<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period ended June 30, 2000
Commission File Number 333-10639
---------
DELPHOS CITIZENS BANCORP, INC.
------------------------------
(Exact name of registrant as specified in its charter)
Delaware 34-1840187
-------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
114 East 3rd Street, Delphos, Ohio 45833
-----------------------------------------
(Address of principal executive offices)
(Zip Code)
(419) 692-2010
--------------
(Registrant's telephone number, including area code)
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 the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
Class: Outstanding at July 31,2000
Common stock, $0.01 par value 1,584,783 common shares
<PAGE>
DELPHOS CITIZENS BANCORP, INC.
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I - FINANCIAL INFORMATION (UNAUDITED)
Item 1. Financial Statements
Consolidated Statements of Financial Condition.................... 3
Consolidated Statements of Income................................. 4
Consolidated Statements of Comprehensive Income................... 5
Condensed Consolidated Statements of Cash Flows................... 6
Notes to Consolidated Financial Statements........................ 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............. 12
Item 3. Quantitative and Qualitative Disclosure About Market Risk... 16
PART II - OTHER INFORMATION
Item 1. Legal Proceedings........................................... 17
Item 2. Changes in Securities and Use of Proceeds................... 17
Item 3. Defaults Upon Senior Securities............................. 17
Item 4. Submission of Matters to a Vote of Security Holders......... 17
Item 5. Other Information........................................... 17
Item 6. Exhibits and Reports on Form 8-K............................ 17
SIGNATURES........................................................... 18
</TABLE>
2.
<PAGE>
DELPHOS CITIZENS BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
Item 1. Financial Statements
<TABLE>
<CAPTION>
June 30, September 30,
2000 1999
------------ ------------
<S> <C> <C>
ASSETS
Cash and amounts due from depository institutions $ 1,594,910 $ 2,853,171
Interest-bearing deposits in other financial institutions 468,798 847,106
------------ ------------
Total cash and cash equivalents 2,063,708 3,700,277
Securities available for sale 1,320,010 1,864,283
Securities held to maturity (Estimated fair value of
$6,116,368 in 2000 and $6,932,862 in 1999) 6,079,209 6,804,708
Federal Home Loan Bank stock 1,602,000 1,250,000
Loans, net 120,677,614 113,272,857
Premises and equipment, net 626,752 662,283
Accrued interest receivable 620,456 573,048
Other assets 109,499 100,110
------------ ------------
Total assets $133,099,248 $128,227,566
============ ============
LIABILITIES
Deposits $ 76,544,307 $ 76,840,590
Federal Home Loan Bank advances 30,000,000 25,000,000
Escrow accounts 193,668 306,750
Accrued interest payable 228,345 52,734
Other liabilities 388,099 540,085
------------ ------------
Total liabilities 107,354,419 102,740,159
------------ ------------
SHAREHOLDERS' EQUITY
Preferred Stock, no par value, 1,000,000 shares authorized,
none outstanding -- --
Common stock, $.01 par value, 4,000,000 shares authorized,
2,047,631 shares issued 20,476 20,476
Additional paid-in capital 20,155,875 20,055,178
Retained earnings 16,244,986 15,458,050
Treasury stock, at cost 462,848 at June 30, 2000
and 409,439 at September 30, 1999 (8,681,160) (7,746,503)
Unearned employee stock ownership plan shares (1,199,242) (1,271,197)
Unearned recognition and retention plan shares (764,211) (995,176)
Accumulated other comprehensive income (31,895) (33,421)
------------ ------------
Total shareholders' equity 25,744,829 25,487,407
------------ ------------
Total liabilities and shareholders' equity $133,099,248 $128,227,566
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
3.
