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1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
[X] Annual report pursuant to Section 13 or 15 (d) of the Securities Exchange
Act of 1934
For the fiscal year ended December 31, 2000
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Commission file number 000-21553
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METROPOLITAN FINANCIAL CORP.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Ohio 34-1109469
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(State or Other Jurisdiction of Incorporation (I.R.S. Employer Identification No.)
or Organization)
22901 Mill Creek Blvd. Highland Hills, Ohio 44122
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(216) 206-6000
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(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12 (b) of the Act: NONE
Securities registered pursuant to Section 12(g)of the Act:
Common Stock, without par value
-------------------------------
(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 reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No _
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, will not be contained, to the
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. [ ]
The aggregated market value of voting stock held by nonaffiliates of the
Registrant as of March 9, 2001 was $4,859,000.
As of March 9, 2001, there were 8,106,459 shares of the Registrant's Common
Stock issued and outstanding.
Documents incorporated by reference:
Portions of the 2000 Annual Report - Parts I and II
Portions of the Proxy Statement for the 2001 Annual Meeting - Part III
2
METROPOLITAN FINANCIAL CORP.
2000 FORM 10-K
TABLE OF CONTENTS
PART I
Item 1. Business............................................ 1
Item 2. Properties.......................................... 21
Item 3. Legal Proceedings................................... 22
Item 4. Submission of Matters to a Vote of Security
Holders................................................... 22
PART II
Item 5. Market For Registrant's Common Equity and Related
Stockholder Matters....................................... 24
Item 6. Selected Financial Data............................. 25
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations....................... 27
Item 7A. Quantitative and Qualitative Disclosures about
Market Risk............................................... 39
Item 8. Financial Statements and Supplementary Data
Report of Independent Auditors...................... 43
Consolidated Financial Statements................... 44
Notes to Consolidated Financial Statements.......... 48
Item 9. Changes In and Disagreements With Accountants on
Accounting and Financial Disclosure....................... 73
PART III
Item 10. Directors and Executive Officers of the
Registrant................................................ 73
Item 11. Executive Compensation............................. 73
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................ 73
Item 13. Certain Relationships and Related Transactions..... 73
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K....................................... 73
3
PART I
ITEM 1. BUSINESS
GENERAL
Metropolitan Financial Corp. ("Metropolitan" or the "Corporation") is a
savings and loan holding company that was incorporated in 1972. We are engaged
in the principal business of originating and purchasing mortgage and other loans
through our wholly-owned subsidiary, Metropolitan Bank and Trust Company ("the
Bank"). The Bank is an Ohio chartered stock savings association established in
1958. We obtain funds for lending and other investment activities primarily from
savings deposits, wholesale borrowings, principal repayments on loans, and the
sale of loans. The activities of Metropolitan at the holding company level are
limited and impact the results of operations primarily through interest expense
on a consolidated basis. Unless otherwise noted, all of the activities discussed
below are of the Bank. Our executive office is located at 22901 Mill Creek
Blvd., Highland Hills, Ohio 44122.
Robert M. Kaye of Rumson, New Jersey, is Metropolitan's current majority
shareholder. Mr. Kaye acquired Metropolitan in 1987 and remained sole
shareholder until the initial public offering of Metropolitan's common stock in
October 1996. Currently, Mr. Kaye owns 74.8% of Metropolitan's outstanding
common stock. Mr. Kaye has the ability to decide the outcome of matters
submitted to the shareholders for approval, the ability to elect or remove all
the directors of the Corporation and has ultimate control of the Corporation and
the Bank. In addition, Mr. Kaye is Chairman of the Board and Chief Executive
Officer of the Corporation and the Bank.
At December 31, 2000, we operated 23 full service retail sales offices in
Northeastern Ohio. As of December 31, 2000, we also maintained 10 real estate
loan production offices. As a secondary line of business, we service mortgage
loans for various investors.
At December 31, 2000, we had total assets of $1.7 billion, total deposits
of $1.1 billion and shareholders' equity of $49.5 million. The Federal Deposit
Insurance Corporation insures the deposits of the Bank up to applicable limits.
At December 31, 2000, we directly or indirectly owned the following
wholly-owned subsidiaries:
ACTIVE SUBSIDIARIES INACTIVE SUBSIDIARIES
------------------- ---------------------
- - Metropolitan Bank and Trust Company - MetroCapital Corporation
- - Kimberly Construction Company - Metropolitan Securities Corporation
- - Metropolitan Capital Trust I - Metropolitan II Corporation
- - Metropolitan Capital Trust II
- - Metropolitan I Corporation
- - Metropolitan Savings Service
Corporation
- - Progressive Land Title Agency, Inc.
The Bank changed its name from Metropolitan Savings Bank of Cleveland to
Metropolitan Bank and Trust Company in April 1998. We formed Metropolitan
Capital Trust I during 1998 to facilitate the issuance of cumulative trust
preferred securities. We formed Metropolitan Capital Trust II in 1999 to issue a
second series of trust preferred securities. Metropolitan I Corporation was
formed in 2000 as a holding company for its majority owned subsidiary,
Progressive Land Title Agency, Inc. Kimberly Construction Company's sole
business function is to serve as a principal party to various construction
contracts entered into in connection with the construction of bank premises.
Metropolitan Savings Service Corporation currently holds and manages real estate
which the Bank has foreclosed upon.
All required disclosures as part of Guide 3 are either included in this
document in Management's Discussion and Analysis of Financial Condition and
Results of Operations or in the Five Year Summary of Selected Data.
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LENDING ACTIVITIES
General. Our primary lending activity is the origination and purchase of
mortgage loans secured by multifamily and commercial real estate. We also
originate one- to four-family residential and construction loans, and to a
lesser extent, consumer and business loans.
Loan Portfolio Composition. The following table presents the composition of
our loan portfolio, including loans held for sale, in dollar amounts and as a
percentage of all loans before deductions for loans in process, deferred fees
and discounts and allowance for losses on loans.
DECEMBER 31,
-----------------------------------------------------------------------------
2000 1999 1998 1997
-------------------- -------------------- -------------------- --------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT
---------- ------- ---------- ------- ---------- ------- --------
(DOLLARS IN THOUSANDS)
REAL ESTATE LOANS:
One- to four-family.... $ 288,352 21.1% $ 295,061 23.5% $ 189,182 17.4% $146,685
Multifamily............ 273,358 20.0 292,015 23.3 337,412 31.1 194,450
Commercial............. 254,824 18.6 247,455 19.7 228,825 21.1 166,593
Construction and
land................. 193,464 14.1 156,112 12.4 137,023 12.6 116,829
Held for sale.......... 51,382 3.8 5,866 0.5 9,416 0.9 14,230
---------- ----- ---------- ----- ---------- ----- --------
Total real estate
loans.............. 1,061,380 77.6 996,509 79.4 901,858 83.1 638,787
Consumer Loans........... 163,019 11.9 143,585 11.4 96,115 8.8 68,590
Consumer Held for Sale... -- -- 852 0.1 5,601 0.5 --
Business and Other
Loans.................. 143,329 10.5 114,333 9.1 82,317 7.6 57,496
---------- ----- ---------- ----- ---------- ----- --------
Total loans.......... $1,367,728 100.0% 1,255,279 100.0% 1,085,891 100.0% 764,873
===== ===== =====
LESS:
Loans in process......... 72,156 56,212 46,001 46,833
Deferred fees, net....... 2,191 4,548 5,013 4,108
Discount (premium) on
loans, net............. (7,393) (7,178) (5,320) 425
Allowance for losses on
loans.................. 13,951 11,025 6,909 5,622
---------- ---------- ---------- --------
TOTAL LOANS
RECEIVABLE, NET.... $1,286,823 $1,190,672 $1,033,288 $707,885
========== ========== ========== ========
DECEMBER 31,
----------------------------
1997 1996
------- ------------------
PERCENT AMOUNT PERCENT
------- -------- -------
(DOLLARS IN THOUSANDS)
REAL ESTATE LOANS:
One- to four-family.... 19.2% $114,758 16.8%
Multifamily............ 25.4 276,544 40.3
Commercial............. 21.8 135,635 19.8
Construction and
land................. 15.3 71,697 10.5
Held for sale.......... 1.8 8,973 1.3
----- -------- -----
Total real estate
loans.............. 83.5 607,607 88.7
Consumer Loans........... 9.0 54,180 7.9
Consumer Held for Sale... -- -- --
Business and Other
Loans.................. 7.5 23,508 3.4
----- -------- -----
Total loans.......... 100.0% 685,295 100.0%
===== =====
LESS:
Loans in process......... 31,758
Deferred fees, net....... 2,336
Discount (premium) on
loans, net............. 560
Allowance for losses on
loans.................. 4,175
--------
TOTAL LOANS
RECEIVABLE, NET.... $646,466
========
We had commitments to originate or purchase fixed and adjustable rate loans
of $78.8 million and $98.4 million, respectively, at December 31, 2000. In
addition, we had firm commitments to sell loans of $30.8 million at December 31,
2000.
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The following table presents the composition of our loan portfolio,
including loans held for sale, in dollar amounts and as a percentage of all
loans before deductions for loans in process, deferred fees and discounts and
allowance for losses on loans by fixed and adjustable rates.
