SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(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 number: 333-29031
CITIZENS BANCORP
(Exact name of registrant specified in its charter)
Indiana 35-2017500
(State or other jurisdiction of (I.R.S. Employer
incororation or organization) Identification Number)
60 South Main Street
Frankfort, Indiana 46041
(Address of principle executive offices,
including Zip Code)
(765) 654-8533
(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 report), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
The number of shares of the Registrant's common stock, without par value,
outstanding as of September 18, 1997 was 1,058,000.
<PAGE>
Citizens Bancorp
Form 10-Q
Index
PART I. FINANCIAL INFORMATION Page No.
Item 1. Financial Statements
Consolidated Statements of Financial
Condition as of September 30, 1997 and June 30, 1997
(Unaudited) 3
Consolidated Statements of Income for the three
months ended September 30, 1997 and 1996
(Unaudited) 4
Consolidated Statement of Changes in
Shareholders' Equity for the three months ended September
30, 1997 (Unaudited) 5
Consolidated Statements of Cash Flows for the
three months ended September 30, 1997 and 1996
(Unaudited) 6
Notes to Unaudited Consolidated Financial
Statements 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
2
<PAGE>
CITIZENS BANCORP
AND WHOLLY-OWNED SUBSIDIARY
CITIZENS SAVINGS BANK OF FRANKFORT
Consolidated Statements of Condition
(in Thousands)
<TABLE>
<CAPTION>
September 30, June 30,
1997 1997
-----------------------------
(unaudited)
<S> <C> <C>
Assets
Cash on hand and in other institutions $ 333 $ 861
Interest-bearing deposits 7,858 3,264
Investment securities available for sale 163 161
Stock in Federal Home Loan Bank 332 332
of Indianapolis
Loans receivable, net 39,488 38,435
Land held for development 959 996
Cash surrender value of
life insurance contract 1,086 1,076
Property and equipment 569 578
Other assets 577 650
-------- --------
Total assets $ 51,365 $ 46,353
======== ========
Liabilities and shareholders' equity
Deposits $ 34,605 $ 36,355
Federal Home Loan Bank advances 1,000 4,000
Other liabilitiies 482 307
-------- --------
Total liabilities 36,087 40,662
Commitments and contingencies -- --
Shareholders' equity:
Common Stock (no par value);
5,000,000 shares authorized;
1,058,000 shares outstanding 10,166 --
Unearned stock awards (846) --
-------- --------
Retained income - substantially restricted 5,958 5,691
Total shareholders equity 15,278 5,691
-------- --------
Total liabilities and shareholders equity $ 51,365 $ 46,353
======== ========
</TABLE>
3
<PAGE>
CITIZENS BANCORP
AND WHOLLY-OWNED SUBSIDIARY
CITIZENS SAVINGS BANK OF FRANKFORT
CONSOLIDATED STATEMENTS OF INCOME
(in thousands)
Three months ended September 30,
1997 1996
-----------------------------
(Unaudited)
Interest income:
Interest on loans $ 858 $ 768
Other interest income 83 93
-----------------------------
941 861
Interest expense:
Interest on deposits 427 415
Interest on borrowings 39 40
-----------------------------
466 455
-----------------------------
Net interest income 475 406
Provision for loan losses 12 12
-----------------------------
Net interest income
after provision for loan losses 463 394
Other income:
Fees and service charges 32 37
Gain on sale of real estate 180 7
Other 14 16
-----------------------------
226 60
Other expense:
Salaries and employee benefits 110 101
Occupancy expense 27 27
Data processing expense 28 25
Federal insurance premium 6 231
Other 68 65
-----------------------------
239 449
-----------------------------
Income before income taxes 450 5
Income taxes 183 --
-----------------------------
Net income $ 267 $ 5
==============================
Net income (loss) per share N/A N/A
Average shares outstanding N/A N/A
<PAGE>
CITIZENS BANCORP
AND WHOLLY-OWNED SUBSIDIARY
CITIZENS SAVINGS BANK OF FRANKFORT
Form 10-Q
