reclassifications had no impact on stockholders equity or net income.
Note 4Securities Available for Sale
Securities available for sale as of September 30, 2013 and 2012 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized Cost |
|
|
Gross Unrealized Gains |
|
|
Gross Unrealized Losses |
|
|
Fair Value |
|
|
|
(In thousands) |
|
September 30, 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government Agencies: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due after five but within ten years |
|
$ |
14,990 |
|
|
$ |
|
|
|
$ |
760 |
|
|
$ |
14,230 |
|
Due after ten years but within fifteen years |
|
|
5,000 |
|
|
|
|
|
|
|
404 |
|
|
|
4,596 |
|
Corporate bonds due after five years but within ten years |
|
|
4,384 |
|
|
|
|
|
|
|
78 |
|
|
|
4,306 |
|
Municipal bonds: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due within five years |
|
|
988 |
|
|
|
|
|
|
|
8 |
|
|
|
980 |
|
Due after five years but within ten years |
|
|
2,753 |
|
|
|
32 |
|
|
|
38 |
|
|
|
2,747 |
|
Mortgage-backed securities |
|
|
13,497 |
|
|
|
203 |
|
|
|
139 |
|
|
|
13,561 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
41,612 |
|
|
$ |
235 |
|
|
$ |
1,427 |
|
|
$ |
40,420 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized Cost |
|
|
Gross Unrealized Gains |
|
|
Gross Unrealized Losses |
|
|
Fair Value |
|
|
|
(In thousands) |
|
September 30, 2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government Agencies: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due after five but within ten years |
|
$ |
18,981 |
|
|
$ |
78 |
|
|
$ |
|
|
|
$ |
19,059 |
|
Due after ten years but within fifteen years |
|
|
5,000 |
|
|
|
29 |
|
|
|
|
|
|
|
5,029 |
|
Corporate bonds due after five years but within ten years |
|
|
4,404 |
|
|
|
195 |
|
|
|
|
|
|
|
4,599 |
|
|
|
|
|
|
Municipal bonds: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due after five years but within ten years |
|
|
3,765 |
|
|
|
127 |
|
|
|
|
|
|
|
3,892 |
|
Mortgage-backed securities |
|
|
15,409 |
|
|
|
373 |
|
|
|
|
|
|
|
15,782 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
47,559 |
|
|
$ |
802 |
|
|
$ |
|
|
|
$ |
48,361 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
There were no securities with unrealized losses at September 30, 2012. The age of unrealized losses and fair value of
related securities available for sale at September 30, 2013 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12 Months |
|
|
12 Months or More |
|
|
Total |
|
|
|
Fair Value |
|
|
Unrealized Losses |
|
|
Fair Value |
|
|
Unrealized Losses |
|
|
Fair Value |
|
|
Unrealized Losses |
|
|
|
(In thousands) |
|
September 30, 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government Agencies |
|
$ |
18,826 |
|
|
$ |
1,164 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
18,826 |
|
|
$ |
1,164 |
|
Corporate bonds |
|
|
4,306 |
|
|
|
78 |
|
|
|
|
|
|
|
|
|
|
|
4,306 |
|
|
|
78 |
|
Municipal bonds |
|
|
2,625 |
|
|
|
46 |
|
|
|
|
|
|
|
|
|
|
|
2,625 |
|
|
|
46 |
|
Mortgage-backed securities |
|
|
4,353 |
|
|
|
139 |
|
|
|
|
|
|
|
|
|
|
|
4,353 |
|
|
|
139 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
30,110 |
|
|
$ |
1,427 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
30,110 |
|
|
$ |
1,427 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32
When the fair value of security is below its amortized cost, additional analysis is performed to determine
whether an other-than-temporary impairment condition exists. Securities are analyzed quarterly for possible other-than-temporary impairment. In addition to the severity of unrealized losses and the length of time such losses have existed, the
analysis considers (i) whether the Company has the intent to sell the securities prior to recovery and/or maturity and (ii) whether it is more likely than not that the Company will have to sell the securities prior to recovery and/or
maturity. Often, the information available to conduct these assessments is limited and rapidly changing, making estimates of fair value subject to judgment. If actual information or conditions are different than estimated, the extent of the
impairment of the security may be different than previously estimated, which could have a material effect on the Companys consolidated financial statements.
The unrealized losses reported on securities at September 30, 2013 relate to four securities issued by U.S. Government Agencies, three Corporate bonds,
four Municipal bonds and one Mortgage-backed security. These unrealized losses were due to changes in interest rates.
All mortgage-backed securities are
U.S. Government Agencies backed and collateralized by residential mortgages.
There were no sales of securities available for sale during the year ended
September 30, 2013. During the year ended September 30, 2012, the Company sold available for sale securities with a carrying value of $23.5 million, and recognized gross gains of $782,000 on such sales.
Refer to Note 8 for disclosure of pledged securities.
Note
5Loans Receivable
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
|
2013 |
|
|
2012 |
|
|
|
(In thousands) |
|
Real estate: |
|
|
|
|
|
|
|
|
One-to-four-family |
|
$ |
90,177 |
|
|
$ |
96,449 |
|
Multi-family |
|
|
25,771 |
|
|
|
21,220 |
|
Non-residential |
|
|
50,655 |
|
|
|
43,361 |
|
Construction |
|
|
935 |
|
|
|
398 |
|
Home equity and second mortgages |
|
|
8,169 |
|
|
|
10,111 |
|
|
|
|
|
|
|
|
|
|
|
|
|
175,707 |
|
|
|
171,539 |
|
Commercial |
|
|
33,089 |
|
|
|
30,618 |
|
Consumer |
|
|
103 |
|
|
|
83 |
|
|
|
|
|
|
|
|
|
|
Total Loans |
|
|
208,899 |
|
|
|
202,240 |
|
Allowance for loan losses |
|
|
(923 |
) |
|
|
(967 |
) |
Net deferred loan origination fees and costs |
|
|
20 |
|
|
|
189 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
207,996 |
|
|
$ |
201,462 |
|
|
|
|
|
|
|
|
|
|
33
The following table summarizes the primary segments of the loan portfolio, including net deferred loan
origination fees and costs, as of September 30, 2013 and 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2013 |
|
Individually Evaluated for Impairment |
|
|
Collectively Evaluated for Impairment |
|
|
Total |
|
|
|
(In thousands) |
|
Real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four-family |
|
$ |
6,693 |
|
|
$ |
83,493 |
|
|
$ |
90,186 |
|
Multi-family |
|
|
|
|
|
|
25,773 |
|
|
|
25,773 |
|
Non-residential |
|
|
|
|
|
|
50,660 |
|
|
|
50,660 |
|
Construction |
|
|
|
|
|
|
935 |
|
|
|
935 |
|
Home equity and second mortgages |
|
|
471 |
|
|
|
7,699 |
|
|
|
8,170 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,164 |
|
|
|
168,560 |
|
|
|
175,724 |
|
Commercial |
|
|
873 |
|
|
|
32,219 |
|
|
|
33,092 |
|
Consumer |
|
|
|
|
|
|
103 |
|
|
|
103 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
8,037 |
|
|
$ |
200,882 |
|
|
$ |
208,919 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2012 |
|
Individually Evaluated for Impairment |
|
|
Collectively Evaluated for Impairment |
|
|
Total |
|
|
|
(In thousands) |
|
Real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four-family |
|
$ |
10,797 |
|
|
$ |
85,742 |
|
|
$ |
96,539 |
|
Multi-family |
|
|
|
|
|
|
21,241 |
|
|
|
21,241 |
|
Non-residential |
|
|
|
|
|
|
43,401 |
|
|
|
43,401 |
|
Construction |
|
|
|
|
|
|
398 |
|
|
|
398 |
|
Home equity and second mortgages |
|
|
619 |
|
|
|
9,502 |
|
|
|
10,121 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,416 |
|
|
|
160,284 |
|
|
|
171,700 |
|
Commercial |
|
|
15 |
|
|
|
30,631 |
|
|
|
30,646 |
|
Consumer |
|
|
|
|
|
|
83 |
|
|
|
83 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
11,431 |
|
|
$ |
190,998 |
|
|
$ |
202,429 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents impaired loans by class, segregated by those for which a specific allowance was required and
those for which a specific allowance was not necessary as of September 30, 2013 and 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2013 |
|
Impaired Loans with Specific Allowance |
|
|
Impaired Loans with No Specific Allowance |
|
|
Total Impaired Loans |
|
|
|
Recorded Investment |
|
|
Related Allowance |
|
|
Recorded Investment |
|
|
Recorded Investment |
|
|
Unpaid Principal Balance |
|
|
|
(In thousands) |
|
Real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four-family |
|
$ |
|
|
|
$ |
|
|
|
$ |
6,693 |
|
|
$ |
6,693 |
|
|
$ |
6,658 |
|
Multi-family |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-residential |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity and second mortgages |
