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 MARCH 31, 1999
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
incorporation or organization) Identification Number)
60 South Main Street
Frankfort, Indiana 46041
(Address of principal 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 May 12, 1999 was 1,005,100.
1
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Citizens Bancorp
Form 10-Q
Index
PART I. FINANCIAL INFORMATION Page No.
Item 1. Financial Statements
Consolidated Statements of Financial Condition
as of March 31, 1999 and June 30, 1998
(Unaudited) 3
Consolidated Statements of Income for the three
months ended March 31, 1999 and 1998
(Unaudited) 4
Consolidated Statements of Income for the nine
months ended March 31, 1999 and 1998 5
(Unaudited)
Consolidated Statement of Changes in
Shareholders' Equity for the nine months ended
March 31, 1999 (Unaudited) 6
Consolidated Statements of Cash Flows for the
nine months ended March 31, 1999 and 1998
(Unaudited) 7
Notes to Unaudited Consolidated Financial
Statements 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. 9
Item 3. Quantitative and Qualitative Disclosure about Market Risk 12
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities and Use of Proceeds 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
2
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements
CITIZENS BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
(dollars in thousands)
<TABLE>
<CAPTION>
March 31, June 30,
1999 1998
(Unaudited) (Note A)
Assets
<S> <C> <C>
Cash on hand and in other institutions $ 531 $ 306
Interest-bearing deposits 2,365 2,227
Investment securities available for sale 400 315
Stock in Federal Home Loan Bank
of Indianapolis 352 352
Loans receivable, net 51,268 46,936
Land held for development 922 964
Cash surrender value of
life insurance contract 1,151 1,119
Property and equipment 568 565
Other assets 754 658
-------- --------
Total assets $ 58,311 $ 53,442
======== ========
Liabilities and shareholders' equity
Liabilities
Deposits $ 36,645 $ 34,067
Federal Home Loan Bank advances 6,000 3,500
Other liabilities 374 707
-------- --------
Total liabilities 43,019 38,274
Shareholders' equity
Preferred stock (no par value); 2,000,000shares
authorized, no shares issued -- --
Common Stock (no par value);5,000,000 shares
authorized; 1999 - 1,058,000 shares issued, 1,016,994
outstanding; 1998 - 1,058,000 issued and outstanding 9,580 10,062
Additional paid-in-capital 59 41
Unearned stock awards (1,251) (1,406)
Accumulated other comprehensive income (10) 3
Retained income - substantially restricted 6,914 6,468
-------- --------
Total shareholders' equity 15,292 15,168
-------- --------
Total liabilities and shareholders' equity $ 58,311 $ 53,442
======== ========
</TABLE>
See notes to consolidated unaudited financial statements.
3
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CITIZENS BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands)
<TABLE>
<CAPTION>
Three months ended March 31,
1999 1998
-------- --------
(Unaudited)
<S> <C> <C>
Interest income:
Interest on loans $ 1,049 $ 943
Other interest income 44 87
-------- --------
1,093 1,030
Interest expense:
Interest on deposits 381 407
Interest on borrowings 91 15
-------- --------
422 472
-------- --------
Net interest income 621 608
Provision for loan losses 15 17
-------- --------
Net interest income
after provision for loan losses 606 591
Other income:
Fees and service charges 38 35
Gain on sale of real estate 2 --
Other 14 14
-------- --------
54 49
Other expense:
Salaries and employee benefits 159 130
Occupancy expense 30 27
Data processing expense 33 30
Federal insurance premium 6 5
Other 73 97
-------- --------
301 289
-------- --------
Income before income taxes 359 351
Income taxes 132 134
-------- --------
Net income $ 227 $ 217
======== ========
Net income per share $ . $ .22
Average shares outstanding 949,507 977,535
</TABLE>
See notes to consolidated unaudited financial statements.
