UNITED STATES SECURITIES AND EXCHANGE COMMISSION
FORM 10-K
| x |
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
|
| |||||
| For the fiscal year ended: December 31, 2002 | |||||
|
| |||||
| o |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
|
| |||||
| For the transition period from ____________ to ______________ | |||||
|
|
|
| |||
| Commission file number 0-19345 | |||||
|
|
|
| |||
| ESB FINANCIAL CORPORATION | |||||
| | |||||
| (Exact name of registrant as specified in its charter) | |||||
|
| |||||
| Pennsylvania |
|
25-1659846 | |||
| |
|
| |||
| (State or other jurisdiction of incorporation or organization) |
|
(I.R.S. Employer Identification No.) | |||
|
|
|
| |||
| 600 Lawrence Avenue, Ellwood City, PA |
|
16117 | |||
| |
|
| |||
| (Address of principal executive offices) |
|
(Zip Code) | |||
|
|
|
| |||
| Registrant’s telephone number, including area code: (724) 758-5584 | |||||
|
| |||||
| Securities registered pursuant to Section 12(b) of the Act: None | |||||
|
| |||||
| Securities registered pursuant to Section 12(g) of the Act: | |||||
|
| |||||
| Common Stock, par value $.01 per share | |||||
| | |||||
| (Title of class) | |||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such report(s)), and (2) has been subject to such filing requirements for the past 90 days. x
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2.
| Yes o |
No x |
As of June 28, 2002, the aggregate value of the 5,907,238 shares of Common Stock of the Registrant outstanding on such date, which excludes 1,141,481 shares held by all directors and officers of the Registrant as a group, was approximately $72.5 million. This amount is based on the closing sales price of $12.27 per share of the Registrant’s Common Stock on June 28, 2002.
Number of shares of Common Stock outstanding as of February 28, 2003: 8,467,693
DOCUMENTS INCORPORATED BY REFERENCE
| Documents |
|
Where Incorporated |
| |
|
|
| 1. Portions of the 2002 Annual Report to Stockholders. |
|
Part II |
|
|
|
|
| 2. Portions of Proxy Statement for the April 16, 2003 Annual Meeting of Stockholders |
|
Parts II and III |
ESB FINANCIAL CORPORATION
TABLE OF CONTENTS
| Item 1. |
1 | |
|
|
|
|
| Item 2. |
27 | |
|
|
|
|
| Item 3. |
28 | |
|
|
|
|
| Item 4. |
28 | |
|
|
|
|
|
|
| |
| Item 5. |
Market for Registrant’s Common Equity and Related Stockholder Matters |
29 |
|
|
|
|
| Item 6. |
29 | |
|
|
|
|
| Item 7. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
29 |
|
|
|
|
| Item7A. |
29 | |
|
|
|
|
| Item 8. |
30 | |
|
|
|
|
| Item 9. |
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
30 |
|
|
|
|
|
|
|
|
| Item 10. |
31 | |
|
|
|
|
| Item 11. |
31 | |
|
|
|
|
| Item 12. |
Security Ownership of Certain Beneficial Owners and Management |
31 |
|
|
|
|
| Item 13. |
31 | |
|
|
|
|
| Item 14. |
31 | |
|
|
|
|
| Item 15. |
Exhibits, Financial Statements, Schedules, and Reports on Form 8-K |
32 |
|
|
|
|
| 34 | ||
General
ESB Financial Corporation (the Company) is a Pennsylvania corporation and thrift holding company that provides a wide range of retail and commercial financial products and services to customers in Western Pennsylvania through its wholly-owned subsidiary bank, ESB Bank, F.S.B. (ESB or the Bank). The Company is also the parent company of PennFirst Financial Services, Inc., a Delaware corporation engaged in the management of certain investment activities on behalf of the Company, PennFirst Capital Trust I (the Trust), a Delaware statutory business trust established in 1997 to facilitate the issuance of trust preferred securities to the public by the Company, and THF, Inc., a Pennsylvania corporation established to provide residential and commercial loan closing services and issue title insurance policies.
As of December 31, 2002, the Company had consolidated total assets of $1.3 billion and stockholders’ equity of $96.4 million. For the year ended December 31, 2002, the Company realized consolidated net income and diluted net income per share of $9.0 million and $1.03, respectively.
