<PAGE> 1
FORM 10-K/A
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
This Amendment No. 2 is being submitted to amend Part II, Item 7: Management's
Discussion and Analysis of Financial Condition and Result of Operations, to
include the table and narrative for "Non-Performing Loans and Other Assets."
This section was inadvertently not included in the 10K filed for fiscal year-
ended December 31, 1998. Amendment No. 1 did not include the entire narrative
of Item 7. Amendment No. 2 includes the entire Management Discussion and
Analysis.
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1998
[ ] TRANSITIONAL REPORT PURSUANT OT SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____ to ____
Commission File No. 000-23277
CITIZENS BANCORP/OR
(Name of registrant in its charter)
91-1841688
Oregon (I.R.S. Employer
(State of incorporation) Identification No.)
275 Southwest Third Street
P. O. Box 30
Corvallis, Oregon 97339
(Address of principal executive offices)
Registrant's telephone number: (541) 752-5161
Agent for service: Lark E. Wysham, CFO
275 Southwest Third Street
Telephone number: (541) 752-5161
Securities registered under Section 12(b) of the Exchange Act: none
Securities registered under Section 12(g) of the Exchange Act:
common stock, no par value
Indicate by check mark whether registrant has (1) filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 122 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ].
The aggregate market value of registrant's voting and non-voting common
equity held by non-affiliates is $52,296,335 based on the most recent reported
sale of registrant's common stock on March 26, 1999 at a price of $17.00 per
share. As of March 26, 1999 there were 3,927,706 shares of registrant's common
stock issued and outstanding, of which 3,076,255 were held by non-affiliates.
DOCUMENTS INCORPORATED BY REFERENCE. Part III of this Form 10-K
incorporates by reference the 1999 Annual Meeting Proxy Statement sent to
registrant's shareholders in connection with the April 21, 1999 Annual Meeting
of Shareholders.
<PAGE> 2
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS FOR YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996.
Earnings per share for the three years ended 1998, 1997, and 1996 was $.99, $.87
and $.83, respectively.
NET INCOME. For the three years ended December 31, 1998, Citizens Bancorp's (in
year's 1998 and 1997) and Citizens Bank's (in year 1996) net income was $3.840
million, $3.341 million, and $3.138 million, respectively. 1998 net income
increased $.499 million or 14.9% over 1997, which increased $.203 million or
6.5% over 1996. Bancorp's increased net income in 1998 is primarily due to
increased income from loans, loan fees, and investment income. This increase was
due to volume increases. Average yield on loans remained relatively constant
over the year. Net income was assisted by an increase in earning assets to total
assets and a decrease in the average yield paid on average interest-bearing
liabilities. Average earning assets to average total assets for the years 1998,
1997 and 1996 are 93.6%, 93.2%, and 93.3%, respectively. Average yield on
earning assets for the same periods was 8.8%, 8.9% and 8.7%, respectively.
Bancorp's 1998 net income was negatively impacted by increased expenses in
salary and benefits, costs associated with the planning of two new branches, and
investment in a computer network (LAN/WAN). Management sees these expenditures
as investments in increased productivity and capacity and should result in
consistent year-to-year future earnings growth.
INTEREST INCOME. Interest income totaled $16.9 million for the year ended
December 31, 1998, an 11.9% increase over the $15.1 million for 1997, which was
10.6% over the $13.7 million generated in 1996. This increase in income was due
primarily to increased loan and investment volume.
INTEREST EXPENSE. Interest expense for the year ended December 31, 1998 was $5.9
million, an 11.9% increase over the $5.3 million expense for 1997, and a 5.0%
increase over the $5.0 million expense in 1997. These increases are due to
deposit volume increases.
NET INTEREST INCOME. Net interest income during the years 1998, 1997, and 1996
grew to $11.0 million from $9.9 million and $8.7 million, respectively.
Additionally, for the same periods beginning with 1998, net interest margins
were 5.8%, 5.9% and 5.6%, respectively. Changes in the net interest margins were
primarily due to increased volumes and the changing interest rate environment.
19
<PAGE> 3
The following table presents for the periods indicated, information regarding
average balances of assets and liabilities as well as the total dollar amounts
of interest income from average interest-bearing liabilities, resulting yield
and cost ratios, interest rate spread, ratio of interest-earning assets to
interest-bearing liabilities and net interest margin for Bancorp. Average
balances for the period have been calculated using daily average balances.
<TABLE>
<CAPTION>
AVERAGE BALANCES AND TAX-EQUIVALENT NET INTEREST MARGIN
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 1998 1997 1996
31,
(In thousands) ----------------------------------------------------------------------------------------
Average Int. Avg. Average Int. Avg. Rate Average Int. Avg.