DECEMBER 31,
-----------------------------------------------------------------------------
2000 1999 1998 1997
-------------------- -------------------- -------------------- --------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT
---------- ------- ---------- ------- ---------- ------- --------
(DOLLARS IN THOUSANDS)
FIXED RATE LOANS:
Real estate:
One- to four-family... $ 112,535 8.2% $ 112,627 9.0% $ 76,566 7.1% $ 59,058
Multifamily........... 163,726 12.0 147,820 11.8 194,521 17.9 60,136
Commercial............ 106,771 7.8 129,865 10.3 147,860 13.6 52,390
Construction and
land................ 10,411 0.8 16,394 1.3 27,849 2.6 20,854
Held for sale......... 39,903 2.9 5,866 0.5 8,920 0.8 6,294
---------- ----- ---------- ----- ---------- ----- --------
Total fixed rate
real estate
loans............. 433,346 31.7 412,572 32.9 455,716 42.0 198,732
Consumer................ 149,957 11.0 137,678 10.9 93,689 8.6 61,307
Consumer held for
sale.................. -- 852 0.1 5,601 0.5 --
Business and other...... 54,576 4.0 46,849 3.7 25,526 2.4 19,575
---------- ----- ---------- ----- ---------- ----- --------
Total fixed rate
loans............. 637,879 46.7% 597,951 47.6% 580,532 53.5% 279,614
---------- ===== ---------- ===== ---------- ===== --------
ADJUSTABLE RATE LOANS:
Real estate:
One- to four-family... 175,817 12.9% 182,434 14.5% 112,616 10.4% 87,627
Multifamily........... 109,632 8.0 144,195 11.5 142,891 13.2 134,314
Commercial............ 148,053 10.8 117,590 9.4 80,965 7.5 114,203
Construction and
land................ 183,053 13.3 139,718 11.1 109,174 10.0 95,975
Held for sale......... 11,479 0.8 -- -- 496 0.0 7,936
---------- ----- ---------- ----- ---------- ----- --------
Total adjustable
rate real estate
loans............. 628,034 45.8 583,937 46.5 446,142 41.1 440,055
Consumer................ 13,062 1.0 5,907 0.5 2,426 0.2 7,283
Business and other...... 88,753 6.5 67,484 5.4 56,791 5.2 37,921
---------- ----- ---------- ----- ---------- ----- --------
Total adjustable
rate loans........ 729,849 53.3% 657,328 52.4% 505,359 46.5% 485,259
---------- ===== ---------- ===== ---------- ===== --------
LESS:
Loans in process........ 72,156 56,212 46,001 46,833
Deferred fees, net...... 2,191 4,548 5,013 4,108
Discount (premium) on
loans, net............ (7,393) (7,178) (5,320) 425
Allowance for losses on
loans................. 13,951 11,025 6,909 5,622
---------- ---------- ---------- --------
TOTAL LOANS
RECEIVABLE, NET... $1,286,823 $1,190,672 $1,033,288 $707,885
========== ========== ========== ========
DECEMBER 31,
----------------------------
1997 1996
------- ------------------
PERCENT AMOUNT PERCENT
------- -------- -------
(DOLLARS IN THOUSANDS)
FIXED RATE LOANS:
Real estate:
One- to four-family... 7.7% $ 41,436 6.1%
Multifamily........... 7.9 88,529 12.9
Commercial............ 6.9 34,726 5.1
Construction and
land................ 2.7 392 0.0
Held for sale......... 0.8 2,531 0.4
----- -------- -----
Total fixed rate
real estate
loans............. 26.0 167,614 24.5
Consumer................ 8.0 46,725 6.8
Consumer held for
sale.................. -- -- --
Business and other...... 2.6 5,650 0.8
----- -------- -----
Total fixed rate
loans............. 36.6% 219,989 32.1%
===== -------- =====
ADJUSTABLE RATE LOANS:
Real estate:
One- to four-family... 11.5% 73,322 10.7%
Multifamily........... 17.6 188,015 27.5
Commercial............ 14.9 100,909 14.7
Construction and
land................ 12.5 71,305 10.4
Held for sale......... 1.0 6,442 0.9
----- -------- -----
Total adjustable
rate real estate
loans............. 57.5 439,993 64.2
Consumer................ 0.9 7,455 1.1
Business and other...... 5.0 17,858 2.6
----- -------- -----
Total adjustable
rate loans........ 63.4% 465,306 67.9%
===== -------- =====
LESS:
Loans in process........ 31,758
Deferred fees, net...... 2,336
Discount (premium) on
loans, net............ 560
Allowance for losses on
loans................. 4,175
--------
TOTAL LOANS
RECEIVABLE, NET... $646,466
========
The following table illustrates the contractual maturity of our loan
portfolio. The table shows loans that have adjustable or renegotiable interest
rates as maturing in the period during which the contract is due. The table does
not reflect the effects of possible prepayments, enforcement of due-on-sale
clauses, or amortization of premiums, discounts, or deferred loan fees. The
table includes demand loans, loans having no stated maturity and overdraft loans
in the due in one year or less category.
DUE AFTER
ONE YEAR
DUE IN ONE THROUGH DUE AFTER
YEAR OR LESS FIVE YEARS FIVE YEARS TOTAL
------------------- ------------------- ------------------- ---------------------
WEIGHTED WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE AVERAGE
AMOUNT RATE AMOUNT RATE AMOUNT RATE AMOUNT RATE
-------- -------- -------- -------- -------- -------- ---------- --------
(DOLLARS IN THOUSANDS)
REAL ESTATE:
One- to four-family................... $ 646 7.17% $ 9,148 7.50% $278,558 7.30% $ 288,352 7.31%
Multifamily........................... 8,035 9.16 38,190 8.77 227,133 8.32 273,358 8.40
Commercial............................ 14,863 9.05 33,614 8.02 206,347 8.40 254,824 8.39
Construction and land................. 153,664 9.66 34,726 10.00 5,074 8.51 193,464 9.71
CONSUMER................................ 1,331 11.56 16,702 8.89 144,986 10.60 163,019 10.43
BUSINESS................................ 31,658 9.73 45,768 9.01 65,903 9.92 143,329 9.59
-------- -------- -------- ----------
Total........................... $210,197 9.61% $178,148 8.88% $928,001 8.50% $1,316,346 8.73%
======== ======== ======== ==========
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The total amount of loans due after December 31, 2001 which have fixed
interest rates is $571.8 million. The total amount of loans due after that date
which have floating or adjustable rates is $534.3 million.
Multifamily Lending. Historically, our greatest lending emphasis has been
on multifamily real estate loans. We originate these loans from our present
customers, contacts within the investor community, and referrals from mortgage
brokers. We have become known for originating multifamily loans in our primary
multifamily lending markets of Ohio, Kentucky, Michigan, Pennsylvania, and New
Jersey. Although we operate full service retail sales offices solely in
Northeast Ohio, we have loan origination offices throughout Ohio and Western
Pennsylvania. We have purchased multifamily loans from selected banks,
particularly in California.
At December 31, 2000, our multifamily loans totaled $273.4 million, with an
average loan size of approximately $479 thousand. Currently, we emphasize the
origination of multifamily fixed and adjustable loans with principal amounts of
$1.0 million to $6.0 million. Adjustable loans are priced on one-, three- or
five-year treasury rates with amortization periods of 25 or 30 years. Fixed rate
loans are priced at a spread over the ten-year treasury rate. The loans are
subject to a maximum individual aggregate interest rate adjustment as well as a
maximum aggregate adjustment over the life of the loan (generally 6%).
Typically, the loans have balloon maturities of 10 years. The maximum loan to
value ratio of multifamily residential loans is 75%.
Apartment buildings, generally with less than 75 residential units,
typically secure multifamily loan originations. Our underwriting process
includes a site evaluation and involves an evaluation of the borrower, whether
the borrower is an individual or a group of individuals acting as a separate
entity. We review the financial statements of each of the individual borrowers
and often obtain personal guarantees in an amount equal to the original
principal amount of the loan. In addition, we complete an analysis of debt
service coverage of the property. Debt service coverage requirements are
determined based upon the individual characteristics of each loan. Typically,
these requirements range from a ratio of 1.15:1 to 1.30:1.
At December 31, 2000, $202.5 million or 74.1% of our multifamily loan
portfolio represented loans we purchased from a variety of sources. Prior to
purchasing these loans, we use a similar underwriting process with substantially
the same standards as for our originated loans. In some cases, when we consider
the purchase of a portfolio with a considerable number of moderate balance
loans, we use an independent contract inspector for property inspections.
Multifamily real estate in Ohio secures 11.7% of our multifamily and commercial
real estate loan portfolio. Underlying real estate for the remaining multifamily
loans is located primarily in California, Pennsylvania, and New Jersey.
We recognize that multifamily loans generally involve a higher degree of
risk than one- to four-family residential real estate loans. Multifamily loans
involve more risk because they typically involve larger loan balances to single
borrowers or groups of related borrowers. The payment experience on these loans
typically depends upon the successful operation of the related real estate
project and is subject to risks such as excessive vacancy rates or inadequate
rental income levels. In order to manage and reduce these risks, we use strict
underwriting standards in our multifamily residential lending process.
Commercial Real Estate Lending. At December 31, 2000, permanent loans
secured by commercial real estate totaled $254.8 million or 18.6% of our total
portfolio. The average size of these loans was approximately $819 thousand. Of
this amount, we originated $149.2 million or 58.6% and $105.6 million or 41.4%
represented loans purchased from a variety of sources, predominantly other
financial institutions.
We purchase loans secured by commercial real estate generally when these
loans are secured by retail strip shopping centers or office buildings and the
loan yields and other terms meet our requirements. In the recent past, we began
to introduce more geographic diversity into the portfolio based on our desire to
acquire high credit quality loans. We believe a certain amount of geographic
diversity is important to reduce the risk of loss due to regional economic
downturns.
We purchase commercial real estate loans secured by strip shopping centers
and small office buildings to supplement our origination of commercial real
estate loans. As a result of referrals from customers and mortgage brokers, we
make loans on commercial real estate in many states, but predominantly in Ohio,
Pennsylvania, Northern Kentucky, Michigan and California.
