<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended March 31, 2000
--------------
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 number: 0-29400
INVESTORSBANCORP, INC.
(Exact name of registrant as specified in its charter)
Wisconsin 39-1854234
(State or other jurisdiction of incorporation) (I.R.S. Employer
Identification No.)
W239 N1700 Busse Road
Waukesha, Wisconsin 53188-1160
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (262) 523-1000
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
--- ---
As of May 12, 2000, the Issuer had 1,050,000 shares of $0.01 par value Common
Stock issued and outstanding.
<PAGE> 2
INVESTORSBANCORP, INC.
FORM 10-QSB INDEX
<TABLE>
<S> <C>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 2000 (Unaudited) and
December 31, 1999. . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Consolidated Statements of Income - For the Three Months
Ended March 31, 2000 and 1999 (Unaudited). . . . . . . . . . . . . . . . .4
Consolidated Statements of Changes in Shareholders' Equity - For the
Three Months Ended March 31, 2000 and 1999 (Unaudited) . . .. . . . . . . 6
Consolidated Statements of Cash Flows - For the Three Months Ended
March 31, 2000 and 1999 (Unaudited) . . . . . . . . . . . . . . . . . . .7
Notes to the Consolidated Financial Statements (Unaudited) .. . . . . . . 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . 18
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . .. . 18
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . . . 18
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . 18
Item 5 Other Information . . . . . . . . . . . . . . . . . . . . . . . . 18
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . 18
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
</TABLE>
2
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INVESTORSBANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
--------- ------------
2000 1999
---- ----
<S> <C> <C>
ASSETS
Cash and due from banks $ 2,663,293 $ 2,281,184
Available for sale securities 5,460,000 6,260,000
Mortgage loans held for sale 758,600 566,100
Loans, less allowance for loan losses of $810,928 and
$770,773, respectively 80,287,728 76,306,547
Furniture and equipment, net 84,261 93,478
Accrued interest receivable and other assets 1,083,227 1,001,192
------------ ------------
TOTAL ASSETS $ 90,337,109 $ 86,508,501
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Deposits:
Demand $ 6,429,471 $ 4,273,423
Savings and NOW accounts 39,480,049 42,895,527
Time 33,343,091 29,619,256
------------ ------------
TOTAL DEPOSITS 79,252,611 76,788,206
Federal funds purchased 2,450,000 925,000
Accrued interest payable and other liabilities 791,735 1,128,395
------------ ------------
TOTAL LIABILITIES 82,494,346 78,841,601
------------ ------------
SHAREHOLDERS' EQUITY:
Preferred stock, $0.01 par value; 1,000,000 shares
authorized, -0- shares issued and outstanding - -
Common stock, $0.01 par value; 9,000,000 shares
authorized, 1,050,000 shares issued and outstanding 10,500 10,500
Surplus 7,316,900 7,316,900
Retained earnings 515,363 339,500
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 7,842,763 7,666,900
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 90,337,109 $ 86,508,501
============ ============
</TABLE>
3
<PAGE> 4
INVESTORSBANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
MARCH 31,
---------
2000 1999
---- ----
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 1,674,363 $ 948,456
Interest on investment securities 71,925 193,748
Interest on federal funds sold 12,107 31,194
----------- ---------
TOTAL INTEREST INCOME 1,758,395 1,173,398
INTEREST EXPENSE:
Interest on deposits 1,030,167 671,268
Interest on federal funds purchased 6,222 -
----------- ---------
TOTAL INTEREST EXPENSE 1,036,389 671,268
NET INTEREST INCOME BEFORE PROVISION FOR
LOAN LOSSES 722,006 502,130
Provision for loan losses 40,155 107,769
----------- ---------
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES 681,851 394,361
----------- ---------
NONINTEREST INCOME:
Service charges on deposit accounts 12,564 6,978
Service release premiums 90,737 191,703
Management service fees 237,707 213,411
Other income 12,954 32,020
----------- ---------
TOTAL NONINTEREST INCOME 353,962 444,112
----------- ---------
NONINTEREST EXPENSE:
Salaries and employee benefits 582,539 469,083
Occupancy expenses 22,639 21,540
Equipment expenses 17,860 13,071
Other expenses 133,373 124,568
----------- ---------
TOTAL NONINTEREST EXPENSE 756,411 628,262
----------- ---------
INCOME BEFORE INCOME TAXES 279,402 210,211
Income tax expense (benefit) 103,539 80,250
----------- ---------
INCOME BEFORE CUMULATIVE EFFECT OF A
CHANGE IN ACCOUNTING PRINCIPLE 175,863 129,961
----------- ---------
Cumulative effect of expensing start-up costs
as incurred, net of income taxes - 111,713
----------- ---------
NET INCOME $ 175,863 $ 18,248
=========== =========
</TABLE>
4
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INVESTORSBANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
MARCH 31,
---------
2000 1999
---- ----
<S> <C> <C>
PER SHARE AMOUNTS:
BASIC EARNINGS PER SHARE:
Income before cumulative effect of a change in
accounting principle $ 0.17 $ 0.13
Cumulative effect of expensing start-up
costs as incurred - (0.11)
