<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
450 5TH STREET
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- - EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
- - EXCHANGE ACT OF 1934
For the transition period from __________ to __________Commission File No.
0-27624
RELIANCE BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
Wisconsin 39-1834823
--------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3140 S 27th Street, Milwaukee Wisconsin 53215
--------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (414) 671-2222
Not applicable
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the 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.
(1) Yes X No .
- -
(2) Yes No X.
- -
Indicate the number of shares outstanding of the issuer's classes of common
stock as of the latest practicable date.
Class Outstanding September 30, 1997
----- ------------------------------
Common Stock, par value $1.00 per share 2,499,401 shares
<PAGE> 2
RELIANCE BANCSHARES, INC. AND SUBSIDIARY
FORM 10-QSB
FOR THE QUARTER ENDED SEPTEMBER 30, 1997
INDEX
<TABLE>
<CAPTION>
PAGE NO.
<S> <C>
PART I - Financial Information
Consolidated Statements of Financial Condition 1
Consolidated Statements of Income 2
Consolidated Statements of Stockholders' Equity 3
Consolidated Statements of Cash Flows 4 - 5
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of Financial Condition
and Results of Operations 7 - 9
PART II - Other Information 10
</TABLE>
<PAGE> 3
RELIANCE BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Financial Condition
(Dollars in Thousands)
<TABLE>
<CAPTION>
September 30 June 30,
1997 1997
------ ------
(Unaudited)
<S> <C> <C>
Assets:
Cash $ 650 $ 829
Cash equivalent interest-bearing deposits 1,944 2,219
Total cash and cash equivalents 2,594 3,048
Investments
Certificates of deposit - at cost 583 294
Investment securities available for sale,
at fair value 13,549 11,481
Investment securities held to maturity
(estimated market value of $2,006 at
September 30, 1997 and $3,202 at
June 30, 1997) 1,993 3,189
Mortgage-backed and related securities
(estimated market value of $567 at
September 30, 1997 and $732 at
June 30, 1997) 520 685
Federal Home Loan Bank stock - at cost 200 200
Loans receivable - net 27,035 27,601
Accrued interest receivable 194 182
Office properties and equipment 82 86
Prepaid expenses and other assets 237 243
--------- ----------
Total assets $ 46,987 $ 47,009
========= ==========
Liabilities and Equity:
Deposit accounts $ 17,702 $ 17,596
Borrowed funds 6,043 6,008
Income taxes:
Current 81 -
Deferred 210 197
Accrued and other liabilities:
Interest 24 32
Other 229 210
--------- ----------
Total liabilities 24,289 24,043
Commitments and contingencies - -
Stockholders' equity:
Common stock, $1.00 par value; 6,000,000 shares authorized;
2,562,344 shares issued 2,562 2,562
Additional paid-in-capital 9,975 9,947
Unearned ESOP compensation (449) (449)
Unrealized gain on securities available for sale, net of
applicable deferred income taxes 514 490
Retained earnings - substantially restricted 10,634 10,471
Treasury stock, at cost, 62,943 and 6,519 shares (538) (55)
--------- ----------
Total stockholders' equity 22,698 22,966
--------- ----------
Total liabilities and stockholders' equit $ 46,987 $ 47,009
========= ==========
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE> 4
RELIANCE BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Income
(Dollars in Thousands)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-----------------------
1997 1996
-------- --------
(Unaudited)
<S> <C> <C>
Interest and dividend income:
Mortgage loans $ 599 $ 521
Investment securities 239 295
Mortgage-backed and related securities 15 17
Other loans - -
Dividends on stock in Federal Home Loan Bank 3 3
--------- ----------
Total interest and dividends 856 836
--------- ----------
Interest expense:
Deposits and escrows 227 231
Notes payable and other borrowings 88 -
--------- ----------
Total interest expense 315 231
--------- ----------
Net interest income 541 605
Provision for loan losses 5 5
--------- ----------
Net interest income after provision for loan losses 536 600
--------- ----------
Noninterest income:
Gain (loss) on sale of investments (4) -
Other income - -
Loan fees and service charges 2 3