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We recognize that commercial real estate loans generally involve a higher
degree of risk than the financing of one- to four-family residential real
estate. These loans typically involve larger loan balances to single borrowers
or groups of related borrowers. The payment experience on these loans is
typically dependent upon the successful operation of the related real estate
project and is subject to certain risks including excessive vacancy due to
tenant turnover and inadequate rental income levels. In addition, the
profitability of the business operating in the property may affect the
borrower's ability to make timely payments. In order to manage and reduce these
risks, we focus our commercial real estate lending on existing properties with a
record of satisfactory performance and target retail strip centers and office
buildings with multiple tenants.
The following table presents information as to the locations and types of
properties securing the multifamily and commercial real estate portfolio as of
December 31, 2000. As of that date, we had loans in 40 states. Properties
securing loans in 37 states are aggregated in the table because none of those
states exceed 5.0% of the outstanding principal balance of the total multifamily
and commercial real estate portfolio.
NUMBER
OF LOANS PERCENT PRINCIPAL PERCENT
-------- -------- --------- -------
(DOLLARS IN THOUSANDS)
OHIO:
Apartments....................................... 116 13.2% $ 61,803 11.7%
Office buildings................................. 34 3.9 24,148 4.6
Retail centers................................... 16 1.8 9,439 1.8
Other............................................ 25 2.8 23,294 4.4
--- ----- -------- -----
Total......................................... 191 21.7 118,683 22.5
--- ----- -------- -----
CALIFORNIA:
Apartments....................................... 233 26.4 124,193 23.5
Office buildings................................. 37 4.2 13,294 2.5
Retail centers................................... 60 6.8 32,510 6.2
Other............................................ 18 2.0 9,954 1.9
--- ----- -------- -----
Total......................................... 348 39.5 179,952 34.1
--- ----- -------- -----
PENNSYLVANIA:
Apartments....................................... 33 3.7 15,407 2.9
Office buildings................................. 15 1.7 37,773 7.2
Retail centers................................... 5 0.6 14,274 2.7
Other............................................ 2 0.2 2,426 0.5
--- ----- -------- -----
Total......................................... 55 6.2 69,880 13.2
--- ----- -------- -----
OTHER STATES:
Apartments....................................... 189 21.4% $ 71,955 13.6%
Office Buildings................................. 34 3.9 34,895 6.6
Retail centers................................... 36 4.1 27,256 5.2
Other............................................ 29 3.3 25,561 4.8
--- ----- -------- -----
Total......................................... 288 32.7 159,667 30.2
--- ----- -------- -----
882 100.0% $528,182 100.0%
=== ===== ======== =====
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8
The following table presents aggregate information as to the type of
security as of December 31, 2000:
AVERAGE
NUMBER BALANCE
OF LOANS PER LOAN PRINCIPAL PERCENT
-------- -------- --------- -------
(DOLLARS IN THOUSANDS)
Apartments......................................... 571 $ 479 $273,358 51.8%
Office buildings................................... 120 918 110,109 20.8
Retail centers..................................... 117 117 83,479 15.8
Other.............................................. 74 828 61,235 11.6
--- -------- -----
Total......................................... 882 $ 599 $528,182 100.0%
=== ======== =====
One- to Four-family Residential Lending. We originate our one- to
four-family residential loans through our full service retail sales offices,
commissioned loan officers, correspondent lenders, our telemarketing department,
and our residential loan origination offices in Ohio and Pennsylvania. We have
focused our one- to four-family residential lending efforts primarily on the
origination of loans secured by first mortgages on owner-occupied residences. As
of December 31, 2000, the one- to four-family residential mortgages totaled
$288.4 million or 21.1% of our loan portfolio.
We emphasize the origination of conventional loans suitable for sale in the
secondary market. In addition, we offer fixed rate end loan financing to
borrowers building homes with our approved construction loan builders. We retain
only a limited dollar amount of this fixed rate end loan financing in our
portfolio. Properties located in Northeastern Ohio secure substantially all of
the one- to four-family residential mortgage loans originated for retention in
our portfolio. At December 31, 2000, our fixed rate residential mortgage loan
portfolio totaled $112.5 million, or 8.2%, of our total loan portfolio.
We are presently originating three types of ARM products for our portfolio.
These products offer different features including the index upon which the
interest rate is based and the period for rate adjustment. We originate ARMs
with terms to maturity of up to 30 years. Borrowers are qualified based upon
secondary market requirements.
At December 31, 2000, $31.2 million, or 10.8% of our one- to four-family
residential loan portfolio represented loans we purchased from a variety of
sources. We use an underwriting process with substantially the same standards as
for our originated loans when purchasing these loans.
Construction Lending and Land Development. At December 31, 2000, we had
$193.5 million of construction and land development loans outstanding. We
originate construction loans on single family homes to local builders in our
primary lending market and to individual borrowers on owner-occupied properties.
We also make loans to builders for the purchase of fully-improved single family
lots and to developers for the purpose of developing land into single family
lots. Our primary market areas for construction lending are in Northeastern
Ohio, in the counties of Cuyahoga, Lake, Geauga, Summit, Medina, Portage, and
Lorain and the greater Columbus, Ohio market.
6
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The following table presents the number, amount, and type of properties
securing construction and land development loans at December 31, 2000:
NUMBER OF PRINCIPAL
LOANS BALANCE
---------- ----------
(DOLLARS IN THOUSANDS)
RESIDENTIAL CONSTRUCTION LOANS:
Owner-occupied............................................ 129 $ 29,918
Builder presold........................................... 42 9,075
Builder model homes....................................... 187 51,818
Builder lines of credit................................... 24 35,178
--- --------
Total residential construction loans................... 382 125,989
NONRESIDENTIAL CONSTRUCTION LOANS:
Multifamily............................................... 6 7,502
Commercial................................................ 4 5,873
--- --------
Total nonresidential construction loans................ 10 13,375
LAND LOANS.................................................. 26 4,747
Lot loans................................................. 74 16,843
Development loans......................................... 34 32,510
--- --------
Total.................................................. 526 $193,464
=== ========
The risk of loss on a construction loan largely depends upon the accuracy
of the initial estimate of the property's value upon completion of the project,
the estimated cost of the project, and proper control over disbursements during
construction. We review the borrower's financial position and require a personal
guarantee on all builder loans. We base all loans upon the appraised value of
the underlying collateral, as completed. Construction inspections are required
to support the percentage of completion during construction.
We establish a maximum loan to value ratio for each type of loan based upon
the contract price, cost estimate or appraised value, whichever is less. The
maximum loan to value ratio by type of construction loan is as follows:
- owner-occupied homes - 80%;
- builder presold homes - 80%;
- builder models or speculative homes - 75%;
- lot loans - 75%;
- development loans - 75% (development of single-family home lots for
resale to builders); and
- builder lines of credit - 75% (development of land for cluster or
condominium projects which will be part of builder line of credit).
All construction loans that we make to builders are for relatively short
terms (6 to 24 months) and are at an adjustable rate of interest. Owner-occupied
loans are generally fixed rate.
We offer builders lines of credit to build single family homes. We secure
all lines of credit by the homes that are built with the draws under such credit
agreements. Most of the homes built with the line of credit funds are presold
homes. We base draws upon the percentage of completion. At all times, we retain
enough funds to complete the home.
We also originate construction loans on multifamily and commercial real
estate projects where we intend to provide the financing once construction is
complete. We underwrite these loans in a manner similar to our originated and
purchased multifamily residential and commercial real estate loans described
above.
Consumer Lending. The underwriting standards we employ for consumer loans
include a determination of the applicant's payment history on other debts and an
assessment of the applicant's ability to meet existing
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obligations and payments on the proposed loan. Although creditworthiness of the
applicant is a primary consideration, the underwriting process also includes a
comparison of the value of the security, if any, in relation to the proposed
loan amount.
Consumer loans entail greater risk than residential mortgage loans,
particularly in the case of consumer loans which are unsecured or are secured by
rapidly depreciable assets, such as automobiles. At December 31, 2000, secured
loans comprised $143.0 million or 87.7% of the $163.0 million consumer loan
portfolio. However, even in the case of secured loans, repossessed collateral
for a defaulted consumer loan may not provide an adequate source of repayment of
the outstanding loan balance due to the higher likelihood of damage, loss or
depreciation. In addition, consumer loan collections depend upon the borrower's
continuing financial stability. The application of various federal and state
laws, including bankruptcy and insolvency laws, may limit the amount recovered
on such loans in the event of default.
In order to supplement the growth in the consumer loan portfolio, we have
purchased loans through correspondent lenders and bulk portfolios offered for
sale. At December 31, 2000, purchased consumer loans represented $94.7 million,
or 66.0% of the outstanding balance of consumer loans. Second mortgages on
one-to four-family homes, and first liens on automobiles, or manufactured
housing are the primary collateral types for these loans. In 1997, we acquired
two packages of subprime loans totaling $6.3 million. Subprime loans are loans
where the borrower's credit rating is below an A grade. In 1998, we acquired an
additional loan package of $5.0 million of subprime loans also secured by
manufactured housing. Total subprime loans were $7.8 million, or 4.8% of total
consumer loans at December 31, 2000.
At December 31, 2000, our credit card portfolio had an outstanding balance
of $6.7 million with $31.4 million in unused credit lines.
Business Lending. At December 31, 2000, we had $143.3 million of business
loans outstanding. Our business lending activities encompass loans with a
variety of purposes and security, including loans to finance accounts
receivable, inventory and equipment. Generally, our business lending has been
limited to borrowers headquartered, or doing business in, our retail market
area. These loans are generally adjustable interest rate loans at some margin
over the prime interest rate and some are guaranteed by the Small Business
Administration.