---------- ----------
Net income $ 0.17 $ 0.02
========== ==========
DILUTED EARNINGS PER SHARE:
Income before cumulative effect of a change in
accounting principle $ 0.17 $ 0.13
Cumulative effect of expensing start-up
costs as incurred - (0.11)
---------- ---------
Net income $ 0.17 $ 0.02
========== =========
</TABLE>
5
<PAGE> 6
INVESTORSBANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
RETAINED TOTAL
COMMON EARNINGS SHAREHOLDERS'
STOCK SURPLUS (DEFICIT) EQUITY
----- ------- --------- ------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1998 $ 10,000 $6,979,900 $ 194,341 $7,184,241
Net income for first three months of 1999 -- -- 18,248 18,248
---------- ---------- ---------- ----------
BALANCE, March 31, 1999 $ 10,000 $6,979,900 $ 212,589 $7,202,489
========== ========== ========== ==========
BALANCE, December 31, 1999 $ 10,500 $7,316,900 $ 339,500 $7,666,900
Net income for first three months of 2000 -- -- 175,863 175,863
---------- ---------- ---------- ----------
BALANCE, March 31, 2000 $ 10,500 $7,316,900 $ 515,363 $7,842,763
========== ========== ========== ==========
</TABLE>
6
<PAGE> 7
INVESTORSBANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $ 175,863 $ 18,248
Adjustments to reconcile net income to net cash
net cash used in operating activities
Depreciation 10,383 10,043
Provision for loan loss 40,155 107,769
Benefit for deferred taxes -- (53,100)
Net (increase) decrease in mortgage loans held for sale (192,500) 2,232,657
(Increase) decrease in assets:
Interest receivable (53,727) (35,725)
Other assets (28,308) 347,167
Increase (decrease) in liabilities:
Accrued interest 112,832 (122,734)
Taxes payable (396,443) (47,337)
Other liabilities (53,049) (162,303)
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES (384,794) 2,294,685
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase in federal funds sold -- (2,560,000)
Net increase in federal funds purchased 1,525,000 --
Proceeds from sales of available for sale securities 2,525,000 7,180,000
Purchase of available for sale securities (1,725,000) (3,195,000)
Proceeds from maturity of held to maturity securities -- 3,980,493
Purchase of furniture and equipment (1,166) (6,118)
Net increase in loans (4,021,336) (10,776,795)
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (1,697,502) (5,377,420)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 2,464,405 4,364,227
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,464,405 4,364,227
------------ ------------
Net increase in cash and due from banks 382,109 1,281,492
Cash and due from banks, beginning of period 2,281,184 1,049,145
------------ ------------
CASH AND DUE FROM BANKS, END OF PERIOD $ 2,663,293 $ 2,330,637
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 917,335 $ 794,002
============ ============
Income taxes $ 499,982 $ 108,670
============ ============
</TABLE>
7
<PAGE> 8
INVESTORSBANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
(UNAUDITED)
NOTE 1. ORGANIZATION
InvestorsBancorp, Inc. (the "Company") was incorporated under Wisconsin law on
June 12, 1996, to be the holding company of InvestorsBank, a Wisconsin state
bank located in Pewaukee, Wisconsin (the "Bank"). The Bank commenced business on
September 8, 1997.
NOTE 2. ACCOUNTING POLICIES
Basis of Presentation - The accompanying unaudited consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial information and the instructions to Form
10-QSB. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management of the Company, all adjustments
necessary to present fairly the financial position as of March 31, 2000 and
December 31, 1999 and the results of operations and cash flows for the three
months ended March 31, 2000 and 1999 have been made. Such adjustments consisted
only of normal recurring items. Operating results for the three months ended
March 31, 2000 are not necessarily indicative of the results that may be
expected for the year ended December 31, 2000. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted.
The accounting policies followed by the Company are set forth in Note 1 to the
Company's consolidated financial statements contained in the Company's 1999
Annual Report on Form 10-KSB. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1999.
Principles of Consolidation - The consolidated financial statements as of and
for the period presented include the accounts of the Company and the Bank, its
wholly owned subsidiary. All significant intercompany accounts and transactions
have been eliminated in the consolidated financial statements.
NOTE 3. SUBSEQUENT EVENT
On April 28, 2000, the Company borrowed $2,500,000 from Bando McGlocklin Capital
Corporation pursuant to an unsecured note which bears interest at a fixed rate
of 11% per year through its maturity. Interest is payable quarterly with the
principal amount of the note due on April 30, 2010.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion provides additional analysis of the financial
statements and should be read in conjunction with this information. This
discussion focuses on significant factors that affected the Company's earnings
for the periods ended March 31, 2000 and 1999. As of March 31, 2000 and 1999,
the Bank was the only subsidiary of the Company and its operations contributed
all of the revenue and expenses.
