<PAGE>
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 Quarter Ended June 30, 2000
-------------
OR
____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to ___________
Commission File Number 0-18301
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IROQUOIS BANCORP, INC.
----------------------
(Exact name of Registrant as specified in its charter)
NEW YORK 16-1351101
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
115 Genesee Street, Auburn, New York 13021
------------------------------------ -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (315) 252-9521
---------------
_________________________________________________________________
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ____
------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 2,306,880 shares of common
stock on July 25, 2000.
<PAGE>
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed Consolidated Balance Sheets -
June 30, 2000 and December 31, 1999 3
Condensed Consolidated Statements of Income -
Three Months Ended June 30, 2000 and 1999 4
Condensed Consolidated Statements of Income -
Six Months Ended June 30, 2000 and 1999 5
Consolidated Statements of Shareholders' Equity
and Comprehensive Income
Six Months Ended June 30, 2000 and 1999 6
Condensed Consolidated Statements of Cash Flows
Six months ended June 30, 2000 and 1999 7
Notes to Condensed Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-13
Item 3. Quantitative and Qualitative Disclosures About Market Risk 14
PART II OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
IROQUOIS BANCORP, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(unaudited)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
(dollars in thousands, except June 30, December 31,
share data) 2000 1999
-------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash and due from banks $ 15,660 $ 13,410
Interest-bearing deposits and Federal funds sold 1,900 2,600
Securities available for sale, at fair value 65,266 65,810
Securities held to maturity (fair value of $51,901 in 2000 and
$50,476 in 1999) 52,654 51,149
Loans 452,873 436,129
Less allowance for loan losses 3,467 3,269
--------- ---------
Loans, net 449,406 432,860
Other assets 30,160 29,297
--------- ---------
Total Assets $ 615,046 $ 595,126
========= =========
Liabilities
Savings and time deposits $ 439,125 $ 430,770
Demand deposits 33,101 30,345
Borrowings 100,635 92,487
Other liabilities 2,206 2,639
--------- ---------
Total Liabilities 575,067 556,241
Shareholders' Equity
Preferred Stock, $1.00 par value, 3,000,000 shares authorized,
none issued and outstanding -- --
Common Stock, $1.00 par value; 6,000,000 shares authorized;
2,426,880 shares issued 2,427 2,427
Additional paid-in capital 9,620 9,620
Retained earnings 31,315 30,208
Accumulated other comprehensive loss (862) (849)
Treasury stock at cost, 120,000 shares (2,242) (2,242)
Unallocated shares of Employee Stock Ownership Plan (279) (279)
--------- ---------
Total Shareholders' Equity 39,979 38,885
--------- ---------
Total Liabilities and Shareholders' Equity $ 615,046 $ 595,126
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements
3
<PAGE>
IROQUOIS BANCORP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(unaudited)
<TABLE>
<CAPTION>
Three months ended
June 30,
-------------------------------------------------------------------------------------------------
(dollars in thousands, except
share data) 2000 1999
-------------------------------------------------------------------------------------------------
<S> <C> <C>
Interest Income:
Loans $ 8,870 $ 8,208
Securities 1,819 1,746
Other 131 134
------- -------
10,820 10,088
------- -------
Interest expense:
Deposits 4,500 3,994
Borrowings 1,432 1,027
------- -------
5,932 5,021
------- -------
Net interest income 4,888 5,067
Provision for loan losses 331 366
------- -------
Net interest income after provision
for loan losses 4,557 4,701
Net gain on sales of assets 15 5
Noninterest income 894 928
Noninterest expense 4,016 3,731
------- -------
Income before income taxes 1,450 1,903
Income taxes 509 655
------- -------
Net income $ 941 $ 1,248
======= =======
Earnings per share
Basic $ 0.41 $ 0.52
======= =======
Diluted $ 0.40 0.52
======= =======
Cash dividends declared per common share $ 0.12 $ 0.10
</TABLE>
See accompanying notes to condensed consolidated financial statements
4
<PAGE>
IROQUOIS BANCORP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(unaudited)
<TABLE>
<CAPTION>
Six months ended
June 30,
-------------------------------------------------------------------------------------------------
(dollars in thousands, except
share data) 2000 1999
-------------------------------------------------------------------------------------------------
<S> <C> <C>
Interest Income:
Loans $17,420 $16,249
Securities 3,638 3,403
Other 259 262
------- -------
21,317 19,914
------- -------
Interest expense:
Deposits 8,861 7,890
Borrowings 2,723 1,927
------- -------
11,584 9,817
------- -------
Net interest income 9,733 10,097
Provision for loan losses 685 724
------- -------
Net interest income after provision
for loan losses 9,048 9,373
Net gain on sales of assets 114 15
Noninterest income 1,740 1,705
Noninterest expense 8,275 7,482
------- -------
Income before income taxes 2,627 3,611
Income taxes 971 1,253
------- -------
Net income $ 1,656 $ 2,358
======= =======
Earnings per share
Basic $ 0.72 $ 0.98
======= =======
Diluted $ 0.71 0.98
======= =======
Cash dividends declared per common share $ 0.24 $ 0.20
</TABLE>
See accompanying notes to condensed consolidated financial statements
5
<PAGE>
IROQUOIS BANCORP, INC.