4
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CITIZENS BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands)
Nine months ended March 31,
1999 1998
-------- --------
(Unaudited)
Interest income:
Interest on loans $ 3,133 $ 2,720
Other interest income 17 267
-------- --------
3,304 2,987
Interest expense:
Interest on deposits 1,204 1,232
Interest on borrowings 238 69
-------- --------
1,442 1,301
-------- --------
Net interest income 1,862 1,686
Provision for loan losses 50 57
-------- --------
Net interest income
after provision for loan losses 1,812 1,629
Other income:
Fees and service charges 121 103
Gain on sale of real estate 13 180
Other 44 46
-------- --------
17 329
Other expense:
Salaries and employee benefits 497 399
Occupancy expense 92 83
Data processing expense 103 85
Federal insurance premium 18 17
Other 265 250
-------- --------
975 834
-------- --------
Income before income taxes 1,015 1,124
Income taxes 40 442
-------- --------
Net income $ 608 $ 682
======== ========
Net income per share $ .6 $ .74 (1)
Average shares outstanding 967,852 977,344 (2)
(1) Pro forma earnings per share.
(2) See Note D to the consolidated unaudited financial statements.
See notes to consolidated unaudited financial statements.
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CITIZENS BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES TO SHAREHOLDERS' EQUITY
(dollars in thousands)
<TABLE>
<CAPTION>
Accumulated
Additional Other Total
Common Stock Paid in Unearned Comprehensive Retained Shareholders'
Shares Amount Capital Stock Awards Income Income Equity
--------- ---------- ---------- ------------ ------ ------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, July 1, 1998 1,058,000 $ 10,062 $ 41 $ (1,406) $ 3 $ 6,468 $ 15,168
Net Income -- -- -- -- -- 608 608
Common stock
repurchased (41,006) (482) -- -- -- -- (482)
Change in unrealized
gain (loss) on
securities available -- -- -- -- (13) -- (13)
for sale (net)
Dividends declared on
common stock -- -- -- -- -- (162) (162)
Allocation of RRP shares -- -- -- 77 -- -- 77
Release of ESOP Shares -- -- 18 78 -- -- 96
---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance, March 31, 1999 1,016,994 $ 9,580 $ 59 ($ 1,251) ($ 10) $ 6,914 $ 15,292
========== ========== ========== ========== ========== ========== ==========
</TABLE>
See notes to consolidated unaudited financial statements.
6
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CITIZENS BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
Nine months ended March 31,
1999 1998
-------- --------
(Unaudited)
Operating activities:
Net income $ 608 $ 682
Adjustments to reconcile net income
to net cash provided
by operating activities:
Provision for loan losses 50 57
Depreciation and amortization 13 22
Deferred federal income tax credit 4 (21)
Release of ESOP/RRP shares 173 82
(Increase) decrease in other assets (112) 15
Increase (decrease) in other liabilities (338) 285
-------- --------
Net cash provided by operating activities 39 1,122
Investing activities:
Purchases of investment securities (107) (146)
Principal collected on loans 18,334 13,195
Loans originated (22,695) (17,104)
Loans purchased -- (2,494)
Decrease in land held for development 42 40
Purchases of equipment (37) (1)
-------- --------
Net cash used by investing activities (4,463) (6,510)
Financing activities:
Increase (decrease) in NOW,
MMDA and passbook deposits 32 (312)
Increase in certificates of deposit 2,545 2,284
Advances from Federal Home Loan Bank 9,500 --
Payments to Federal Home Loan Bank (7,000) (3,000)
Sale of common stock, net of costs -- 9,216
Repurchase of common stock --
Dividend paid on common stock (167) --
-------- --------
Net cash provided by financing activities 4,428 8,188
-------- --------
Increase in cash and cash equivalents 363 2,800
Cash and cash equivalents at beginning of period 2,533 4,125
-------- --------
Cash and cash equivalents at end of period $ 2,896 $ 6,925
======== ========
See notes to consolidated unaudited financial statements.
7
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CITIZENS BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED UNAUDITED 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 ("Citizens").
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 Citizens 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 Citizens (See Note B). The results of operations for the
three- and nine-month periods ended March 31, 1999 are not necessarily
indicative of those expected for the remainder of the year.
The balance sheet at June 30, 1998, has been derived from the audited
consolidated financial statements at that date, but does not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
NOTE B: Conversion to Federal Stock Savings Bank
In April, 1997, the Board of Directors adopted a Plan of Conversion ("Plan") to
convert Citizens from a federal-chartered mutual savings bank to a
federal-chartered stock savings bank (the "Conversion"). The Plan provided for
the sale of Citizens' capital stock to the Company, which was formed in
connection with the Conversion.