Results of Operations
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND MARCH 31, 1999
During the quarter ended March 31, 2000, the Company reported net income of
$176,000, or $0.17 per share, as compared to net income of $18,000, or $0.02 per
share for the quarter ended March 31, 1999. Net income as of March 31, 1999
included the cumulative effect of a change in accounting principle that totaled
$112,000 after income taxes. Income before the cumulative effect of a change in
accounting increased 35%. This enhanced profitability was primarily attributable
to a 31% increase in average earning assets.
Net Interest Income
Net interest income is the difference between interest income, including fees on
loans, and interest expense, and is the largest contributing factor to net
income for the Company. Total net interest income increased 44% to $722,000 for
the quarter ended March 31, 2000 from $502,000 for the quarter ended March 31,
1999. Significantly higher loan volumes resulted in a 77% increase in interest
and fee income on loans which totaled $1.7 million for the three months ended
March 31, 2000 compared to $948,000 for the three months ended March 31, 1999.
The majority of interest income on loans was derived from the commercial and
commercial real estate loan portfolios which, in the aggregate, comprised
approximately 79% of total loans at March 31, 2000. Interest earned on
investment securities and federal funds sold totaling $72,000 and $12,000,
respectively, were the other components of interest income. While the direction
of future interest rates, competition, and other factors may have a significant
impact, management anticipates interest income will continue to increase
proportionately with the growth of the loan portfolio and other investments.
Interest expense similarly increased 49% to $1.0 million for the quarter ended
March 31, 2000 from $671,000 for the quarter ended March 31, 1999. Interest
expense consisted predominantly of interest paid on money market accounts
totaling $541,000 and certificates of deposit totaling $472,000 for the quarter
ended March 31, 2000. Interest expense is anticipated to continue to rise in the
near future as management expects these deposit instruments will remain the
primary funding sources utilized by the Company to fund additional growth.
9
<PAGE> 10
Provision for Loan Losses
The allowance for loan losses increased 5% to $811,000 as of March 31, 2000 from
$771,000 as of December 31, 1999. The allowance for loan losses is established
through a provision for loan losses charged to expense. A loan loss provision of
$40,000 was expensed in the quarter ended March 31, 2000 as compared to $108,000
during the three months ended March 31, 1999. The allowance for loan losses
remained at approximately 1.00% of total loans, net of residential mortgage
loans held for sale on the secondary market.
Loans are charged against the allowance for loan losses when management believes
that the collectibility of the principal is unlikely. The allowance is an amount
that management believes will be adequate to absorb possible losses on existing
loans that may become uncollectible, based on evaluation of the collectibility
of loans and prior loan loss experience. The evaluations take into consideration
such factors as changes in the nature and volume of the loan portfolio, overall
portfolio quality, review of specific problem loans, and current economic
conditions that may affect the borrower's ability to pay. While management uses
the best information available to make its evaluation, future adjustments to the
allowance may be necessary if there are significant changes in economic
conditions. Impaired loans are measured based on the present value of expected
future cash flows discounted at the loan's effective interest rate or, as a
practical expedient, at the loan's observable market price or the fair value of
the collateral if the loan is collateral dependent. A loan is impaired when it
is probable the creditor will be unable to collect all contractual principal and
interest payments due in accordance with the terms of the loan agreement.
There were no loan charge-offs or recoveries, nor any impaired loans during 1999
or the first three months of 2000. While a comprehensive analysis of the
allowance for loan losses is somewhat difficult due to the Company's relatively
short operating history, management believes that the allowance was at an
adequate level at March 31, 2000 based on the composition of the portfolio as
well as regulatory guidelines.
Non-Interest Income and Expenses
Non-interest income for the quarter ended March 31, 2000 totaled $354,000 as
compared to $444,000 for the quarter ended March 31, 1999, a 20% decrease. The
majority of the decrease was the result of service release fees decreasing to
$91,000 for the quarter ended March 31, 2000 compared to $192,000 for the
quarter ended March 31, 1999. Service release fees are from the sale of
residential mortgages sold in the secondary market. Due to the rising long-term
interest rates, there were fewer individuals refinancing their current mortgages
during the first quarter of 2000 as compared to the first quarter of 1999.
Management service fees totaled $238,000 for the quarter ended March 31, 2000
compared to $213,000 for the quarter ended March 31, 1999. The Company charges
Bando McGlocklin Capital Corporation (BMCC), the former principal shareholder of
the Company, a management fee for salaries and employee benefits of common
management, as well as a loan servicing fee based on total loans and leases
under management. As of March 31, 2000, the Company had BMCC loans under
management totaling $118.2 million and leased properties of $31.4 million.
Service charges and other income were $26,000 compared to $39,000 for the same
periods.
10
<PAGE> 11
Non-interest expense increased 20% to $756,000 for the three months ended March
31, 2000 as compared to $628,000 for the three months ended March 31, 1999. The
increase was primarily due to salaries and employee benefits expense increasing
$114,000 due to additional employees and regular compensation increases. During
the quarter ended March 31, 2000, the Company had an average of 26 full time
equivalent employees compared to an average of 22 full time equivalents for the
prior year's first quarter. Salaries and employee benefits totaled $583,000 and
$469,000 for the three months ended March 31, 2000 and 1999, respectively. These
amounts include salaries that were reimbursed through the management service fee
noted above. The other operating expenses, which included occupancy and fixed
asset expense, data processing fees, advertising, investor communications, and
professional fees, increased $14,000.