--------- ----------
Total noninterest income (2) 3
--------- ----------
Operating income 534 603
--------- ----------
Noninterest expense:
Compensation and benefits 160 100
Occupancy 7 7
Advertising 2 2
Furniture and equipment 1 7
Federal insurance premiums 3 156
Professional services 22 23
Data processing 18 17
Stationery, communications, and other operating 20 11
Directors' fees and expenses of directors, officers
and employees 20 23
--------- ----------
Total noninterest expense 253 346
--------- ----------
Income before income taxes 281 257
--------- ----------
Income taxes:
Current 121 101
Deferred (3) (3)
--------- ----------
Total income taxes 118 98
--------- ----------
Net income $ 163 $ 159
========= ==========
Net earnings per share $ 0.07 $ 0.06
--------- ----------
Weighted-average shares outstanding 2,452,142 2,465,957
========= ==========
Dividends per share $ 0.00 $ 0.00
========= ==========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 5
RELIANCE BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statement of Stockholders' Equity
(Dollars in Thousands)
<TABLE>
<CAPTION>
Unrealized
Gain (Loss)
on
Securities
Available
for Sale, Net
Additional Unearned of Applicable
Common Paid-in ESOP Deferred Retained
Stock Capital Compensation Income Taxes Earnings
----------- ------- ------------ ------------ --------
<S> <C> <C> <C> <C> <C>
Balances at June 30, 1997 $ 2,562 $ 9,947 $ (449) $ 490 $ 10,471
Net income - - - - 163
Purchase of treasury stock - - - - -
Amortization of unearned ESOP compensation - 28 - - -
Change in unrealized gain (loss) on securities
available for sale, net of applicable deferred
income taxes of $16,000 - - - 24 -
----------- ---------- ---------- ---------- ----------
Balances at September 30, 1997 $ 2,562 $ 9,975 $ (449) $ 514 $ 10,634
=========== ========== ========== ========== ==========
<CAPTION>
Total
Treasury Stockholders'
Stock Equity
-------- -------------
<S> <C> <C>
Balances at June 30, 1997 $ (55) $ 22,966
Net income - 163
Purchase of treasury stock (483) (483)
Amortization of unearned ESOP compensation - 28
Change in unrealized gain (loss) on securities
available for sale, net of applicable deferred
income taxes of $16,000 - 24
---------- ----------
Balances at September 30, 1997 $ (538) $ 22,698
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 6
RELIANCE BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Dollars in Thousands)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-------------------------
1997 1996
---------- -----------
(Unaudited)
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 163 $ 159
Adjustments to reconcile net income to net cash provided (used)
by operating activities:
Provision for depreciation 4 8
Provision for loan losses 5 5
Amortization of premiums, discounts and fees - net (25) (30)
ESOP expenses 28 15
Increase (decrease) in income taxes payable 81 66
Provision for (reduction of) deferred income taxes (3) (3)
(Increase) decrease in interest receivable (12) (69)
Net increase (decrease) in accrued/other liabilities 11 130
Net (increase) decrease in prepaid expense and
other assets 6 (1)
Loss (gain) on investments 4 -
--------- ----------
Net cash provided (used) by operating activities 262 280
Cash Flows from Investing Activities:
Purchases of Federal Home Loan Bank stock - -
Proceeds from sale of Federal Home Loan Bank stock - -
Proceeds from sale/maturities of investment securities 776 3,235
Purchase of investment securities (1,898) (4,180)
Net (increase) decrease in loans 583 (388)
Principal payments collected on mortgage-backed
securities 165 29
Purchase of fixed assets - -
Investment in real estate in judgment - -
Proceeds from real estate in judgment - -
--------- ----------
Net cash provided (used) by investing activities (374) (1,304)
Cash Flows from Financing Activities:
Repayments of short-term borrowing - -
Proceeds from short-term borrowing - -
Proceeds from securities sold under repurchase agreements 2,043 -
Payments on securities sold under repurchase agreements (2,008) -
Increase (decrease) in deposit accounts 106 42
Payment of cash dividend - -
Purchase of treasury stock (483) (283)
--------- ----------
Net cash provided (used) by financing activities (342) (241)
--------- ----------