|
|
|
|
|
|
|
|
|
|
471 |
|
|
|
471 |
|
|
|
462 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,164 |
|
|
|
7,164 |
|
|
|
7,120 |
|
Commercial |
|
|
|
|
|
|
|
|
|
|
873 |
|
|
|
873 |
|
|
|
873 |
|
Consumer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
8,037 |
|
|
$ |
8,037 |
|
|
$ |
7,993 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2012 |
|
Impaired Loans with Specific Allowance |
|
|
Impaired Loans with No Specific Allowance |
|
|
Total Impaired Loans |
|
|
|
Recorded Investment |
|
|
Related Allowance |
|
|
Recorded Investment |
|
|
Recorded Investment |
|
|
Unpaid Principal Balance |
|
|
|
(In thousands) |
|
Real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four-family |
|
$ |
1,384 |
|
|
$ |
41 |
|
|
$ |
9,413 |
|
|
$ |
10,797 |
|
|
$ |
10,730 |
|
Multi-family |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-residential |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity and second mortgages |
|
|
108 |
|
|
|
7 |
|
|
|
511 |
|
|
|
619 |
|
|
|
605 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,492 |
|
|
|
48 |
|
|
|
9,924 |
|
|
|
11,416 |
|
|
|
11,335 |
|
Commercial |
|
|
|
|
|
|
|
|
|
|
15 |
|
|
|
15 |
|
|
|
15 |
|
Consumer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
1,492 |
|
|
$ |
48 |
|
|
$ |
9,939 |
|
|
$ |
11,431 |
|
|
$ |
11,350 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents the average recorded investment in impaired loans and related interest income recognized for the
years ended September 30, 2013 and 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2013 |
|
One-to- four- family |
|
|
Home Equity and Second Mortgages |
|
|
Commercial |
|
|
Consumer |
|
|
Total |
|
|
|
(In thousands) |
|
Average investment in impaired loans |
|
$ |
9,165 |
|
|
$ |
558 |
|
|
$ |
175 |
|
|
$ |
10 |
|
|
$ |
9,908 |
|
Interest income recognized on an accrual basis on impaired loans |
|
|
118 |
|
|
|
11 |
|
|
|
26 |
|
|
|
|
|
|
|
155 |
|
Interest income recognized on a cash basis on impaired loans |
|
|
19 |
|
|
|
2 |
|
|
|
1 |
|
|
|
|
|
|
|
22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2012 |
|
One-to- four- family |
|
|
Home Equity and Second Mortgages |
|
|
Commercial |
|
|
Consumer |
|
|
Total |
|
|
|
(In thousands) |
|
Average investment in impaired loans |
|
$ |
9,312 |
|
|
$ |
672 |
|
|
$ |
52 |
|
|
$ |
9 |
|
|
$ |
10,045 |
|
Interest income recognized on an accrual basis on impaired loans |
|
|
135 |
|
|
|
16 |
|
|
|
|
|
|
|
|
|
|
|
151 |
|
Interest income recognized on a cash basis on impaired loans |
|
|
25 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
27 |
|
35
The following table presents the classes of the loan portfolio summarized by the aggregate Pass (including loans
graded Watch) and the classified ratings of Special Mention, Substandard and Doubtful within the internal risk rating system as of September 30, 2013 and 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2013 |
|
Pass |
|
|
Special Mention |
|
|
Substandard |
|
|
Doubtful |
|
|
Total |
|
|
|
(In thousands) |
|
Real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four-family |
|
$ |
86,077 |
|
|
$ |
|
|
|
$ |
4,109 |
|
|
$ |
|
|
|
$ |
90,186 |
|
Multi-family |
|
|
25,018 |
|
|
|
755 |
|
|
|
|
|
|
|
|
|
|
|
25,773 |
|
Non-residential |
|
|
50,660 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,660 |
|
Construction |
|
|
935 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
935 |
|
Home equity and second mortgages |
|
|
7,999 |
|
|
|
|
|
|
|
171 |
|
|
|
|
|
|
|
8,170 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
170,689 |
|
|
|
755 |
|
|
|
4,280 |
|
|
|
|
|
|
|
175,724 |
|
Commercial |
|
|
28,498 |
|
|
|
3,721 |
|
|
|
873 |
|
|
|
|
|
|
|
33,092 |
|
Consumer |
|
|
103 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
103 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
199,290 |
|
|
$ |
4,476 |
|
|
$ |
5,153 |
|
|
$ |
|
|
|
$ |
208,919 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2012 |
|
Pass |
|
|
Special Mention |
|
|
Substandard |
|
|
Doubtful |
|
|
Total |
|
|
|
(In thousands) |
|
Real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four-family |
|
$ |
88,137 |
|
|
$ |
|
|
|
$ |
8,402 |
|
|
$ |
|
|
|
$ |
96,539 |
|
Multi-family |
|
|
20,475 |
|
|
|
766 |
|
|
|
|
|
|
|
|
|
|
|
21,241 |
|
Non-residential |
|
|
43,401 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43,401 |
|
Construction |
|
|
398 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
398 |
|
Home equity and second mortgages |
|
|
9,786 |
|
|
|
|
|
|
|
335 |
|
|
|
|
|
|
|
10,121 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
162,197 |
|
|
|
766 |
|
|
|
8,737 |
|
|
|
|
|
|
|
171,700 |
|
Commercial |
|
|
28,761 |
|
|
|
1,870 |
|
|
|
15 |
|
|
|
|
|
|
|
30,646 |
|
Consumer |
|
|
83 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
83 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
191,041 |
|
|
$ |
2,636 |
|
|
$ |
8,752 |
|
|
$ |
|
|
|
$ |
202,429 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management further monitors the performance and credit quality of the loan portfolio by analyzing the delinquency aging of the
portfolio as determined by the length of time a recorded payment is past due.
The following table presents the classes of the loan portfolio summarized by
the aging categories of performing loans and nonaccrual loans as of September 30, 2013 and 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2013 |
|
Current |
|
|
30-59 Days Past Due |
|
|
60-89 Days Past Due |
|
|
90 Days or More Past Due and Accruing |
|
|
Non- Accrual |
|
|
Total Past Due |
|
|
Total |
|
|
|
(In thousands) |
|
Real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four-family |
|
$ |
86,125 |
|
|
$ |
|
|
|
$ |
237 |
|
|
$ |
|
|
|
$ |
3,824 |
|
|
$ |
4,061 |
|
|
$ |
90,186 |
|
Multi-family |
|
|
25,773 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,773 |
|
Non-residential |
|
|
50,660 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,660 |
|
Construction |
|
|
935 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
935 |
|
Home equity and second mortgages |
|
|
8,098 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
72 |
|
|
|
72 |
|
|
|
8,170 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
171,591 |
|
|
|
|
|
|
|
237 |
|
|
|
|
|
|
|
3,896 |
|
|
|
4,133 |
|
|
|
175,724 |
|
Commercial |
|
|
32,206 |
|
|
|
|
|
|
|
13 |
|
|
|
|
|
|
|
873 |
|
|
|
886 |
|
|
|
33,092 |
|
Consumer |
|
|
103 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
103 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
203,900 |
|
|
$ |
|
|
|
$ |
250 |
|
|
$ |
|
|
|
$ |
4,769 |
|
|
$ |
5,019 |
|
|
$ |
208,919 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2012 |
|
Current |
|
|
30-59 Days Past Due |
|
|
60-89 Days Past Due |
|
|
90 Days or More Past Due and Accruing |
|
|
Non- Accrual |
|
|
Total Past Due |
|
|
Total |
|
|
|
(In thousands) |
|
Real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four-family |
|
$ |
87,715 |
|
|
$ |
1,889 |
|
|
$ |
867 |
|
|
$ |
|
|
|
$ |
6,068 |
|
|
$ |
8,824 |
|
|
$ |
96,539 |
|
Multi-family |
|
|
21,241 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,241 |
|
Non-residential |
|
|
43,401 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43,401 |
|
Construction |
|
|
398 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
398 |
|
Home equity and second mortgages |
|
|
9,992 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
129 |
|
|
|
129 |
|
|
|
10,121 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
162,747 |
|
|
|
1,889 |
|
|
|
867 |
|
|
|
|
|
|
|
6,197 |
|
|
|
8,953 |
|
|
|
171,700 |
|
Commercial |
|
|
30,646 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,646 |
|
Consumer |
|
|
75 |
|
|
|
8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8 |
|
|
|
83 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
193,468 |
|
|
$ |
1,897 |
|
|
$ |
867 |
|
|
$ |
|
|
|
$ |
6,197 |
|
|
$ |
8,961 |
|
|
$ |
202,429 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company is not committed to lend additional funds on nonaccrual loans at September 30, 2013.
Management reviews the loan portfolio on a quarterly basis using a defined, consistently applied process in order to make appropriate and timely adjustments
to the ALLL. When information confirms all or part of specific loans to be uncollectible, these amounts are promptly charged off against the ALLL. Management utilizes an internally developed spreadsheet to track and apply the various components
of the allowance.