Balance Income Rate Balance Income Earned/ Balance Income Rate
(Expense) Earned/ (Expense) Paid (Expense) Earned/
Paid Paid
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loans (2) .............................. $130,895 $13,396 10.23% $119,157 $12,250 10.28% $107,718 $10,850 10.07%
INVESTMENT SECURITIES:
Taxable ............................ 45,193 2,645 5.86% 39,265 2,386 6.08% 38,610 2,315 6.00%
Tax-exempt (1) ..................... 5,787 373 6.45% 3,918 330 8.43% 5,603 455 8.11%
-------- ------- ----- -------- -------- ------ -------- ------- -----
TOTAL
INVESTMENT
SECURITIES 50,980 3,018 5.93% 43,183 2,716 6.29% 44,213 2,770 6.26%
======== ======= ===== ======== ======== ====== ======== ======= =====
Interest bearing
deposits in banks and
federal funds sold ..................... 14,937 843 5.64% 11,915 557 4.67% 9,430 464 4.92%
TOTAL EARNING ASSETS ................... 196,722 17,257 8.77% 174,255 15,523 8.91% 161,361 14,084 8.73%
======== ======= ===== ======== ======== ====== ======== ======= =====
Cash and due from banks 8,357 7,548 8,367
Premises and equipment ................. 2,904 2,717 2,694
Other assets ........................... 3,424 3,393 1,469
Reserve for possible
credit losses .......................... (1,299) (1,128) (962)
-------- -------- --------
TOTAL .................................. $210,198 $186,785 $172,929
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Savings, MMDA, NOW ................... $ 74,518 (1,960) 2.63% $ 68,601 (1,903) 2.77% $ 64,358 (1,798) 2.79%
Time ................................. 60,014 (3,226) 5.38% 53,673 (2,872) 5.35% 52,130 (2,798) 5.37%
-------- ------- ----- -------- -------- ------ -------- ------- -----
TOTAL INTEREST-
BEARING DEPOSITS ................... 134,532 (5,186) 3.85% 122,274 (4,775) 3.91% 116,488 (4,596) 3.95%
======== ======= ===== ======== ======== ====== ======== ======= =====
Repurchase agreements .................. 14,225 (525) 3.69% 11,361 (450) 3.96% 9,883 (390) 3.95%
Other borrowings ....................... 3,961 (206) 5.20% 1,349 (61) 4.60% 1,123 (48) 4.27%
-------- ------- ----- -------- -------- ------ -------- ------- -----
TOTAL INTEREST-BEARING
LIABILITIES ............................ 152,718 (5,917) 3.87% 134,984 (5,286) 3.92% 127,494 (5,034) 3.95%
======== ======= ===== ======== ======== ====== ======== ======= =====
Demand deposits ........................ 34,792 31,713 28,299
Other liabilities ...................... 918 1,022 850
Shareholders' equity ................... 21,770 19,066 16,286
-------- -------- --------
TOTAL .................................. $210,198 $186,785 $172,929
======== ======= ===== ======== ======== ====== ======== ======= =====
Net interest margin (1) ................ $11,340 $10,236 $ 9,050
Interest income as a % of avg. earning . 8.78% 8.91% 8.73%
assets
Interest expense as a % of avg. earning 3.01% 3.03% 3.12%
assets
Net interest margin .................... 5.77% 5.88% 5.60%
</TABLE>
(1) Includes taxable equivalent adjustments related to income on securities that
is exempt form federal income taxes. The federal statutory rate was 34%
(2) For purposes of these calculations, nonaccrual loans are included in the
average loan balance outstanding. Loan fees and late charges of $971, $812 and
$572 are included in interest income for 1998, 1997 and 1996.
20
<PAGE> 4
The following table sets forth, on a tax-equivalent basis, a summary of the
changes in net interest income resulting from changes in volumes and rates.
CHANGES NOT DUE SOLELY TO VOLUME OR RATE CHANGES ARE ALLOCATED TO VOLUME AND
RATE IN PROPORTION TO THE RELATIONSHIP OF THE ABSOLUTE DOLLAR AMOUNTS OF THE
CHANGE IN EACH.
<TABLE>
<CAPTION>
1998 versus 1997 1997 versus 1996
-----------------------------------------------------------------
Increase (decrease) Increase (decrease)
due to change in Due to change in
-----------------------------------------------------------------
Average Average Net Average Average Net
Volume Rate Change Volume Rate Change
------- ------- ------ ------- ------- -------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME
Loans ...................... $1,207 $ (61) $1,146 $1,172 $228 $1,400
Investment securities ...... 397 (95) 302 (65) 11 (54)
Interest-bearing deposits in
banks and federal funds sold 258 28 286 117 (24) 93
------ ------ ------ ------ ---- ------
TOTAL INTEREST INCOME ...... 1,862 (128) 1,734 1,224 215 1,439
====== ===== ====== ====== ==== ======
INTEREST EXPENSE
Savings deposits ........... 84 (27) 57 118 (13) 105
Time deposits .............. 345 9 354 83 (9) 74
Repurchase agreements ...... 87 (12) 75
Other borrowings ........... 141 4 145 69 5 74
------ ------ ------ ------ ---- ------
TOTAL INTEREST EXPENSE ..... 518 (32) 631 270 (17) 253
====== ===== ====== ====== ==== ======
CHANGES IN NET
INTEREST INCOME ............ $1,344 $ (96) $1,103 $ 954 $232 $1,186
====== ===== ====== ====== ==== ======
</TABLE>
The following table further reflects changes in average balances and rates from
December 31, 1998 to December 31, 1997.
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN AVERAGE BALANCE: INCREASE (DECREASE) IN AVERAGE RATE:
- --------------------------------------- ------------------------------------
<S> <C> <C> <C>
Loans 9.85% Loans (.49)%
Investments 17.63% Investments (5.89)%
Fed Funds & Deposits 25.36% Fed Funds & Deposits 20.77%
------ -----
TOTAL EARNING ASSETS 12.85% TOTAL EARNING ASSETS (1.48)%
====== ======
Savings, NOW, MMDA 8.63% Savings, NOW, MMDA (5.32)%
Time 11.81% Time .56%
Repurchase Agreements 25.21% Repurchase Agreements (7.32)%
Other Borrowings 293.62% Other Borrowings 13.04%
------ -----
TOTAL INT BEAR LIABILITIES 13.14% TOTAL INT BEAR LIABILITIES (1.29)%
====== =====
</TABLE>
21
<PAGE> 5
The following chart further reflects changes in average balances and rates from
December 31, 1997 to December 31, 1996.
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN AVERAGE BALANCE: INCREASE (DECREASE) IN AVERAGE RATE:
- --------------------------------------- ------------------------------------
<S> <C> <C> <C>
Loans 10.62% Loans 2.06%
Investments (2.33)% Investments 0.39%
Fed Funds & Deposits 26.35% Fed Funds & Deposits (4.99)%
------ -----
TOTAL EARNING ASSETS 7.99% TOTAL EARNING ASSETS 2.06%
====== =====
Savings, NOW, MMDA 6.59% Savings, NOW, MMDA (0.71)%
Time 2.96% Time (0.31)%
Repurchase Agreements & Repurchase Agreements &
Other Borrowings 15.48% Other Borrowings 1.22%
------ -----
TOTAL INT BEAR LIABILITIES 5.87% TOTAL INT BEAR LIABILITIES (0.80)%
====== =====
</TABLE>
NET INTEREST INCOME AFTER PROVISION FOR POSSIBLE CREDIT LOSSES. Net interest
income after provision for possible credit losses was $10.8 million at December
31, 1998, $9.7 million at December 31, 1997, and $8.5 million at December 31,
1996. Total provision for possible credit loss expense for the three years
ending December 31, 1998, was $236,000, $165,000, and $135,000 respectively.