ESB is a federally chartered, Federal Deposit Insurance Corporation (FDIC) insured, stock savings bank, which conducts business through 17 offices in Allegheny, Beaver, Butler and Lawrence counties, Pennsylvania. ESB operates three wholly-owned subsidiaries: (i) AMSCO, Inc., which engages in the management of certain real estate development partnerships on behalf of the Company, (ii) ESB Financial Services, Inc., a Delaware corporation which holds loans and other investments and (iii) PennFirst Financial Advisory Services, Inc., which entered into a strategic alliance with Raymond James Financial Services, Inc., to make available a vast array of nondeposit investment products and financial advisory services for individuals and corporations served by ESB Bank.
The Bank is a financial intermediary whose principal business consists of attracting deposits from the general public and investing such deposits in real estate loans secured by liens on residential and commercial properties, consumer loans, commercial business loans, securities and interest-earning deposits. In addition, the Company utilizes borrowed funds, primarily advances from the Federal Home Loan Bank (FHLB) of Pittsburgh and repurchase agreements, to fund the Company’s investing activities. The Company invests in securities issued by the U.S. government and agencies and other investments permitted by federal law and regulations.
The Company and ESB are subject to examination and comprehensive regulation by the Office of Thrift Supervision (OTS), the chartering authority of the Bank, and the FDIC as the administrator of the Savings Association Insurance Fund (SAIF). Additionally, the Company is subject to the various reporting and filing requirements of the Securities and Exchange Commission (SEC). Customer deposits with the Bank are insured to the maximum extent provided by law through the SAIF. The Bank is a member of the FHLB of Pittsburgh, which is one of the twelve regional banks comprising the FHLB system. The Bank is further subject to regulations of the Board of Governors of the Federal Reserve System (Federal Reserve Board), which governs the reserves required to be maintained against deposits and certain other matters.
Competition
The Company and its subsidiaries face substantial competition for both loans and deposits. Numerous financial institutions, some larger and several of which are similar in size and resources to the Company, are competitors of the Company to varying degrees. Competition for loans comes principally from commercial banks, credit unions, mortgage-banking companies and savings banks. The Company competes for loans principally through the interest rates and loan fees that are charged and the efficiency and quality of services provided to borrowers, sellers, real estate brokers and attorneys. The most direct competition for deposits has historically come from commercial banks, credit unions and other depository institutions. The Company faces additional competition for deposits from securities brokers, mutual funds and insurance companies. The Company competes for deposits through pricing, service, the branch network and by offering a wide variety of products and services. Competition may increase as a result of reduced restrictions on the interstate operations of financial institutions and legislation authorizing the acquisition of savings institutions by bank holding companies.
Market Area
The Company’s primary market area includes Allegheny, Butler, Beaver and Lawrence counties in Western Pennsylvania. The Company’s business is conducted through its corporate office located in Ellwood City, PA, and the Bank’s 17 offices.
1
Substantially all of the Bank’s deposits are received from residents of its principal market area and most loans are secured by properties in Western Pennsylvania.
Lending Activities
General. As of December 31, 2002, the Company’s net loans receivable amounted to $339.3 million or 25.7% of the Company’s total assets. Loans secured by real estate amounted to $278.4 million or 78.3% of total loans receivable. Consumer loans and commercial business loans amounted to $61.1 million or 17.2% and $16.1 million or 4.5%, respectively, of the Company’s total loan portfolio.
The Company’s lending activities are conducted through the Bank. The Company’s loan origination activities have primarily involved the origination of single-family residential loans and, to a lesser extent, multi-family residential mortgage loans, primarily secured by properties in the Company’s market area. In addition, the Company has in recent years increased its involvement in the origination of other types of loans within its primary market area. These loans include construction loans, commercial real estate loans and a variety of consumer loans. Loans originated in the Company’s market area, both fixed and adjustable rate, are made primarily for retention in the Company’s own portfolio. The Company estimates that approximately 95% of its mortgage loans are secured by properties located in Western Pennsylvania. Moreover, substantially all of the Company’s non-mortgage loan portfolio consists of loans made to residents and businesses located in the Company’s primary market area.