The following table sets forth information regarding the number and amount
of our business loans as of December 31, 2000:
OUTSTANDING
NUMBER TOTAL LOAN PRINCIPAL
OF LOANS COMMITMENT BALANCE
-------- ---------- -----------
(DOLLARS IN THOUSANDS)
LOANS SECURED BY:
Accounts receivable, inventory and equipment.............. 93 $ 11,385 $ 9,028
First lien on real estate................................. 83 65,274 61,070
Lien on real estate other than first lien................. 121 61,528 56,560
Specific equipment and machinery.......................... 24 2,916 1,714
Titled vehicles........................................... 14 471 248
Stocks and bonds.......................................... 6 15,471 6,667
Certificates of deposit................................... 12 2,260 1,966
UNSECURED LOANS............................................. 31 7,124 6,076
----- -------- --------
Total.................................................. 384 $166,429 $143,329
===== ======== ========
Business loans differ from residential mortgage loans. Residential mortgage
loans generally are made on the basis of the borrower's ability to make
repayment from his or her employment and other income and are secured by real
property whose value is easily ascertainable. Business loans are of higher risk
and typically are made on the basis of the borrower's ability to make repayment
from the cash flow of the borrower's business. As a result, the availability of
funds for the repayment of business loans may depend substantially upon the
success of the business. Furthermore, the collateral securing the loans may
depreciate over time, may be difficult to appraise, and may fluctuate in value
based on the success of the business. We work to reduce this risk by carefully
underwriting business loans.
8
11
SECONDARY MARKET ACTIVITIES
In addition to originating loans for our own portfolio, we participate in
secondary mortgage market activities by selling participations, whole loans, as
well as creating mortgage-backed securities, with FannieMae, FreddieMac, and
other entities. Secondary market sales allow us to make loans during periods
when deposit flows decline, or are not otherwise available, and at times when
customers prefer loans with long-term fixed interest rates which we choose not
to hold in our own portfolio. While our primary focus in mortgage banking
operations is to sell fixed rate one- to four-family residential mortgage loans,
we also sell adjustable one- to four-family residential mortgage loans.
The secondary market for mortgage loans is primarily comprised of
institutional investors who purchase loans meeting certain underwriting
specifications with respect to loan-to-value ratios, maturities and yields.
Subject to market conditions, we tailor some of our real estate loan programs to
meet the specifications of FreddieMac and FannieMae, two of the largest
institutional investors. We generally retain a portion of the loan origination
fee paid by the borrower and receive annual servicing fees as compensation for
retaining responsibility for and performing the servicing of all loans sold to
institutional investors. See "Loan Servicing Activities."
The terms and conditions under which such sales are made depend upon, among
other things, the specific requirements of each institutional investor, the type
of loan, the interest rate environment and our relationship with the
institutional investor. In the case of one- to four-family residential loans, we
periodically obtain formal commitments to sell loans primarily with FreddieMac
and FannieMae. Pursuant to these commitments, FreddieMac or FannieMae is
obligated to purchase a specific dollar amount of whole loans over a specified
period. The terms of the commitments range from ten to sixty days. The pricing
varies depending upon the length of each commitment. We classify loans as held
for sale while we are negotiating the sale of specific loans which meet selected
criteria to a specific investor or after a sale is negotiated but before it is
settled.
During the fourth quarter of 1999, we completed the securitization of
$108.8 million of multifamily loans in a program with FannieMae. This program
uses insurance to provide the credit enhancement necessary to achieve a
satisfactory rating. We are servicing the loans as mortgage-backed securities
for FannieMae. We completed a similar securitization of $93.0 million of
multifamily loans in 1997. During the fourth quarter of 1998, we completed the
securitization of $101.0 million of commercial real estate loans with a private
issuer in a non-rated structure. Similar to the other securitization
transactions, we used an insurance policy to assume a portion of the credit
risk. In addition to decreasing loans receivable and increasing mortgage-backed
securities, the securitizations have provided several other benefits, including
the following:
- improvement in the credit risk profile of the Bank's balance sheet by
converting whole loans into mortgage-backed securities guaranteed by
others; and
- addition of high quality collateral which can be pledged for borrowings
in the secondary market to fund other corporate needs.
We also sell whole loans or participations in multifamily and commercial
real estate loans to private investors and retain the right to service the
loans. We make the majority of our sales of multifamily and commercial real
estate loans under individually negotiated whole loan or participation sales
agreements. These sales are for individual loans or for a package of loans.
During 2000, we sold $66.5 million of multifamily and commercial real estate
participations. The Bank may seek a participant when a loan would otherwise
exceed the loan-to-one borrower limit. We have sold other loans to manage
geographic concentration or interest rate risk.
9
12
LOAN SERVICING ACTIVITIES
At December 31, 2000, our overall servicing portfolio had a value of $2.7
billion. Of that amount, loans serviced for others totaled $1.9 billion. The
following table summarizes the portfolio by investor and source:
ORIGINATED PURCHASED PORTFOLIO
SERVICING SERVICING SERVICING TOTAL
---------- ---------- --------- ----------
(DOLLARS IN THOUSANDS)
One- to Four-family:
Metropolitan portfolio........................ -- -- $453,256 $ 453,256
FreddieMac.................................... $416,123 $ 466,592 -- 882,715
FannieMae..................................... 41,411 640,209 -- 681,620
Private investors............................. 16,352 9,319 -- 25,671
-------- ---------- -------- ----------
Total One- to Four-family.................. 473,886 1,116,120 453,256 2,043,262
-------- ---------- -------- ----------
Multifamily and Commercial:
Metropolitan portfolio........................ -- -- 355,396 355,396
FannieMae..................................... 113,751 54,101 -- 167,852
Private investors............................. 158,240 21,401 -- 179,641
-------- ---------- -------- ----------
Total Multifamily and Commercial........... 271,991 75,502 355,396 702,889
-------- ---------- -------- ----------
Total...................................... $745,877 $1,191,622 $808,652 $2,746,151
======== ========== ======== ==========
Generally, we service the loans we originate. When we sell loans to an
investor, such as FreddieMac or FannieMae, we generally retain the servicing
rights for the loans. We receive fee income for servicing these sold loans at
various percentages based upon the unpaid principal balances of the loans
serviced. We collect and retain service fees out of monthly mortgage payments.
To further increase our servicing fee income, the Bank during 2000 and in prior
years purchased servicing portfolios from other originating institutions. These
purchased servicing portfolios are primarily FreddieMac and FannieMae single
family loans that are secured by homes located within the eastern half of the
nation. At December 31, 2000, the unpaid principal balance of our purchased
servicing portfolio was $1.2 billion. The related net book value of purchased
mortgage servicing rights was $13.9 million.
Loan servicing functions include collecting and remitting loan payments,
accounting for principal and interest, holding escrow (impound) funds for
payment of taxes and insurance, making rate and payment changes to contractually
adjustable loans, managing loans in payment default, processing foreclosure and
other litigation activities to recover mortgage debts, conducting property
inspections and risk assessment for investment loans and general administration
of loans for the investors to whom they are sold.
LOAN DELINQUENCIES AND NONPERFORMING ASSETS
When a borrower fails to make a required payment on a loan, we begin work
to cure the delinquency by contacting the borrower. In the case of real estate
loans, we send a late notice 15 days after the due date. If the delinquency is
not cured within 30 days of the due date, we contact the borrower by telephone.
We make additional written and verbal contacts with the borrower between 30 and
90 days after the due date. If the delinquency continues for a period of 90
days, we usually bring an action to foreclose on the property. If we foreclose
on the property, we sell the property at public auction where we may be the
acquirer. Delinquent consumer loans are handled in a similar manner, except that
we make our initial contact when the payment is 10 days past due. We bring an
action to collect any loan payment that is delinquent for more than 30 days. Our
procedures for collection efforts, repossession, and sale of consumer collateral
must comply with various requirements under state and federal consumer
protection laws. In the case of business loans, we monitor payment activity on a
weekly basis. We make telephone contact with any borrower who has not made their
payment by its due date. If a delay in payment continues, we meet with the
borrower. The borrowers' cash flow situation is evaluated and a repayment plan
instituted. In some situations, we exercise our rights to collateral or
assignment of receivables in order to liquidate the debt.
10
13
The following table sets forth information concerning delinquent loans at
December 31, 2000, in dollar amounts and as a percentage of each category of the
loan portfolio. The amounts presented represent the total remaining principal
balances of the related loans, rather than the actual payment amounts that are
overdue.
TOTAL LOANS 60 DAYS
60-89 DAYS 90 DAYS AND OVER OR MORE DELINQUENT
--------------------------- --------------------------- ---------------------------
PERCENT PERCENT PERCENT
OF LOAN OF LOAN OF LOAN
NUMBER AMOUNT CATEGORY NUMBER AMOUNT CATEGORY NUMBER AMOUNT CATEGORY
------ ------- -------- ------ ------- -------- ------ ------- --------
(DOLLARS IN THOUSANDS)
REAL ESTATE
One- to four-family................. -- -- -- 4 $ 484 0.14% 4 $ 484 0.14%
Multifamily......................... -- -- -- -- -- -- -- -- --
Commercial real estate.............. 8 $ 8,260 3.23% 3 468 0.18 11 8,728 3.41
Construction and land............... -- -- -- 4 1,133 0.61 4 1,133 0.61
CONSUMER.............................. 113 1,272 0.78 196 4,658 2.86 309 5,930 3.64
BUSINESS.............................. 7 1,374 0.96 43 7,996 5.58 50 9,370 6.54
--- ------- ---- --- ------- ---- --- ------- ----
Total............................. 128 $10,906 0.80% 250 $14,739 1.08% 378 $25,645 1.88%
=== ======= ==== === ======= ==== === ======= ====
Nonperforming assets include all nonaccrual loans, loans past due greater
than 90 days still accruing, and real estate owned. Generally, interest is not
accrued on loans contractually past due 90 days or more as to interest or
principal payments. However, at December 31, 2000, the Bank had $6.4 million of
business loans that were 90 days or more past maturity but not delinquent as to
interest. These loans were nonperforming but not considered nonaccrual loans. In
addition, interest is not accrued on loans as to which payment of principal and
interest in full is not expected unless in our judgment the loan is well
secured, and we expect no loss in principal or interest.