Total provision expense was increased due to loan volume increases. Recoveries
were $14,000, $0, and $15,000 in 1998, 1997, and 1996. Charge-offs of $32,000,
$2,000, and $8,000 were realized during the same periods. The Bank has a history
of very low credit loss experience. Management believes the quality of the loan
portfolio is outstanding due to strong internal controls, good loan policy
standards, experienced loan officers, and the strong economy in Oregon. The
reserve for possible credit losses to total loans for the years ended December
31, 1998, 1997, and 1996, respectively, were 1.07%, .99%, and .88%.
NON-INTEREST INCOME. Non-interest income (total other operating income) was $2.2
million for the year ended December 31, 1998, an 19.9% increase from $1.8
million for 1997, and an 18.4% increase from $1.6 million in 1996. These
increases are due to increased service charges and customer fee income which is
primarily a function of increased volumes of accounts. Very few rate increases
have been made in service charges and fees during this period. During 1997 and
1998, the low and declining interest rate environment on term loans generated
refinance activity and new home purchases, resulting in an increased volume of
home loans made for sale into the secondary market. Gains on the sale of these
loans represented a substantial portion of the increase the Bank experienced in
other operating income.
NON-INTEREST EXPENSE. Non-interest expenses (other operating expenses) have
increased during the last three years ending December 31, 1998 to $7.2 million
from $6.2 million in 1997 and $5.3 million in 1996. A 15.5% increase or a $1
million increase occurred from 1997 to 1998 and a 16.6% or a $.9 million
increase occurred from 1996 to 1997. These increases in non-interest expense are
in correlation and are a direct result of increased non-interest income. The
specific areas of increase occurred in increased salaries and benefits,
equipment, occupancy, professional fees, marketing, printing, office supplies,
communications, and other expenses. At the end of 1998 the Bank had the staff
for its new West Albany branch hired and trained for the early
22
<PAGE> 6
1999 opening. The Bank had also hired a manager and assistant manager to plan
the branch in McMinnville due to open early Spring 1999. This added to the
increase in salary and benefits expense. Overall increases are a result of the
Bank's increased volume, and management's increased emphasis on business
development, marketing, auditing, and human resource management.
Opening new offices results in higher operating costs, which are not offset
until a certain level of growth in loans and deposits is achieved. Initially,
new branch offices will increase non-interest expenses, thus having an adverse
effect on net income for Bancorp. At the end of 1998, Bancorp employed 111
full-time equivalent employees compared to 108 at year end 1997 and 99 at year
end 1996. The Bank has been able to increase staff productivity through
training, education, and improved hiring practices.
Increases in non-interest expense is generally caused by higher operating levels
associated with growth in business volume. Bancorps total assets at December 31,
1998, were 21.9% greater than total assets of the Bank at December 31, 1996.
INCOME TAXES. Income tax expense for 1998 was $2,027 or 34.5% of net income
before taxes, 1997 was $2,023 or 37.7% of net income before taxes. In 1996 the
tax provision was $1,660 or 34.6% of net income before taxes. Bancorp's tax rate
of 34.6% is lower than in 1997 due to an increased percentage of Bancorp's
income being generated by tax exempt items primarily in the Bank's investment
portfolio.
ASSET/LIABILITY MANAGEMENT. Bancorp uses an asset/liability modeling system
called ALX to estimate the degree of interest rate risk and market risk inherent
in its mix of interest earning assets and interest bearing liabilities. Bancorps
profitability is dependent to a large extent on net interest income. Bancorp is
very slightly asset sensitive, meaning that interest earning assets mature or
are otherwise subject to repricing at a slightly faster rate than interest
bearing liabilities. A significant decrease in market rates could adversely
impact the net earnings of Bancorp. In contrast, an inclining interest rate
environment could have a positive affect on net interest income. Bancorps
strategy is to keep a position that is very close to "balanced". That is, the
repricing of assets and liabilities would move much at the same rate. Because
the current position is only slightly asset sensitive the net interest margin
should increase slightly when rates increase and decrease slightly when rates
fall.
LIQUIDITY AND SOURCES OF FUNDS. Bancorp's primary sources of funds for liquidity
purposes are customer deposits, maturities of investment securities, sales of
"available for sale" securities, loan repayments, advances on lines of credit
from correspondent banks and from the Federal Home Loan Bank of Seattle, and the
purchase of federal funds. Bancorp can anticipate the availability of funds from
scheduled loan repayments, maturities of securities and from borrowed funds.
Customer deposits and unscheduled payments of loans are influenced by the
interest rate environment, the condition of the economy, competition and other
factors.
Deposits are Bancorp's primary source of new funds. At December 31, 1998, total
deposits were $188.2 million, $161.7 million at December 31, 1997, and $161.8
million at December 31, 1996. The Bank also had REPO'S (securities sold under
agreements to repurchase) for the periods of
23
<PAGE> 7
December 31, 1998, 1997, and 1996 of $16.2 million, $14.1 million, and $10.0
million, respectfully. The overall cost of funds was as follows:
<TABLE>
<CAPTION>
COST OF FUNDS
------------------------------
1998 1997 1996
------ ------ -----
<S> <C> <C>
3.87% 3.92% 3.95%
</TABLE>
Management anticipates that Bancorp will rely primarily on deposit growth,
maturities of investment securities, sales of available for sale securities, and
loan repayments to meet its liquidity needs. Borrowings can be used to provide
liquidity for short-term needs but it is the practice of Bancorp to attempt to
fund long-term loans and investments with core deposits and earnings, not
short-term borrowings. A limited amount of borrowings may be used on a long-term
basis to fund lending activities and to match maturities or repricing intervals
of assets.