<PAGE>
DELPHOS CITIZENS BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
----------------------- -----------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees $2,240,404 $1,989,802 $6,488,222 $5,836,706
Securities 140,095 174,810 434,541 583,179
FHLB stock dividends 27,405 16,482 72,601 49,880
Interest-bearing deposits 13,035 11,476 42,692 37,747
---------- ---------- ---------- ----------
2,420,939 2,192,570 7,038,056 6,507,512
---------- ---------- ---------- ----------
INTEREST EXPENSE
Deposits 931,647 887,213 2,702,045 2,757,285
FHLB advances 427,743 222,285 1,153,003 547,890
---------- ---------- ---------- ----------
1,359,390 1,109,498 3,855,048 3,305,175
---------- ---------- ---------- ----------
NET INTEREST INCOME 1,061,549 1,083,072 3,183,008 3,202,337
Provision for loan losses 9,000 9,000 27,000 21,000
---------- ---------- ---------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,052,549 1,074,072 3,156,008 3,181,337
---------- ---------- ---------- ----------
NONINTEREST INCOME
Service charges and fees 53,461 69,260 165,099 320,639
Gain on sale of real estate owned -- 8,532 -- 8,532
Other income 12,220 11,333 36,315 34,475
---------- ---------- ---------- ----------
65,681 89,125 201,414 363,646
---------- ---------- ---------- ----------
NONINTEREST EXPENSE
Compensation and benefits 348,672 256,871 807,933 744,511
Occupancy expense 23,262 24,480 79,676 76,829
Federal deposit insurance premiums 4,525 13,235 21,800 39,753
State franchise taxes 44,604 52,242 142,985 161,953
Other expenses 179,731 151,505 580,155 512,208
---------- ---------- ---------- ----------
600,794 498,333 1,632,549 1,535,254
---------- ---------- ---------- ----------
Income before income tax 517,436 664,864 1,724,873 2,009,729
Income tax expense 152,000 225,100 587,759 704,650
---------- ---------- ---------- ----------
NET INCOME $ 365,436 $ 439,764 $1,137,114 $1,305,079
========== ========== ========== ==========
Earnings per common share
Basic $.26 $.30 $.81 $.86
Diluted $.26 $.29 $.80 $.85
</TABLE>
See accompanying notes to consolidated financial statements.
4.
<PAGE>
DELPHOS CITIZENS BANCORP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
-------------------- -------------------------
2000 1999 2000 1999
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
NET INCOME $365,436 $439,764 $1,137,114 $1,305,079
Other comprehensive income (loss)
Unrealized holding gains (losses) on
available for sale securities
arising during the period 6,142 (20,428) 2,312 (40,202)
Tax effect (2,088) 6,946 (786) 13,669
-------- -------- ---------- ----------
Other comprehensive income (loss) 4,054 (13,482) 1,526 (26,533)
-------- -------- ---------- ----------
COMPREHENSIVE INCOME $369,490 $426,282 $1,138,640 $1,278,546
======== ======== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
5.
<PAGE>
DELPHOS CITIZENS BANCORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
June 30,
-----------------------------
2000 1999
------------ ------------
<S> <C> <C>
NET CASH FROM OPERATING ACTIVITIES $ 1,412,679 $ 1,516,667
CASH FLOWS FROM INVESTING ACTIVITIES
Securities available for sale
Proceeds from principal payments 545,462 2,430,404
Securities held to maturity
Proceeds from maturities and principal payments 734,829 1,761,781
Purchases of Federal Home Loan Bank stock (279,500) (92,300)
Net increase in loans (7,431,757) (11,326,652)
Premises and equipment expenditures (2,143) (54,717)
------------ ------------
Net cash from investing activities (6,433,109) (7,281,484)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposits (296,283) (1,296,467)
Net change in escrow accounts (113,082) (6,681)
Advances from FHLB 70,000,000 27,000,000
Principal payments on FHLB advances (65,000,000) (17,000,000)
Dividends on unallocated ESOP shares 62,327 --
Shares purchased under RRP -- (43,488)
Cash dividends paid (334,443) (310,511)
Purchase of treasury stock (934,658) (1,583,857)
------------ ------------
Net cash from financing activities 3,383,861 6,758,996
------------ ------------
Net change in cash and cash equivalents (1,636,569) 994,179
Cash and cash equivalents at beginning of period 3,700,277 1,618,326
------------ ------------
Cash and cash equivalents at end of period $ 2,063,708 $ 2,612,505
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 3,679,437 $ 3,312,762
Income taxes 903,549 691,702
</TABLE>
See accompanying notes to consolidated financial statements.
6.