When a loan reaches nonaccrual status, we discontinue interest accruals and
reverse prior accruals. The classification of a loan on nonaccrual status does
not necessarily indicate that the principal is uncollectible in whole or in
part. We consider both the adequacy of the collateral and the other resources of
the borrower in determining the steps to take to collect nonaccrual loans. The
final determination as to these steps is made on a case-by-case basis.
Alternatives we consider are commencing foreclosure, collecting on guarantees,
restructuring the loan, or instituting collection lawsuits.
ALLOCATION OF ALLOWANCE FOR LOSSES ON LOANS
We maintain an allowance for losses on loans because some loans may not be
repaid in full. We maintain the allowance at a level we consider adequate to
cover possible losses that are currently anticipated based on past loss
experience, general economic conditions, information about specific borrower
situations, including their financial position and collateral values, and other
factors and estimates which are subject to change over time. While we may
periodically allocate portions of the allowance for specific problem loans, the
whole allowance is available for any loan charge-offs that occur. We charge a
loan against the allowance as a loss when, in our opinion, it is uncollectible.
Despite the charge-off, we continue collection efforts. As a result, future
recoveries may occur.
The following table sets forth an allocation of the allowance for losses on
loans among categories as of the dates indicated based on our estimate of
probable losses that were currently anticipated based largely on past loss
experience. Since the factors influencing such estimates are subject to change
over time, we believe that any allocation of the allowance for losses on loans
into specific categories lends an appearance of precision which does not exist.
In practice, we use the allowance as a single unallocated allowance available
for all loans. The allowance can also be reallocated among different loan
categories if actual losses differ from expected losses and
11
14
based upon changes in our expectation of future losses. The following allocation
table should not be interpreted as an indication of the actual amounts or the
relative proportion of future charges to the allowance.
DECEMBER 31,
-----------------------------------------------------------------------------
2000 1999 1998 1997
--------------------- --------------------- -------------------- ------
PERCENT OF PERCENT OF PERCENT OF
LOANS IN LOANS IN LOANS IN
EACH EACH EACH
CATEGORY CATEGORY CATEGORY
TO TOTAL TO TOTAL TO TOTAL
AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS AMOUNT
------- ----------- ------- ----------- ------ ----------- ------
(DOLLARS IN THOUSANDS)
One-to four-family... $ 759 24.8% $ 778 24.0% $ 304 18.3% $ 237
Multifamily.......... 962 20.5 904 23.3 648 31.1 482
Commercial real
estate............. 1,456 18.7 1,281 19.7 1,019 21.1 1,400
Construction and
land............... 796 13.6 550 12.4 237 12.6 353
Consumer............. 3,631 11.9 3,947 11.5 2,335 9.3 2,132
Business............. 4,952 10.5 2,462 9.1 1,675 7.6 456
Unallocated.......... 1,395 -- 1,103 -- 691 -- 562
------- ----- ------- ----- ------ ----- ------
Total............ $13,951 100.0% $11,025 100.0% $6,909 100.0% $5,622
======= ===== ======= ===== ====== ===== ======
DECEMBER 31,
----------------------------------
1997 1996
----------- --------------------
PERCENT OF PERCENT OF
LOANS IN LOANS IN
EACH EACH
CATEGORY CATEGORY
TO TOTAL TO TOTAL
LOANS AMOUNT LOANS
----------- ------ -----------
(DOLLARS IN THOUSANDS)
One-to four-family... 19.8% $ 228 17.1%
Multifamily.......... 25.4 1,020 40.8
Commercial real
estate............. 23.0 937 20.3
Construction and
land............... 15.0 193 10.5
Consumer............. 9.0 1,182 7.9
Business............. 7.5 197 3.4
Unallocated.......... -- 418 --
----- ------ -----
Total............ 100.0% $4,175 100.0%
===== ====== =====
With the uncertainties that could adversely affect the overall quality of
the loan portfolio, we consider an adequate allowance for losses on loans
essential. At December 31, 2000, we considered the unallocated allowance
adequate to cover losses from the existing loans that had not demonstrated
problems such as late payments, financial difficulty of the borrower, or
deterioration of collateral values. However, on March 26, 2001, based on
financial projections provided by the borrower on March 12, 2001, management
determined that business loans to related borrowers in the amount of $14.7
million were impaired. Management has estimated the impairment to be
approximately $3.5 million.
The risks associated with off-balance sheet commitments are insignificant.
Therefore, management has not provided an allowance for those commitments.
INVESTMENT PORTFOLIO
We maintain our investment portfolio in accordance with policies adopted by
the Board of Directors that consider the regulatory requirements and
restrictions which dictate the type of securities that we can hold. As a member
of the Federal Home Loan Bank System, the Bank is required to hold a minimum
amount of Federal Home Loan Bank stock based upon asset size and mix. As the
Bank grows, management anticipates this investment will increase.
The following table summarizes the amounts and the distribution of
securities held as of the dates indicated:
AT DECEMBER 31,
---------------------------
2000 1999 1998
------- ------- -------
(DOLLARS IN THOUSANDS)
SECURITIES:
Mutual funds.............................................. $ 889 $ 835 $ 2,059
Tax-exempt bond........................................... 14,705 14,699 14,817
Revenue bond.............................................. 775 1,180 1,400
FreddieMac preferred stock................................ 6,150 6,150 7,500
FreddieMac note........................................... 9,986 9,764 9,884
FannieMae notes........................................... 19,920 19,080 --
Federal Home Loan Bank stock.............................. 20,624 10,948 6,054
Treasury notes and bills.................................. 2,361 -- --
------- ------- -------
Total............................................. $75,410 $62,656 $41,714
======= ======= =======
OTHER INTEREST-EARNING ASSETS:
Interest-bearing deposits with banks...................... $ 2,727 $ 2,750 $ 9,275
Term repurchase agreements................................ -- -- --
------- ------- -------
Total............................................. $ 2,727 $ 2,750 $ 9,275
======= ======= =======
12
15
The following table sets forth the contractual maturities and approximate
weighted average yields of debt securities at December 31, 2000.
DUE IN
--------------------------------------------
ONE YEAR ONE TO MORE THAN
OR LESS FIVE YEARS TEN YEARS TOTAL
-------- ----------- --------- -------
(DOLLARS IN THOUSANDS)
Tax-exempt bond.................................... -- -- $14,705 $14,705
Revenue bond....................................... -- $ 775 -- 775
FreddieMac note.................................... -- 9,986 -- 9,986
U.S. Treasury Notes and Bills...................... $2,261 100 -- 2,361
FannieMae notes.................................... -- 19,920 -- 19,920
------ ------- ------- -------
Total......................................... $2,261 $30,781 $14,705 $47,747
====== ======= ======= =======
Weighted average tax-equivalent yield.............. 5.83% 6.04% 10.77% 7.49%
The FreddieMac and FannieMae notes have call features which make them
callable at any time after December 31, 2000.
MORTGAGE-BACKED SECURITIES PORTFOLIO
Mortgage-backed securities offer higher rates than treasury or agency
securities with similar maturities because the timing of the repayment of
principal can vary based on the level of prepayments. However, they offer lower
yields than similar loans because the risk of loss of principal is often
guaranteed by the issuing entity or through mortgage insurance. We acquire
mortgage-backed securities through purchases and securitization of loans from
our portfolio. As rates have risen during 2000, we experienced a decrease in
prepayments on mortgage-backed securities over the level experienced in 1999 and
1998. We classify all mortgage-backed securities as available for sale. The
following table sets forth the fair market value of mortgage-backed securities
portfolio at the dates indicated.
AT DECEMBER 31,
--------------------------------
2000 1999 1998
-------- -------- --------
(DOLLARS IN THOUSANDS)
FannieMae pass-through certificates........................ $ 74,412 $112,675 $ 61,705
GNMA pass-through certificates............................. 27,249 29,526 5,870
FreddieMac participation certificates...................... 2,948 6,609 13,149
BPA Commercial Capital L.L.C. mortgage-backed security..... 77,162 92,492 100,995
FreddieMac Collateralized Mortgage Obligation.............. 8,192 8,518 8,494
FannieMae Collateralized Mortgage Obligation............... 5,666 5,703 7,868
Other...................................................... 200 204 214
-------- -------- --------
Total................................................. $195,829 $255,727 $198,295
======== ======== ========
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16
The following table sets forth the final maturities and approximate
weighted average yields of mortgage-backed securities at December 31, 2000.
DUE IN
-------------------------------------------------
ONE YEAR TO FIVE TO OVER
FIVE YEARS TEN YEARS TEN YEARS TOTAL
----------- --------- --------- --------
(DOLLARS IN THOUSANDS)
FannieMae pass-through certificates........... $71,627 $ 2,785 $ 74,412
GNMA pass-through certificates................ $ 25 -- 27,224 27,249
FreddieMac participation certificates......... -- -- 2,948 2,948
BPA Commercial Capital L.L.C. Mortgage-backed
security.................................... -- -- 77,162 77,162
FreddieMac Collateralized Mortgage
Obligation.................................. -- -- 8,192 8,192
FannieMae Collateralized Mortgage
Obligation.................................. -- -- 5,666 5,666
Other......................................... -- -- 200 200
------- ------- -------- --------
Total mortgage-backed securities......... $ 25 $71,627 $124,177 $195,829
======= ======= ======== ========
Weighted average yield........................ 6.50% 6.93% 7.37% 7.21%
The actual timing of the payment of principal on mortgage-backed securities
is dependent on principal payments on the underlying loans which may or may not
carry prepayment penalties for the borrowers. Therefore, the table above is not
necessarily representative of actual or expected cash flows from these
securities.