The average daily amount of deposits and rates paid on deposits is summarized
for the periods indicated in the following table:
<TABLE>
<CAPTION>
1998 1997 1996
----------------------------------------------------------------------------------------
(In Thousands) Amount $ Rate % Amount $ Rate % Amount $ Rate %
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
DEPOSITS
Demand $ 34,758 -- $ 31,713 -- $ 28,299 --
Savings $ 74,518 2.63% $ 68,601 2.77% $ 64,358 2.79%
Time $ 60,014 5.38% $ 53,673 5.35% 52,130 5.37%
-------- -------- --------
TOTAL $169,290 $153,987 $144,787
======== ======== ========
</TABLE>
The following table indicates the amount of the Bank's certificates of deposits
with balances equal to or greater than $100,000 classified by time remaining
until maturity as of December 31, 1998.
<TABLE>
<CAPTION>
Maturity Period Certificates of Deposit
-------------------------------------------------------------
In Thousands
<S> <C>
3 months or less 9,786
3 months through 6 months 3,418
6 months through 12 months 2,888
Over 12 months 4,875
------
TOTAL 20,967
======
</TABLE>
24
<PAGE> 8
The following table is a summary of securities sold under repurchase agreement
(REPO) for each of the last three years.
<TABLE>
<CAPTION>
(Dollars in Thousands)
----------------------
1998 1997 1996
----------- ------- --------
<S> <C> <C> <C>
Securities sold under agreement to repurchase:
Average interest rate
At year end ............................ 3.10% 3.28% 3.24%
For the year ........................... 3.69% 3.96% 3.95%
Average amount outstanding
during the year .............................. $ 14,225 $11,361 $ 9,883
Maximum amount outstanding at
any month end ................................ $ 16,299 $14,086 $11,231
Amount outstanding at year end ............... $ 16.299 $14,086 $10,040
</TABLE>
CAPITAL RESOURCES. The Bank is subject to various capital requirements
administered by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory, and possibly additional
discretionary actions by regulators, that if undertaken, could have a direct
material effect on the Bank's financial statements. Under capital adequacy
guidelines that involve quantitative measures of the Bank's assets, and certain
off-balance-sheet items as calculated under regulatory accounting practices, the
Bank's capital classification is also subject to qualitative judgments by the
regulators about components, risk weightings, and other factors.
As of December 31, 1998, the most recent notification from the Bank's regulator
categorized the Bank as well-capitalized under the applicable regulations. To be
categorized as "well-capitalized," the Bank must maintain at least 10% total
risk based capital, 6% Tier 1 risk based capital and 5% Tier 1 leverage capital.
There are no conditions or events since that notification that management
believes have changed the institution's category.
25
<PAGE> 9
The following table indicates Citizens Bancorp capital adequacy position at
December 31, 1998, and at December 31, 1997, and compares those positions to
capital adequacy requirements.
<TABLE>
<CAPTION>
Citizens Bancorp
---------------- For Capital
Actual Adequacy Purposes
(in thousands) ------ -----------------
AS OF DECEMBER 31, 1998: Amount Ratio Amount Ratio
- ------------------------------ ------- ----- ------ -----
<S> <C> <C> <C> <C>
Total Risk-Based Capital (to
Risk-Weighted Assets) 23,448 16.5 11,346 =>8%
Tier 1 Capital (to
Risk-Weighted Assets) 22,029 15.5 5,673 =>4%
Tier 1 Capital (to average
Total Assets) 22,029 9.8 9,012 =>4%
AS OF DECEMBER 31, 1997:
Total Risk-Based Capital (to
Risk-Weighted Assets) $20,185 16.6% $9,735 >8%
-
Tier 1 Capital (to
Risk-Weighted Assets) $18,984 15.6% $4,868 >4%
-
Tier 1 Capital (to Average
Total Assets) $18,984 9.7% $7,855 >4%
-
</TABLE>
Shareholders equity increased to $22.6 million at December 31, 1998 from $19.4
million in 1997 and $16.8 million in 1996. Bancorp's (Citizens Bank in 1996)
shareholders average equity, as a percentage of average assets were 10.4% at
December 31, 1998, 10.2% at December 31, 1997, and 9.4% at December 31, 1996.
In a changing interest rate environment the value of the Bank's available for
sale portfolio may be negatively impacted and therefore may cause a reduction in
reported shareholders equity. Equity grew at 16.4% over the period between
December 31, 1997 and December 31, 1998, while assets grew by 16.9% over the
same period.
At December 31, 1998, the Bank had no material commitment for capital
expenditures that would negatively impact Bancorp's capital position.
26
<PAGE> 10
INVESTMENT PORTFOLIO
The following table shows Investments Held to Maturity.
<TABLE>
<CAPTION>
In Thousands
-------------------------------------
Outstanding Balance at December 31,
1998
-------------------------------------
Estimated Fair Value Amortized Cost % of Portfolio
-------------------- -------------- --------------
<S> <C> <C> <C>
U.S. Treasury Securities $2,036 $2,014 3.33%
Federal Agency
Obligations ............ 501 484 .80%
Obligations of State and
Political Subdivisions . 7,320 7,235 11.94%
------ ------ -----
TOTAL .................. $9,857 $9,733 16.07%
====== ====== =====
</TABLE>
<TABLE>
<CAPTION>
In Thousands
------------------------------------------
Outstanding Balance at December 31,
1997
------------------------------------------
Estimated Fair Value Amortized Cost % of Portfolio
-------------------- -------------- --------------
<S> <C> <C> <C>
U.S. Treasury Securities $6,036 $6,000 12.98%
Federal Agency
Obligations 500 482 1.04%
Obligations of State and
Political Subdivisions 3,561 3,501 7.57%
------- ------ -----
TOTAL $10,097 $9,983 21.59%
======= ====== =====
</TABLE>
<TABLE>
<CAPTION>
In Thousands
------------------------------------------
Outstanding Balance at December 31,
1996
------------------------------------------
Estimated Fair Value Amortized Cost % of Portfolio
-------------------- -------------- --------------
<S> <C> <C> <C>
U.S. Treasury Securities $10,066 $10,007 21.21%
Federal Agency
Obligations 657 650 1.38%
Obligations of State and
Political Subdivisions 5,042 5,078 9.72%
------- ------- -----
TOTAL $15,765 $15,735 32.31%
======= ======= =====
</TABLE>
27
<PAGE> 11
The following table sets forth the maturities and weighted average yields of
securities held to maturity at December 31, 1998.