CONSOLIDATED STATEMENTs OF CHANGES TO SHAREHOLDERS' EQUITY
(Dollars in thousands)
<TABLE>
<CAPTION>
Common Stock Total
----------------------------- Unearned Retained Shareholders'
Shares Amount Stock Awards Income Equity
-------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C> <C>
Balance, July 1, 1997 --- $--- $--- $5,691 $5,691
Net income 267 267
Common stock issued in
conversion, net of
costs 1,017,526 9,320 9,320
Shares issued to ESOP 40,474 846 (846) ---
---------------------------------------------------------------------
Balance, September 30, 1997 1,058,000 $10,166 (846) $5,958 $15,278
=====================================================================
</TABLE>
<PAGE>
CITIZENS BANCORP
AND WHOLLY-OWNED SUBSIDIARY
CITIZENS SAVINGS BANK OF FRANKFORT
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended September 30,
1997 1996
-------------------------------
(Unaudited)
Operating activities
Net income $ 267 $ 5
Adjustments to reconcile
net income to net cash provided
by operating activities:
Provision for loan losses 12 12
Depreciation and amortization 9 12
Deferred federal income
tax credit (1) (7)
Increase in other assets 64 5
Increase (decrease) in
other liabilities 175 96
------- -------
Net cash provided by
operating activities 526 123
Investing activities
Purchases of investment securities (2) (45)
Principal collected on loans 3,274 3,504
Loans originated (4,339) (4,878)
Proceeds from sale of loans -- 91
(Increase) decrease in land held
for development 37 24
Purchases of equipment -- (2)
------- -------
Net cash provided (used)
by investing activities (1,030) (1,306)
Financing activities
Increase (decrease) in NOW,
MMDA and passbook deposits (789) (123)
Increase (decrease)
in certificates of deposit (961) 2,023
Advances from Federal
Home Loan Bank -- 4,500
Payments to Federal
Home Loan Bank (3,000) (5,500)
Sale of Common Stock,
net of costs 9,320 --
------- -------
Net cash provided by
financing activities 4,570 900
------- -------
Increase (decrease) in cash
and cash equivalents 4,066 (283)
Cash and cash equivalents
at beginning of period 4,125 3,308
------- -------
Cash and cash equivalents
at end of period $ 8,191 $ 3,025
======= =======
<PAGE>
CITIZENS BANCORP
AND WHOLLY-OWNED SUBSIDIARY
CITIZENS SAVINGS BANK OF FRANKFORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A: Basis of Presentation
The unaudited interim consolidated financial statements include the accounts of
Citizens Bancorp ("Company") and its wholly-owned subsidiary, Citizens Savings
Bank of Frankfort ("Bank").
The unaudited interim consolidated financial statements have been prepared in
accordance with the instructions to Form 10-Q and, therefore, do not include all
information and disclosures required by generally accepted accounting principles
for complete financial statements. The significant accounting policies followed
by the Company and Bank for interim financial reporting are consistent with the
accounting policies followed for annual financial reporting. All adjustments,
consisting of normal recurring adjustments, which in the opinion of management
are necessary for a fair presentation of the results for the periods reported,
have been included in the accompanying consolidated financial statements.
Financial and other data contained herein prior to September 18, 1997 relates
solely to the Bank (See Note B). The results of operations for the three months
ended September 30, 1997 are not necessarily indicative of those expected for
the remainder of the year.
NOTE B: Conversion to Federal Stock Savings Bank
In April, 1997, the Board of Directors adopted a Plan of Conversion ("Plan") to
convert the Bank from a federal-chartered mutual savings bank to a
federal-chartered stock savings bank. The Plan provided for the sale of the
Bank's capital stock to the Company, which was formed in connection with the
conversion.