Increase (decrease) in cash and cash equivalents (454) (1,265)
Cash and Cash Equivalents at beginning of period 3,048 4,055
--------- ----------
Cash and Cash Equivalents at end of period $ 2,594 $ 2,790
========= ==========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 7
RELIANCE BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Dollars in Thousands)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
------------------------
1997 1996
---------- -----------
(Unaudited)
<S> <C> <C>
Supplemental Cash Flow Information:
Cash paid during the period for:
Interest on deposit accounts $ 28 $ 49
Income taxes 109 80
Interest on borrowings 88 -
Noncash investing activities:
Loans transferred to foreclosed properties and real
estate in judgment - -
Total increase in unrealized gain on securities available
for sale 40 98
</TABLE>
Accounting Policies Note: Cash equivalents include demand deposits at other
financial institutions and the Federal Home Loan
Bank.
See accompanying notes to consolidated financial statements.
5
<PAGE> 8
RELIANCE BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited)
1. The information contained in the accompanying consolidated financial
statements is unaudited. In the opinion of management, the financial
statements contain all adjustments (none of which were other than normal
recurring entries) necessary for a fair statement of the results of
operations for the interim periods. The results of operations for the
interim periods are not necessarily indicative of the results which may be
expected for the entire fiscal year. The accompanying consolidated
financial statements should be read in conjunction with the consolidated
financial statements for the year ended June 30, 1997 contained in the
Annual Report to stockholders and as an exhibit filed with Form 10-KSB.
2. The Company initiated a stock repurchase program upon approval of the
FDIC of up to 5% of the common stock issued by the Company. During the
quarter ended September 30, 1997, the Company repurchased 56,424 shares of
common stock at an average price of $8.566 per share.
3. During the quarter ended September 30, 1997, the Bank reclassified its
investments in its Held-To-Maturity portfolio to its Available-For-Sale
portfolio.
4. Earnings per share are based on the weighted-average shares outstanding.
ESOP shares which have been committed to be released are considered
outstanding.
6
<PAGE> 9
RELIANCE BANCSHARES, INC. AND SUBSIDIARY
Management's Discussion and Analysis of
Financial Condition and Results of Operations
General
Reliance Bancshares, Inc. (Company) has no significant assets other than common
stock of Reliance Savings Bank (Bank), cash and cash equivalents, securities
and the loan to the ESOP. The Company's principal business is the business of
the Bank. Therefore, the information in the Management's Discussion and
Analysis of Financial Condition and Results of Operations relates to the Bank
and its operations.
Certain statements in this report which relate to the Company's plans,
objectives or future performance, may be deemed to be forward-looking
statements within the meaning of the Private Securities Litigation Act of 1996.
Such forward-looking statements includes words and phrases such as "will
likely result", "are expected to", "will continue", "is anticipated",
"estimate", "project", or similar expressions and various other statements
contained herein. Such statements are based on management's current
expectations. Actual strategies and results in future periods may differ
materially from those currently expected because of various risks and
uncertainties. Additional discussion of factors affecting the Company's
business and prospects is contained in periodic filings with the Securities and
Exchange Commission.
Lending Activities
The Bank originates first mortgage loans secured by one-to-four family
owner-occupied residences and residential construction loans within the Bank's
primary lending area. All of the Bank's first mortgage loans are originated
for the Bank's own loan portfolio. The Bank originated $3,147,000 mortgage
loans at an average rate of 8.77% during the three months ended September 30,
1997 compared to $3,535,000 at an average rate of 8.63% during the three months
ended September 30, 1996.