The following table summarizes the primary segments of the ALLL, segregated into the amount required for loans individually evaluated
for impairment and the amount required for loans collectively evaluated for impairment as of September 30, 2013 and 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2013 |
|
ALLL Balance |
|
|
Collectively Evaluated for Impairment |
|
|
Individually Evaluated for Impairment |
|
|
|
(In thousands) |
|
Real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four-family |
|
$ |
225 |
|
|
$ |
225 |
|
|
$ |
|
|
Multi-family |
|
|
48 |
|
|
|
48 |
|
|
|
|
|
Non-residential |
|
|
374 |
|
|
|
374 |
|
|
|
|
|
Construction |
|
|
7 |
|
|
|
7 |
|
|
|
|
|
Home equity and second mortgages |
|
|
82 |
|
|
|
82 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
736 |
|
|
|
736 |
|
|
|
|
|
Commercial |
|
|
187 |
|
|
|
187 |
|
|
|
|
|
Consumer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
923 |
|
|
$ |
923 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2012 |
|
ALLL Balance |
|
|
Collectively Evaluated for Impairment |
|
|
Individually Evaluated for Impairment |
|
|
|
(In thousands) |
|
Real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four-family |
|
$ |
625 |
|
|
$ |
584 |
|
|
$ |
41 |
|
Multi-family |
|
|
35 |
|
|
|
35 |
|
|
|
|
|
Non-residential |
|
|
67 |
|
|
|
67 |
|
|
|
|
|
Construction |
|
|
3 |
|
|
|
3 |
|
|
|
|
|
Home equity and second mortgages |
|
|
71 |
|
|
|
64 |
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
801 |
|
|
|
753 |
|
|
|
48 |
|
Commercial |
|
|
164 |
|
|
|
164 |
|
|
|
|
|
Consumer |
|
|
2 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
967 |
|
|
$ |
919 |
|
|
$ |
48 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes activity in the primary segments of the ALLL for the years ended September 30, 2013 and
2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2013 |
|
Balance September 30, 2012 |
|
|
Charge- offs |
|
|
Recoveries |
|
|
Provision |
|
|
Balance September 30, 2013 |
|
|
|
(In thousands) |
|
|
|
|
|
|
|
Real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four-family |
|
$ |
625 |
|
|
$ |
(562 |
) |
|
$ |
82 |
|
|
$ |
80 |
|
|
$ |
225 |
|
Multi-family |
|
|
35 |
|
|
|
|
|
|
|
|
|
|
|
13 |
|
|
|
48 |
|
Non-residential |
|
|
67 |
|
|
|
|
|
|
|
|
|
|
|
307 |
|
|
|
374 |
|
Construction |
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
7 |
|
Home equity and second mortgages |
|
|
71 |
|
|
|
|
|
|
|
|
|
|
|
11 |
|
|
|
82 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
801 |
|
|
|
(562 |
) |
|
|
82 |
|
|
|
415 |
|
|
|
736 |
|
Commercial |
|
|
164 |
|
|
|
|
|
|
|
|
|
|
|
23 |
|
|
|
187 |
|
Consumer |
|
|
2 |
|
|
|
(7 |
) |
|
|
|
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
967 |
|
|
$ |
(569 |
) |
|
$ |
82 |
|
|
$ |
443 |
|
|
$ |
923 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2012 |
|
Balance September 30, 2011 |
|
|
Charge- offs |
|
|
Recoveries |
|
|
Provision |
|
|
Balance September 30, 2012 |
|
|
|
(In thousands) |
|
|
|
|
|
|
|
Real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four-family |
|
$ |
583 |
|
|
$ |
(810 |
) |
|
$ |
|
|
|
$ |
852 |
|
|
$ |
625 |
|
Multi-family |
|
|
29 |
|
|
|
|
|
|
|
|
|
|
|
6 |
|
|
|
35 |
|
Non-residential |
|
|
92 |
|
|
|
|
|
|
|
|
|
|
|
(25 |
) |
|
|
67 |
|
Construction |
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3 |
|
Home equity and second mortgages |
|
|
31 |
|
|
|
(260 |
) |
|
|
|
|
|
|
300 |
|
|
|
71 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
738 |
|
|
|
(762 |
) |
|
|
|
|
|
|
1,133 |
|
|
|
801 |
|
Commercial |
|
|
459 |
|
|
|
(50 |
) |
|
|
|
|
|
|
(245 |
) |
|
|
164 |
|
Consumer |
|
|
3 |
|
|
|
(4 |
) |
|
|
|
|
|
|
3 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
1,200 |
|
|
$ |
(1,124 |
) |
|
$ |
|
|
|
$ |
891 |
|
|
$ |
967 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38
Effective October 1, 2011, the Company adopted Accounting Standards Update (ASU) No. 2011-02, which
provides additional guidance to creditors for evaluating whether a modification or restructuring of a receivable is a troubled debt restructuring (TDR). A TDR is a loan that has been modified whereby the Bank has agreed to make certain
concessions that would otherwise not be granted to a borrower experiencing or expected to experience financial difficulties in order to maximize the ultimate recovery of a loan. The types of concessions granted generally include, but are not limited
to interest rate reductions, limitations on the accrued interest charged, term extensions, and deferment of principal. In evaluating whether a restructuring constitutes a TDR, ASU No. 2011-02 requires that a creditor must separately conclude
that the restructuring constitutes a concession and the borrower is experiencing financial difficulties. In conjunction with the Banks adoption of ASU No. 2011-02, it determined that no loans were TDRs other than those previously
considered as such prior to the adoption. The concessions granted on these loans consisted of interest rate reductions and/- or extensions of the loan term. The following table summarizes the TDR identified during the years ended September 30,
2013 and 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2013 |
|
Number of Loans |
|
|
Recorded Investment Before Modification |
|
|
Recorded Investment After Modification |
|
|
|
(Dollars in thousands) |
|
One-to-four-family |
|
|
4 |
|
|
$ |
1,089 |
|
|
$ |
1,170 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2012 |
|
Number of Loans |
|
|
Recorded Investment Before Modification |
|
|
Recorded Investment After Modification |
|
|
|
(Dollars in thousands) |
|
One-to-four-family |
|
|
5 |
|
|
$ |
1,863 |
|
|
$ |
1,934 |
|
Commercial |
|
|
1 |
|
|
$ |
72 |
|
|
$ |
72 |
|
A default on a troubled debt restructured loan for purposes of disclosure occurs when a borrower is 90 days past due or a
foreclosure or repossession of the applicable collateral has occurred. During the years ended September 30, 2013 and 2012, respectively, none and two defaults occurred on troubled debt restructured loans that were modified as a TDR within 12
months of the initial modification.
Note 6Premises and Equipment
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
|
2013 |
|
|
2012 |
|
|
|
(In thousands) |
|
Land |
|
$ |
179 |
|
|
$ |
179 |
|
|
|
|
|
|
|
|
|
|
Buildings and improvements |
|
|
1,336 |
|
|
|
1,316 |
|
Accumulated depreciation |
|
|
(632 |
) |
|
|
(596 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
704 |
|
|
|
720 |
|
|
|
|
|
|
|
|
|
|
Leasehold improvements |
|
|
2,526 |
|
|
|
2,515 |
|
Accumulated amortization |
|
|
(1,068 |
) |
|
|
(880 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
1,458 |
|
|
|
1,635 |
|
|
|
|
|
|
|
|
|
|
Furnishings and equipment |
|
|
2,388 |
|
|
|
2,375 |
|
Accumulated depreciation |
|
|
(1,987 |
) |
|
|
(1,855 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
401 |
|
|
|
520 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
2,742 |
|
|
$ |
3,054 |
|
|
|
|
|
|
|
|
|
|
39
Note 7Deposits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
|
2013 |
|
|
2012 |
|
|
|
Amount |
|
|
Weighted Average Rate |
|
|
Amount |
|
|
Weighted Average Rate |
|
|
|
(Dollars in thousands) |
|
Demand deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest bearing deposits |
|
$ |
28,488 |
|
|
|
|
|
|
$ |
27,749 |
|
|
|
|
|
Interest bearing deposits |
|
|
50,275 |
|
|
|
0.30 |
% |
|
|
47,365 |
|
|
|
0.39 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
78,763 |
|
|
|
0.19 |
% |
|
|
75,114 |
|
|
|
0.24 |
% |
Savings and club deposits |
|
|
43,050 |
|
|
|
0.25 |
% |
|
|
41,791 |
|
|
|
0.25 |
% |
Certificates of deposit |
|
|
90,499 |
|
|
|
1.37 |
% |
|
|
86,611 |
|
|
|
1.41 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
212,312 |
|
|
|
0.71 |
% |
|
$ |
203,516 |
|
|
|
0.74 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The scheduled maturities of certificates of deposit are as follows:
|
|
|
|
|
Years Ending September 30, (In thousands) |
|
|
|
2014 |
|
$ |
39,131 |
|
2015 |
|
|
7,452 |
|
2016 |
|
|
27,936 |
|
2017 |
|
|
14,659 |
|
2018 |
|
|
1,321 |
|
|
|
|
|
|
|
|
$ |
90,499 |
|
|
|
|
|
|
The aggregate amount of certificates of deposit with balances of $100,000 or more totaled approximately $38.6 million and
$37.1 million at September 30, 2013 and 2012, respectively. Deposits in excess of $250,000 are generally not insured by the FDIC.
Interest expense
on deposits consists of the following:
|
|
|
|
|
|
|
|
|
|
|
Years Ended September 30, |
|
|
|
2013 |
|
|
2012 |
|
|
|
(In thousands) |
|
Demand deposits |
|
$ |
166 |
|
|
$ |
184 |
|
Savings and club deposits |
|
|
106 |
|
|
|
136 |
|
Certificates of deposit |
|
|
1,200 |
|
|
|
1,592 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,472 |
|
|
$ |
1,912 |
|
|
|
|
|
|
|
|
|
|
40
Note 8Advances from FHLB and other credit facilities
A schedule of advances from the FHLB follows:
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
|
2013 |
|
|
2012 |
|
|
|
(In thousands) |
|
Overnight and short term advances, maturing in less than one year, with interest at 0.38% and 0.39% |
|
$ |
4,560 |
|
|
$ |
17,300 |
|
One year advance, maturing February 28, 2014 and July 12, 2013, with interest payable monthly at 0.27% and 0.34% |
|
|
1,250 |
|
|
|
5,575 |
|
Seven year advance, maturing December 29, 2014, with interest payable quarterly at 3.56% |
|
|
5,000 |
|
|
|
5,000 |
|
Seven year fixed rate advance with interest at 5.57%, payable in monthly installments of principal and interest of $57,000 with a
balloon payment of $8,925,000 on August 8, 2014 |
|
|
9,079 |
|
|
|
9,255 |
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
19,889 |
|
|
$ |
37,130 |
|
|
|
|
|
|
|
|
|
|
A schedule of the Companys annual principal obligations to the FHLB is as follows:
|
|
|
|
|
Year Ending September 30, (In thousands) |
|
|
|
2014 |
|
$ |
14,889 |
|
2015 |
|
|
5,000 |
|
|
|
|
|
|
|
|
$ |
19,889 |
|
|
|
|
|
|
These FHLB advances are secured by stock of the FHLB in the amount of $1.3 million and $2.0 million at September 30, 2013
and 2012, respectively, and a blanket assignment of qualifying loans and securities.