Amounts provided for income tax expense or benefit are based on income reported
for financial statement purposes and do not necessarily represent amounts
currently payable under tax laws. Deferred income tax assets and liabilities are
computed quarterly for differences between the financial statement and tax basis
of assets and liabilities that will result in taxable or deductible amounts in
the future based on enacted tax laws and rates applicable to the periods in
which the differences are expected to affect taxable income. As changes in tax
laws or rates are enacted, deferred tax assets and liabilities are adjusted
through the provision for income taxes. The differences are related principally
to tax exempt interest income, allowance for loan losses, depreciation, and
operating loss carryforwards that will be used to offset future net operating
income.
For the quarter ended March 31, 2000, the Company recorded federal and state
income tax expense of $104,000. The Company also has a deferred tax asset of
$294,000. For the quarter ended March 31, 1999, the Company recorded a federal
and state income tax expense of $80,000 and had a deferred tax asset of
$147,000. Management believes it is more likely than not that the deferred tax
asset will be fully realized. The effective rate for the expense for income
taxes for the quarter ended March 31, 2000 was 37%.
FINANCIAL CONDITION
Assets
The Company reported total assets of $90.3 million as of March 31, 2000 versus
$86.5 million as of December 31, 1999, a 4% increase. Cash and due from banks
increased to $2.7 million as of March 31, 2000 from $2.3 million at December 31,
1999. The Company's investment securities portfolio decreased to $5.5 million as
of March 31, 2000 from $6.3 million at year end. The $800,000 decrease in the
investment portfolio was the result of funding loan commitments in the first
three months of 2000. As of March 31, 2000, investment securities consisted of
taxable variable rate demand notes secured by irrevocable letters of credit from
federally insured, domestic financial institutions. Although the notes have a
long term maturity structure, the interest rate is adjustable weekly and the
holder has the option to liquidate the security at 100% of par value within
seven days upon proper notice. These instruments provide the Company with ready
liquidity to provide for loan funding requirements. Management believes that the
investment portfolio is adequately diversified.
11
<PAGE> 12
Loans continued to grow during the quarter. As of March 31, 2000, loans rose 5%
to $81.1 million compared to $77.1 million as of December 31, 1999. While most
of the growth occurred in the commercial, industrial and commercial real estate
segments of the loan portfolio, residential real estate loans, including home
equity credit facilities, also grew considerably. It is management's focus to
grow the loan portfolio as much as possible. For the funding source of this loan
growth, the Company does not rely solely on its liquid assets, such as
investments. The Company has access to various off-balance sheet sources. As of
March 31, 2000, the Company had $759,000 of loans held for sale. As of December
31, 1999, residential mortgage loans originated for sale on the secondary market
totaled $566,000. Excluding the mortgage loans originated for sale, the
allowance for loan losses remained at approximately 1.00% of gross loans,
totaling $811,000 at March 31, 2000 and $771,000 at year end 1999. In addition
to loans outstanding, the Company had unfunded loan commitments totaling $27.5
million as of March 31, 2000, although the Company intends to participate
approximately $8.6 million of those loans to BMCC and other third party lenders.
Loan demand continues to remain strong for both commercial and residential loans
in the Company's trade area. Despite the recent increase in residential loan
rates, the Company has continued to increase its volume of residential loans and
to grow its market share.
Other assets at March 31, 2000 totaled $1.2 million compared to $1.1 million at
December 31, 1999. Other assets at March 31, 2000 included net furniture and
equipment of $84,000, accrued interest receivable on loans and investments of
$539,000, excess servicing assets of $122,000 relating to loans sold to a third
party, deferred tax assets of $294,000 and other miscellaneous assets of
$129,000.
Liabilities
Total deposits increased 3% to $79.3 million at March 31, 2000 from $76.8
million as of year end 1999. Indexed money market accounts comprised the largest
portion of the deposit base totaling $38.1 million as of March 31, 2000 compared
to $41.5 million as of December 31, 1999. Time certificates of deposit increased
to $33.3 million compared to $29.6 million as of year end. Time deposits
included retail brokered deposits with maturities ranging from 1 to 3 years of
$7.1 million and $9.6 million as of March 31, 2000 and December 31, 1999,
respectively. In order for the Company to facilitate continued loan growth,
management expects to continue to aggressively market and competitively price
its money market and certificate of deposit products. Other deposits outstanding
as of March 31, 2000 included non-interest bearing accounts totaling $6.4
million and interest bearing checking accounts (NOW accounts) of $1.4 million.
Other liabilities increased to $3.2 million as of March 31, 2000 from $2.1
million at December 31, 1999. Federal funds purchased increased to $2.5 million
from $925,000 at year end. Other liabilities as of March 31, 2000 consisted
primarily of accrued interest payable totaling $603,000, as well as accrued
expenses payable of $19,000, retained loan discount relating to loans sold to a
third party totaling $107,000, and other miscellaneous liabilities of $62,000.