The following table sets forth the composition of the Company’s portfolio of loans receivable in dollar amounts and in percentages as of December 31 for the years indicated:
| (Dollar amounts in thousands) |
|
2002 |
|
2001 |
|
2000 |
|
1999 |
|
1998 |
| ||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
|
|
|
Dollar |
|
% |
|
Dollar |
|
% |
|
Dollar |
|
% |
|
Dollar |
|
% |
|
Dollar |
|
% |
| ||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
| Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
| |
Residential - single family |
|
$ |
154,438 |
|
|
43.4 |
% |
$ |
335,838 |
|
|
62.1 |
% |
$ |
333,726 |
|
|
61.8 |
% |
$ |
249,801 |
|
|
60.2 |
% |
$ |
222,831 |
|
|
58.8 |
% | |
| |
Residential - multi family |
|
|
31,661 |
|
|
8.9 |
% |
|
29,154 |
|
|
5.4 |
% |
|
26,998 |
|
|
5.0 |
% |
|
15,035 |
|
|
3.6 |
% |
|
11,206 |
|
|
3.0 |
% | |
| |
Commercial |
|
|
51,495 |
|
|
14.5 |
% |
|
48,869 |
|
|
9.0 |
% |
|
48,633 |
|
|
9.0 |
% |
|
39,171 |
|
|
9.4 |
% |
|
32,300 |
|
|
8.5 |
% | |
| |
Construction |
|
|
40,778 |
|
|
11.5 |
% |
|
46,072 |
|
|
8.5 |
% |
|
51,523 |
|
|
9.5 |
% |
|
42,935 |
|
|
10.4 |
% |
|
41,215 |
|
|
10.9 |
% | |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
| |
Total real estate loans |
|
|
278,372 |
|
|
78.3 |
% |
|
459,933 |
|
|
85.1 |
% |
|
460,880 |
|
|
85.4 |
% |
|
346,942 |
|
|
83.6 |
% |
|
307,552 |
|
|
81.2 |
% | |
| Other loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
| |
Consumer loans |
|
|
61,087 |
|
|
17.2 |
% |
|
65,815 |
|
|
12.2 |
% |
|
68,099 |
|
|
12.6 |
% |
|
59,351 |
|
|
14.3 |
% |
|
56,897 |
|
|
15.0 |
% | |
| |
Commercial business loans |
|
|
16,080 |
|
|
4.5 |
% |
|
15,264 |
|
|
2.8 |
% |
|
10,692 |
|
|
2.0 |
% |
|
8,884 |
|
|
2.1 |
% |
|
14,216 |
|
|
3.8 |
% | |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| |
Total other loans |
|
|
77,167 |
|
|
21.7 |
% |
|
81,079 |
|
|
15.0 |
% |
|
78,791 |
|
|
14.6 |
% |
|
68,235 |
|
|
16.4 |
% |
|
71,113 |
|
|
18.8 |
% | |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Total loans receivable |
|
|
355,539 |
|
|
100.0 |
% |
|
541,012 |
|
|
100.0 |
% |
|
539,671 |
|
|
100.0 |
% |
|
415,177 |
|
|
100.0 |
% |
|
378,665 |
|
|
100.0 |
% | ||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Less: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
| |
Allowance for loan losses |
|
|
4,237 |
|
|
|
|
|
5,147 |
|
|
|
|
|
4,981 |
|
|
|
|
|
4,823 |
|
|
|
|
|
4,815 |
|
|
|
| |
| |
Net deferred fees/discounts |
|
|
88 |
|
|
|
|
|
483 |
|
|
|
|
|
1,380 |
|
|
|
|
|
858 |
|
|
|
|
|
785 |
|
|
|
| |
| |
Loans in process |
|
|
11,890 |
|
|
|
|
|
14,309 |
|
|
|
|
|
21,557 |
|
|
|
|
|
15,732 |
|
|
|
|
|
15,008 |
|
|
|
| |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Net loans receivable |
|
$ |
339,324 |
|
|
|
|
$ |
521,073 |
|
|
|
|
$ |
511,753 |
|
|
|
|
$ |
393,764 |
|
|
|
|
$ |
358,057 |
|
|
|
| ||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
2
The following table sets forth the scheduled contractual principal repayments of loans in the Company’s portfolio at December 31, 2002. Demand loans having no stated schedule of repayment and no stated maturity are reported as due within one year:
| (Dollar amounts in thousands) |
|
Due in one |
|
Due from one |
|
Due from five |
|
Due after |
|
Total |
| |||||
| |
|
|
|
|
|
|
|
|
|
|
| |||||
| Real estate loans |
|
$ |
20,779 |
|
$ |
53,012 |
|
$ |
52,208 |
|
$ |
152,373 |
|
$ |
278,372 |
|
| Consumer loans |
|
|
10,700 |
|
|
28,729 |
|
|
17,451 |
|
|
4,207 |
|
|
61,087 |
|
| Commercial business loans |
|
|
13,032 |
|
|
2,657 |
|
|
303 |
|
|
88 |
|
|
16,080 |
|
| |
|
|
|
|
|
|
||||||||||