On September 18, 1997, the Bank completed the conversion and the formation of
the Company as the holding company of the Bank. As part of the conversion, the
Company issued 1,058,000 shares of common stock at $10 per share of which 40,474
shares were issued to an Employee Stock Ownership Plan. Net proceeds of the
Company's stock issuance, after costs, were approximately $9,320,000 of which
$5,083,000 was used to acquire 100% of the stock and ownership of the Bank.
Costs associated with the conversion were deducted from the proceeds of stock
sold by the Company. The transaction was accounted for in a manner similar to a
pooling of interests. Since the Company did not commence operations until
September 18, 1997, financial and other data contained herein prior to September
18, 1997 relates solely to the Bank.
At the date of conversion, the Bank established a liquidation account of
$5,691,000 which equaled the Bank's retained earnings as of the most recent
financial statements, June 30, 1997, contained in the final conversion
prospectus. The liquidation account was established to provide a limited
priority claim to the assets of the Bank to qualifying depositors who continue
to maintain deposits in the Bank after conversion. In the unlikely event of a
complete liquidation of the Bank, and only in such event, qualifying depositors
would receive a liquidation distribution based on their proportionate share of
the then total remaining qualifying deposits.
8
<PAGE>
The Company, subject to certain supervisory policies of the Federal Deposit
Insurance Corporation, may pay dividends to its shareholders if its assets
exceed its liabilities and it is able to pay its debts as they come due. Current
regulations allow the Bank to pay dividends on its stock after the conversion if
its regulatory capital would not be reduced below the amount then required for
the liquidation account, and if those dividends do not exceed net profits of the
Bank for the current year plus those for the previous two years.
Note C: New Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued Statement 130,
"Reporting Comprehensive Income" and Statement 131, "Disclosures about Segments
of an Enterprise and Related Information." Statement 130 establishes standards
for reporting and display of comprehensive income and its components in a full
set of general-purpose financial statements. This statement is effective for
fiscal years beginning after December 15, 1997. Statement 131 established
standards for public business enterprises reporting on information about
operating segments in annual financial statements and requires that those
enterprises report selected information about operating segments in interim
financial reports. It also establishes standards for related disclosures on
products and services, geographical areas, and major customers. This statement
is effective for financial statements for periods beginning after December 15,
1997. Adoption of these statements will result in additional disclosures, but
will not impact the Company's consolidated results of operations and financial
position.
Note D: Earnings Per Share
The Company completed its stock conversion on September 18, 1997. Earnings per
share information is not meaningful for the quarter ended September 30, 1997,
and is not applicable for any years prior to the stock conversion. In February
1997, the Financial Accounting Standards Board issued Statement 128, "Earnings
per Share," effective for periods ending after December 15, 1997. At that time,
the Company will be required to change the method currently used to compute
earnings per share and to restate all prior periods. Under the new requirements
for calculating primary earnings per share, the dilutive effect of stock options
will be excluded. The impact of Statement 128 on the calculation of basic and
fully diluted earnings per share is not expected to be material.
9
<PAGE>
Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations.
General
Citizens Bancorp, an Indiana corporation (the "Company"), was organized in June,
1997. On September 18, 1997, it acquired the common stock of Citizens Savings
Bank of Frankfort ("Citizens") upon the conversion of Citizens from a federal
mutual savings bank to a federal stock savings bank.
Citizens was organized as a state-chartered building and loan association in
1916 and currently conducts its business from one full-service office located in
Frankfort, Indiana. Citizens' principal business consists of attracting deposits
from the general public and originating fixed-rate and adjustable-rate loans
secured primarily by first mortgage liens on one- to four-family real estate.
Citizens' deposit accounts are insured up to applicable limits by the Savings
Association Insurance Fund ("SAIF") of the Federal Deposit Insurance Corporation
("FDIC"). Citizens offers a number of consumer and commercial financial
services. These services include: (i) residential real estate loans; (ii)
multi-family loans; (iii) construction loans; (iv) nonresidential real estate
loans; (v) home equity loans (vi) single-pay loans; (vii) installment loans;
(viii) automobile loans; (ix) NOW accounts; (x) money market demand accounts
("MMDAs") (xi) passbook savings accounts; (xii) certificates of deposit and
(xiii) individual retirement accounts.