12
<PAGE> 13
CAPITAL RESOURCES
Capital ratios applicable to the Bank and the Company at March 31, 2000 and
December 31, 1999 are as follows:
<TABLE>
<CAPTION>
Total Tier I
Risk-based Risk-based Leverage
Capital Capital Ratio
------- ------- -----
<S> <C> <C> <C>
Regulatory Capital Requirements:
Minimum 8.0% 4.0% 4.0%
Well-capitalized 10.0% 6.0% 5.0%
At March 31, 2000
Bank 10.7% 9.7% 9.1%
Company 10.7% 9.7% 9.1%
At December 31, 1999
Bank 11.1% 10.0% 9.4%
Company 11.1% 10.0% 9.4%
</TABLE>
Management intends to maintain capital levels well in excess of minimums
established by the regulatory authorities. The Bank has committed to the FDIC
that the ratio of Tier I capital to total assets will not be less than 8% for
the first three years of operations commencing September 8, 1997.
The application for a bank charter and for federal deposit insurance stated that
the Bank would retain its earnings during the first three years of operation. As
such, no dividends will be paid by the Company to the shareholders during that
period. The Company expects that all earnings will be retained to finance the
growth of the Company and the Bank and that no cash dividends will be paid for
the foreseeable future.
Liquidity
The liquidity of a financial institution reflects its ability to provide funds
to meet loan requests, accommodate possible deposit withdrawals, and take
advantage of interest rate market opportunities in a cost effective manner.
Although primary sources of funds are deposits and repayment of loan principal,
the Company maintains a significant level of liquid assets to provide for
potential funding needs. In addition to cash balances as of March 31, 2000, the
Company held $5.5 million of marketable securities and $759,000 of residential
mortgage loans originated and intended for sale in the secondary market. Should
an immediate need for funds arise, these assets may be readily liquidated with
nominal risk of principal loss.
Additionally, the Company has access to various alternative sources of funds
including the purchase of federal funds from correspondent banks, the sale of
commercial loans, and the
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<PAGE> 14
acquisition of brokered deposits. Currently, the Company has correspondent
banking relationships with four institutions which collectively have approved
federal funds lines for the Bank totaling $7.5 million. The Company also has the
ability to sell loan participations to correspondents and affiliates. Further,
the Company has the ability to acquire funds via the brokered certificate of
deposit market. Management has periodically purchased certificates of deposit
through approved brokers as market conditions dictate to fill funding gaps.
Finally, the Bank has a $2.0 million revolving line of credit with one of its
correspondent banks. There was no outstanding balance on the note as of March
31, 2000. Management believes that current liquidity levels are sufficient to
meet anticipated loan demand, as well as absorb deposit withdrawals.
Asset/Liability Management
The primary function of asset/liability management is to identify, measure and
control the extent to which changes in interest rates, commodity prices or
equity prices adversely affect a financial institution's earnings or economic
capital. The Company's strategy is to optimize and stabilize net income across a
wide range of interest rate cycles while maintaining adequate liquidity and
conforming to all applicable capital and other regulatory requirements.
Changes in net interest income, other than volume related changes, arise when
interest rates on assets reprice in a time frame or interest rate environment
that is different from the repricing period for liabilities. Changes in net
interest income also arise from changes in the mix of interest earning assets
and interest bearing liabilities.
In the normal course of business, the Company engages in off-balance sheet
activity to hedge interest rate risk. As of March 31, 2000, the Company had one
interest rate swap agreement outstanding with a notional value totaling $3.0
million structured as a hedge of specific fixed-rate deposits whose terms
coincide with the terms of the swap agreement. The swap agreements are
structured so that the Company receives a fixed interest rate and pays a
variable rate which is based on the federal funds rate. These instruments allow
management to more closely balance the repricing opportunities of the Company's
assets and liabilities, and thereby, reduce potential rate risk exposure.
The Company does not expect to experience any significant fluctuations in its
net interest income as a consequence of changes in interest rates.
Unlike most industries, virtually all of the assets and liabilities of the
Company are monetary in nature. As a result, interest rates have a more
significant impact on the Company's performance and results of operations than
the effect of general levels of inflation. Interest rates do not necessarily
move in the same direction or magnitude as the prices of goods and services as
measured by the Consumer Price Index. As discussed previously, the Company's
interest rate gap position in conjunction with the direction of the movement in
interest rates is an important factor in the Company's operating results.
14
<PAGE> 15
RECENT REGULATORY DEVELOPMENTS
On November 12, 1999, President Clinton signed legislation that will allow bank
holding companies to engage in a wider range of nonbanking activities, including
greater authority to engage in securities and insurance activities. Under the
Gramm-Leach-Bliley Act (the "Act"), a bank holding company that elects to become
a financial holding company may engage in any activity that the Board of
Governors of the Federal Reserve System (the "Federal Reserve"), in consultation
with the Secretary of the Treasury, determines by regulation or order is
financial in nature, incidental to any such financial activity, or complementary
to any such financial activity and does not pose a substantial risk to the
safety or soundness of depository institutions or the financial system
generally. The Act specifies certain activities that are deemed to be financial
in nature, including lending, exchanging, transferring, investing for others, or
safeguarding money or securities; underwriting and selling insurance; providing
financial, investment, or economic advisory services; underwriting, dealing in
or making a market in, securities; and any activity currently permitted for bank
holding companies by the Federal Reserve under Section 4(c)(8) of the Bank
Holding Company Act. A bank holding company may elect to be treated as a
financial holding company only if all depository institutions subsidiaries of
the holding company are well-capitalized, well-managed and have at least a
satisfactory rating under the Community Reinvestment Act.