<PAGE>
DELPHOS CITIZENS BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation: These interim consolidated financial statements are
prepared without audit and reflect all adjustments which, in the opinion of
management, are necessary to present fairly the financial position of Delphos
Citizens Bancorp, Inc. at June 30, 2000, and its results of operations and cash
flows for the periods presented. All such adjustments are normal and recurring
in nature. The accompanying consolidated financial statements have been
prepared in accordance with the instructions of Form 10-Q and, therefore, do not
purport to contain all necessary financial disclosures required by generally
accepted accounting principles that might otherwise be necessary in the
circumstances. The annual report for the Company for the year ended September
30, 1999, contains consolidated financial statements and related notes that
should be read in conjunction with the accompanying unaudited consolidated
financial statements.
Consolidation Policy: The consolidated financial statements include the
accounts of Delphos Citizens Bancorp, Inc. ("Delphos") and its wholly-owned
subsidiary, Citizens Bank of Delphos ("Bank"), together referred to as the
Company. All significant intercompany balances and transactions have been
eliminated.
Nature of Operations: The Company is engaged in the business of banking with
operations conducted through its office located in Delphos, Ohio. The Company
originates and holds primarily residential and consumer loans to customers
throughout the Allen and Van Wert County area in Northwest Ohio, which generates
the majority of the Company's income. The Company's primary deposit products
are interest-bearing checking accounts and certificates of deposit. There are
no branch operations.
Business Segment Information: While the Company's chief decision-makers monitor
the revenue streams of the Company's various products and services, operations
are managed and financial performance is evaluated on a company-wide basis.
Accordingly, all of the Company's banking operations are considered by
management to be aggregated in one reportable segment.
Use of Estimates: To prepare financial statements in conformity with generally
accepted accounting principals, management makes estimates and assumptions based
on available information. These estimates and assumptions affect the amounts
reported in the financial statements and the disclosures provided, and future
results could differ. The allowance for loan losses, fair values of financial
instruments and status of contingencies are particularly subject to change.
Income Taxes: Income tax expense is the sum of the current year income tax due
or refundable and the change in deferred tax assets and liabilities. Deferred
tax assets and liabilities are the expected future tax consequences of temporary
differences between the carrying amounts and tax bases of assets and
liabilities, computed using enacted tax rates. A valuation allowance, if
needed, reduces deferred tax assets to the amount expected to be realized.
Earnings Per Common Share: Basic earnings per common share is net income
divided by the weighted average number of shares outstanding during the period.
Employee Stock Ownership Plan ("ESOP") shares are considered to be outstanding
for this calculation unless unearned. Recognition and Retention Plan ("RRP")
shares are considered outstanding as they become vested. Diluted earnings per
common share includes the dilutive effect of RRP shares and the additional
potential common shares issuable under stock options.
7.
<PAGE>
DELPHOS CITIZENS BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
The factors used in the earnings per share computation were as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
------------------------ ------------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
BASIC EARNINGS PER COMMON SHARE
Net income $ 365,436 $ 439,764 $1,137,114 $1,305,079
========== ========== ========== ==========
Weighted average common shares
outstanding 1,584,783 1,670,938 1,590,246 1,716,042
Less: Average unallocated ESOP
shares (121,497) (131,091) (123,296) (133,498)
Less: Average nonvested RRP shares (54,692) (66,787) (57,871) (69,105)
---------- ---------- ---------- ----------
Average shares 1,408,594 1,473,060 1,409,079 1,513,439
========== ========== ========== ==========
Basic earnings per common share $ .26 $ .30 $ .81 $ .86
========== ========== ========== ==========
DILUTED EARNINGS PER COMMON SHARE
Net income $ 365,436 $ 439,764 $1,137,114 $1,305,079
========== ========== ========== ==========
Weighted average common shares
outstanding for basic earnings per
common shares 1,408,594 1,473,060 1,409,079 1,513,439
Add: Dilutive effects of average
nonvested RRP shares -- 7,070 -- 8,264
Add: Dilutive effects of stock options 136 16,988 9,525 18,966
---------- ---------- ---------- ----------
Average shares and dilutive potential
common shares 1,408,730 1,497,118 1,418,604 1,540,669
========== ========== ========== ==========
Diluted earnings per common share $ .26 $ .29 $ .80 $ .85
========== ========== ========== ==========
</TABLE>
Stock options for 117,225 and 5,097 shares of common stock were not considered
in computing diluted earnings per common share for the three and nine months
ended June 30, 2000 and 1999, as they were antidilutive.