On September 18, 1997, Citizens completed the Conversion and the formation of
the Company as the holding company of Citizens. As part of the Conversion, the
Company issued 1,058,000 shares of common stock at $10 per share of which 84,640
shares were issued to an Employee Stock Ownership Plan (the "ESOP"). Net
proceeds of the Company's stock issuance, after costs, were approximately
$9,216,000 of which $5,031,000 was used to acquire 100% of the stock and
ownership of Citizens. 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 Citizens.
At the date of the Conversion, Citizens established a liquidation account of
$5,691,000 which equaled Citizens' 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 Citizens to qualifying depositors who continue
to maintain deposits with Citizens after the Conversion. In the unlikely event
of a complete liquidation of Citizens, and only in such event, qualifying
depositors would receive a liquidation distribution based on their proportionate
share of the then total remaining qualifying deposits.
The Company, subject to certain supervisory policies of the Office of Thrift
Supervision, 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 Citizens 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 its net income to
date in the calendar year plus 50% of the excess capital of Citizens.
NOTE C: New Accounting Pronouncements
As of July 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income". Statement 130 establishes
standards for the reporting and display of comprehensive income and its
components in a full set of general-purpose financial statements as well as in
condensed financial statements of interim periods issued for external purposes.
Statement 130 requires gains or losses on the Company's available-for-sale
securities, which prior to adoption were reported separately in shareholders'
equity, to be included in other comprehensive income. Prior year financial
statements have been reclassified to conform to the requirements of Statement
130. For the three months ended March 31, 1999 and 1998, total comprehensive
income was $234,000 and $228,000, respectively. For the nine months ended March
31, 1999 and 1998, total comprehensive income was $595,000 and $693,000,
respectively.
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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 Conversion. The Company had
$.24 and $.63 earnings per share for the three and nine months ended March 31,
1999, respectively. Earnings per share for the three months ended March 31,
1998, were $.22. Pro forma earnings per share would have been $.74 for the nine
months ended March 31, 1998. Earnings per share on a pro forma basis assumes the
stock offering and the formation of the ESOP occurred on July 1, 1997, and
includes the increase in earnings associated with the investment of the net
proceeds raised in regard to the issuance of common stock in the subscription
stock offering. Pro forma earnings per share is computed by dividing pro forma
net income by the weighted average number of common shares outstanding during
the period assuming the stock offering occurred July 1, 1997.
Unearned ESOP shares have been excluded from the computation of average shares
outstanding.
Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations.
General
The Company was organized in June, 1997. On September 18, 1997, it acquired the
common stock of 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 home buyers. 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-earnings 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.
Financial Condition
Total assets increased to $58.3 million at March 31, 1999, compared to $53.4
million at June 30, 1998. Cash increased $225,000 to $531,000 at March 31, 1999,
from $306,000 at June 30, 1998, while interest bearing deposits, consisting
primarily of overnight deposits at the Federal Home Loan Bank ("FHLB") of
Indianapolis and certificates of deposit at other FDIC insured financial
institutions, increased to $2.4 million at March 31, 1999, from $2.2 million at
June 30, 1998. Net loans receivable increased $4.4 million to $51.3 million at
March 31, 1999, from $46.9 million at June 30, 1998. The increase in loans and
interest-bearing deposits was funded by an increase in deposits and borrowings
during the period. Deposits increased $2.6 million primarily as a result of an
increase in the amount of public funds on deposit. Borrowings at the Federal
Home Loan Bank increased $2.5 million to $6.0 million as of March 31, 1999, from
$3.5 million at June 30, 1998.
Shareholders' equity increased $124,000 during the nine months ended March 31,
1999. This was primarily a result of the profit of $608,000 for the period,
which increased shareholders' equity, less the cost of the Company's repurchase
of $482,000 of its common stock at various times and market prices during the
period. The company declared a dividend of $.06 per share of common stock held
as of March 31, 1999, payable on April 14, 1999. Shareholders' equity decreased
by $56,000 as a result of the declaration of the dividend.
