Profits increased 25 percent during Rochester Community Savings Bank's second fiscal quarter ended May 31, the bank said Thursday.
The bank, which will open branches in four Buffalo suburbs next month, also announced it is trying to foreclose on several large real estate developments in the southeast, a move that would boost its repossessed real estate by about $30 million in the third quarter.
Non-performing loans also increased during the quarter due to the inclusion of loans from a New Jersey savings bank purchased in April, the bank said.
First-quarter profits increased to $4 million, or 29 cents per share, from $3.2 million, or 23 cents per share, during the second quarter of 1989.
During the first six months, profits increased 12.5 percent to $9 million, or 65 cents per share, from $8 million, or 58 cents per share, in 1989.
The profits came from increases both in net interest income and in other income, said Leonard S. Simon, the bank's chairman and chief executive.
Simon predicted that earnings during the second half would be stronger than those of the first, a pattern the bank's earnings have followed for several years.
Net interest income -- the money the bank makes on its basic lending businesses -- increased by 17.9 percent to $22.7 million during the second quarter.
Much of the increase was due to higher rates on the bank's one-year adjustable-rate mortgage portfolio, and to the inclusion of interest income from Shadow Lawn Savings Bank in New Jersey, which the bank acquired on April 2.
Other income from bank fees, service charges, mortgage banking operations, and the issuance of $125 million in securities backed by auto loans increased by 13.3 percent to $14.7 million.
Mortgage banking income accounted for $8.8 million of other income.
"On the whole, solid results in mortgage banking, automobile lending and our core retail banking operation offset reduced levels of activity in commercial real estate lending," Simon said.
Non-performing loans increased to 2.4 percent of the bank's $4.71 billion in assets, from 1.7 percent of assets at the end of the first quarter.
Most of the increase was due to the inclusion of non-performing assets from Shadow Lawn, which the bank had anticipated, Simon said.
The bank is trying to foreclose on several multifamily real estate projects built by a large developer in the southeast, it said.
Payments on its loans to the projects are past due, although payments to other lenders are up to date. The projects are earning money but the developer is in financial difficulty, and the bank believes that it should take action now to preserve the value of its investment.
"While this strategy may increase non-performing assets initially, our experience has been that by electing to take control of sound and marketable properties, we ultimately realize the highest end return to the bank and its shareholders," Simon said.
The bank also declared a regular quarterly dividend of 14 cents per share, payable July 25 to shareholders of record on July 10.