8.
<PAGE>
DELPHOS CITIZENS BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Unaudited)
NOTE 2 - SECURITIES
The amortized cost and fair values of securities were as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Loss Value
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
June 30, 2000
Available for sale
Ginnie Mae Certificates $ 582,443 $ -- $(14,504) $ 567,939
Fannie Mae Certificates 785,893 -- (33,822) 752,071
---------- -------- -------- ----------
Total $1,368,336 $ -- $(48,326) $1,320,010
========== ======== ======== ==========
Held to maturity
Ginnie Mae Certificates $6,048,118 $ 85,251 $(49,108) $6,084,261
Freddie Mac Certificates 31,091 1,016 -- 32,107
---------- -------- -------- ----------
Total $6,079,209 $ 86,267 $(49,108) $6,116,368
========== ======== ======== ==========
September 30, 1999
Available for sale
Ginnie Mae Certificates $ 612,628 $ 1,928 $(11,486) $ 603,070
Fannie Mae Certificates 1,302,293 -- (41,080) 1,261,213
---------- -------- -------- ----------
Total $1,914,921 $ 1,928 $(52,566) $1,864,283
========== ======== ======== ==========
Held to maturity
Ginnie Mae Certificates $6,751,603 $156,048 $(29,891) $6,877,760
Freddie Mac Certificates 53,105 1,997 -- 55,102
---------- -------- -------- ----------
Total $6,804,708 $158,045 $(29,891) $6,932,862
========== ======== ======== ==========
</TABLE>
There were no sales of securities during the three and nine months ended June
30, 2000 or 1999.
9.
<PAGE>
DELPHOS CITIZENS BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Unaudited)
<TABLE>
<CAPTION>
NOTE 3 - LOANS
Loans were as follows:
June 30, September 30,
2000 1999
------------ -------------
<S> <C> <C>
Real estate loans
One- to four-family $105,637,111 $ 99,540,099
Multi-family 2,328,099 2,276,434
Commercial real estate 6,613,637 6,562,409
Construction and land 5,374,838 5,413,046
------------ ------------
119,953,685 113,791,988
Less:
Mortgage loans in process (4,100,260) (3,717,498)
Net deferred loan origination fees (23,660) (28,205)
------------ ------------
115,829,765 110,046,285
Consumer and other loans
Manufactured homes 81,468 116,985
Home equity loans 4,081,777 2,326,539
Unsecured loans 98,328 133,286
Other consumer loans 742,157 783,255
------------ ------------
5,003,730 3,360,065
Less: Allowance for loan losses (155,881) (133,493)
------------ ------------
$120,677,614 $113,272,857
============ ============
Activity in the allowance for loan losses was as follows:
Three Months Ended Nine Months Ended
June 30, June 30,
----------------- --------------------------
2000 1999 2000 1999
-------- ------- --------- ----------
Beginning balance $146,881 $124,968 $ 133,493 $ 118,360
Provision for loan losses 9,000 9,000 27,000 21,000
Recoveries -- -- 250 --
Charge-offs -- -- (4,862) (5,392)
-------- -------- --------- ----------
Ending balance $155,881 $133,968 $ 155,881 $ 133,968
======== ======== ========= ==========
</TABLE>
Loans considered impaired within the scope of SFAS No. 114 were not significant
at June 30, 2000 and September 30, 1999, and during the three and nine months
ended June 30, 2000 and 1999.
10.
<PAGE>
DELPHOS CITIZENS BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Unaudited)
NOTE 4 - SEVERANCE PLAN
The Board of Directors approved the Citizens Bank of Delphos Employee Severance
Compensation Plan to provide benefits to eligible employees in the event of a
change in control. Generally, eligible employees are those employees who have
completed twelve consecutive months of service with the Bank. Under the Plan,
participants terminated in conjunction with a change in control will be entitled
to receive a severance benefit equal to 1/26 of their annual compensation for
each year of service up to a maximum of 100% of the participants annual
compensation.
No compensation expense has been accrued for these plans during the nine months
ended June 30, 2000.