<TABLE>
<CAPTION>
IN THOUSANDS
----------------------------------------------------
After 1 year, but After 5 years, but
Amount Within 1 year before 5 years before 10 years After 10 years
- ------ ------------- ----------------- ------------------ --------------
<S> <C> <C> <C> <C>
U.S. Treasury Securities ...................... 2,014 0 0 0
Federal Agency
Obligations ................................... 0 0 0 0
Obligations of State and
Political Subdivisions ........................ 591 2,355 3,724 1,049
----- ----- ----- -----
TOTAL ......................................... 2,605 2,355 3,724 1,049
===== ===== ===== =====
Weighted Average Yield(*)
U.S. Treasury Securities ...................... 6.03% 0 0 0
Federal Agency
Obligations ................................... 0 0 0 0
Obligations of State and
Political Subdivisions ........................ 5.69% 4.44% 4.28% 4.45%
----- ----- ----- -----
TOTAL ......................................... 5.95% 4.44% 4.28% 4.45%
===== ===== ===== =====
</TABLE>
(*) Yield on tax exempt delegations have not been computed on a tax equivalent
basis
The following tables show Investments Available for Sale.
<TABLE>
<CAPTION>
In Thousands
------------------------------------------
Outstanding Balance at December 31,
1998
------------------------------------------
Estimated Fair Value Amortized Cost % of Portfolio
-------------------- -------------- --------------
<S> <C> <C> <C>
U.S. Treasury Securities 26,864 26,679 44.34
Federal Agency
Obligations 23,334 23,137 38.51
Obligations of State and
Political Subdivisions 0 0 0
Other Securities 657 657 1.08
------ ------ -----
TOTAL 50,855 50,473 83.93
====== ====== =====
</TABLE>
28
<PAGE> 12
<TABLE>
<CAPTION>
In Thousands
------------------------------------------
Outstanding Balance at December 31,
1997
------------------------------------------
Estimated Fair Value Amortized Cost % of Portfolio
-------------------- -------------- --------------
<S> <C> <C> <C>
U.S. Treasury Securities $22,075 $22,027 47.73%
Federal Agency
Obligations 13,570 13,527 29.35%
Obligations of State and
Political Subdivisions 0 0 0
Other Securities 613 613 1.33%
------- ------- ------
TOTAL $36,258 $36,167 78.41%
======= ======= ======
</TABLE>
<TABLE>
<CAPTION>
In Thousands
------------------------------------------
Outstanding Balance at December 31,
1996
------------------------------------------
Estimated Fair Value Amortized Cost % of Portfolio
-------------------- -------------- --------------
<S> <C> <C> <C>
U.S. Treasury Securities $23,564 $23,540 50.42%
Federal Agency
Obligations 7,535 7,517 16.12%
Obligations of State and
Political Subdivisions 0 0 0
Other Securities 0 0 1.15%
------- ------- ------
TOTAL $31,099 $31,057 66.54%
======= ======= ======
</TABLE>
The following table sets forth the maturities, weighted average maturities, and
weighted average yields of securities available for sale.
<TABLE>
<CAPTION>
After 1 year, but After 5 years, but
Amount Within 1 year before 5 years before 10 years After 10 years
- ------ ------------- ----------------- ------------------ --------------
<S> <C> <C> <C> <C>
U.S. Treasury Securities 13,604 13,260 0 0
Federal Agency
Obligations 7,556 15,778 0 0
Obligations of State and
Political Subdivisions 0 0 0 0
Other Securities 657 0 0 0
------ ------ -- --
TOTAL 21,817 29,038 0 0
====== ====== == ==
</TABLE>
29
<PAGE> 13
<TABLE>
<CAPTION>
Investments Available For Sale
------------------------------------------------------------------------
After 1 year, but After 5 years, but
Within 1 Year before 5 years before 10 years After 10 years
------------- ------------------ ------------------ --------------
Weighted Average Yield(*)
- -------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Securities 5.43 5.28 0 0
Federal Agency
Obligations 6.05 5.69 0 0
Obligations of State and
Political Subdivisions 0 0 0 0
Other Securities 7.58 0 0 0
---- ---- -- --
TOTAL 5.71 5.50 0 0
==== ==== == ==
</TABLE>
(*) Yield information is computed using amortized cost balances and does not
give effect to changes in fair value that are reflected as a component of
shareholders equity.
LENDING AND CREDIT MANAGEMENT. Interest on loans is the primary source of income
for Bancorp. Net loans represented 55.9% of total assets as of December 31,
1998. The Bank works to serve the credit needs of the entire community, however
its primary focus for lending is small-to-medium sized businesses,
professionals, and individuals for commercial and real estate related financing
needs. Substantially all of the Bank's loans are to customers located within the
Bank's service areas.
Although the risk of non-payment always exists, type and level of risk changes
with different types of loans. In the Bank's loan portfolio, real estate is
frequently used as collateral. The primary source of repayment is the income
generated by a business or by an individual, but real estate as collateral
provides an additional measure of security. There are risks associated with
taking real estate as collateral. The risks are changing property values,
changes in property tax laws, and changes in economic conditions.
Loan risk is mitigated by lending to borrowers with proven credit histories and
demonstrated ability to repay. The Bank manages risk in the loan portfolio by
following loan policies and underwriting practices designed to result in minimal
risk.
30
<PAGE> 14
At December 31, the following table sets forth the composition of the Bank's
Loan Portfolio by type of loan as of the dates indicated.