SOURCES OF FUNDS
The Bank's primary sources of funds are deposits, amortization and
repayment of loan principal, borrowings, sales of mortgage loans, sales or
maturities of mortgage-backed securities, securities, and short-term
investments. Deposits are the principal source of funds for lending and
investment purposes. We offer the following types of accounts:
Statement and Checking Accounts. We offer three types of statement savings
accounts, two interest-bearing checking, and one noninterest-bearing checking
account for consumers. We offer three types of statement savings accounts and
one noninterest-bearing checking account for business and commercial customers.
In connection with loan servicing activities, we maintain custodial
checking accounts for principal and interest payments collected for investors
monthly and for tax and insurance escrow balances.
Certificates of Deposit. We offer fixed rate, fixed term certificates of
deposit. Terms are from seven days to five years. These accounts generally bear
the highest interest rates of any deposit product offered. We review interest
rates offered on certificates of deposit regularly and adjust them based on cash
flow projections and market interest rates.
From time to time, we have accepted certificates of deposit through brokers
or from out-of-state individuals and entities, predominantly credit unions.
These deposits typically have balances of $90,000 to $100,000 and have a term of
one year or more. At December 31, 2000, these individuals and entities held
approximately $118.9 million of certificates of deposits, or 10.4% of total
deposits.
In conjunction with certificates of deposit, we also offer Individual
Retirement Accounts.
14
17
The following table provides information regarding trends in average
deposits for the periods indicated. The noninterest bearing demand deposit
category includes principal and interest custodial accounts and taxes and
insurance custodial accounts for loans serviced for FreddieMac, FannieMae and
private investors.
DECEMBER 31,
-------------------------------------------------------------------------------------
2000 1999 1998
--------------------------- --------------------------- -------------------------
PERCENT PERCENT PERCENT
AVERAGE OF RATE AVERAGE OF RATE AVERAGE OF RATE
AMOUNT TOTAL PAID AMOUNT TOTAL PAID AMOUNT TOTAL PAID
---------- ------- ---- ---------- ------- ---- -------- ------- ----
(DOLLARS IN THOUSANDS)
Noninterest-bearing
deposits.................... $ 71,714 6.3% $ 64,633 5.6% $ 51,385 6.1%
Interest bearing deposits:
Interest-Bearing Checking
Accounts.................. 99,142 8.7 4.15% 54,538 4.7 2.66% 45,980 5.5 2.75%
Passbook Savings and
Statement Savings......... 146,635 12.9 3.82 215,265 18.8 4.21 184,907 21.9 4.54
Certificates of Deposit..... 818,062 72.1 6.11 815,448 70.9 5.50 560,010 66.5 5.87
---------- ----- ---------- ----- -------- -----
Total interest-bearing
deposits................ 1,063,839 93.7 5.60 1,085,251 94.4 5.09 790,897 93.9 5.38
---------- ----- ---------- ----- -------- -----
Total average deposits.... $1,135,553 100.0% $1,149,884 100.0% $842,282 100.0%
========== ===== ========== ===== ======== =====
Deposits increased 0.8% to $1.1 billion at December 31, 2000 from a year
earlier. The increase was primarily due to increased noninterest bearing
checking accounts, interest bearing checking accounts, and certificates of
deposit.
The following table shows rate and maturity information for certificates of
deposit as of December 31, 2000.
PERCENT
OF
2.00-4.99% 5.00-5.99% 6.00-6.99% 7.00-8.99% TOTAL TOTAL
---------- ---------- ---------- ---------- -------- -------
(DOLLARS IN THOUSANDS)
CERTIFICATE ACCOUNTS MATURING
IN QUARTER ENDING:
March 31, 2001................ $15,634 $ 43,240 $139,918 $ 8,311 $207,103 25.3%
June 30, 2001................. 118 22,721 116,101 33,000 171,940 21.0
September 30, 2001............ 20 18,835 141,543 35,685 196,082 23.9
December 31, 2001............. -- 7,233 72,154 16,970 96,357 11.8
March 31, 2002................ 12 1,097 38,643 14,532 54,284 6.6
June 30, 2002................. -- 529 9,774 3,196 13,500 1.6
September 30, 2002............ -- 1,088 13,636 6,915 21,639 2.6
December 31, 2002............. -- 1,432 9,838 3,169 14,439 1.8
March 31, 2003................ -- 617 6,141 3,236 9,994 1.2
June 30, 2003................. -- 550 9,766 972 11,288 1.4
September 30, 2003............ -- 1,432 2,036 15 3,484 0.4
December 31, 2003............. -- 1,438 197 -- 1,636 0.2
Thereafter.................... -- 5,410 10,475 1,456 17,341 2.1
------- -------- -------- -------- -------- -----
Total.................... $15,784 $105,622 $570,222 $127,457 $819,087 100.0%
======= ======== ======== ======== ======== =====
Percent of total.............. 1.9% 12.9% 69.6% 15.6%
15
18
The following table shows the remaining maturity for time deposits of
$100,000 or more as of December 31, 2000.
DECEMBER 31, 2000
----------------------
(DOLLARS IN THOUSANDS)
Three months or less........................................ $ 51,072
Over three through six months............................... 44,585
Over six through twelve months.............................. 104,234
Over twelve months.......................................... 35,541
--------
Total.................................................. $235,432
========
In addition to deposits, we rely on borrowed funds. The discussion below
describes our current borrowings.
Subordinated Note Offering. In December 1995, we issued subordinated notes
due January 1, 2005 with an aggregate principal balance of $14.0 million through
a public offering. The interest rate on the notes is 9.625%.
Line of Credit. We have a commercial line of credit agreement with a
commercial bank. The maximum borrowing under the line is $12.0 million. The
balance at December 31, 2000 was $6.0 million. The line matures annually on May
30. During the second quarter, 2000, by mutual agreement, the line was extended
to May 31, 2001. The interest rate on the line is tied to LIBOR or prime at our
option. As collateral for the loan, our largest shareholder, Robert Kaye, has
agreed to pledge a portion of his shares of Common Stock of Metropolitan in an
amount at least equal in value to 200% of any outstanding balance.
Commercial bank repurchase agreement. In November, 1999, the Bank entered
into a repurchase agreement involving a transaction which allowed a line of
credit for use by the Bank. The balance on this line at December 31, 1999 was
$55 million. During the third quarter 2000, the balance was paid-off and the
line of credit terminated.
Federal Home Loan Bank Advances. The Federal Home Loan Bank makes funds
available for housing finance to eligible financial institutions like the Bank.
We collateralize advances by any combination of the following assets: one- to
four-family first mortgage loans, multifamily loans, home equity loans,
commercial loans, investment securities, mortgage-backed securities, and Federal
Home Loan Bank stock. The aggregate balance of assets pledged as collateral for
Federal Home Loan Bank advances at December 31, 2000 was $578 million.
Repurchase Agreements. From time to time, the Bank borrows funds by using
its investment or mortgage-backed securities to issue repurchase agreements. The
aggregate balance of mortgage-backed securities pledged as collateral for
repurchase agreements at December 31, 2000 was $45 million.
The following table shows the maximum month-end balance, the average
balance, and the ending balance of borrowings during the periods indicated.
YEAR ENDED DECEMBER 31,
--------------------------------
2000 1999 1998
-------- -------- --------
(DOLLARS IN THOUSANDS)
MAXIMUM MONTH-END BALANCE:
Federal Home Loan Bank advances............................ $365,094 $205,352 $119,000
1993 subordinated notes.................................... -- -- 4,874
1995 subordinated notes.................................... 14,000 14,000 14,000
Commercial bank repurchase agreement....................... 50,000 55,000 --
Commercial bank line of credit............................. 7,000 12,000 8,000
Repurchase agreements...................................... 80,166 88,380 97,983
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YEAR ENDED DECEMBER 31,
--------------------------------
2000 1999 1998
-------- -------- --------
(DOLLARS IN THOUSANDS)
AVERAGE BALANCE:
Federal Home Loan Bank advances............................ $290,369 $140,001 $ 65,714
1993 subordinated notes.................................... -- -- 1,999
1995 subordinated notes.................................... 14,000 14,000 14,000
Commercial bank repurchase agreement....................... 25,250 7,708 --
Commercial bank line of credit............................. 6,083 7,891 2,147
Repurchase agreements...................................... 70,595 81,507 70,368
ENDING BALANCE:
Federal Home Loan Bank advances............................ $365,094 $205,352 $111,236
1993 subordinated notes.................................... -- -- --
1995 subordinated notes.................................... 13,985 14,000 14,000
Commercial bank repurchase agreement....................... -- 55,000 --
Commercial bank line of credit............................. 6,000 6,000 8,000
Repurchase agreements...................................... 41,000 80,044 82,250
The following table provides the interest rates which includes amortization
of issuance costs of borrowings during the periods indicated.
YEAR ENDED DECEMBER 31,
------------------------
2000 1999 1998
----- ----- ------
WEIGHTED AVERAGE INTEREST RATE:
Federal Home Loan Bank advances............................. 6.15% 5.60% 5.68%
1993 subordinated notes..................................... -- -- 10.47
1995 subordinated notes..................................... 9.63 9.63 9.63
Commercial bank repurchase agreement........................ 8.25 7.34 --
Commercial bank line of credit.............................. 8.80 7.96 8.49
Repurchase agreements....................................... 6.06 5.60 5.66
GUARANTEED PREFERRED BENEFICIAL INTERESTS IN THE CORPORATION'S JUNIOR
SUBORDINATED DEBENTURES
Trust Preferred securities were issued in 1998 and 1999 through two
wholly-owned subsidiaries of Metropolitan Financial Corp. The Corporation used
the net proceeds from the sale of the securities to repay outstanding debt and
contribute capital to the Bank.
COMPETITION
The Bank faces strong competition both in originating real estate and other
loans and in attracting deposits. Competition in originating real estate loans
comes primarily from other savings institutions, commercial banks, mortgage
companies, credit unions, finance companies, and insurance companies.