NOTE 5 - RECOGNITION AND RETENTION PLAN
In connection with the Company's 1997 Recognition and Retention Plan ("RRP"),
the Board of Directors granted 21,317 additional shares to certain officers and
directors of the Bank and Company. One-third of these shares vested
immediately with an additional one-third vesting in each of the next two years.
Compensation expense of $113,616 was recognized in the June 30, 2000 income
statement related to the immediate vesting of these shares.
11.
<PAGE>
DELPHOS CITIZENS BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following discusses the financial condition of the Company as of June 30,
2000, as compared to September 30, 1999, and the results of operations for the
three and nine month periods ended June 30, 2000, compared with the same periods
in 1999. This discussion should be read in conjunction with the interim
financial statements and footnotes included herein.
FORWARD LOOKING STATEMENTS
When used in this document, the words or phrases "will likely result," "are
expected to," "will continue," "is anticipated," "estimated," "projected," or
similar expressions are intended to identify "forward looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. Such
statements are subject to certain risks and uncertainties including changes in
economic conditions in the Bank's market area, change in policies by regulatory
agencies, fluctuations in interest rates, demand from historical earnings and
those presently anticipated or projected. Factors listed above could affect the
Company's financial performance and could cause the Company's actual results for
future periods to differ materially from any statements expressed with respect
to future periods.
The Company does not undertake, and specifically disclaims any obligation, to
publicly revise any forward looking statements to reflect events of
circumstances after the date of such statements or to reflect the occurrence of
anticipated or unanticipated events.
ANALYSIS OF FINANCIAL CONDITION
The Company's assets totaled $133.1 million at June 30, 2000, an increase of
$4.9 million, or 3.8%, from $128.2 million at September 30, 1999. The growth in
assets was primarily in loans partly offset by a decrease in securities and cash
and cash equivalents. Such growth was funded by FHLB advances.
At June 30, 2000, the Company's securities portfolio was comprised of Ginnie
Mae, Fannie Mae and Freddie Mac fixed and variable rate securities.
Approximately 17.8% of the securities portfolio was classified as available for
sale. The remainder of the securities portfolio was classified as held to
maturity as the Company does not anticipate the need to sell these securities
due to the Company's liquidity position and ability to obtain additional funds
through the use of FHLB advances. Management's strategy emphasizes the
investment in mortgage-backed securities guaranteed by U.S. government agencies
in order to minimize risk.
Net loans increased from $113.3 million at September 30, 1999 to $120.7 million
at June 30, 2000. The growth in loans was primarily in one- to four-family real
estate loans, which increased $6.1 million, or 6.1%, during the period. Growth
in total real estate loans is primarily related to growth in the Company's
market area. Changes in other types of loans were not significant.
Borrowings from the FHLB totaled $30.0 million at June 30, 2000, an increase of
$5.0 million from September 30, 1999. Management has used advances from the
FHLB as an alternative source of funds in order to continue to meet loan demand
and to leverage the Company's excess capital.
12.
<PAGE>
DELPHOS CITIZENS BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
Shareholders' equity totaled $25.7 million at June 30, 2000. Equity as a
percentage of assets decreased slightly from 19.9% at September 30, 1999 to
19.3% at June 30, 2000. The decrease was primarily the result of the Company
purchasing 53,409 shares of its common stock.
RESULTS OF OPERATIONS
Operating results of the Company are affected by general economic conditions,
monetary and fiscal policies of federal agencies and policies of agencies
regulating financial institutions. The Company's cost of funds is influenced by
interest rates on competing investments and general market rates of interest.
Lending activities are influenced by demand for real estate loans and other
types of loans which, in turn, is affected by the interest rates at which such
loans are made, general economic conditions and availability of funds for
lending activities.
The Company's net income is primarily dependent on its net interest income (the
difference between interest income generated on interest-earning assets and
interest expense incurred on interest-bearing liabilities). Net income is also
affected by provisions for loan losses, service charges, gains on sale of assets
and other income, noninterest expense and income taxes. The Company's net
income of $365,000 and $1,137,000 for the three and nine months ended June 30,
2000 represented decreases of $75,000 and $169,000 when compared to the same
periods in 1999. Basic earnings per share decreased $0.04 and $0.05 per share
from $0.30 and $0.86 per share for 1999 to $0.26 and $0.81 per share for 2000.