<TABLE>
<CAPTION>
In Thousands
------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
Type of Loan Amount % Amount % Amount % Amount % Amount %
- ------------ -------- -- -------- -- -------- -- -------- -- ------- --
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial $ 26,234 20% $ 23,507 20% $ 21,975 19% $ 21,169 21% $21,858 24%
Agriculture 12,402 9% 10,992 9% 9,072 8% 8,834 9% 7,742 9%
Real Estate
Construction 7,900 6% 5,459 4% 3,865 3% 4,065 4% 2,543 3%
1-4 Family 31,390 24% 34,625 28% 34,322 29% 30,993 31% 25,080 28%
Other 50,421 38% 42,142 35% 40,300 35% 31,833 32% 25,317 28%
Other -- -- -- -- -- -- 105 -- 9 --
Consumer 4,393 3% 5,423 4% 6,861 6% 5,240 4% 8,187 8%
-------- ---- -------- ---- -------- ---- -------- ---- ------- ----
TOTAL LOANS 132,740 $122,148 $116,395 $102,239 $90,736
======== ==== ======== ==== ======== ==== ======== ==== ======= ====
Less Deferred
Loan Fees (614) (678) (709) (628) (496)
Less Allowance
for Credit Loss
Reserve
(1,419) (1,201) (1,038) (896) (844)
-------- ---- -------- ---- -------- ---- -------- ---- ------- ----
NET LOANS $130,707 100% $120,269 100% $114,648 100% $100,715 100% $89,396 100%
======== ==== ======== ==== ======== ==== ======== ==== ======= ====
</TABLE>
Interest income on loans is accrued daily on the principal balance outstanding.
Generally, no interest is accrued on loans deemed to be uncollectable, or when
the principal or interest payment becomes 90 days past due. At December 31,
1998, the Bank had loans totaling $447,000 that were 90 days or more past due
and still accruing interest because in management's judgement all of the
principal and accrued interest was deemed collectable and not subject to loss.
The following table shows the contractual maturity of the Bank's gross loans at
December 31, 1998. Loans having no stated schedule of repayments and no stated
maturity, demand loans, and overdrafts are reported as due in one year or less.
Loan balances do not include undisbursed loan proceeds, deferred loan fees and
discounts and allowance for losses on loans. The table does not reflect any
estimate of prepayments, which significantly shorten the average life of all
loans and may cause the Bank's actual repayment experience to differ from that
shown below.
<TABLE>
<CAPTION>
In Thousands
------------
After 1 year, but After 5 years, but
Within 1 year before 5 years before 10 years After 10 years
------------- ----------------- ------------------ --------------
<S> <C> <C> <C> <C>
Commercial 9,860 8,068 2,012 2,904
Agriculture 8,375 2,385 262 0
Real Estate
Construction 8,106 0 0 0
1-4 Family 3,080 1,813 5,269 20,970
Other 3,630 6,163 7,134 37,414
Consumer 1,260 2,644 628 149
------ ------ ------ ------
TOTAL 34,311 21,073 15,305 61,437
====== ====== ====== ======
</TABLE>
31
<PAGE> 15
NON-PERFORMING LOANS AND OTHER ASSETS
The following table represents information with respect to non-performing loans
and other assets:
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Loans on non-accrual status $ 173 $ 0 $ 4 $ 106 $ 221
Loans past due greater than 90 days 447 438 23 273 221
------ ------ ------ ------ ------
Total non-performing loans 620 438 27 379 442
Other real estate owned 0 240 59 0 455
------ ------ ------ ------ ------
Total non-performing assets $ 620 $ 678 $ 86 $ 379 $ 897
====== ====== ====== ====== ======
Allowance for loan losses $1,419 $1,201 $1,039 $ 896 $ 844
Allowance for loan losses/non-performing assets 229% 177% 1,208% 236% (5.97)%
Non-performing loans/total loans .47% .36% .02% .38% .49%
Non-performing assets/total assets .27% .34% .04% .23% .58%
</TABLE>
Bancorp has a policy that places loans on nonaccrual status after they become 90
days past due unless waived by management when collectability is deemed eminent.
Bancorp may place loans that are not contractually past due or that are fully
collateralized on nonaccrual status as a management tool to actively oversee
specific loans. Loans on nonaccrual status at December 31, 1998 were
approximately $173,000, $0 at December 31, 1997, and $4,000 at December 31,
1996.
32-a
<PAGE> 16
The following table sets forth the dollar amount of all loans due one year or
more after December 31, 1998, which have fixed interest rates and have floating
or adjustable interest rates.
<TABLE>
<CAPTION>
In Thousands
------------
Fixed Rates Floating or Adjustable Rates
----------- ----------------------------
<S> <C> <C>
Commercial 7,313 5,671
Agriculture 1,094 1,553
Real Estate
Construction 97 2,991
1-4 Family 11,540 16,511
Other 20,667 30,044
Consumer 3,290 132
------ ------
TOTAL 44,001 56,902
====== ======
</TABLE>
PROVISION FOR POSSIBLE CREDIT LOSSES
The provision for credit losses charged to operating expense is based on the
Bank's credit loss experience and certain other factors determined by management
that deserve recognition in estimating credit losses. Management monitors the
loan portfolio to ensure that the reserve for possible credit losses is adequate
to cover outstanding loans.
It is Bank policy that once each quarter, (in January, April, July, and October)
Bank management makes recommendations to the Board regarding the adequacy of the
Bank's credit loss reserves and the amount of the provision that should be
charged against earnings for the next three months. The Board then makes a
decision regarding these amounts and these decisions are communicated to the
Banks' Lending Officers.
When determining loan reserve amounts the Board is given information divided
into the following categories.
1. Specific. Specific reserves are for loans graded substandard or doubtful
to cover the amount of exposure the Bank has calculated for each loan.
2. General. For all loans graded higher than substandard or doubtful, the
Bank uses estimates based on its previous experience for each category
of loans.
3. Special. From time to time special reserves will be established to
facilitate a change in bank strategy. This happens only when the Bank
intentionally embarks on a strategy that has more than a normal amount
of credit risk associated with it. Special allocations are also made to
cover suspected shortfalls in other real estate owned (OREO) or to
establish a reserve for some other form of special asset.