The Company can borrow on an overnight or a term basis from the
FHLB. The Companys overall credit exposure at the FHLB cannot exceed 50% of its total assets, subject to certain limitations based on the underlying loan and securities pledged as collateral.
Note 9Lease Commitments and Total Rental Expense
The Company leases five locations under long-term operating leases. Future minimum lease payments by year and in the aggregate, under non-cancellable operating
leases with initial or remaining terms of one year or more, consisted of the following at September 30, 2013 (in thousands):
|
|
|
|
|
Years ending September 30, |
|
|
|
2014 |
|
$ |
648 |
|
2015 |
|
|
620 |
|
2016 |
|
|
499 |
|
2017 |
|
|
503 |
|
2018 |
|
|
375 |
|
Thereafter |
|
|
1,807 |
|
|
|
|
|
|
|
|
$ |
4,452 |
|
|
|
|
|
|
The total rental expense and related charges for all leases for the years ended September 30, 2013 and 2012 was $786,000
and $749,000, respectively.
41
Note 10Income Taxes
The Company qualifies as a thrift under the provisions of the Internal Revenue Code and, therefore, was permitted, prior to January 1, 1996, to deduct
from federal taxable income an allowance for bad debts based on 8% of taxable income before such deduction, less certain adjustments, subject to certain limitations. Beginning January 1, 1996, the Company, for federal income tax purposes, must
calculate its tax bad debt deduction using either the experience or specific charge off method. The New York State tax law permits the Company to deduct 32% of its taxable income before bad debt deduction, subject to certain limitations.
Retained earnings at September 30, 2013 included approximately $1,981,000 of such bad debt deduction for which federal income taxes of approximately
$612,000 have not been provided. In addition, deferred New York State taxes of approximately $369,000 have not been provided on bad debt deductions in the amount of $4,100,000. If such amount is used for purposes other than for bad debt losses,
including distributions in liquidation, it will be subject to income tax at the then current rate.
The components of income taxes (benefit) are as
follows:
|
|
|
|
|
|
|
|
|
|
|
Years Ended September 30, |
|
|
|
2013 |
|
|
2012 |
|
|
|
(In thousands) |
|
Current income tax expense (benefit): |
|
|
|
|
|
|
|
|
Federal |
|
$ |
105 |
|
|
$ |
(195 |
) |
State |
|
|
33 |
|
|
|
(33 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
138 |
|
|
|
(228 |
) |
|
|
|
|
|
|
|
|
|
Deferred income tax expense (benefit): |
|
|
|
|
|
|
|
|
Federal |
|
|
230 |
|
|
|
60 |
|
State |
|
|
84 |
|
|
|
(7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
314 |
|
|
|
53 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
452 |
|
|
$ |
(175 |
) |
|
|
|
|
|
|
|
|
|
The following table reconciles the reported income taxes and the federal income taxes which would be computed by applying the
normal federal income tax rate of 34% to income before income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended September 30, |
|
|
|
2013 |
|
|
Percent of Pretax Loss |
|
|
2012 |
|
|
Percent of Pretax Loss |
|
|
|
(Dollars in thousands) |
|
Federal income taxes |
|
$ |
473 |
|
|
|
34.0 |
% |
|
$ |
(277 |
) |
|
|
(34.0 |
)% |
State income taxes, net of federal income tax effect |
|
|
77 |
|
|
|
5.6 |
% |
|
|
(26 |
) |
|
|
(3.2 |
)% |
Non-deductible stock based compensation |
|
|
14 |
|
|
|
1.0 |
% |
|
|
28 |
|
|
|
3.4 |
% |
Non-deductible merger related costs (reimbursement) |
|
|
(102 |
) |
|
|
(7.3 |
)% |
|
|
102 |
|
|
|
12.5 |
% |
Other items, net |
|
|
(10 |
) |
|
|
(0.8 |
)% |
|
|
(2 |
) |
|
|
(0.2 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective Income Taxes |
|
$ |
452 |
|
|
|
32.5 |
% |
|
$ |
(175 |
) |
|
|
(21.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42
The tax effects of existing temporary differences that give rise to significant portions of net deferred tax
assets and liabilities are as follows:
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
|
2013 |
|
|
2012 |
|
|
|
(In thousands) |
|
Deferred tax assets: |
|
|
|
|
|
|
|
|
Allowance for loan losses |
|
$ |
366 |
|
|
$ |
384 |
|
Net operating loss carryforwards |
|
|
|
|
|
|
252 |
|
Deferred rent |
|
|
63 |
|
|
|
71 |
|
Benefit plan adjustment (Accumulated Other Comprehensive Income) |
|
|
599 |
|
|
|
245 |
|
Unrealized loss on securities available for sale |
|
|
473 |
|
|
|
|
|
Stock based compensation |
|
|
203 |
|
|
|
176 |
|
Interest income and other |
|
|
152 |
|
|
|
271 |
|
|
|
|
|
|
|
|
|
|
Total Deferred Tax Assets |
|
|
1,856 |
|
|
|
1,399 |
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities: |
|
|
|
|
|
|
|
|
Accrued pension |
|
|
292 |
|
|
|
288 |
|
Depreciation |
|
|
26 |
|
|
|
86 |
|
Unrealized gain on securities available for sale |
|
|
|
|
|
|
319 |
|
|
|
|
|
|
|
|
|
|
Total Deferred Tax Liabilities |
|
|
318 |
|
|
|
693 |
|
|
|
|
|
|
|
|
|
|
Net Deferred Tax Assets Included in Other Assets |
|
$ |
1,538 |
|
|
$ |
706 |
|
|
|
|
|
|
|
|
|
|
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some
portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences are deductible and
carry-forwards are available.
At September 30, 2013, the Company had no net operating loss carry-forwards available for tax reporting purposes. At
September 30, 2012, the Company had approximately $602,000 of federal and $834,000 of state net operating loss carry-forwards available to offset future taxable income for tax reporting purposes. These net operating loss carry-forwards were
generated during the year ended September 30, 2012 and expire in 2032. At September 30, 2012, there was no valuation allowance against these net operating loss carry-forwards. In determining whether or not a valuation allowance was
necessary for its federal and state net operating losses, the Company considered a tax planning strategy related to harvesting the $802,000 of unrealized gains in the available for sale security portfolio at September 30, 2012, and considered
forecasted earnings and taxable income limited to the twelve months following September 30, 2012.
The Company, in projecting future results, has
considered future market growth, forecasted earnings, future taxable income, and feasible and permissible tax planning strategies in determining the realizability of deferred tax assets. If the Company was to determine that it would not be able to
realize a portion of its net deferred tax asset in the future for which there is currently no valuation allowance, an adjustment to the net deferred tax asset would be charged to earnings in the period such determination was made. Conversely, if the
Company was to make a determination that it is more likely than not that the deferred tax assets for which there is a valuation allowance would be realized, the related valuation allowance would be reduced and a benefit to earnings would be
recorded.
Note 11Comprehensive Income (Loss)
Total comprehensive income (loss) represents the sum of net income and items of other comprehensive income or loss that are reported directly in
equity on an after tax basis, such as the net unrealized holding gain or loss on
43
securities available for sale and defined benefit pension plan adjustments. The Company has reported its total comprehensive income in the consolidated statements of comprehensive income and
changes in stockholders equity.
Accumulated other comprehensive income (loss), which is included in stockholders equity, consisted of the
following:
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
|
2013 |
|
|
2012 |
|
|
|
(In thousands) |
|
Net unrealized holding gains (losses) on securities available for sale, net of deferred income tax of $473,000 and $(319,000),
respectively |
|
$ |
(719 |
) |
|
$ |
483 |
|
Benefit plan adjustment, net of related deferred taxes of $599,000 and $245,000, respectively |
|
|
(909 |
) |
|
|
(372 |
) |
|
|
|
|
|
|
|
|
|
|
|
$ |
(1,628 |
) |
|
$ |
111 |
|
|
|
|
|
|
|
|
|
|
Note 12Regulatory Matters
For the purpose of granting eligible account holders a priority in the event of future liquidation, the Bank, at the time of conversion, established a
liquidation account in an amount equal to its retained earnings of $8.3 million at September 30, 2006. In the event of a future liquidation of the Bank (and only in such event), an eligible account holder who continues to maintain his or her
deposit account shall be entitled to receive a distribution from the special account. The total amount of the special account is decreased (but never increased) in an amount proportionally corresponding to decreases in the deposit account balances
of eligible account holders as of each subsequent year end. After conversion, no dividends may be paid to stockholders if such dividends would reduce retained earnings of the converted Bank below the amount required by the special account.
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory and possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on the Company. Under capital adequacy guidelines and the regulatory framework for prompt corrective
action, the Bank must meet specific capital guidelines that involve quantitative measures of the Banks assets, liabilities, and certain off balance sheet items as calculated under regulatory accounting practices. The Banks capital
amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.