The Bank had $408,000 in commitments outstanding to originate mortgage loans at
September 30, 1997.
Liquidity and Capital Resources
The Bank's principal sources of funds are cash receipts from deposits,
principal collections on loans and mortgage-backed and related securities,
proceeds from maturities of securities, and net earnings. The Bank has an
agreement with the Federal Home Loan Bank to provide cash advances, should the
need for additional funds be required. The financial institution industry
historically has accepted interest rate risk as a part of its operating
philosophy. The Bank continues to actively manage its interest rate risk, with
strategies such as originating mortgage loans which permit adjustment to the
interest rate annually after an initial fixed-rate term of three years in order
to reduce inherent interest rate risk.
The Bank is required to maintain minimum amounts of capital to total
"risk-weighted" assets, as defined by the banking regulators. At September 30,
1997, the Bank is required to have a minimum 3% Tier 1 capital to total assets
ratio, a minimum 4% Tier 1 capital to risk-weighted assets ratio and a minimum
8% of qualifying total capital to risk-weighted assets ratio. The Bank's
actual ratios at that date were 46.44%, 68.18% and 70.47%, respectively.
Wisconsin-
7
<PAGE> 10
chartered savings banks are also required to maintain a minimum capital to
assets ratio of 6%. The Bank's capital exceeds all minimum standards required
by federal and state regulations.
For regulatory purposes, liquidity is measured as a ratio of cash and certain
investments to withdrawable deposits and short-term borrowings. The minimum
level of liquidity required by regulation is 8%. The Bank's liquidity ratio
was over 80% at September 30, 1997.
Financial Condition
Total assets decreased $22,000 to $46,987,000 at September 30, 1997 from
$47,009,000 at June 30, 1997. Investment securities increased $872,000 to
$15,542,000 at September 30, 1997 from $14,670,000 at June 30, 1997,
certificates of deposit increased $289,000 to $583,000 at September 30, 1997
from $294,000 at June 30, 1997 and cash and cash equivalent deposits decreased
$454,000 to $2,594,000 at September 30, 1997 from $3,048,000 at June 30, 1997.
The net increase in these items was offset by the $566,000 decrease in loans
receivable to $27,035,000 at September 30, 1997 from $27,601,000 at June 30,
1997.
Proceeds from the sale and maturity of securities were also used to fund loans
and purchase securities. An unrealized gain on securities available for sale,
net of tax effect, of $514,000 has been recognized as a component of
stockholders' equity at September 30, 1997. Stockholders' equity is expected
to increase or decrease in the future to the extent, net of income tax effect,
that the market value of securities held for sale increase or decrease.
Accrued interest on loans and securities increased and accrued interest on
certificates of deposit decreased due to timing of interest receipts. Other
assets and income taxes payable fluctuated due to timing of corporate income
tax payments.
Net Earnings
The Company had net earnings of $163,000 for the three months ended September
30, 1997 compared to net earnings of $159,000 for the three months ended
September 30, 1996. The primary reason for the improvement in net earnings was
due to increased income on loans and investment securities and decreased
federal insurance premiums, offset by increased interest expense on borrowings
and higher compensation and benefits.
The federal insurance premiums paid in September 1996 was a special one-time,
industry-wide assessment by the Federal Deposit Insurance Corporation (FDIC) to
recapitalize the Savings Association Insurance Fund (SAIF) at a rate of 65.7
basis points per $100 of SAIF-assessable deposits held as of March 31, 1995.
The special assessment resulted in an after-tax charge to net income of $87,000
or $0.04 per share, for the three months ended September 30, 1996.
Net Interest Income
Net interest income decreased from $605,000 for the three months ended
September 30, 1996 to $541,000 for the three months ended September 30, 1997.
