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RCSB PROFITS DECLINE 8 PERCENT

Profits dipped by 8 percent at Rochester Community Savings Bank during its first quarter due to higher tax rates, but core earnings increased, the bank said Wednesday.

Net income for the quarter ended Feb. 28 was $8.3 million, or 44 cents per share, compared with $9 million, or 49 cents per share, in the same quarter a year earlier.

Income before taxes increased by 13 percent to $11.3 million from $10 million a year ago.

The bank had strong net interest income in the first quarter, while reducing its operating expenses and loan loss provisions. Those gains were offset by lower levels of noninterest income and a higher effective tax rate, it said.

"RCSB's net interest margin, a key profitability measure, gained strength and moved to an all-time high in an environment where bank margins have generally declined," said Leonard S. Simon, the bank's chairman, president and chief executive officer.

"We're also pleased with the level of this quarter's net income given the increase in our effective tax rate, the softness in mortgage banking income and the absence of securities sale gains this year," he added.

He noted that the bank had a smaller asset base in the first quarter than it did a year ago due to its sale of Shadow Lawn Savings Bank in New Jersey.

Net interest income was $30.3 million in the first quarter, down from $31.7 million a year ago.

The bank's net interest margin increased to a record 3.82 percent, up from 3.45 percent a year earlier. The interest rate spread also increased to 3.45 percent from 3.22 percent.

Improvements in the bank's asset quality and increased loan loss reserves allowed RCSB to reduce its provision for loan losses to $1.3 million from $5.8 million in 1994.

The ratio of non-performing assets to total assets was 0.89 percent, compared to 0.83 percent at the end of the previous fiscal year and 2.25 percent a year earlier.

Mortgage banking income plunged, declining 56.2 percent and contributing to a decline in noninterest income to $8.9 million from $20 million a year earlier. Also contributing to that decline were less retail banking income due to the sale of Shadow Lawn and the absence of securities sale gains.

Operating expenses also declined by 25.9 percent to $26.6 million due to the sale of Shadow Lawn.

Assets at the quarter's end were $3.39 billion, down from $3.92 billion a year earlier. Deposits were $2.08 billion, compared to $2.69 billion a year earlier.

Shareholders' equity increased to $350.8 million, or $18.81 per share, compared to $17.25 a year ago.

The bank also declared a quarterly dividend of 10 cents per share of common stock, payable May 1 to shareholders of record on April 15.

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