Citizens currently owns one subsidiary, Citizens Loan and Service Corporation
("CLSC"), which primarily engages in the purchase and development of tracts of
undeveloped land. Because CLSC engages in activities that are not permissible
for a national bank, OTS regulations prohibit Citizens from including its
investment in CLSC in its calculation of regulatory capital. CLSC purchases
undeveloped land, constructs improvements and infrastructure on the land, and
then sells lots to builders, who construct homes for sale to homebuyers. CLSC
ordinarily receives payment when title is transferred.
Citizens' results of operations depend primarily upon the level of net interest
income, which is the difference between the interest income earned on
interest-earning assets, such as loans and investments, and costs incurred with
respect to interest-bearing liabilities, primarily deposits and borrowings.
Results of operations also depend upon the level of the Company's non-interest
income, including fee income and service charges, and the level of its
non-interest expenses, including general and administrative expenses.
10
<PAGE>
Financial Condition
Total assets increased to $51, 365,000 at September 30, 1997, compared to
$46,353,000 at June 30, 1997. Cash decreased by $0.5 million, while interest
bearing deposits increased approximately $4.6 million, due primarily to the
additional capital received from the sale of stock on September 18, 1997.
Deposits decreased $1.75 million primarily as a result of funds on deposit being
utilized for the purchase of common stock issued in the conversion. Borrowings
at the Federal Home Loan Bank decreased $3.0 million to $1.0 million as a result
of net repayments during the period.
Shareholder equity increased $9.6 million as a result of stock, issued by the
Company to complete the conversion process on September 18, 1997.
Comparison of operating results for the three-month periods ended September 30,
1997 and 1996.
The Company had an increase in net income of $262,000 to $267,000 for the
three-months ended September 30, 1997, compared to a net income of $5,000 for
the three-month period ended September 30, 1996.
Net interest income increased $69,000 to $474,000 for the quarter ended
September 30, 1997 compared to $406,000 for the same period in 1996. The
increase resulted primarily from an increase in earning assets during the 1997
period.
The provision for loan losses was $12,000 for both the September 30, 1997 and
1996 periods. At September 30, 1997, the allowance for loan loss was 0.55% of
the total loans compared to 0.41% at September 30, 1996.
Total non-interest income increased $166,000 to $226,000 for the quarter ended
September 30, 1997, compared to the same period in 1996. The increase is
primarily the result of a net gain on the sale of real estate of $173,000, less
a decrease in fees, service charges and other non-interest income of $7,000.
Total non-interest expense decreased $210,000 to $239,000 for the quarter ended
September 30, 1997 compared to $449,000 for the same quarter in 1996. The
decrease was primarily due to the one-time FDIC special assessment to
recapitalize the Savings Association Insurance fund ("SAIF"), in the pre-tax
amount of $211,000. The FDIC deposit insurance premium decreased $225,000 to
$6,000 for the three-months ended September 30, 1997 from $231,000 for the
three-months period ended September 30, 1996. Salaries and benefits increased
for the 1997 period by $9,000 and office occupancy expense, data processing
expense and other expenses increased by $7,000 for the same period.
Income tax expense increased by $183,000 to $183,000 for the three-months ended
September 30, 1997, compared to $18 for the same period in 1996. This was
primarily the result of an increase in net income before income taxes as the
result of the gain on the sale of real estate that increased the non-interest
income for the 1997 period and the FDIC special assessment that increased the
non-interest expense for the 1996 period.
11
<PAGE>
Asset Quality
The allowance for loan losses was $224,000 at September 30, 1997 compared to
$212,000 at June 30, 1997. Management considered the allowance for loan losses
at September 30, 1997, to be adequate to cover estimated losses inherent in the
loan portfolio at that date, and its consideration included probable losses that
could be reasonably estimated. Such belief is based upon an analysis of loans
currently outstanding, past loss experience, current economic conditions and
other factors and estimates which are subject to change over time. The following
table sets forth the changes affecting the allowance for loan losses for the
three months ended September 30, 1997.