4. Unallocated. The Board may from time to time increase the credit loss
reserve to an amount that is larger than is needed to meet specific,
general, and special reserves requirements. The Board does this by
adding unallocated reserves. The Board does
32
<PAGE> 17
this when it is uncomfortable with the amount of the calculated
allocation, when it foresees an economic downturn, or it otherwise
sees a need for additional reserves.
Management also uses a loan grading system wherein officers grade each of their
commercial loans at inception, annually thereafter when financial statements are
received if the loan has an annual maturity, and at other times when there is an
indication that a credit may have weakened or improved. It is the responsibility
of the loan review officer to ensure the integrity of the loan grading system.
Loans graded substandard or doubtful, either by the Bank or by a regulator,
receive special attention in the analysis and specific reserve amounts are set
aside for each loan based upon the total principal dollar amount of the loan.
Specific reserves for doubtful and substandard loans are 50% and 25%,
respectively. Estimated loss percentages are used for all other loans by type as
follows: installment (consumer loans to individual) .57%, real estate mortgage
loans .23%, and all other loans (general) .55%. These loss percentage factors
establish the required reserve amount by multiplying the factor times the total
of loans in each category.
As of December 31, 1998, the Bank held in its reserve for possible credit losses
a total of $1.4 million.
The following table presents the relationship of the reserve for possible credit
loss to the loan portfolio as of December 31, 1998, 1997, 1996, 1995, and 1994.
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
BALANCE AT END OF PERIOD:
-------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
% of % of % of % of % of
Loans Loans Loans Loans to Loans
to Total to Total to Total Total to Total
$ Amount Loans $ Amount Loans $ Amount Loans $ Amount Loans $ Amount Loans
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
DOMESTIC:
Commercial,
Financial, &
Agricultural 482 32% 403 28% 216 27% 207 29% 211 33%
Real Estate -
Construction 31 3% 27 5% 89 3% 94 4% 58 3%
Real Estate -
Mortgage 126 60% 107 63% 170 64% 143 62% 115 55%
Installment
Loans to
Individuals 64 5% 46 4% 39 6% 30 5% 46 9%
UNALLOCATED 716 N/A 618 N/A 524 N/A 422 N/A 414 N/A
Total Allowance
for Possible
Credit Losses 1,419 100% 1,201 100% 1,038 100% 896 100% 844 100%
</TABLE>
The total reserve for possible credit losses represents the Boards' opinion at
December 31, of each year as to an amount that would meet the Bank's needs in
the event of an economic downturn or unforeseen event.
It is the opinion of management that the total reserve for possible credit loss
at December 31, 1998 was adequate to meet the policy portfolio requirements of
the Bank. Total allowance represented 1.07% of total loans at that date.
33
<PAGE> 18
The following table summarizes transactions in the reserve for possible credit
losses and details the charge-offs, recoveries, and net credit losses by loan
category for the last five years.
<TABLE>
<CAPTION>
IN THOUSANDS
------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
ALLOWANCE AT
BEGINNING OF PERIOD: . $1,201 $1,038 $ 896 $ 844 $ 779
====== ====== ====== ====== ======
Provision for Possible
Credit Losses ........ 236 165 134 100 72
CHARGE-OFFS:
Commercial ........... 28 0 0 44 0
Agriculture .......... 0 0 0 0 0
Real Estate .......... 0 0 0 0 0
Construction ..... 0 0 0 0 0
1-4 Family ....... 0 0 0 0 0
Other ............ 0 0 0 0 0
Consumer ............. 4 2 8 10 7
------ ------ ------ ------ ------
TOTAL CHARGE-OFFS: ... $ 32 $ 2 $ 8 $ 53 $ 7
====== ====== ====== ====== ======
RECOVERIES:
Commercial ........... 14 0 15 5 0
Agriculture .......... 0 0 0 0 0
Real Estate .......... 0 0 0 0 0
Construction ..... 0 0 0 0 0
1-4 Family ....... 0 0 0 0 0
Other ............ 0 0 0 0 0
Consumer ............. 0 0 0 0 0
------ ------ ------ ------ ------
TOTAL
RECOVERIES ........... $ 14 $ 0 $ 15 $ 5 $ 0
====== ====== ====== ====== ======
NET RECOVERIES
(CHARGE-OFFS) ........ (18) (2) 7 (48) (7)
====== ====== ====== ====== ======
BALANCE AT
END OF PERIOD ........ $1,419 $1,201 $1,038 $ 896 $ 844
====== ====== ====== ====== ======
RATIO OF NET CHARGE-
OFFS TO AVG. LOANS
OUTSTANDING .......... .00% .00% .00% .05% .01%
====== ====== ====== ====== ======
</TABLE>
In May 1993, the Financial Accounting Standards Board (FASB) issued SFAS No.
114, "Accounting by Creditors for Impairment of a Loan" and in October 1996
issued SFAS No. 118," "Accounting by Creditors for Impairment of a Loan--Income
Recognition Disclosures, an
34
<PAGE> 19
amendment to SFAS No. 114." The Bank measures impaired loans based on the
present value of expected future cash flows discounted at the loan's effective
interest rate, or as a practical expedient, at the loan's observable market
price or the fair market value of the collateral if the loan is collateral
dependent. The Bank excludes loans that are currently measured at fair value or
at lower of cost or fair value, and certain large groups of smaller balance
homogeneous loans that are collectively measured for impairment. At December 31,
1998 and 1997, the Bank had no materially impaired loans.
YEAR 2000 ISSUES
Citizens Bancorp first became aware of the Year 2000 (Y2K) problem through a
combination of industry contacts and the Federal Financial Institutions
Examination Council (FFIEC) statement "The Effect of Year 2000 on Computer
Systems" issued in June 1996. The problem, as it is commonly defined, arose out
of a shortage of disk space in the early 1960's and 1970's. Instead of storing
dates as four digits (1997), they were shortened to two digits (97). However,
when the clock rolls over to 2000, many systems will think "00" is 1900, rather
than 2000. Hardware or software that runs on a time schedule or involves
calculations based on dates can be seriously affected. Without correction, the
expanded date formats of the new millennium will cause many operating systems to
produce incorrect data or cause them to fail completely.