Quantitative
measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios of Total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital to total
assets (as defined). The following table presents a reconciliation of the Banks capital based on GAAP and regulatory capital at the dates presented:
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
|
2013 |
|
|
2012 |
|
|
|
(In thousands) |
|
GAAP capital: |
|
$ |
20,318 |
|
|
$ |
19,575 |
|
Pension liability, net of deferred taxes |
|
|
909 |
|
|
|
372 |
|
Unrealized (gain) loss on securities available for sale, net of deferred taxes |
|
|
719 |
|
|
|
(483 |
) |
|
|
|
|
|
|
|
|
|
Tier I and tangible capital |
|
|
21,946 |
|
|
|
19,464 |
|
General valuation allowance |
|
|
923 |
|
|
|
967 |
|
|
|
|
|
|
|
|
|
|
Total Regulatory Capital |
|
$ |
22,869 |
|
|
$ |
20,431 |
|
|
|
|
|
|
|
|
|
|
44
The following table sets forth the Banks capital position, compared to the minimum regulatory capital
requirements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual |
|
|
For Capital Adequacy Purposes |
|
|
To be Well Capitalized under Prompt Corrective Action Provisions |
|
|
|
Amount |
|
|
Ratio |
|
|
Amount |
|
|
Ratio |
|
|
Amount |
|
|
Ratio |
|
|
|
(Dollars in thousands) |
|
September 30, 2013: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital (to risk-weighted assets) |
|
$ |
22,869 |
|
|
|
12.91 |
% |
|
$ |
³ 14,176 |
|
|
|
³ 8.00 |
% |
|
$ |
³ 17,720 |
|
|
|
³ 10.00 |
% |
Core (Tier 1) capital (to risk-weighted assets) |
|
|
21,946 |
|
|
|
12.39 |
|
|
|
|
|
|
|
|
|
|
|
³ 10,632 |
|
|
|
³ 6.00 |
|
Core (Tier 1) capital (to total adjusted assets) |
|
|
21,946 |
|
|
|
8.49 |
|
|
|
³ 10,342 |
|
|
|
³ 4.00 |
|
|
|
³ 12,928 |
|
|
|
³ 5.00 |
|
Tangible capital (to total adjusted assets) |
|
|
21,946 |
|
|
|
8.49 |
|
|
|
³ 3,878 |
|
|
|
³ 1.50 |
|
|
|
|
|
|
|
|
|
September 30, 2012: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital (to risk-weighted assets) |
|
$ |
20,431 |
|
|
|
11.77 |
% |
|
$ |
³ 13,886 |
|
|
|
³ 8.00 |
% |
|
$ |
³ 17,358 |
|
|
|
10.00 |
% |
Core (Tier 1) capital (to risk-weighted assets) |
|
|
19,464 |
|
|
|
11.21 |
|
|
|
|
|
|
|
|
|
|
|
³ 10,415 |
|
|
|
6.00 |
|
Core (Tier 1) capital (to total adjusted assets) |
|
|
19,464 |
|
|
|
7.36 |
|
|
|
³ 10,572 |
|
|
|
³ 4.00 |
|
|
|
³ 13,215 |
|
|
|
5.00 |
|
Tangible capital (to total adjusted assets) |
|
|
19,464 |
|
|
|
7.36 |
|
|
|
³ 3,965 |
|
|
|
³ 1.50 |
|
|
|
|
|
|
|
|
|
The Bank continues to meet the requirements to be categorized as well-capitalized under the regulatory framework
for prompt corrective action. There are no conditions existing or events which have occurred since September 30, 2013 that management believes would change the Banks regulatory capital categorization.
45
Note 13Benefit Plans
Pension Plan
The Bank maintains a
non-contributory defined benefit pension plan (the Plan) covering all eligible employees hired before July 1, 2008. The benefits are based on employees years of service and compensation. The Banks policy is to fund the
Plan annually with at least the minimum contribution deductible and/or allowable for federal income tax purposes. On January 28, 2010, the Board of Directors passed a resolution to suspend the accrual of benefits under the Companys
defined benefit pension plan. The following table sets forth the Plans funded status and components of net periodic pension cost:
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
|
2013 |
|
|
2012 |
|
|
|
(In thousands) |
|
Change in benefit obligation: |
|
|
|
|
|
|
|
|
Benefit obligationbeginning of year |
|
$ |
4,043 |
|
|
$ |
3,687 |
|
Service cost |
|
|
|
|
|
|
|
|
Interest cost |
|
|
256 |
|
|
|
252 |
|
Actuarial loss (gain) |
|
|
957 |
|
|
|
266 |
|
Benefits paid |
|
|
(191 |
) |
|
|
(162 |
) |
|
|
|
|
|
|
|
|
|
Benefit obligationend of year |
|
$ |
5,065 |
|
|
$ |
4,043 |
|
|
|
|
|
|
|
|
|
|
Change in plan assets: |
|
|
|
|
|
|
|
|
Fair value of assetsbeginning of year |
|
$ |
4,157 |
|
|
$ |
3,081 |
|
Actual return on plan assets |
|
|
332 |
|
|
|
538 |
|
Benefits paid |
|
|
(191 |
) |
|
|
(162 |
) |
Contributions |
|
|
|
|
|
|
700 |
|
|
|
|
|
|
|
|
|
|
Fair value of assetsend of year |
|
$ |
4,298 |
|
|
$ |
4,157 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
|
2013 |
|
|
2012 |
|
|
|
(In thousands) |
|
Reconciliation of funded status: |
|
|
|
|
|
|
|
|
Accumulated benefit obligation |
|
$ |
5,065 |
|
|
$ |
4,043 |
|
|
|
|
|
|
|
|
|
|
Projected benefit obligation |
|
$ |
(5,065 |
) |
|
$ |
(4,043 |
) |
Fair value of assets |
|
|
4,298 |
|
|
|
4,157 |
|
|
|
|
|
|
|
|
|
|
Funded status |
|
$ |
(767 |
) |
|
$ |
114 |
|
|
|
|
|
|
|
|
|
|
Prepaid (accrued) pension cost included in other assets (liabilities) |
|
$ |
(767 |
) |
|
$ |
114 |
|
|
|
|
|
|
|
|
|
|
The Company expects to recognize approximately $91,000 of net actuarial loss in operations during the year ending
September 30, 2014.
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
|
2013 |
|
|
2012 |
|
|
|
(In thousands) |
|
Amounts recognized in accumulated other comprehensive loss, pre-tax, consist of: |
|
|
|
|
|
|
|
|
Net actuarial loss |
|
$ |
(1,508 |
) |
|
$ |
(617 |
) |
|
|
|
|
|
|
|
|
|
46
|
|
|
|
|
|
|
|
|
|
|
Years Ended September 30, |
|
|
|
2013 |
|
|
2012 |
|
|
|
(Dollars in thousands) |
|
Net periodic pension expense |
|
|
|
|
|
|
|
|
Service cost |
|
$ |
|
|
|
$ |
|
|
Interest cost |
|
|
256 |
|
|
|
252 |
|
Expected return on assets |
|
|
(284 |
) |
|
|
(218 |
) |
Amortization of unrecognized net loss |
|
|
18 |
|
|
|
30 |
|
|
|
|
|
|
|
|
|
|
Total net periodic pension (credit) expense |
|
$ |
(10 |
) |
|
$ |
64 |
|
|
|
|
|
|
|
|
|
|
Valuation assumptions: |
|
|
|
|
|
|
|
|
Discount rate |
|
|
5.0 |
% |
|
|
6.5 |
% |
Rate of return on long-term assets |
|
|
7.0 |
% |
|
|
7.0 |
% |
Salary increase rate |
|
|
0.0 |
% |
|
|
0.0 |
% |
The Plan assets are invested as follows:
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
|
2013 |
|
|
2012 |
|
Separate accountPrudential Large Cap Blend / Victory Fund |
|
|
51 |
% |
|
|
43 |
% |
Guaranteed insurance funds |
|
|
49 |
% |
|
|
57 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
100 |
% |
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
The long-term rate of return on assets assumption is set based on historical returns earned by equities and fixed income
securities, adjusted to reflect expectations of future returns as applied to the Plans actual target allocation of asset classes. Equities and fixed income securities are assumed to earn real rates of return in the ranges of 5.0% to 9.0% and
2.0% to 6.0%, respectively. Additionally, the long-term inflation rate is projected to be 2.5%. When these overall return expectations are applied to the Plans target allocation, the result is an expected return of 8.0% to 10.0%.
The Bank intends to maintain the current asset mix and to seek to achieve an optimal risk/reward profile by limiting market exposure to present levels. It is
expected to have a 4.0% to 5.0% return from fixed income and a 5.0% to 9.0% rate of return from equities. The overall expected long-term rate of return on Plan assets used was 7.0% for both 2013 and 2012.
The fair values of the Companys pension plan assets, by asset category (see Note 16 for definition of Levels), are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2013 |
|
Fair Value |
|
|
(Level 1) Quoted Prices in Active Markets for Identical Assets |
|
|
(Level 2) Significant Other Observable Inputs |
|
|
(Level 3) Significant Unobservable Inputs |
|
|
|
(In thousands) |
|
Separate account Prudential Large Cap Blend /Victory Fund |
|
$ |
2,178 |
|
|
$ |
|
|
|
$ |
2,178 |
|
|
$ |
|
|
Guaranteed investment contract |
|
$ |
2,120 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
2,120 |
|
|
|
|
September 30, 2012 |
|
|
|
|
|
|
|
|
(In thousands) |
|
Separate account Prudential Large Cap Blend /Victory Fund |
|
$ |
1,796 |
|
|
$ |
|
|
|
$ |
1,796 |
|
|
$ |
|
|
Guaranteed investment contract |
|
$ |
2,361 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
2,361 |
|
47
At September 30, 2013, expected benefit payments were as follows (in thousands):
|
|
|
|
|
Years ending September 30, |
|
|
|
2014 |
|
$ |
216 |
|
2015 |
|
|
213 |
|
2016 |
|
|
209 |
|
2017 |
|
|
211 |
|
2018 |
|
|
269 |
|
2019 to 2023 |
|
|
1,695 |
|
|
|
|
|
|
|
|
$ |
2,813 |
|
|
|
|
|
|
The Bank does not expect to have any required contributions to the Plan during the fiscal year ending September 30, 2014.