Comparison of operating results for the three-month periods ended March 31, 1999
and 1998.
The Company had an increase in net income of $10,000 to $227,000 for the three
months ended March 31, 1999, compared to a net income of $217,000 for the
three-month period ended March 31, 1998.
Net interest income increased $13,000 to $621,000 for the quarter ended March
31, 1999, compared to $608,000 for the same period in 1998. The
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increase resulted primarily from an increase in earning assets during the 1999
period.
The provision for loan losses was $15,000 for the March 31, 1999 period, as
compared to $17,000 for the 1998 period. At March 31, 1999, the allowance for
loan loss was 0.60% of the total loans, compared to 0.57% at June 30, 1998.
Total non-interest income increased $5,000 to $54,000 for the quarter ended
March 31, 1999, compared to $49,000 during the same period in 1998. The increase
is primarily the result of a net gain of $2,000 on the sale of real estate
during the 1999 period, as well as an increase of $3,000 in fees and service
charges during the 1999 period.
Total non-interest expense increased $12,000 to $301,000 for the quarter ended
March 31, 1999, compared to $289,000 for the same quarter in 1998. The increase
was primarily due to an increase in salaries and benefits of $29,000 during the
1999 period due to compensation expense related to the ESOP and the Recognition
and Retention Plan and Trust which was adopted by the Company on March 24, 1998
("the RRP"). Office occupancy expense and data processing expenses increased by
$6,000 for the 1999 period, and other expenses, consisting of legal, accounting
and other operating expenses, decreased by $24,000 to $73,000 for the quarter
ended March 31, 1999, compared to $97,000 for the 1998 period. The decrease was
primarily due to legal, accounting and printing fees incurred during the first
quarter of 1998 related to the special meeting of shareholders held in March of
1998.
Income tax expense decreased by $2,000 to $132,000 for the three months ended
March 31, 1999, compared to $134,000 for the three months ended March 31, 1998.
Comparison of operating results for the nine-month periods ended March 31, 1999
and 1998.
The Company had a decrease in net income of $74,000 to $608,000 for the nine
months ended March 31, 1999, compared to a net income of $682,000 for the
nine-month period ended March 31, 1998.
Net interest income increased $176,000 to $1,862,000 for the nine months ended
March 31, 1999, compared to $1,686,000 for the same period in 1998. The increase
resulted primarily from an increase in earning assets during the 1999 period.
The provision for loan losses was $50,000 for the period ended March 31, 1999,
as compared to $57,000 for the 1998 period. At March 31, 1999, the allowance for
loan loss was 0.60% of the total loans, compared to 0.57% at June 30, 1998.
Total non-interest income decreased $151,000 to $178,000 for the nine months
ended March 31, 1999, compared to $329,000 for the same period in 1998. The
decrease primarily resulted from a net gain on the sale of a tract of real
estate of $172,000 ($103,000 net of tax) during the 1998 period. This was offset
by an increase in fees and service charges of $18,000 during the 1999 period.
Total non-interest expense increased $141,000 to $975,000 for the nine months
ended March 31, 1999, compared to $834,000 for the same period in 1998. The
increase was primarily due to an increase in salaries and benefits of $98,000
during the 1999 period due to compensation expense related to the ESOP and the
RRP. Office occupancy expense and data processing expense increased by $27,000
for the 1999 period and other expenses, consisting primarily of legal and
accounting fees, increased by $15,000 during the 1999 period, due to the
increased reporting requirements for public companies.
Income tax expense decreased by $35,000 to $407,000 for the nine months ended
March 31, 1999, compared to $442,000 for the same period in 1998. This primarily
resulted from a decrease in net income before income taxes in the 1999 period as
a result of the gain on the sale of real estate that increased non-interest
income for the 1998 period.
Asset Quality
The allowance for loan losses was $306,000 at March 31, 1999, compared to
$269,000 at June 30, 1998. Management considered the allowance for loan losses
at March 31, 1999 to be adequate to cover estimated losses inherent in the loan
portfolio at that date, taking into consideration 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 nine months
ended March 31, 1999.