National banks are also authorized by the Act to engage, through "financial
subsidiaries", in any activity that is permissible for financial holding
companies (as described above) and any activity that the Secretary of the
Treasury, in consultation with the Federal Reserve, determines is financial in
nature or incidental to any such financial activity, except (i) insurance
underwriting, (ii) real estate development or real estate investment activities
(unless otherwise expressly permitted by law), (iii) insurance company portfolio
investments and (iv) merchant banking. The authority of a national bank to
invest in a financial subsidiary is subject to a number of conditions,
including, among other things, requirements that the bank must be well-managed
and well-capitalized (after deducting from capital the bank's outstanding
investments in financial subsidiaries). The Act provides that state banks may
invest in financial subsidiaries (assuming they have the requisite investment
authority under applicable state law) subject to the same conditions that apply
to national banks.
Various bank regulatory agencies have begun issuing regulations as mandated by
the Act. The Federal Reserve has issued an interim regulation establishing
procedures for bank holding companies to elect to become financial holding
companies. In addition, the Federal Reserve has issued interim regulations
listing the financial activities permissible for financial holding companies and
describing the parameters under which financial holding companies may engage in
securities and merchant banking activities. The Federal Deposit Insurance
Corporation has issued an interim regulation regarding the parameters under
which state nonmember banks may conduct activities through subsidiaries that
national banks may conduct only in financial subsidiaries. In addition, all
federal bank regulatory agencies have jointly issued a proposed regulation that
would implement the privacy provisions of the Act. At this time, it is not
possible to predict the impact the Act and its implementing regulations may have
on the Company. As of the date of this filing, the Company has not applied for
or received approval to operate as a
15
<PAGE> 16
financial holding company. In addition, the Bank has not applied for or received
approval to establish financial subsidiaries.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This report contains certain forward looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Exchange Act. The Company intends such forward-looking statements to be covered
by the safe harbor provisions for forward-looking statements contained in the
Private Securities Reform Act of 1995, and is including this statement for
purposes of these safe harbor provisions. Forward-looking statements, which are
based on certain assumptions and describe future plans, strategies and
expectations of the Company, are generally identifiable by the use of the words
"believe", "expect", "intend", "anticipate", "estimate", "project" or similar
expressions. The Company's ability to predict results or the actual effect of
future plans or strategies is inherently uncertain. Factors which could have a
material adverse affect on the operations and future prospects of the Company
and the subsidiaries include, but are not limited to, changes in interest rates,
general economic conditions guidelines, including the condition of the local
real estate market, legislative/regulatory changes, monetary and fiscal policies
of the U.S. Government, including policies of the U.S. Treasury and the Federal
Reserve Board, the quality or composition of the loan or investment portfolios,
demand for loan products, deposit flows, competition, demand for financial
services in the Company's market area, our implementation of new technologies,
our ability to develop and maintain secure and reliable electronic systems and
accounting principles and policies. These risks and uncertainties should be
considered in evaluating forward-looking statement and undue reliance should not
be placed on such statements.
16
<PAGE> 17
DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY
AVERAGE BALANCE SHEETS
<TABLE>
<CAPTION>
FOR THREE MONTHS ENDED FOR YEAR ENDED
MARCH 31, 2000 DECEMBER 31, 1999
-------------- -----------------
<S> <C> <C>
Cash and due from banks $ 1,971,935 $ 1,413,255
Federal funds sold 880,440 1,786,216
Available for sale securities 4,676,264 8,442,054
Mortgage loans held for sale 299,813 878,445
Loans:
Commercial 15,390,946 22,441,159
Commercial Real Estate 46,641,697 25,819,397
Residential Real Estate 16,201,886 10,943,122
Installment and consumer 203,694 201,803
------------ ------------
Total loans 78,438,223 59,405,481
Less allowance for loan losses (780,445) (578,171)
------------ ------------
Net loans 77,657,778 58,827,310
Furniture and equipment, net 89,665 112,345
Accrued interest receivable and other assets 908,105 704,389
------------ ------------
Total assets $ 86,484,000 $ 72,164,014
============ ============
Demand deposits $ 5,854,253 $ 3,943,584
Interest bearing deposits
NOW 1,322,021 1,308,114
Money market 38,644,320 41,094,253
Time deposits 31,568,294 17,646,743
------------ ------------
Total deposits 77,388,888 63,992,694
Federal funds purchased 401,154 165,636
Accrued interest payable and other liabilities 949,551 690,363
------------ ------------
Total liabilities 78,739,593 64,848,693
Equity capital 7,744,407 7,315,321
------------ ------------
Total liabilities and capital $ 86,484,000 $ 72,164,014
============ ============
</TABLE>
17
<PAGE> 18
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the
Company or its subsidiary is a party.