401(k) Savings and Investment Plan
The Company has implemented a Savings and Investment Plan (the Savings Plan) pursuant to Section 401(k) of the Internal Revenue Code for all
eligible employees. Under the Savings Plan, employees may elect to contribute a percentage of their compensation, subject to limits. The Company makes a matching contribution equal to 50% of an employees contribution, up to 8.0% of
compensation, subject to certain limitations. The Savings Plan expenses for the years ended September 30, 2013 and 2012, amounted to $83,000 and $88,000, respectively.
Employees Stock Ownership Plan (ESOP)
The Company established an ESOP for all eligible employees in connection with the public offering of common stock in April 2007. The ESOP used the proceeds of
a $1.6 million, 8.0% term loan from the Company to purchase 164,413 shares of Company common stock. The term loan from the Company to the ESOP is payable in annual installments of principal and interest over 30 years commencing on December 31,
2007. The Company intends to make discretionary contributions to the ESOP which will be equal to principal and interest payments on the term loan to the ESOP from the Company. Shares purchased with the loan proceeds are initially pledged as
collateral for the term loan and are held in a suspense account for future allocation among participants. Contributions to the ESOP and shares released from the suspense account will be allocated among the participants on the basis of compensation,
as defined by the ESOP, in the year of allocation. As of September 30, 2013 and 2012, the loan had a balance of $1,509,000 and $1,530,000, respectively.
The ESOP is accounted for in accordance with the guidance issued by FASB. Accordingly, the ESOP shares pledged as collateral are reported as unearned ESOP
shares in the consolidated statements of financial condition.
As shares are committed to be released from collateral, the Company reports compensation
expense equal to the current market price of the shares, and the shares become outstanding for earnings per share computations. Dividends on unallocated ESOP shares are recorded as a reduction of debt. ESOP compensation expense was $48,000 and
$43,000 for the years ended September 30, 2013 and 2012, respectively.
The ESOP shares are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
|
2013 |
|
|
2012 |
|
Unearned shares |
|
|
127,380 |
|
|
|
134,271 |
|
Shares committed to be released |
|
|
4,110 |
|
|
|
4,110 |
|
Shares released |
|
|
31,512 |
|
|
|
26,032 |
|
|
|
|
|
|
|
|
|
|
Total shares |
|
|
163,002 |
|
|
|
164,413 |
|
|
|
|
|
|
|
|
|
|
Fair value of unearned shares |
|
$ |
1,093,000 |
|
|
$ |
1,074,000 |
|
|
|
|
|
|
|
|
|
|
48
Note 14Stock-Based Compensation
At a special meeting of the stockholders of the Company held on November 9, 2007, the stockholders approved the CMS Bancorp, Inc. 2007 Stock Option Plan
and the CMS Bancorp, Inc. 2007 Recognition and Retention Plan (collectively the Plans). The Plans authorize the award of up to 205,516 stock options and 82,206 shares of restricted stock. The stock options and restricted stock awarded
vest over a five year service period based on the anniversary of the grant date.
Under the Plans, the Company has granted shares of restricted stock and
options to purchase the Companys common stock as shown in the following table. The fair value of each stock option grant was established at the date of grant using the Black-Scholes option pricing model and the assumptions shown in the
following table:
|
|
|
|
|
|
|
|
|
|
|
September 2013 |
|
|
September 2012 |
|
Shares of restricted stock |
|
|
4,519 |
|
|
|
1,500 |
|
Grant date fair value per share |
|
$ |
8.04 |
|
|
$ |
8.00 |
|
Number of stock options |
|
|
16,000 |
|
|
|
6,000 |
|
Exercise price |
|
$ |
8.04 |
|
|
$ |
8.00 |
|
Fair value per option |
|
$ |
4.85 |
|
|
$ |
4.72 |
|
Risk free interest rate |
|
|
1.62 |
% |
|
|
1.69 |
% |
Volatility factor |
|
|
61.2 |
% |
|
|
58.8 |
% |
Expected life |
|
|
7 years |
|
|
|
7 years |
|
Dividends |
|
|
none |
|
|
|
none |
|
The Company expenses, in accordance with FASB guidance, the fair value of all options over their five year vesting periods and
expenses the fair value of all share-based compensation granted over the requisite five year vesting periods. In the years ended September 30, 2013 and 2012, the Company recorded an expense of $53,000 and $100,000 respectively, relating to
stock options and $54,000 and $146,000, respectively, relating to the restricted stock. The Company recognized approximately $44,000 and $69,000 of income tax benefits resulting from this expense in the years ended September 30, 2013 and 2012,
respectively.
As of September 30, 2013 and 2012, there were 19,037 stock options, respectively, and no shares of restricted stock in either year
remaining available for future awards under the Plans. Stock options and restricted stock awarded under the Plans vest over five years, at the rate of 20% per year.
The following is a summary of the status of the Companys non-vested restricted shares:
|
|
|
|
|
|
|
|
|
|
|
Restricted Shares |
|
|
Weighted Average Grant Date Fair Value |
|
Non-vested at October 1, 2011 |
|
|
38,359 |
|
|
$ |
9.46 |
|
Forfeited |
|
|
(822 |
) |
|
$ |
10.12 |
|
Granted |
|
|
6,019 |
|
|
|
8.03 |
|
Vested |
|
|
(15,301 |
) |
|
$ |
9.74 |
|
|
|
|
|
|
|
|
|
|
Non-vested at September 30, 2012 |
|
|
28,255 |
|
|
$ |
8.99 |
|
Vested |
|
|
(15,584 |
) |
|
$ |
9.60 |
|
|
|
|
|
|
|
|
|
|
Non-vested at September 30, 2013 |
|
|
12,771 |
|
|
$ |
8.24 |
|
|
|
|
|
|
|
|
|
|
Expected future compensation expense relating to the 12,771 non-vested restricted shares outstanding at September 30,
2013 is $92,000 over a weighted average period of 3.0 years.
49
The following is a summary of stock option activity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of Stock
Options |
|
|
Weighted
Average
Exercise Price |
|
|
Weighted Average
Remaining Contractual
Term |
|
Balance at October 1, 2011 |
|
|
174,754 |
|
|
$ |
9.78 |
|
|
|
6.6 years |
|
Granted |
|
|
22,000 |
|
|
$ |
8.03 |
|
|
|
10.0 years |
|
Forfeited |
|
|
(10,275 |
) |
|
|
10.12 |
|
|
|
5.2 years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2012 |
|
|
186,479 |
|
|
$ |
9.56 |
|
|
|
6.2 years |
|
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2013 |
|
|
186,479 |
|
|
$ |
9.56 |
|
|
|
5.2 years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at September 30, 2013 |
|
|
153,379 |
|
|
$ |
9.88 |
|
|
|
4.5 years |
|
Shares issued upon exercise of stock options will be issued from treasury stock or from previously unissued shares. As of
September 30, 2013, the Company had 192,362 shares of treasury stock. Expected future compensation expense relating to the 186,479 vested and non-vested options outstanding at September 30, 2013 is $128,000 over a weighted average period
of 0.8 years.
At September 30, 2013 and 2012, the stock options outstanding had an intrinsic value of $27,000 and $6,000, respectively, and stock
options exercisable had an intrinsic value of $10,000 and none at September 30, 2013 and 2012, respectively.
Note 15Commitments and
Contingencies
The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs
of its customers. These financial instruments primarily include commitments to extend credit. These financial instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the statements of
financial condition. The contract amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments. The Companys exposure to credit loss in the event of nonperformance by the other
party to the financial instrument for commitments to extend credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments as it does for on-balance-sheet instruments.
The Company has the following outstanding commitments:
|
|
|
|
|
|
|
|
|
|
|
September 30 |
|
|
|
2013 |
|
|
2012 |
|
|
|
(In thousands) |
|
Commitments to originate loans, expiring in three months or less |
|
$ |
3,850 |
|
|
$ |
839 |
|
Commitments under homeowners equity lending program |
|
|
6,619 |
|
|
|
6,633 |
|
Commitments under overdraft protection and commercial lines of credit |
|
|
4,558 |
|
|
|
4,143 |
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
15,027 |
|
|
$ |
11,615 |
|
|
|
|
|
|
|
|
|
|
At September 30, 2013, $900,000 in outstanding commitments to originate loans were at fixed rates ranging from 3.75% to
4.875% and $2,950,000 were at variable rates ranging from 4.25% to 4.75% at September 30, 2013. At September 30, 2012, all of the $839,000 in outstanding commitments to originate loans were at fixed rates ranging from 4.00% to 4.25. At
September 30, 2013 and 2012, undisbursed funds from approved lines of credit under a homeowners equity lending program totaled $6,619,000 and $6,633,000, respectively. Interest rates are either fixed (ranging from 5.75% to 7.625% at
September 30, 2013) or variable, based on the prime rate or prime minus 25 basis points adjusted on a monthly basis (ranging from 3.25% to 4.25% at September 30, 2013). At September 30, 2013 and 2012, unused overdraft protection and
commercial lines of credits were $4.6 million and $4.1 million, respectively. Unless specifically cancelled by notice from the Company, these funds represent firm commitments available to the respective borrowers on demand.
50
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any
condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since some of the commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customers creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of
credit, is based on managements credit evaluation of the counterparty. Collateral held consists primarily of residential real estate, but may include income-producing commercial properties.
The Company also has, in the normal course of business, commitments for services and supplies. Management does not anticipate losses on any of these
transactions.
The Company, in the ordinary course of business, becomes a party to litigation from time to time. In the opinion of management, the
ultimate disposition of such litigation is not expected to have a material adverse effect on the financial position or results of operations of the Company.