Net interest income is the largest component of the Company's income and is
affected by the interest rate environment and volume and composition of
interest-earning assets and interest-bearing liabilities. Net interest income
totaled $1,062,000 and $3,183,000 for the three and nine months ended June 30,
2000, compared to $1,083,000 and $3,202,000 for the same periods in 1999. The
Company remains liability sensitive, whereby its interest-bearing liabilities
will generally reprice more quickly than its interest-earning assets.
Therefore, the Company's net interest margin will generally increase in periods
of falling interest rates in the market and will decrease in periods of rising
interest rates. Accordingly, in a rising interest rate environment, the Company
may need to increase rates to attract and retain deposits. Due to the negative
gap position, the rise in interest rates may not have such an immediate impact
on interest-earning assets. This lag could negatively affect net interest
income in future periods.
Interest and fees on loans totaled $2,240,000 and $6,488,000 for the three and
nine months ended June 30, 2000 compared to $1,990,000 and $5,837,000 for the
three and six months ended June 30, 1999. The increase in interest and fees on
loans was due to an overall increase in the interest rate environment and higher
average loan balances related to the origination of new one- to four-family real
estate loans.
Interest and dividends on securities totaled $140,000 and $434,000 for the three
and nine months ended June 30, 2000, compared to $175,000 and $583,000 for the
same periods in 1999. The decrease was primarily due to a decrease in the
volume of securities held since the prior period as the majority of the proceeds
from principal payments have been reinvested in higher yielding loans.
Interest on deposits totaled $932,000 and $2,702,000 for the three and nine
months ended June 30, 2000, and $887,000 and $2,757,000 for the three and nine
months ended June 30, 1999. The Company increased the rates paid for the three
months ended June 30, 2000 in order to attract deposits. The overall decrease
resulted from a lower average cost of deposits for the year.
13.
<PAGE>
DELPHOS CITIZENS BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
Interest on FHLB advances was $428,000 and $1,153,000 for the three and nine
months ended June 30, 2000 compared to $222,000 and $548,000 for the three and
six months ended June 30, 1999. The Company has continued to increase its use
of FHLB advances as a means to fund loan growth and to leverage its excess
capital. As opportunities arise, the Company may make additional borrowings to
fund future loan demand.
The Company maintains an allowance for loan losses in an amount, which, in
management's judgment, is adequate to absorb probable losses inherent in the
loan portfolio. While management utilizes its best judgment and information
available, ultimate adequacy of the allowance is dependent on a variety of
factors, including performance of the Company's loan portfolio, the economy,
changes in real estate values and interest rates and the view of the regulatory
authorities toward loan classifications. The provision for loan losses is
determined by management as the amount to be added to the allowance for loan
losses after net charge-offs have been deducted to bring the allowance to a
level considered adequate to absorb probable losses in the loan portfolio. The
amount of the provision is based on management's regular review of the loan
portfolio and consideration of such factors as historical loss experience,
general prevailing economic conditions, changes in size and composition of the
loan portfolio and specific borrower considerations, including ability of the
borrower to repay the loan and the estimated value of the underlying collateral.
The provision for loan losses totaled $9,000 and $27,000 during the three and
nine months ended June 30, 2000, compared to $9,000 and $21,000 for the same
periods in 1999.
Noninterest income totaled $66,000 and $201,000 for the three and nine months
ended June 30, 2000, compared to $89,000 and $364,000 for the three and nine
months ended June 30, 1999. The decrease was primarily the result of increased
service charges and fees on loan accounts during the nine months ended June 30,
1999 resulting primarily from the number of loan customers refinancing their
loans due to the decrease in interest rates in the fourth quarter of 1998.
Noninterest expense totaled $601,000 and $1,633,000 for the three and nine
months ended June 30, 2000, compared to $498,000 and $1,535,000 for the same
periods in 1999. Noninterest expense is comprised of employee compensation and
benefits, occupancy, deposit insurance premiums, state franchise taxes and
miscellaneous other expenses. Compensation and benefits attributed to most of
the increase as a higher number of RRP shares vested in May 2000, requiring the
Company recognize additional compensation expense.