The Bank attracts its deposits through its retail sales offices, primarily
from the communities in which those retail sales offices are located. Therefore,
competition for those deposits is principally from other savings institutions,
commercial banks, credit unions, mutual funds, and brokerage companies located
in the same communities.
EMPLOYEES
At December 31, 2000, we had a total of 470 employees, including part-time
and seasonal employees. Our employees are not represented by any collective
bargaining group. Management considers its employee relations to be excellent.
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REGULATION AND SUPERVISION
INTRODUCTION
Metropolitan is a savings and loan holding company within the meaning of
the Home Owners' Loan Act. As a savings and loan holding company, we are subject
to the regulations, examination, supervision, and reporting requirements of the
Office of Thrift Supervision. The Bank, an Ohio-chartered savings and loan
association, is a member of the Federal Home Loan Bank System. Its deposits are
insured by the Federal Deposit Insurance Corporation through the Savings
Association Insurance Fund. The Bank is subject to examination and regulation by
the Office of Thrift Supervision, the Federal Deposit Insurance Corporation, and
the Ohio Division of Financial Institutions. The Bank must comply with
regulations regarding matters such as capital standards, mergers, establishment
of branch offices, subsidiary investments and activities, and general investment
authority.
METROPOLITAN
As a savings and loan holding company, we are subject to restrictions
relating to our activities and investments. Among other things, we are generally
prohibited, either directly or indirectly, from acquiring control of any other
savings association or savings and loan holding company, without prior approval
of the Office of Thrift Supervision, and from acquiring more than 5% of the
voting stock of any savings association or savings and loan holding company
which is not a subsidiary. Similarly, a person must obtain Office of Thrift
Supervision approval prior to that person's acquiring control of the Bank or
Metropolitan.
THE BANK
General. The Office of Thrift Supervision has enforcement authority over
all savings associations. This enforcement authority includes the ability to
impose penalties for and to seek correction of violations of laws and
regulations and unsafe or unsound practices.
As a lender and a financial institution, the Bank is subject to various
regulations promulgated by the Federal Reserve Board including, without
limitation, Regulation B (Equal Credit Opportunity), Regulation D (Reserves),
Regulation E (Electronic Fund Transfers), Regulation F (Interbank Liabilities),
Regulation Z (Truth in Lending), Regulation CC (Availability of Funds), and
Regulation DD (Truth in Savings). As lenders of loans secured by real property,
and as owners of real property, financial institutions, including the Bank, are
subject to compliance with various statutes and regulations applicable to
property owners generally.
Insurance of Accounts and Regulation by the Federal Deposit Insurance
Corporation. The Bank is a member of the Savings Association Insurance Fund,
which is administered by the Federal Deposit Insurance Corporation. The Federal
Deposit Insurance Corporation insures deposits up to applicable limits and the
full faith and credit of the United States Government back such insurance. As
insurer, the Federal Deposit Insurance Corporation imposes deposit insurance
premiums and conducts examinations of and requires reporting by Federal Deposit
Insurance Corporation-insured institutions.
The Deposit Insurance Funds Act of 1996 required the merger of the Bank
Insurance Fund and Savings Association Insurance Fund into a single insurance by
January 1, 1999 assuming certain pre-conditions. Those pre-conditions were not
met and a timetable for the merger has not been established. In connection with
this merger, Savings Association Insurance Fund-insured institutions could be
forced to convert to state bank charters or national bank charters. If that
proposal became law, Metropolitan would become a bank holding company. As a
result, Metropolitan would be subject to regulation by the Federal Reserve Board
which impose capital requirements on bank holding companies.
Regulatory Capital Requirements. The capital regulations of the Office of
Thrift Supervision establish a "leverage limit," a "tangible capital
requirement," and a "risk-based capital requirement." In addition, the Office of
Thrift Supervision may establish, on a case by case basis, individual minimum
capital requirements for a savings association which vary from the requirements
that would otherwise apply under the Capital Regulations. The Office of Thrift
Supervision has not established an individual minimum capital requirements for
the Bank.
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The leverage limit currently requires a savings association to maintain
"core capital" of not less than 3% of adjusted total assets. The Office of
Thrift Supervision has taken the position, however, that the prompt corrective
action regulation has effectively raised the leverage ratio requirement for all
but the most highly-rated institutions. The leverage ratio has in effect
increased to 4% since an institution is "undercapitalized" if, among other
things, its leverage ratio is less than 4%.
The tangible capital requirement requires a savings association to maintain
"tangible capital" in an amount not less than 1.5% of adjusted total assets.
The risk-based capital requirement generally provides that a savings
association must maintain total capital in an amount at least equal to 8.0% of
its risk-weighted assets. The risk-based capital regulations are similar to
those applicable to national banks. The regulations assign each asset and
certain off-balance sheet assets held by a savings association to one of four
risk-weighting categories, based upon the degree of credit risk associated with
the particular type of asset.
At December 31, 2000, the Bank complied with each of the tangible capital,
the core capital, and the risk-based capital requirements. The following table
presents the Bank's regulatory capital position at December 31, 2000.
PERCENT
OF ASSETS
AS DEFINED
FOR EACH
AMOUNT CAPITAL TEST
-------- ------------
(DOLLARS IN THOUSANDS)
Tangible capital............................................ $106,608 6.31%
Tangible capital requirement................................ 25,343 1.50
-------- ----
Excess...................................................... $ 81,265 4.81%
======== ====
Core capital................................................ $106,625 6.31%
Core capital requirement.................................... 67,591 4.00
-------- ----
Excess...................................................... $ 39,034 2.31%
======== ====
Risk-based capital.......................................... $118,077 9.35%
Risk-based capital requirement.............................. 101,028 8.00
-------- ----
Excess...................................................... $ 17,049 1.35%
======== ====
The Bank is also subject to the capital adequacy requirements under the
Federal Deposit Insurance Corporation Investment Act of 1991. The additional
capital adequacy ratio imposed under Federal Deposit Insurance Corporation
Investment Act is the Tier 1 capital to risk adjusted assets ratio. This ratio
must be at least 6.0% for a "well capitalized" institution. At December 31,
2000, the Tier 1 risk-based capital ratio of the Bank was 8.45%.
Prompt Corrective Action. Banks and savings associations are classified
into one of five categories based upon capital adequacy, ranging from
"well-capitalized" to "critically undercapitalized." Generally, the regulations
require the appropriate federal banking agency to take prompt corrective action
with respect to an institution which becomes "undercapitalized" and to take
additional actions if the institution becomes "significantly undercapitalized"
or "critically undercapitalized." Based on these requirements, the Bank is an
"adequately capitalized" institution.
The appropriate federal banking agency has the authority to reclassify a
well-capitalized institution as adequately capitalized. In addition, the agency
may treat an adequately capitalized or undercapitalized institution as if it
were in the next lower capital category, if the agency determines, after notice
and an opportunity for a hearing, that the institution is in an unsafe or
unsound condition or that the institution has received and not corrected a
less-than-satisfactory rating for any of the categories of asset quality,
management, earnings, or liquidity in its most recent examination. As a result
of such reclassification or determination, the appropriate federal banking
agency may require an adequately capitalized or under-capitalized institution to
comply with mandatory and discretionary supervisory actions.
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Restrictions on Dividends and Other Capital Distributions. Savings
association subsidiaries of holding companies generally are required to provide
their Office of Thrift Supervision regional director not less than thirty days'
advance notice of any proposed declaration of a dividend on the association's
stock. Any dividend declared within the notice period, or without giving the
prescribed notice, is invalid. In some circumstances, an association may be
required to provide their Office of Thrift Supervision regional director with an
application for a proposed declaration of a dividend on the association's stock.
The Office of Thrift Supervision regulations impose limitations upon
certain "capital distributions" by savings associations. These distributions
include cash dividends, payments to repurchase or otherwise acquire an
association's shares, payments to shareholders of another institution in a
cash-out merger, and other distributions charged against capital.
In addition, the Office of Thrift Supervision retains the authority to
prohibit any capital distribution otherwise authorized under the regulation if
the Office of Thrift Supervision determines that the capital distribution would
constitute an unsafe or unsound practice.
The Gramm-Leach Bliley Act, or Financial Services Modernization Act, became
law in November of 1999. This law includes significant changes in the way
financial institutions are regulated and types of financial business they may
engage in. Among other things the law provides for:
- facilitation of affiliations among banks, securities firms, and insurance
companies;
- changes in the regulation of securities activities by banks;
- changes in the regulation of insurance activities by banks;
- elimination of the creation of new unitary thrift holding companies;
- new regulation of the use and privacy of customer information by banks;
and
- modernization of the Federal Home Loan Bank System.
The changes in this law take effect at various times ranging from
immediately to eighteen months after the Act became law. Generally, the law
provides opportunities for new products and new affiliations with other
financial services providers. It will not restrict us from any activities we are
currently engaging in.
Liquidity. Federal regulations currently require savings associations to
maintain, for each calendar quarter, an average daily balance of liquid assets
equal to at least 4% of the ending or average daily balance of deposit accounts
with maturities less than a year and short-term borrowings with maturities less
than a year. Liquid assets include cash, certain time deposits, bankers'
acceptances, and specified United States Government, state or federal agency
obligations. From time to time, the Office of Thrift Supervision may change this
liquidity requirement to an amount within a range of 4% to 10% of such accounts
and borrowings depending upon economic conditions and the deposit flows of
savings associations. The Office of Thrift Supervision may impose monetary
penalties for failure to meet liquidity ratio requirements. At December 31,
2000, the liquidity ratio of the Bank was 5.52%.
Qualified Thrift Lender Test. Pursuant to the Qualified Thrift Lender test,
a savings institution must invest at least 65% of its portfolio assets in
qualified thrift investments on a monthly average basis on a rolling 12-month
look-back basis. Portfolio assets are an institution's total assets less
goodwill and other intangible assets, the institution's business property, and a
limited amount of the institution's liquid assets.
