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 DECEMBER 31, 1998
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 February 10, 1999 was 1,016,994.
1
<PAGE>
Citizens Bancorp
Form 10-Q
Index
PART I. FINANCIAL INFORMATION Page No.
Item 1. Financial Statements
Consolidated Statements of Financial Condition as of
December 31, 1998 and June 30, 1998 (Unaudited) 3
Consolidated Statements of Income for the three months
ended December 31, 1998 and 1997 (Unaudited) 4
Consolidated Statements of Income for the six months
ended December 31, 1998 and 1997 (Unaudited) 5
Consolidated Statement of Changes in Shareholders'
Equity for the six months ended December 31, 1998
(Unaudited) 6
Consolidated Statements of Cash Flows for the six
months ended December 31, 1998 and 1997 (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
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
CITIZENS BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
(dollars in thousands)
<TABLE>
<CAPTION>
December 31, June 30,
1998 1998
------------ --------
(Unaudited) (Note A)
Assets
<S> <C> <C>
Cash on hand and in other institutions $ 698 $ 306
Interest-bearing deposits 2,425 2,227
Investment securities available for sale 287 315
Stock in Federal Home Loan Bank
of Indianapolis 352 352
Loans receivable, net 50,997 46,936
Land held for development 915 964
Cash surrender value of
life insurance contract 1,140 1,119
Property and equipment 544 565
Other assets 909 658
-------- --------
Total assets $ 58,267 $ 53,442
======== ========
Liabilities and shareholders' equity
Liabilities
Deposits $ 36,177 $ 34,067
Federal Home Loan Bank advances 6,500 3,500
Other liabilities 449 707
-------- --------
Total liabilities 43,126 38,274
Shareholders' equity
Preferred stock (no par value);2,000,000 shares
authorized, no shares issued -- --
Common Stock (no par value);5,000,000 shares
authorized; 1998 - 1,058,000 shares issued,1,024,194
outstanding; 1997 - 1,058,000 issued and outstanding 9,661 10,062
Additional paid-in-capital 55 41
Unearned stock awards (1,301) (1,406)
Accumulated other comprehensive income (16) 3
Retained income - substantially restricted 6,742 6,468
-------- --------
Total shareholders equity 15,141 15,168
-------- --------
Total liabilities and shareholders equity $ 58,267 $ 53,442
======== ========
</TABLE>
See notes to consolidated unaudited financial statements.
3
<PAGE>
CITIZENS BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands)
Three months ended December 31,
1998 1997
------ ------
(Unaudited)
Interest income:
Interest on loans $1,056 $ 919
Other interest income 79 97
------ ------
1,135 1,016
Interest expense:
Interest on deposits 425 398
Interest on borrowings 88 15
------ ------
413 513
------ ------
Net interest income 622 603
Provision for loan losses 20 28
------ ------
Net interest income
after provision for loan losses 602 575
Other income:
Fees and service charges 42 36
Gain on sale of real estate 9 --
Other 16 18
------ ------
67 54
Other expense:
Salaries and employee benefits 176 159
Occupancy expense 32 29
Data processing expense 33 27
Federal insurance premium 6 6
Other 90 85
------ ------
337 306
------ ------
Income before income taxes 332 323
Income taxes 138 125
------ ------
Net income $ 194 $ 198
====== ======
Net income per share $ .20 $ .20
Average shares outstanding 970,903 974,788
See notes to consolidated unaudited financial statements.
4
<PAGE>
CITIZENS BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands)
Six months ended December 31,
1998 1997
-------- --------
Interest income:
Interest on loans $ 2,084 $ 1,777
Other interest income 12 180
-------- --------
2,211 1,957
Interest expense:
Interest on deposits 823 825
Interest on borrowings 147 54
-------- --------
970 879
-------- --------
Net interest income 1,241 1,078
Provision for loan losses 35 40
-------- --------
Net interest income
after provision for loan losses 1,206 1,038
Other income:
Fees and service charges 83 68
Gain on sale of real estate 11 180
Other 30 32
-------- --------
12 280
Other expense:
Salaries and employee benefits 337 269
Occupancy expense 62 56
Data processing expense 70 55
Federal insurance premium 12 12
Other 193 153
-------- --------
674 545
-------- --------
Income before income taxes 656 773
Income taxes 27 308
-------- --------
Net income $ 380 $ 465
======== ========
Net income per share $ .39 $ .52 (1)(2)
Average shares outstanding 976,859 976,039 (2)
(1) Pro forma earnings per share.
(2) See Note D to the consolidated unaudited financial statements.
See notes to consolidated unaudited financial statements.
5
<PAGE>
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 -- -- -- -- -- 380 380
Common stock
repurchased (33,806) (401) -- -- -- -- (401)
Change in unrealized
gain (loss) on
securities available -- -- -- -- (20) -- (20)
for sale (net)
Dividends declared on
common stock -- -- -- -- -- (105) (105)
Allocation of RRP shares -- -- -- 52 -- -- 52
Release of ESOP Shares -- -- 14 53 -- -- 67
---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance,
December 31, 1998 1,024,194 $ 9,661 $ 55 ($ 1,301) ($ 17) $ 6,743 $ 15,141
========== ========== ========== ========== ========== ========== ==========
</TABLE>
See notes to consolidated unaudited financial statements.