At Citizens Bancorp we recognize this problem as one of more than just a
technological/mechanical risk. We see the Y2K problem representing a regulatory
and ongoing business operations challenge not only to our business but to those
that we interact with as well.
The Y2K challenge is a particular problem for financial institutions, since many
financial transactions, such as interest accruals and payments, are date
sensitive. It also may affect the operations of third parties with whom Citizens
Bancorp does business, including its vendors, suppliers, utility companies, and
customers.
Bancorp is committed to addressing these Y2K challenges in a prompt and
responsible manner. Bancorp's year 2000 compliance plan ("Y2K Plan") follows the
five-step approach outlined by the FFIEC of Awareness, Assessment, Renovation,
Validation, and Implementation in mitigating this risk on all fronts. Bancorp
has substantially completed the awareness and assessment phases, although
appropriate follow-up activities are continuing to occur. Bancorp is currently
involved in the testing phase of the Y2K Plan. Validation will take place after
each piece of testing is completed and renovation will continue to be done on an
"as needed" basis.
Bancorp has assigned primary responsibility for the Y2K project to its Chief
Operating Officer. Bancorp has also formed a Y2K committee, consisting of
appropriate representatives from its critical operational areas. In addition,
Bancorp provides periodic reports to its Board of Directors in order to assist
them in overseeing its Y2K readiness.
35
<PAGE> 20
During the Assessment phase of our Y2K preparation, an individual analysis of
each hardware, software and time sensitive environmental application used by
Bancorp was completed. This assessment included a risk evaluation, which
measured the criticality of the application, a rating of confidence of Bancorp
to achieve a compliant status, and a determination of the level of control
Bancorp has in effecting change in the compliance process. The designation
"Mission Critical", meaning those systems that should they fail would have a
significant adverse impact on Bancorp's operations and financial condition as
well as those of its customers, and "Non Mission Critical", meaning those system
which are less essential to functionality of Bancorp, were then assigned to each
application.
Bancorp has also requested documentation of compliance from the vendor of each
application. In addition, a primary solution for on site compliance of each
application as used was selected and a testing approach was established. An
individual contingency plan was then written for each application should testing
fail or functionality be effected after the date change.
Well in advance of all federally mandated time frames, Bancorp has internally
established and is currently on track with the following tables:
<TABLE>
<S> <C>
Mission Critical testing complete 12/31/98
Mission Critical process validation complete 3/31/99
Mission Critical remediation as necessary complete 3/31/99
Non-Mission Critical testing complete 3/31/99
Non-Mission Critical process validation complete 6/30/99
Non-Mission Critical remediation as necessary complete 6/30/99
</TABLE>
Bancorp has established a budget for extraordinary expenses related to Y2K of
approximately $300,000. The budget includes an estimation of both real costs and
lost opportunities relative to investments and loans. Approximately $37,000.00
of this amount has already been incurred.
The potential risk involved with issues brought about by the advent of Y2K are
extensive and could be serious in nature. The possible interruption of business
operations for Bancorp, its customers, and vendors has the potential to impact
financial condition, liquidity, and create a material loss of revenue. Based on
the Bancorp's extensive investment of resources, both human and financial, in
preparing for the issues surrounding Y2K and the highly regulated nature of the
business, management anticipates that Bancorp will be well prepared to avoid any
significant detrimental effects. Since Bancorp has drawn specific contingency
plans for each application it uses that could be impacted by Y2K, the worst case
scenario is believed to stem from the potential of environmental Y2K failures,
such as power or telecommunications, the preparation for which are generally out
of the Bancorp's control. Bancorp continues to monitor the progress of these
entities toward Y2K compliance and by June of 1999 will more fully develop the
contingency plans for environmental failure as more specifics of readiness for
these vendors are available. Bancorp also anticipates the possible scenario of
several borrowing customers experiencing short term Y2K cash flow problems and a
pre-Y2K increase in cash demand by all customers. If Bancorp has borrowers that
experience Y2K cash flow problems, they will be dealt with in the same routine
manner by which normal cash flow
36
<PAGE> 21
interruptions experienced by borrowers are addressed. Any increase in cash
demand will be funded by Bancorp's normal currency ordering procedures funded by
deposits held at the Federal Reserve Bank and investments maturing in 1999.
Bancorp has sufficient liquidity to cover anticipated withdrawals. In summary,
Bancorp presently believes it will be Y2K compliant by its internally
established timelines which are well ahead of the actual century date change and
will have sufficient contingency plans in place to maintain a satisfactory level
of business operations.
37
<PAGE> 22
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned; thereunto duly authorized, on the 10th day of June,
1999.
CITIZENS BANCORP
(Registrant)
By: /s/ William V. Humphreys
-------------------------------------
William V. Humphreys
President and Chief Executive Officer
Each person whose individual signature appears below hereby authorizes and
appoints William V. Humphreys and Lark Wysham, and each of them, with full power
of substitution and full power to act without the other, as his/her true and
lawful attorney-in-fact and agent to act in his name, place and stead and to
execute in the name and on behalf of each person individually and in each
capacity stated below, and to file any and all amendments to this Registration
Statement, including any and all post-effective amendments.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated on the 10th day of June, 1999.
PRINCIPAL EXECUTIVE OFFICER:
/s/ William V. Humphreys, President and Chief Executive Officer
- --------------------------------
William V. Humphreys
PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER:
/s/ Lark E. Wysham, Senior Vice President and Chief Financial Officer
- ---------------------------------
Lark E. Wysham
DIRECTORS:
/s/ Gene N. Thompson /s/ Jock Gibson
- ---------------------------------- ------------------------------------
Gene N. Thompson Jock Gibson
/s/ Rosetta C. Venell /s/ James E. Richards
- ---------------------------------- ------------------------------------
Rosetta C. Venell James E. Richards
/s/ John Truax /s/ Scott A. Fewel
- ---------------------------------- ------------------------------------
John Truax Scott A. Fewel
/s/ Duane L. Sorensen /s/ William V. Humphreys
- ---------------------------------- ------------------------------------
Duane L. Sorensen William V. Humphreys