Item 2. CHANGES IN SECURITIES
None.
Item 3. DEFAULTS UPON SENIOR SECURITIES
None.
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) List of Exhibits
10 Promissory Note dated April 28, 2000 between
InvestorsBancorp, Inc. and Bando McGlocklin
Capital Corporation
11 Statement Regarding Computation of Per Share
Earnings
27 Financial Data Schedule (EDGAR version only)
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company
during the quarter ended March 31, 2000.
18
<PAGE> 19
SIGNATURE
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 thereunder duly authorized.
INVESTORSBANCORP, INC.
(Registrant)
Date: May 12, 2000 /s/ George R. Schonath
----------------------
George R. Schonath
Chief Executive Officer
Date: May 12, 2000 /s/ Susan J. Hauke
------------------
Susan J. Hauke
Vice President Finance and
Chief Accounting Officer
19
<PAGE> 1
EXHIBIT 10
THIS OBLIGATION IS NOT A DEPOSIT AND IS NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION
PROMISSORY NOTE
Borrower: InvestorsBancorp, Inc. Lender: Bando McGlocklin Capital Corp.
W239 N1700 Busse Road W239 N1700 Busse Road
Waukesha, WI 53188-1160 Waukesha, WI 53188-1160
Principal Amount: $2,500,000.00 Date of Note: April 28, 2000
------------- --------------
Interest Rate: 11.0% - Fixed Due Date: April 30, 2010
------------- --------------
PROMISE TO PAY. InvestorsBancorp, Inc. ("Borrower") promises to pay to
the order of Bando McGlocklin Capital Corp. ("Lender"), in lawful money of the
United States of America, the principal amount of Two Million Five Hundred
Thousand Dollars ($2,500,000) together with interest thereon on the Due Date of
April 30, 2010.
PAYMENT. Borrower will pay this loan in one payment of all outstanding
principal plus all accrued unpaid interest on April 30, 2010. In addition,
Borrower will pay regular quarterly payments of accrued unpaid interest
beginning July 31, 2000, and all subsequent interest payments are due on the
last day of each October, January, and April after that. Borrower will pay
Lender at Lender's address shown above or at such other places Lender may
designate in writing. Unless otherwise agreed or required by applicable law,
payments will be applied first to accrued unpaid interest, then to principal,
and any remaining amount to any costs.
INTEREST RATE. The interest rate on this Note is 11.0%. The interest
rate will be applied to the unpaid principal balance of this Note for the actual
number of days that there is an outstanding balance based on a 360 day year.
PREPAYMENT. Borrower may not prepay any portion of the principal amount
owed under this Note prior to maturity without the prior written consent of the
Federal Reserve Bank of Chicago.
DEFAULT. Borrower will be in default if any of the following happens:
(a) Borrower fails to make any payment when due; (b) Borrower fails to comply
with or to perform when due any other term, obligation, covenant, or condition
contained in this Note or any agreement related to this Note, or in any other
agreement or loan Borrower has with Lender; (c) any representation or statement
made or furnished to Lender by Borrower or on Borrower's behalf is false or
misleading in any material respect either now or at the time made or furnished;
(d) Borrower becomes insolvent, a receiver is appointed for any part of
Borrower's property, Borrower makes an assignment for the benefit of creditors
or any proceeding is commenced either by Borrower or against Borrower under any
bankruptcy or insolvency laws; (e) any material adverse change occurs in
Borrower's financial condition or Lender reasonably believes that the prospect
of payment or performance for the indebtedness is impaired.
LENDER'S RIGHTS. This Note has been delivered to Lender and accepted by
Lender in the State of Wisconsin. If there is a lawsuit, Borrower agrees upon
Lender's request to submit to the jurisdiction of the courts of Waukesha County
in the State of Wisconsin. This Note should be governed by and construed in
accordance with the laws of the State of Wisconsin.
SUBORDINATION.
(a) The indebtedness evidenced by this Note is unsecured and is
subordinate and junior in right of payment to all Senior Debt (as defined below)
of the Borrower to the extent provided in this Section, and Lender agrees to
this subordination and shall be bound by its provisions.
(b) In the event of the occurrence of an event of default with respect
to any Senior Debt, as defined in the instrument under which the same is
outstanding, permitting the holders of such Senior Debt to accelerate its
maturity; then in any such event all Senior Debt shall first be paid in full
before any payment or distribution, whether in cash, securities or other
property, shall be made to the Lender. Upon the occurrence of any such event,
any payment or distribution, whether in cash, securities or other property which
would otherwise (but for the provisions of this Section) be payable or
deliverable in respect of this Note shall be paid or delivered directly to the
holders of Senior Debt in accordance with the priorities then existing among
such holders until all Senior Debt has been paid in full. Amounts paid to the
holders of Senior Debt pertaining to this Note may be applied by the holders of
such Senior Debt to any such Senior Debt held at the discretion of such holder
and such payments shall not extinguish the obligation of Borrower to Lender
under this Note.