6
<PAGE>
CITIZENS BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
Six months ended December 31,
1998 1997
-------- --------
(Unaudited)
Operating activities:
Net income $ 380 $ 465
Adjustments to reconcile net income
to net cash provided
by operating activities:
Provision for loan losses 35 40
Depreciation and amortization 9 14
Deferred federal income tax credit 31 (14)
Release of ESOP/RRP shares 118 41
(Increase) decrease in other assets (283) 52
Increase (decrease) in other liabilities (264) 237
-------- --------
Net cash provided by operating activities 26 835
Investing activities:
Purchases of investment securities (5) (4)
Principal collected on loans 10,829 7,633
Loans originated (14,913) (10,991)
Loans purchased -- (1,497)
Decrease in land held for development 50 29
-------- --------
Net cash used by investing activities (4,039) (4,830)
Financing activities:
Increase (decrease) in NOW,
MMDA and passbook deposits 114 (244)
Increase (decrease) in certificates of depos 1,996 (191)
Advances from Federal Home Loan Bank 9,500 --
Payments to Federal Home Loan Bank (6,500) (3,000)
Sale of common stock, net of costs -- 9,216
Repurchase of common stock --
Dividend paid on common stock (106) --
-------- --------
Net cash provided by financing activities 4,603 5,781
-------- --------
Increase in cash and cash equivalents 590 1,786
Cash and cash equivalents at beginning of period 2,533 4,125
-------- --------
Cash and cash equivalents at end of period $ 3,123 $ 5,911
======== ========
See notes to consolidated unaudited financial statements.
7
<PAGE>
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 six-month periods ended December 31, 1998 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 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 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 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.
The adoption of this Statement had no impact on the Company's net income or
shareholders' equity for the six months ended December 31, 1998. 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 December 31, 1998 and 1997, total comprehensive income was $185,000
and $198,000, respectively. For the six months ended December 31, 1998 and 1997,
total comprehensive income was $361,000 and $465,000, respectively.
8
<PAGE>
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. The Company
had $.20 and $.39 earnings per share for the three and six months ended December
31, 1998. Earnings per share for the three months ended December 31, 1997, were
$.20. Pro forma earnings per share would have been $.52 for the six months ended
December 31, 1997. 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 on July 1, 1997.
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 December 31, 1998, compared to $53.4
million at June 30, 1998. Cash increased $392,000 to $698,000 at December 31,
1998, 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, increased to $2.4 million at December 31, 1998, from
$2.2 million at June 30, 1998. Net loans receivable increased $4.1 million to
$51.0 million at December 31, 1998, 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 $2.1 million
primarily as a result of an increase in the amount of public funds on deposit.
Borrowings at the Federal Home Loan Bank increased $3.0 million to $6.5 million
as of December 31, 1998, from $3.5 million at June 30, 1998.
Shareholder equity decreased $27,000 during the six months ended December 31,
1998. This was primarily a result of the profit of $380,000 for the period,
which increased shareholders' equity, less the cost of the Company's repurchase
of $401,000 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 December 22, 1998, payable on January 7, 1999. Shareholder equity
decreased by $57,000 as a result of the declaration of the dividend.
Comparison of operating results for the three-month periods ended December 31,
1998 and 1997.
The Company had a decrease in net income of $4,000 to $194,000 for the
three-months ended December 31, 1998, compared to a net income of $198,000 for
the three-month period ended December 31, 1997.
Net interest income increased $19,000 to $622,000 for the quarter ended December
31, 1998, compared to $603,000 for the same period in 1997. The increase
resulted primarily from an increase in earning assets during the 1998 period.
9
<PAGE>
The provision for loan losses was $20,000 for the December 31, 1998 period, as
compared to $28,000 for the 1997 period. At December 31, 1998, the allowance for
loan loss was 0.57% of the total loans, which was unchanged from June 30, 1998.
Total non-interest income increased $13,000 to $67,000 for the quarter ended
December 31, 1998, compared to $54,000 during the same period in 1997. The
increase is primarily the result of a net gain of $9,000 on the sale of real
estate during the 1998 period, as well as an increase of $6,000 in fees and
service charges during the 1998 period.
Total non-interest expense increased $31,000 to $337,000 for the quarter ended
December 31, 1998, compared to $306,000 for the same quarter in 1997. The
increase was primarily due to an increase in salaries and benefits of $17,000
during the 1998 period due to compensation expense related to the ESOP and the
Recognition and Retention Plan and Trust ("the RRP"). Office occupancy expense
and data processing expenses increased by $9,000 for the 1998 period, and other
expenses, consisting of legal, accounting and other operating expenses,
increased by $5,000 for the 1998 period.