Balance, July 1, 1998 $ 268,837
Provision for loan losses 50,000
Recoveries --
Charge-offs (12,498)
---------
Balance, March 31, 1999 $ 306,339
=========
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Non-performing loans totaled $539,000 or 1.05% of total loans at March 31, 1999,
compared to $170,000 or .36% of total loans at June 30, 1998.
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 March 31, 1999 and June 30, 1998, cash and
interest-bearing deposits totaled $2.9 million and $2.5 million, respectively.
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 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 March 31, 1999, borrowings from the FHLB totaled $6.0 million.
Year 2000 Compliance
The Company's lending and deposit activities, like those of most financial
institutions, depend significantly upon computer systems. The Company is
addressing the potential problems associated with the possibility that the
computers which control its operating systems, facilities and infrastructure may
not be programmed to read four-digit date codes. This could cause some computer
applications to be unable to recognize the change from the year 1999 to the year
2000, which could cause computer systems to generate erroneous data or to fail.
The Company is working with the companies that supply or service its systems
that rely on computers to identify and remedy any Year 2000 related problems. As
of March 31, 1999, the Company has completed an assessment of all systems that
could be significantly affected by Year 2000 related problems and has begun
remediating its non-compliant systems. The bulk of the Company's computer
processing is provided under contract by BISYS, Inc. in Houston, Texas
("BISYS"). BISYS has completed the remediation phase of its Year 2000 efforts
and began testing of its upgraded systems and interfaces with the Company in
November, 1998. BISYS expects to be in Year 2000 compliance by June, 1999. BISYS
will assist the Company with other phases of Year 2000 compliance throughout the
remainder of 1999. Citizens' loan document preparation system is provided by
Banker's Systems and is also expected to be in Year 2000 compliance by June 30,
1999.
The Company has contacted the approximately twenty other companies that supply
or service its material operations requesting that they certify that they have
plans to make their respective computer systems Year 2000 compliant. As of March
31, 1999, the Company has received such certification from all of these
companies. Once the Company receives certification from a service provider, it
continuously monitors the progress that it makes in meeting its targeted
schedule for becoming Year 2000 compliant. Should the Company find that a
provider is not making satisfactory progress in its Year 2000 compliance efforts
the Company will identify and contract with an alternative service provider. The
Company does not expect the expense of such changes in suppliers or servicers to
be material to its operations, financial condition or results. Notwithstanding
the efforts the Company has made, no assurances can be given that the systems of
its service providers will be timely renovated to address the Year 2000 issue.
The Company's Board of Directors reviews on a monthly basis the progress made in
addressing Year 2000 issues. Management estimates that the Company's expenses
related to upgrading its systems and software for Year 2000 compliance will not
exceed $50,000. At March 31, 1999, the Company had spent approximately $19,000
in connection with Year 2000 compliance. Although management believes it is
taking the necessary steps to address the Year 2000 compliance issue, no
assurances can be given that some problems will not occur or that the Company
will not incur significant additional expenses in future periods. In the event
that the Company is ultimately required to purchase replacement computer
systems, programs and equipment, or to incur substantial expenses to make its
current systems, programs and equipment Year 2000 compliant, its net income and
financial condition could be adversely affected.
In addition to possible expenses related to the Company's own systems and those
of its service providers, the Company could incur losses if Year 2000 problems
affect any of its depositers or borrowers. Such problems could include delayed
loan payments due to Year 2000 problems affecting any of the Company's
significant borrowers or impairing the payroll systems of large employers in its
market area. Because the Company's loan portfolio to individual borrowers is
diversified and its market area does not depend significantly on one employer or
industry, management does not expect any such Year 2000 related difficulties
that may affect the Company's depositors and borrowers to significantly affect
net earnings or cash flows.
Because the Company has only two commercial borrowers and neither loan is of a
material amount, the Company has not requested certification from those
borrowers that their computer systems are Year 2000 compliant. The Company will
require borrowers under new commercial loans in
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excess of $50,000 that it originates to certify that they are aware of the Year
2000 issue and will give all necessary attention to insure that their
information technology will be Year 2000 compliant.