(c) If any payment or distribution of any character or any security,
whether in cash, securities or other property, shall be received by Lender under
this Note in contravention of any of the terms of this Note and before all the
Senior Debt shall have been paid in full, such payment or distribution or
security shall be received in trust for the benefit of, and shall be paid over
or delivered and transferred to, the holders of the Senior Debt at the time
outstanding in accordance with the priorities then existing among such holders
for application to the payment of all Senior Debt remaining unpaid, to the
extent necessary to pay all such Senior Debt in full. Any amounts received by
Lender under this Note and turned over to holders of Senior Debt under this
Section shall be reinstated as owing to Lender.
(d) Except to the extent provided in this Section, nothing contained in
this Note shall impair, as between the Borrower and the Lender, the obligation
of the Borrower to pay to Lender the principal amount of this Note, interest on
such amount and collection costs, if any, as and when the same shall become due
and payable in accordance with the terms of this Note, or prevent Lender from
exercising all rights, powers and remedies otherwise permitted by applicable law
or under this Note, all subject to the rights of the holders of the Senior Debt
under this Section.
<PAGE> 2
(e) The term "Senior Debt" as used herein shall mean (I) the principal
of, premium, if any, and interest on any indebtedness of Borrower, whether now
existing or hereafter arising, other that the indebtedness incurred under this
Note or any indebtedness which, by its terms, is expressly made not senior to
this Note, and (II) Borrower's obligations to its depositors.
GENERAL PROVISIONS. Borrower agrees to pay Lender's cost and expenses
of enforcing this Note, including without limitation court costs and reasonable
attorney's fees. This Note benefits the Lender and its successors and assigns
and binds Borrower and Borrower's successors, assigns and representatives.
Lender may delay or forego enforcing any of its rights or remedies under this
Note without losing them. Borrower and any other person who signs, guarantees or
endorses this Note to the extent allowed by law, waives presentment, demand for
payment, protest and notice of dishonor. Upon any change in the terms of this
Note, and unless otherwise expressly stated in writing, no party who signs this
Note, whether as maker, guarantor, combination maker or endorser, shall be
released from liability. All such parties agree that Lender may renew or extend
repeatedly and for any length of time this loan, or release any party or
guarantor, or impair, fail to realize upon or perfect Lender's security interest
in any collateral, and take any other action deemed necessary by Lender without
the consent or notice to anyone. This Note is ineligible to be used as
collateral for a loan made by the Borrower.
BORROWER: InvestorsBancorp, Inc.
By: George R. Schonath
------------------------------------
George R. Schonath, President & CEO
LENDER: Bando McGlocklin Capital Corp.
By: George R. Schonath
------------------------------------
George R. Schonath, President & CEO
<PAGE> 1
EXHIBIT 11
INVESTORSBANCORP, INC. AND SUBSIDIARY
COMPUTATION OF BASIC AND DILUTED EARNINGS PER SHARE
(Unaudited)
A reconciliation of the income and shares used in computing the basic and
diluted earnings per share is as follows:
<TABLE>
<CAPTION>
FOR THREE MONTHS ENDED
----------------------
MARCH 31,
---------
2000 1999
---- ----
<S> <C> <C>
Net income $ 175,863 $ 18,248
========= ========
Determination of shares:
Weighted average common shares
outstanding (basic) 1,050,000 1,050,000 *
Assumed conversion of stock options - 15,288 *
--------- ---------
Weighted average common shares
outstanding (diluted) 1,050,000 1,065,288 *
========= =========
Basic earnings per common share $ 0.17 $ 0.02 *
========= ========
Diluted earnings per common share $ 0.17 $ 0.02 *
========= ========
</TABLE>
* Restated for 5% stock dividend as of the December 31, 1999 record date
20
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
INVESTORSBANCORP, INC., MARCH 31, 2000, 10-QSB.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 2,663,293
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 5,460,000
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 81,857,256
<ALLOWANCE> 810,928
<TOTAL-ASSETS> 90,337,109
<DEPOSITS> 79,252,611
<SHORT-TERM> 2,450,000
<LIABILITIES-OTHER> 791,735
<LONG-TERM> 0
0
0
<COMMON> 10,500
<OTHER-SE> 7,832,263
<TOTAL-LIABILITIES-AND-EQUITY> 90,337,109
<INTEREST-LOAN> 1,674,363
<INTEREST-INVEST> 84,032
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 1,758,395
<INTEREST-DEPOSIT> 1,030,167
<INTEREST-EXPENSE> 1,036,389
<INTEREST-INCOME-NET> 722,006
<LOAN-LOSSES> 40,155
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 756,411
<INCOME-PRETAX> 279,402
<INCOME-PRE-EXTRAORDINARY> 279,402
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 175,863
<EPS-BASIC> 0.17
<EPS-DILUTED> 0.17
<YIELD-ACTUAL> 3.26
<LOANS-NON> 0
<LOANS-PAST> 47,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 770,773
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 810,928
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 810,928
</TABLE>