Income tax expense increased by $13,000 to $138,000 for the three-months ended
December 31, 1998, compared to $125,000 for the same period in 1997. This was
primarily the result of an increase in net income before income taxes in the
1998 period.
Comparison of operating results for the six-month periods ended December 31,
1998 and 1997.
The Company had a decrease in net income of $85,000 to $380,000 for the six
months ended December 31, 1998, compared to a net income of $465,000 for the
six-month period ended December 31, 1997.
Net interest income increased $163,000 to $1,241,000 for the six months ended
December 31, 1998, compared to $1,078,000 for the same period in 1997. The
increase resulted primarily from an increase in earning assets during the 1998
period.
The provision for loan losses was $35,000 for the period ended December 31,
1998, as compared to $40,000 for the 1997 period. At December 31, 1998, the
allowance for loan loss was 0.57% of the total loans, which was unchanged from
June 30, 1998.
Total non-interest income decreased $156,000 to $124,000 for the six months
ended December 31, 1998, compared to $280,000 for the same period in 1997. 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 1997 period. This was offset
by an increase in fees and service charges of $15,000 during the 1998 period.
Total non-interest expense increased $129,000 to $674,000 for the six months
ended December 31, 1998, compared to $545,000 for the same period in 1997. The
increase was primarily due to an increase in salaries and benefits of $68,000
during the 1998 period due to compensation expense related to the ESOP and the
RRP. Office occupancy expense and data processing expense increased by $21,000
for the 1998 period and other expenses, consisting primarily of legal and
accounting fees, increased by $40,000 during the 1998 period, due to the
increased reporting requirements for public companies.
Income tax expense decreased by $32,000 to $276,000 for the six months ended
December 31, 1998, compared to $308,000 for the same period in 1997. This
primarily resulted from a decrease in net income before income taxes in the 1998
period as a result of the gain on the sale of real estate that increased
non-interest income for the 1997 period.
Asset Quality
The allowance for loan losses was $291,000 at December 31, 1998, compared to
$269,000 at June 30, 1998. Management considered the allowance for loan losses
at December 31, 1998, 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 six
months ended December 31, 1998.
Balance, July 1, 1998 $ 268,837
Provision for loan losses 35,000
Recoveries --
Charge-offs (12,498)
---------
Balance, December 31, 1998 $ 291,339
=========
Non-performing loans totaled $287,000 or .56% of total loans at December 31,
1998, compared to $170,000 or .36% of total loans at June 30, 1998.
10
<PAGE>
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 December 31, 1998 and June 30, 1998, cash and
interest-bearing deposits totaled $3.1 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 Federal Home Loan Bank 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 December 31, 1998, borrowings from the FHLB totaled
$6.5 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 December 31, 1998, 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 is nearing completion of 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
within the next year.
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
December 31, 1998, the Company has received such certification from nearly all
of these companies and has set a deadline of March 31, 1999, for the remaining
companies to provide this certification. 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. The March 31,
1999, deadline that the Company has established for its remaining service
providers to certify that their systems are Year 2000 compliant should provide
the Company sufficient time to identify and contract with alternative service
providers to replace any provider that cannot certify that it is, or soon will
be, Year 2000 compliant. 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 quarterly 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 December 31, 1998, the Company had spent approximately
$15,000 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 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.
11
<PAGE>
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.
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.
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) No reports on form 8-K were filed during the quarter ended
December 31, 1998.
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: February 10, 1999 By: /s/ Fred W. Carter
----------------------------------
Fred W. Carter
President and Chief Executive Officer
Date: February 10, 1999 By:/s/ Stephen D. Davis
----------------------------------
Stephen D. Davis
Treasurer
13
<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 DECEMBER 31, 1998 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> 6-mos
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-1-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1.000
<CASH> 698
<INT-BEARING-DEPOSITS> 2,425
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 287
<INVESTMENTS-CARRYING> 352
<INVESTMENTS-MARKET> 352
<LOANS> 50,997
<ALLOWANCE> 291
<TOTAL-ASSETS> 58,267
<DEPOSITS> 36,177
<SHORT-TERM> 500
<LIABILITIES-OTHER> 449
<LONG-TERM> 6,000
<COMMON> 10,062
0
0
<OTHER-SE> 5,079
<TOTAL-LIABILITIES-AND-EQUITY> 58,267
<INTEREST-LOAN> 2,084
<INTEREST-INVEST> 21
<INTEREST-OTHER> 106
<INTEREST-TOTAL> 2,211
<INTEREST-DEPOSIT> 823
<INTEREST-EXPENSE> 970
<INTEREST-INCOME-NET> 1,241
<LOAN-LOSSES> 35
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 674
<INCOME-PRETAX> 656
<INCOME-PRE-EXTRAORDINARY> 380
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 380
<EPS-PRIMARY> .39
<EPS-DILUTED> .39
<YIELD-ACTUAL> 4.59
<LOANS-NON> 201
<LOANS-PAST> 49
<LOANS-TROUBLED> 37
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 269
<CHARGE-OFFS> 13
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 291
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 291
</TABLE>