Balance, July 1, 1997 $211,635
Provision for loan losses 12,000
Recoveries 175
Charged-offs 0
--------
Balance, September 30, 1997 $223,810
========
Total non-performing loans totaled $286,000 or .72% of total loans at September
30, 1997 compared to $344,000 or .89% of total loans at June 30, 1997.
Liquidity and Capital Resources
The Company's most liquid assets are cash and interest bearing deposits. The
levels of these assets are dependent on the Company's operating, financing and
investing activities. At September 30, 1997 and June 30, 1997, cash and
interest-bearing deposits totaled $8.2 million and $4.1 million, respectively.
The level at June 30, 1997 was unusually high as a result of funds on deposit
related to the conversion which were invested short term.
The Company's primary sources of funds are deposits, borrowings and the proceeds
from principal and interest payments on loans. While maturities and scheduled
amortization of loans are a predictable source of funds, deposit flows and
mortgage prepayments are greatly influenced by general interest rates, economic
conditions and competition.
If the Company requires funds beyond its ability to generate them internally, it
has the ability to borrow funds from the Federal Home Loan Bank ("FHLB") of
Indianapolis. Federal law limits an institution's borrowings from the FHLB to 20
times the amount paid for capital stock in the FHLB, subject to regulatory
capital requirements. As a policy matter, however, the FHLB of Indianapolis
typically limits the amount of borrowings from the FHLB to 50% of adjusted
assets (total assets less borrowings). At September 30, 1997, borrowing from the
FHLB totaled $1.0 million.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes in market interest rates or in the Company's
interest rate sensitive instruments which would cause a material change in the
market risk exposures which effect the quantitative and qualitative risk
disclosures as presented in Item 7A of the Registrant's Annual Report on Form
10-K for the period ended June 30, 1997.
12
<PAGE>
Part II. OTHER INFORMATION
Item 1. Legal Proceedings. None.
Item 2. Changes in Securities. None.
Item 3. Defaults Upon Senior Securities. None.
Item 4. Submission of Matters to Vote of Security Holders. None.
Item 5. Other Information. None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
27. Financial Data Schedule
(b) No reports on form 8-K were filed during the quarter ended
September 30, 1997.
15
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CITIZENS BANCORP
Date: November 14, 1997 By: /s/ Fred W. Carter
-----------------------
Fred W. Carter
President and
Chief Executive Officer
Date: November 14, 1997 By: /s/ Stephen D. Davis
-----------------------------
Stephen D. Davis
Treasurer
16
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001040734
<NAME> Citizens Bancorp
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-1-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1.000
<CASH> 333
<INT-BEARING-DEPOSITS> 7,858
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 163
<INVESTMENTS-CARRYING> 332
<INVESTMENTS-MARKET> 332
<LOANS> 39,488
<ALLOWANCE> 224
<TOTAL-ASSETS> 51,365
<DEPOSITS> 34,605
<SHORT-TERM> 1,000
<LIABILITIES-OTHER> 482
<LONG-TERM> 0
<COMMON> 10,166
0
0
<OTHER-SE> 5,112
<TOTAL-LIABILITIES-AND-EQUITY> 51,365
<INTEREST-LOAN> 858
<INTEREST-INVEST> 9
<INTEREST-OTHER> 74
<INTEREST-TOTAL> 941
<INTEREST-DEPOSIT> 427
<INTEREST-EXPENSE> 466
<INTEREST-INCOME-NET> 475
<LOAN-LOSSES> 12
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 239
<INCOME-PRETAX> 450
<INCOME-PRE-EXTRAORDINARY> 267
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 267
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 4.28
<LOANS-NON> 182
<LOANS-PAST> 62
<LOANS-TROUBLED> 40
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 212
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 224
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 224
</TABLE>