A savings association's failure to remain a Qualified Thrift Lender may
result in: a) limitations on new investments and activities; b) imposition of
branching restrictions; c) loss of Federal Home Loan Bank borrowing privileges;
and d) limitations on the payment of dividends. The qualified thrift investments
of the Bank were in excess of 67.62% of its portfolio assets as of December 31,
2000.
Ohio Regulation. As a savings and loan association organized under the laws
of the State of Ohio, the Bank is subject to regulation by the Ohio Division of
Financial Institutions. Regulation by the Ohio Division of Financial
Institutions affects the internal organization of the Bank as well as its
savings, mortgage lending, and other investment activities. Periodic
examinations by the Ohio Division of Financial Institutions are usually
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conducted on a joint basis with the Office of Thrift Supervision. Ohio law
requires the Bank to maintain federal deposit insurance as a condition of doing
business.
Under Ohio law and regulations, an Ohio association may invest in loans and
interests in loans, secured or unsecured, of any type or amount for any purpose,
subject to certain requirements. In addition, certain restrictions are placed on
the limit to which certain investments may be made.
Ohio has adopted a statutory limitation on the acquisition of control of an
Ohio savings and loan association which requires the written approval of the
Division prior to the acquisition by any person or entity of a controlling
interest in an Ohio association. In addition, Ohio law requires prior written
approval of the Ohio Division of Financial Institution of a merger of an Ohio
association with another savings and loan association or a holding company
affiliate.
FEDERAL AND STATE TAXATION
The following discussion of tax matters is only a summary and does not
purport to be a comprehensive description of the tax rules applicable to
Metropolitan or the Bank.
Metropolitan, the Bank and other includable subsidiaries file consolidated
federal income tax returns on a December 31 calendar year basis using the
accrual method of accounting. The Internal Revenue Service has audited
Metropolitan, the Bank and other includable subsidiaries through December 31,
1994.
In addition to the regular income tax, corporations, including savings
associations such as the Bank, generally are subject to an alternative minimum
tax. An alternative minimum tax is imposed at a tax rate of 20% on alternative
minimum taxable income ("AMTI"), which is the sum of a corporation's regular
taxable income with certain adjustments and tax preference items, less any
available exemption. Adjustments and preferences include depreciation deductions
in excess of those allowable for alternative minimum tax purposes, tax-exempt
interest on most private activity bonds issued after August 7, 1986 (reduced by
any related interest expense disallowed for regular tax purposes), and, for 1990
and succeeding years, 75% of the difference (positive or negative) between
adjusted current earnings ("ACE") and AMTI. Any ACE reductions to AMTI are
limited to prior aggregate ACE increases to AMTI. ACE equals pre-adjustment AMTI
increased or decreased by certain ACE adjustments and determined without regard
to the ACE adjustment and the alternative tax net operating loss. The
alternative minimum tax is imposed to the extent it exceeds the corporation's
regular income tax, and alternative tax net operating losses can offset no more
than 90% of AMTI. The payment of alternative minimum tax will give rise to a
minimum tax credit which will be available with an indefinite carry forward
period to reduce federal income taxes in future years (but not below the level
of alternative minimum tax arising in each of the carry forward years).
The Bank is subject to the Ohio corporate franchise tax. As a financial
institution, the Bank computes its franchise tax based on its net worth. Under
this method, the Bank will compute its Ohio corporate franchise tax by
multiplying its net worth (as determined under generally accepted accounting
principles) as specifically adjusted pursuant to Ohio law, by the applicable tax
rate, which is currently 1.3%. As an Ohio-chartered savings and loan
association, the Bank also receives a credit against the franchise tax for a
portion of the state supervisory fees paid by it.
At the present time, Metropolitan, at the holding company level, does not
have a liability for the net worth portion of the franchise tax as it satisfies
the requirements to be treated as a qualified holding company. In addition,
there is no liability on the net income portion of the tax as the holding
company has historically operated at a net loss on a stand alone basis.
ITEM 2. PROPERTIES
Our executive office is located at 22901 Mill Creek Blvd., Highland Hills,
Ohio 44122. We operate twenty-three retail sales offices. We lease seven of
these locations under long-term lease agreements with various parties. We own
the other sixteen retail sales offices, located in Aurora, Beachwood, Brunswick,
Cleveland, Cleveland Heights, Euclid, Hudson, Macedonia, Mayfield Heights,
Medina, Montrose, Pepper Pike, Stow, Twinsburg, Willoughby Hills, and
Willoughby, Ohio. Our executive office and a majority of our retail sales
offices include
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space beyond what is required for the conduct of our business. That space is
rented to nonaffiliated entities under long term leases. In 2001, we will be
opening sales offices in Solon and Strongsville, Ohio. In addition, we have
purchased land in Auburn, Avon, Brecksville, and Broadview Heights, Ohio and we
plan to use these sites for future full service retail offices. The Bank
currently leases office space for its residential and construction loan
production offices in Akron, Canton, Cincinnati, Columbus, Dayton, Massillon,
North Olmsted and Toledo, Ohio. We also have a commercial real estate loan
origination office in Pittsburgh, Pennsylvania.
ITEM 3. LEGAL PROCEEDINGS
The Bank is involved in various legal proceedings incidental to the conduct
of its business. We do not expect that any of these proceedings will have a
material adverse effect on our financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of shareholders of the Corporation during
the fourth quarter of the fiscal year covered by this Report, through the
solicitation of proxies or otherwise.
EXECUTIVE OFFICERS OF THE REGISTRANT
(Included pursuant to Instruction 3 to paragraph (b) of Item 401 of
Regulation S-K)
The executive officers of the Corporation as of March 1, 2001, unless otherwise
indicated, were as follows:
POSITIONS HELD WITH METROPOLITAN
NAME AND THE BANK BUSINESS EXPERIENCE
---- -------------------------------- -------------------
Robert M. Kaye Chairman and Chief Executive Officer, Mr. Kaye has served as Chairman and
Age 64 and a Director of Metropolitan Chief Executive Officer of Metropolitan
Chairman and Chief Executive Officer, and the Bank since 1987. He has also
and a Director of the Bank served as President of Planned
Residential Communities, Inc. since
1960. Planned Residential Communities,
Inc. is actively engaged in every aspect
of multifamily housing from new
construction and rehabilitation to
acquisition and management. Mr. Kaye
serves as a member of the Board of
Directors of Community Bank of New
Jersey. He is a member of the Board of
Directors of Neighborhood Progress Inc.
and Chairman of the Board of New Village
Corp. He has also been a member of the
Corporate Council of the Cleveland
Museum of Art since its inception in
1993 and has been a member of the Board
of Trustees of the College of New Jersey
since 1980 and of The Peddie School
since 1988.
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POSITIONS HELD WITH METROPOLITAN
NAME AND THE BANK BUSINESS EXPERIENCE
---- -------------------------------- -------------------
Kenneth T. Koehler President and Director of Mr. Koehler joined Metropolitan in
Age 55 Metropolitan January 1999 as Executive Vice
President. He has served as President
President, Director, and Chief and Chief Operating Officer since
Operating Officer of the Bank October 1999. Previously, Mr. Koehler
served as President and Chief Executive
Officer of United Heritage Bank, Edison,
NJ, a community Bank (1998-1999); and
President and Chief Executive Officer of
Golden City Commercial Bank, New York,
NY, a community bank (1994-1998). He has
also served as a director of Cumberland
Farms/Gulf Oil Company, and as a trustee
of Providence Performing Arts
Association and Catholic Charities
Annual Appeal, Diocese of RI. He is a
trustee of the Great Lakes Theater
Company and Catholic Charities Corp.
Malvin E. Bank Director, Vice Chairman, Secretary Mr. Bank has been the Secretary,
Age 70 and Assistant Treasurer of Assistant Treasurer and a Director of
Metropolitan Metropolitan and Secretary and Director
of the Bank for more than five years and
Director, Vice Chairman, and Vice Chairman for one year. Mr. Bank is
Secretary of the Bank General Counsel of the Cleveland
Foundation, a community foundation. Mr.
Bank also serves as a Director of
Oglebay Norton Company. Mr. Bank also
serves as a Trustee of Case Western
Reserve University, The Holden
Arboretum, Chagrin River Land
Conservancy, Cleveland Center for
Research in Child Development, Hanna
Perkins School, and numerous other civic
and charitable organizations and
foundations.
David P. Miller Director, Treasurer and Assistant Mr. Miller has served as a Director of
Age 68 Secretary of Metropolitan Metropolitan and the Bank since 1992.
Mr. Miller has also held the positions
Director of the Bank of Treasurer and Assistant Secretary of
Metropolitan. Since 1986, Mr. Miller has
been the President and Chief Executive
Officer of Columbia National Group,
Inc., a Cleveland-based scrap and waste
materials wholesaler and steel
manufacturer. He is currently a
commissioner of the Ohio Lottery.
Donald F. Smith Chief Financial Officer of Mr. Smith became Executive Vice
Age 52 Metropolitan President and Chief Financial Officer of
Executive Vice President and Chief the Bank on January 1, 2000. Mr. Smith
Financial Officer of the Bank was previously Senior Vice President and
Chief Financial Officer of Steris
Corporation (1999) and a Partner in the
accounting firm of Ernst & Young LLP and
its predecessor from 1984 to 1999. Mr.
Smith is on the Board of Directors of
Junior Achievement of Greater Cleveland
and Lake County YMCA.
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POSITIONS HELD WITH METROPOLITAN
NAME AND THE BANK BUSINESS EXPERIENCE
---- -------------------------------- -------------------
Leonard Kichler Executive Vice President of the Bank Mr. Kichler became Executive Vice
Age 43 President- Relationship Banking in July,