Note 16Fair Value Measurements and Fair Value of Financial Instruments
U.S. GAAP has established a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value. The hierarchy gives the highest
priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:
Level 1: Quoted prices in active markets for identical assets or liabilities.
Level 2: Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in
markets that are not active; or inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of
the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of
fair value requires significant management judgment or estimation.
An assets or liabilitys level within the fair value hierarchy is based on
the lowest level of input that is significant to the fair value measurement.
In general, fair value is based upon quoted market prices, where available.
If such quoted market prices are not available, fair value is based upon internally developed models that primarily use, as inputs, observable market-based parameters. Valuation adjustments may be made to ensure that financial instruments are
recorded at fair value. These adjustments may include amounts to reflect counterparty credit quality and counterparty creditworthiness, among other things, as well as unobservable parameters. Any such valuation adjustments are applied consistently
over time. The Companys valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective value or reflective of future values. While management believes the Companys valuation
methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the
reporting date. In addition, the guidance requires the Company to disclose the fair value for financial assets on both a recurring and non-recurring basis.
51
For financial assets measured at fair value on a recurring basis, the fair value measurements by level within the
fair value hierarchy at September 30, 2013 and 2012 are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Description |
|
Fair Value |
|
|
(Level 1) Quoted Prices in Active Markets for Identical Assets |
|
|
(Level 2) Significant Other Observable Inputs |
|
|
(Level 3) Significant Unobservable Inputs |
|
|
|
(In thousands) |
|
September 30, 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities available for sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government Agencies |
|
$ |
18,826 |
|
|
$ |
|
|
|
$ |
18,826 |
|
|
$ |
|
|
Corporate bonds |
|
|
4,306 |
|
|
|
|
|
|
|
4,306 |
|
|
|
|
|
Municipal bonds |
|
|
3,727 |
|
|
|
|
|
|
|
3,727 |
|
|
|
|
|
Mortgage-backed securities |
|
|
13,561 |
|
|
|
|
|
|
|
13,561 |
|
|
|
|
|
|
|
|
|
(In thousands) |
|
September 30, 2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities available for sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government Agencies |
|
$ |
24,088 |
|
|
$ |
|
|
|
$ |
24,088 |
|
|
$ |
|
|
Corporate bonds |
|
|
4,599 |
|
|
|
|
|
|
|
4,599 |
|
|
|
|
|
Municipal bonds |
|
|
3,892 |
|
|
|
|
|
|
|
3,892 |
|
|
|
|
|
Mortgage-backed securities |
|
|
15,782 |
|
|
|
|
|
|
|
15,782 |
|
|
|
|
|
For financial assets measured at fair value on a non-recurring basis, the fair value measurements by level within the fair
value hierarchy at September 30, 2013 and 2012 are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Description |
|
Fair Value |
|
|
(Level 1) Quoted Prices in Active Markets for Identical Assets |
|
|
(Level 2) Significant Other Observable Inputs |
|
|
(Level 3) Significant Unobservable Inputs |
|
|
|
|
|
|
(In thousands) |
|
|
|
|
September 30, 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans subject to specific valuation allowances |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans subject to specific valuation allowances |
|
$ |
1,444 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
1,444 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis
and for which Level 3 inputs were used to determine fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands) |
|
Impaired loans |
|
Fair value estimate |
|
|
Valuation
techniques |
|
Unobservable input |
|
Range |
|
Weighted average |
|
September 30, 2012 |
|
$ |
1,444 |
|
|
Discounted cash flows(1) |
|
Liquidation expenses(2) |
|
1.46% to 6.47% |
|
|
3.24% |
|
(1) |
Fair value is generally determined through discounted cash flows or independent appraisals of the underlying collateral, which generally include various Level 3 inputs which are not identifiable. |
(2) |
Includes estimated liquidation expenses. |
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments at September 30, 2013 and 2012:
Cash and Cash Equivalents, Interest Receivable and Interest
Payable. The carrying amounts for cash and cash equivalents, interest receivable and interest payable approximate fair value because they mature in three months or less.
52
Securities. The fair value for debt securities, both available for sale and held to maturity are based on
quoted market prices or dealer prices (Level 1), if available. If quoted market prices are not available, fair values are determined by obtaining matrix pricing, which is a mathematical technique widely used in the industry to value debt securities
without relying exclusively on quoted prices for the specific securities but rather by relying on the securities relationship to other benchmark quoted securities (Level 2 inputs).
Loans Receivable. The fair value of loans receivable is estimated by discounting the future cash flows, using the current market rates at which similar
loans would be made to borrowers with similar credit ratings and for the same remaining maturities, of such loans.
Loans Held for Sale. Loans held
for sale are carried at the lower of cost or market, determined based on actual amounts subsequently realized after the balance sheet date, or estimates of amounts to be subsequently realized, based on actual amounts realized for similar loans.
Deposits. The fair value of demand, savings and club accounts is equal to the amount payable on demand at the reporting date. The fair
value of certificates of deposit is estimated using market rates currently offered for deposits of similar remaining maturities. The fair value estimates do not include the benefit that results from the low-cost funding provided by deposit
liabilities compared to the cost of borrowing funds in the market.
Advances from FHLB. Fair value is estimated using rates currently offered for
advances of similar remaining maturities.
Commitments to Extend Credits. The fair value of commitments to fund credit lines and originate or
participate in loans is estimated using fees currently charged to enter into similar agreements taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed rate loan commitments, fair
value also considers the difference between current levels of interest and the committed rates. The carrying value, represented by the net deferred fee arising from the unrecognized commitment, and the fair value, determined by discounting the
remaining contractual fee over the term of the commitment using fees currently charged to enter into similar agreements with similar credit risk, was not considered material at September 30, 2013 or 2012.
The carrying amounts and estimated fair values of financial instruments at September 30, 2013 are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Description |
|
Carrying Amount |
|
|
Fair Value |
|
|
(Level 1) Quoted Prices in Active Markets for Identical Assets |
|
|
(Level 2) Significant Other Observable Inputs |
|
|
(Level 3) Significant Unobservable Inputs |
|
September 30, 2013 |
|
|
|
|
(In thousands) |
|
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
2,477 |
|
|
$ |
2,477 |
|
|
$ |
2,477 |
|
|
$ |
|
|
|
$ |
|
|
Securities available-for-sale |
|
|
40,420 |
|
|
|
40,420 |
|
|
|
|
|
|
|
40,420 |
|
|
|
|
|
Loans held for sale |
|
|
337 |
|
|
|
337 |
|
|
|
|
|
|
|
337 |
|
|
|
|
|
Loans receivable |
|
|
207,996 |
|
|
|
224,884 |
|
|
|
|
|
|
|
|
|
|
|
224,884 |
|
Accrued interest receivable |
|
|
954 |
|
|
|
954 |
|
|
|
|
|
|
|
954 |
|
|
|
|
|
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
|
212,312 |
|
|
|
213,595 |
|
|
|
|
|
|
|
213,595 |
|
|
|
|
|
FHLB-NY advances |
|
|
19,889 |
|
|
|
20,976 |
|
|
|
|
|
|
|
20,976 |
|
|
|
|
|
Accrued interest payable |
|
|
130 |
|
|
|
130 |
|
|
|
|
|
|
|
130 |
|
|
|
|
|
53
The carrying amounts and estimated fair values of financial instruments at September 30, 2012 are summarized
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Description |
|
Carrying Amount |
|
|
Fair Value |
|
|
(Level 1) Quoted Prices in Active Markets for Identical Assets |
|
|
(Level 2) Significant Other Observable Inputs |
|
|
(Level 3) Significant Unobservable Inputs |
|
September 30, 2012 |
|
|
|
|
(In thousands) |
|
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
1,841 |
|
|
$ |
1,841 |
|
|
$ |
1,841 |
|
|
$ |
|
|
|
$ |
|
|
Securities available-for-sale |
|
|
48,361 |
|
|
|
48,361 |
|
|
|
|
|
|
|
48,361 |
|
|
|
|
|
Loans held for sale |
|
|
2,426 |
|
|
|
2,426 |
|
|
|
|
|
|
|
2,426 |
|
|
|
|
|
Loans receivable |
|
|
201,462 |
|
|
|
228,507 |
|
|
|
|
|
|
|
|
|
|
|
228,507 |
|
Accrued interest receivable |
|
|
1,006 |
|
|
|
1,006 |
|
|
|
|
|
|
|
1,006 |
|
|
|
|
|
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
|
203,516 |
|
|
|
205,054 |
|
|
|
|
|
|
|
205,054 |
|
|
|
|
|
FHLB-NY advances |
|
|
37,130 |
|
|
|
38,366 |
|
|
|
|
|
|
|
38,366 |
|
|
|
|
|
Accrued interest payable |
|
|
93 |
|
|
|
93 |
|
|
|
|
|
|
|
93 |
|
|
|
|
|
Limitations
The fair
value estimates are made at a discrete point in time based on relevant market information about the financial instruments. Fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk
characteristics of various financial instruments and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions
could significantly affect the estimates. Further, the foregoing estimates may not reflect the actual amount that could be realized if all of the financial instruments were offered for sale.
In addition, the fair value estimates are based on existing on-and-off balance sheet financial instruments without attempting to value the anticipated future
business and the value of assets and liabilities that are not considered financial instruments. Other significant assets and liabilities that are not considered financial assets and liabilities include premises and equipment and advances from
borrowers for taxes and insurance. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in any of the estimates.
Finally, reasonable comparability between financial institutions may not be likely due to the wide range of permitted valuation techniques and numerous
estimates which must be made given the absence of active secondary markets for many of the financial instruments. This lack of uniform valuation methodologies introduces a greater degree of subjectivity to these estimated fair values.