The change in income tax expense is primarily attributable to the change in net
income before income taxes. Income tax expense totaled $152,000 and $588,000,
or an effective rate of 30.3% and 34.4%, for the three and nine months ended
June 30, 2000, compared to $225,000 and $705,000, or an effective rate of 33.9%
and 35.1% for the three and nine months ended June 30, 1999.
14.
<PAGE>
DELPHOS CITIZENS BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
LIQUIDITY
Federally insured banks are required to maintain minimum levels of liquid
assets. The Bank is currently required to maintain an average daily balance of
liquid assets of at least 4% of the sum of its average daily balance of net
withdrawable deposit accounts and borrowings payable in one year or less. At
June 30, 2000, the Bank complied with this requirement with a liquidity ratio of
8.8%. Management considers this liquidity position adequate to meet its
expected needs for the foreseeable future.
CAPITAL RESOURCES
Savings institutions insured by the Federal Deposit Insurance Corporation are
required by federal law to meet three regulatory capital requirements. If a
requirement is not met, regulatory authorities may take legal or administrative
actions, including restrictions on growth or operations or, in extreme cases,
placing the institution in receivership or conservatorship.
The following table summarizes the Bank's regulatory capital requirements and
actual capital at June 30, 2000.
<TABLE>
<CAPTION>
Excess of actual
capital over current
Actual capital Current requirement requirement
------------------ -------------------- ------------------ Applicable
(Dollars in thousands) Amount Percent Amount Percent Amount Percent Asset Total
------- -------- -------- --------- ------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Tangible capital $15,850 11.9% $1,997 1.5% $13,853 10.4% $133,137
Core capital 15,850 11.9 3,994 3.0 11,856 8.9 133,137
Risk-based capital 16,006 21.9 5,836 8.0 10,170 13.9 72,944
</TABLE>
The Bank's tangible and core capital consists solely of shareholder equity.
Risk based capital consists of core capital plus general loan loss allowances
less certain assets required to be deducted.
At June 30, 2000, the Bank was considered well capitalized under Prompt
Corrective Action Regulations.
15.
<PAGE>
DELPHOS CITIZENS BANCORP, INC.
QUANTITATIVE AND QUALITATIVE DISCLOSURE
ABOUT MARKET RISK
Item 3. Quantitative and Qualitative Disclosure About Market Risk
There have been no material changes in the quantitative and qualitative
disclosures about market risk as of June 30, 2000, from that presented in the
Company's Annual Report on Form 10-K for the fiscal year ended September 30,
1999.
16.
<PAGE>
DELPHOS CITIZENS BANKCORP, INC.
PART II -- OTHER INFORMATION
Item 1 - Legal Proceedings
None
Item 2 - Changes in Securities and Use of Proceeds
None
Item 3 - Defaults Upon Senior Securities
None
Item 4 - Submission of Matter to a Vote of Security Holders
None
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit Number Description
-------------- -----------
3.1 Certificate of Incorporation of Delphos Citizens
Bancorp, Inc. (1)
3.2 Bylaws of Delphos Citizens Bancorp, Inc. (1)
4.0 Stock Certificate of Delphos Citizens Bancorp,
Inc. (1)
10.0 Delphos Citizens Bancorp, Inc. Employment Agreement
dated April 21, 1997 and First Amendment dated
December 20, 1999
10.1 Citizens Bank of Delphos - Employee Severance
Compensation Plan
11.0 Statement Re: Computation of Per Share Earnings (2)
27.0 Financial Data Schedule
(b) No current reports on Form 8-K were filed by the Registrant during the
quarter ended June 30, 2000.
(1) Incorporation herein by reference from the Exhibits to the Registration
Statement on Form S-1, as amended, filed on August 22, 1996, Registration
No. 333-10639.
(2) Incorporation herein by reference to Note 1 to the Consolidated Financial
Statements.
17.
<PAGE>
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.
DELPHOS CITIZENS BANCORP INC.
-----------------------------
(Registrant)
Date: August 14, 2000 /s/ Joseph R. Reinemeyer
--------------------------- -------------------------------------
Joseph R. Reinemeyer
President and Chief Executive Officer
(Principal Executive Officer)
18.