The decrease in net interest income was due to increased interest expense on
borrowings partially offset by increased interest income on loans and decreased
interest income on investment securities. Interest income on loans increased
as a result of a higher portfolio average balance while interest income on
investment securities decreased as a result of a lower portfolio average
balance. Interest expense on borrowings increased due to the increase in
borrowings.
8
<PAGE> 11
Provision for Loan Losses
Provision for loan losses is based upon management's consideration of economic
conditions which may affect the ability of borrowers to repay the loans.
Management also reviews individual loans for which full collectibility may not
be reasonably assured and considers, among other matters, the risks inherent in
the Bank's portfolio and the estimated fair value of the underlying collateral.
This evaluation is ongoing and results in variations in the Bank's provision
for loan losses. There were no nonperforming loans at September 30, 1997 and
1996 respectively. As a result of this evaluation, the Bank's provision for
loan losses for the three months ended September 30, 1997 and 1996 amounted to
$5,000.
Noninterest Income
Noninterest income decreased from $3,000 for the three months ended September
30, 1996 to ($2,000) for the three months ended September 30, 1997.
Noninterest Expense
Noninterest expense decreased from $346,000 for the three months ended
September 30, 1996 to $253,000 for the three months ended September 30, 1997.
Deposit insurance premiums decreased from $156,000 for the three months ended
September 30, 1996 to $3,000 for the three months ended September 30, 1997.
The majority of this decrease was because of the special one-time FDIC
assessment of $144,000 made during the three months ended September 30, 1996.
Compensation and benefits increased from $100,000 for the three months ended
September 30, 1996 to $160,000 for the three months ended September 30, 1997
due to the implementation of the ESOP and the Management Retention Plan.
Income Taxes
Income taxes fluctuated due to the level of pre-tax earnings.
9
<PAGE> 12
RELIANCE BANCSHARES, INC. AND SUBSIDIARY
PART II - Other Information
Item 1 - Legal Proceedings
There are no material legal proceedings to which the Holding Company or
the Bank is a party or of which any of their property is subject. From
time to time, the Bank is a party to various legal proceedings incident to
its business.
Item 2 - Changes in Securities
None.
Item 3 - Defaults upon Senior Securities
Not applicable.
Item 4 - Submission of Matters to a Vote of Security Holders
None.
Item 5 - Other Information
None.
Item 6 - Exhibits and Reports on Form 8-K.
a) Exhibits: None.
b) Reports on Form 8-K: No reports on Form 8-K have been filed
during the quarter for which this report is filed.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RELIANCE BANCSHARES, INC.
(Registrant)
Date: October 30, 1997 BY: /s/ Allan T. Bach
--------------------------------------------
Allan T. Bach, Chairman of the Board,
President and Chief Executive Officer
(Principal Executive Officer)
Date: October 30, 1997 BY: /s/ Carol A. Barnharst
--------------------------------------------
Carol A. Barnharst, Vice President and
Chief Financial Officer (Principal Financial
and Accounting Officer)
10
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 650
<INT-BEARING-DEPOSITS> 1,944
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 13,549
<INVESTMENTS-CARRYING> 2,513
<INVESTMENTS-MARKET> 2,573
<LOANS> 27,035
<ALLOWANCE> 153
<TOTAL-ASSETS> 46,987
<DEPOSITS> 17,702
<SHORT-TERM> 6,043
<LIABILITIES-OTHER> 544
<LONG-TERM> 0
0
0
<COMMON> 2,562
<OTHER-SE> 20,136
<TOTAL-LIABILITIES-AND-EQUITY> 46,987
<INTEREST-LOAN> 599
<INTEREST-INVEST> 257
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 856
<INTEREST-DEPOSIT> 227
<INTEREST-EXPENSE> 315
<INTEREST-INCOME-NET> 541
<LOAN-LOSSES> 5
<SECURITIES-GAINS> (4)
<EXPENSE-OTHER> 253
<INCOME-PRETAX> 281
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 163
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
<YIELD-ACTUAL> 2.11
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 148
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 153
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 153
</TABLE>