54
Note 17Parent Only Financial Information
The following are the financial statements of the Company (Parent only) as of and for the years ended September 30, 2013 and 2012.
CONDENSED STATEMENTS OF FINANCIAL CONDITION
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
|
2013 |
|
|
2012 |
|
Assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
844 |
|
|
$ |
337 |
|
Investment in Bank |
|
|
20,318 |
|
|
|
19,575 |
|
Loans receivable |
|
|
|
|
|
|
641 |
|
ESOP loan receivable |
|
|
1,509 |
|
|
|
1,530 |
|
Other assets |
|
|
154 |
|
|
|
244 |
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
22,825 |
|
|
$ |
22,327 |
|
|
|
|
|
|
|
|
|
|
Liabilities and stockholders equity |
|
|
|
|
|
|
|
|
Other liabilities |
|
$ |
90 |
|
|
$ |
369 |
|
Stockholders equity |
|
|
22,735 |
|
|
|
21,958 |
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity |
|
$ |
22,825 |
|
|
$ |
22,327 |
|
|
|
|
|
|
|
|
|
|
CONDENSED STATEMENTS OF OPERATIONS
In thousands)
|
|
|
|
|
|
|
|
|
|
|
Years Ended September 30, |
|
|
|
2013 |
|
|
2012 |
|
Interest income |
|
$ |
122 |
|
|
$ |
132 |
|
Equity in income (loss) of Bank |
|
|
873 |
|
|
|
(146 |
) |
Provision for loan losses |
|
|
72 |
|
|
|
91 |
|
Other non-interest expenses |
|
|
92 |
|
|
|
658 |
|
|
|
|
|
|
|
|
|
|
Income (loss) before income tax (benefit) |
|
|
831 |
|
|
|
(763 |
) |
Income tax expense (benefit) |
|
|
(108 |
) |
|
|
(124 |
) |
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
939 |
|
|
|
(639 |
) |
Preferred stock dividends |
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to common shareholders |
|
$ |
906 |
|
|
$ |
(639 |
) |
|
|
|
|
|
|
|
|
|
55
CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
Years Ended September 30, |
|
|
|
2013 |
|
|
2012 |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
939 |
|
|
$ |
(639 |
) |
Equity in (income) loss of Bank |
|
|
(873 |
) |
|
|
146 |
|
Provision for loan losses |
|
|
72 |
|
|
|
91 |
|
Decrease in other assets |
|
|
91 |
|
|
|
26 |
|
Increase (decrease) in other liabilities |
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(279 |
) |
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335 |
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|
|
|
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|
|
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|
Net cash (used by) operating activities |
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(50 |
) |
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(41 |
) |
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Cash flows from investing activities: |
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Capital contribution to Bank |
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(1,455 |
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Net decrease in loan receivable |
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569 |
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3 |
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Decrease in ESOP loan receivable |
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21 |
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19 |
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Net cash (used by) provided by investing activities |
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(865 |
) |
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22 |
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Cash flows from financing activities |
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Proceeds of sale of preferred stock |
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1,455 |
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Dividend on preferred stock |
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(33 |
) |
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Net cash provided by financing activities |
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1,422 |
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|
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Net increase (decrease) in cash and cash equivalents |
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507 |
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(19 |
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Cash and cash equivalentsbeginning of period |
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337 |
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356 |
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Cash and cash equivalentsend of period |
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$ |
844 |
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$ |
337 |
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Note 18Transactions with Officers and Directors
The Bank has had, and may be expected to have in the future, banking transactions in the ordinary course of business with its officers, directors, and their
immediate families (commonly referred to as related parties), on the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with non-related parties. These persons were indebted
to the bank for loans totaling $3.0 million and $837,000 at September 30, 2013 and 2012, respectively. During the year ended September 30, 2013, $3.5 million of new loans were made to and $1.3 million of repayments were made by related
parties. During the year ended September 30, 2012, $176,000 of new loans were made and $344,000 of repayments were made.
Note 19Subsequent
Events
On December 20, 2013, the Company announced its decision to not further extend the termination date of a previously announced Agreement
and Plan of Merger dated as of August 10, 2012 by and between the Company and Customers Bancorp, Inc. (Customers), as amended effective as of April 22, 2013 (Merger Agreement). The Merger Agreement had called for a
termination date by December 31, 2013 if the contemplated merger of the Company and Customers is not completed by that time. Customers would have had a right to extend the termination date to a later date of March 31, 2014 if certain
conditions were satisfied, including that Customers shall have made all regulatory filings that are required to obtain regulatory approval for the purchase of the Company and CMS by December 31, 2013. To date, this condition has not been
satisfied and it is the Companys understanding that Customers will not satisfy this condition. As the Company had informed Customers, the decision of the Companys Board of Directors to not further extend the Merger Agreement beyond the
December 31, 2013 termination date was due to delays in the receipt of regulatory approvals by Customers to purchase the Company and CMS Bank. Due to the continued delay and uncertainty in the timing of receipt of regulatory approvals by
Customers, the Company decided that not further extending the Merger Agreement, which allows the Merger Agreement to be terminated, is in the Companys best interest.
56
On December 20, 2013, Customers issued a press release announcing termination of the Merger Agreement. The
press release indicated that the Merger Agreement had been terminated by mutual consent of the parties, thereby releasing Customers of its obligation to pay a One Million Dollar ($1,000,000) termination fee to the Company that the parties had
specifically previously agreed to if the merger cannot close due to Customers failure to receive the required regulatory approvals.
The
Companys position is that it did not waive its right to the termination fee, nor did it agree to any terms of termination with Customers, and views Customers attempt to evade its obligation to pay the termination fee as being an
intentional breach of the Merger Agreement and demonstrates an absence of good faith. The Company has indicated it will proceed to terminate the Merger Agreement in its normal course on December 31, 2013, pursuant to the terms of the Merger
Agreement, and will seek to enforce payment of the termination fee from Customers.
57
ANNUAL MEETING OF SHAREHOLDERS OF
CMS BANCORP, INC.
To
Be Held on Wednesday, September 24, 2014
GO GREEN
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e-Consent makes it easy to go paperless. With e-Consent, you can quickly access your proxy material, statements and other eligible documents online, while reducing costs, clutter and paper waste. Enroll today via www.amstock.com to
enjoy online access. |
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NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL:
The Notice of Meeting, Proxy Statement, Proxy Card
are available at http://www.astproxyportal.com/ast/15310/
Please sign, date and mail
your
proxy card in the
envelope provided as soon
as possible.
¯ Please detach along perforated line and mail in the envelope provided. ¯
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¢ |
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20430300000000001000 1 |
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092414 |
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The Board of Directors unanimously recommends a vote
FOR the nominees named in Item 1, a vote FOR the proposal in Item 2, and a vote FOR the proposal in
Item 3. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN
HERE x |
1. Election of the four Directors
for a term of office to expire in 2017 or until their successors are elected and qualified. |
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FOR |
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AGAINST |
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ABSTAIN |
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2. |
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Ratify the appointment of BDO USA, LLP as CMS Bancorp, Inc.s independent registered public accounting firm for the fiscal year ending September 30, 2014. |
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NOMINEES: |
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FOR |
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AGAINST |
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ABSTAIN |
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FOR ALL NOMINEES
WITHHOLD AUTHORITY FOR ALL NOMINEES
FOR ALL EXCEPT
(See instructions below) |
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¡ William M. Mooney, Jr.
¡
Gerry Ryan ¡ Robert P. Weisz
¡
William V. Cuddy, Jr. |
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3. |
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Approval of an advisory proposal regarding the compensation paid to CMS Bancorps named executive officers (the Say on Pay proposal). |
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The undersigned hereby acknowledges receipt of the Notice of Annual Meeting of Shareholders and the Proxy Statement for the Annual Meeting of Shareholders dated August 18,
2014. |
INSTRUCTIONS: To withhold authority to vote for any individual nominee(s), mark FOR ALL
EXCEPT and fill in the circle next to each nominee you wish to withhold, as shown here: l |
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I Will Attend Annual Meeting. |
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To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on
the account may not be submitted via this method. |
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Signature of Shareholder |
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Date: |
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Signature of Shareholder |
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Date: |
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¢ |
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Note: |
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Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the
signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. |
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0 ¢
CMS BANCORP, INC.
This Proxy is solicited on behalf of the Board of Directors of CMS Bancorp, Inc.
for the Annual Meeting of Shareholders to be held on September 24, 2014.
The undersigned shareholder of CMS Bancorp, Inc. hereby appoints William P. Harrington and Susan A. Massaro, and each of them, with full
powers of substitution, to represent and to vote as proxy, as designated, all shares of common stock of CMS Bancorp, Inc. held of record by the undersigned on August 15, 2014, at the Annual Meeting of Shareholders (the Annual
Meeting) to be held on September 24, 2014 at 3:00 p.m., Eastern time, at the Crowne Plaza Hotel, located at 66 Hale Avenue, White Plains, New York 10601, or at any adjournment or postponement thereof, upon the matters described in the
accompanying Notice of the Annual Meeting of Shareholders and Proxy Statement, dated August 18, 2014, and upon such other matters as may properly come before the Annual Meeting. The undersigned hereby revokes all prior proxies.
This Proxy, when properly executed, will be voted in the manner directed herein by the undersigned shareholder. If no direction is given,
this Proxy will be voted FOR the election of all nominees listed in Item 1, FOR the proposal listed in Item 2, and FOR the proposal listed in Item 3.
PLEASE MARK, SIGN AND DATE THIS PROXY ON THE REVERSE SIDE AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
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