The Company is in the process of developing contingency plans to be implemented
in the event of the failure of all or part of its Year 2000 program or of the
Year 2000 programs of any of its service providers. These contingency plans
involve, among other actions, manual workarounds, adjusting staffing strategies
and temporarily discontinuing services or products which are not considered by
management to be critical to the Company's operations. The Company has set a
deadline of June 30, 1999, for completion of the contingency plans.
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 affect the quantitative and qualitative risk
disclosures as presented in Item 7A of the Registrant's Annual Report on Form
10-K for the year ended June 30,1998.
The Securities and Exchange Commission maintains a Web site that contains
reports, proxy and information statements and other information regarding
registrants with the commission, including the Company. The address of that Web
site is http://www.sec.gov.
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 Matters to Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) The exhibits filed herewith or incorporated by reference
herein are set forth on the Exhibit Index on page 15.
(b) The Company filed a report on form 8-K on March 22, 1999,
to report a change in the Company's Certifying Accountant.
12
<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: May 12, 1999 By: /s/ Fred W. Carter
-------------------
Fred W. Carter
President and Chief Executive Officer
Date: May 12, 1999 By: /s/ Stephen D. Davis
--------------------
Stephen D. Davis
Treasurer
14
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
3(1) Registrant's Articles of Incorporation are incorporated by
reference to Exhibit 3(1) to the Registration Statement on
Form S-1 (Registration No. 333-29031) (the "Registration
Statement")
(2) Registrant's Code of By-Laws are incorporated by reference to
Exhibit 3(2) to the Registration Statement
10(4) Citizens Bancorp Employee Stock Ownership Plan and Trust
Agreement is incorporated by reference to Exhibit 10(4) to the
Registrant's Form 10-K for the period ended June 30, 1997 (the
"1997 Form 10-K")
(5) Employment Agreement between Citizens Savings Bank of
Frankfort and Fred W. Carter is incorporated by reference to
Exhibit 10(5) to the Registration Statement
(6) Director Deferred Compensation Agreement -- Fred W. Carter is
incorporated by reference to Exhibit 10(6) to the Registration
Statement
(7) Executive Supplemental Retirement Agreement -- Fred W. Carter
is incorporated by reference to Exhibit 10(7) to the
Registration Statement
(8) Executive Supplemental Retirement Agreement -- Stephen D.
Davis is incorporated by reference to Exhibit 10(8) to the
Registration Statement
(9) Executive Supplemental Retirement Agreement -- Cindy S.
Chambers is incorporated by reference to Exhibit 10(9) to the
Registration Statement
(10) Exempt Loan and Share Purchase Agreement between Trust under
Citizens Bancorp Employee Stock Ownership Plan and Trust
Agreement and Citizens Bancorp is incorporated by reference to
Exhibit 10(10) of the 1997 Form 10-K
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS
ENDED MARCH 31, 1999 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> 9-mos
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-1-1998
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1.000
<CASH> 531
<INT-BEARING-DEPOSITS> 2,365
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 400
<INVESTMENTS-CARRYING> 352
<INVESTMENTS-MARKET> 352
<LOANS> 51,268
<ALLOWANCE> 306
<TOTAL-ASSETS> 58,311
<DEPOSITS> 36,645
<SHORT-TERM> 0
<LIABILITIES-OTHER> 374
<LONG-TERM> 6,000
<COMMON> 9,580
0
0
<OTHER-SE> 5,712
<TOTAL-LIABILITIES-AND-EQUITY> 58,311
<INTEREST-LOAN> 3,133
<INTEREST-INVEST> 30
<INTEREST-OTHER> 141
<INTEREST-TOTAL> 3,304
<INTEREST-DEPOSIT> 1,204
<INTEREST-EXPENSE> 1,442
<INTEREST-INCOME-NET> 1,862
<LOAN-LOSSES> 50
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 975
<INCOME-PRETAX> 1,015
<INCOME-PRE-EXTRAORDINARY> 608
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 608
<EPS-PRIMARY> .63
<EPS-DILUTED> .63
<YIELD-ACTUAL> 4.57
<LOANS-NON> 400
<LOANS-PAST> 103
<LOANS-TROUBLED> 36
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 269
<CHARGE-OFFS> 13
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 306
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 306
</TABLE>