Consolidated Statements of Shareholders' Equity and Comprehensive Income
(unaudited)
Six months ended June 30, 1999:
<TABLE>
<CAPTION>
Unallocated
(dollars in thousands, Addi- Accumulated Shares of
except share data) tional Other Stock
Common Paid-In Retained Comprehensive Treasury Ownership
Stock Capital Earnings Income(Loss) Stock Plan Total
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1998 $2,410 9,303 26,557 490 -- (418) 38,342
--------------------------------------------------------------------------------------------------------------------------
Comprehensive income:
Net income -- -- 2,358 -- -- -- 2,358
Change in net unrealized
gain(loss) on securities
available for sale, net of taxes -- -- -- (936) -- -- (936)
-----
Total comprehensive income 1,422
-----
Stock options exercised 17 287 -- -- -- -- 304
Cash dividends declared -- -- (478) -- -- -- (478)
--------------------------------------------------------------------------------------------------------------------------
Balances at June 30, 1999 $2,427 9,590 28,437 (446) -- (418) 39,590
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
Six months ended June 30, 2000:
<TABLE>
<CAPTION>
Unallocated
(dollars in thousands, Addi- Accumulated Shares of
except share data) tional Other Stock
Common Paid-In Retained Comprehensive Treasury Ownership
Stock Capital Earnings Income(Loss) Stock Plan Total
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1999 $2,427 9,620 30,208 (849) (2,242) (279) 38,885
----------------------------------------------------------------------------------------------------------------------------
Comprehensive income:
Net income -- -- 1,656 -- -- -- 1,656
Change in net unrealized
gain(loss) on securities
available for sale, net of
taxes -- -- -- (13) -- -- (13)
-----
Total comprehensive income 1,643
-----
Cash dividends declared (549) -- -- -- (549)
----------------------------------------------------------------------------------------------------------------------------
Balances at June 30, 2000 $2,427 9,620 31,315 (862) (2,242) (279) 39,979
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to condensed consolidated financial statements
6
<PAGE>
IROQUOIS BANCORP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Six months ended
June 30,
----------------------------------------------------------------------------------------------------------
(dollars in thousands) 2000 1999
----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net Income $ 1,656 $ 2,358
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 685 724
Depreciation and amortization 639 647
Net gain on sales of assets (114) (15)
(Increase) decrease in other assets (184) 1,572
Decrease in other liabilities (433) (1,446)
-------- ---------
Net cash provided by operating activities 2,249 3,840
-------- ---------
Cash flows from investing activities:
Proceeds from maturities of available for sale securities 5,152 6,121
Proceeds from sales of available for sale securities 3,964 1,713
Proceeds from maturities of held to maturity securities 7,808 5,849
Purchases of available for sale securities (8,637) (21,042)
Purchases of held to maturity securities (9,321) (8,779)
Proceeds from sales of loans 1,135 1,569
Net increase in loans (18,549) (18,373)
Proceeds from sale of bank premises 264 --
Purchases of bank premises and equipment (1,186) (149)
Purchase of corporate owned life insurance -- (5,000)
Purchase of FHLB stock (39) (459)
-------- ---------
Net cash used by investing activities (19,409) (38,550)
-------- ---------
Cash flows from financing activities:
Net increase in demand deposits, money market
accounts, and savings accounts 8,009 4,344
Net increase (decrease) in time deposits 3,102 (1,976)
Net increase in other borrowings 12,157 21,300
Proceeds of long-term borrowings 17,200 17,500
Repayment of long-term borrowings (21,209) (9,509)
Cash dividends (549) (478)
Net proceeds from exercise of stock options, and related tax benefit -- 304
-------- ---------
Net cash provided by financing activities 18,710 31,485
Net increase (decrease) in cash and cash equivalents 1,550 (3,225)
Cash and cash equivalents at beginning of period 16,010 15,964
-------- ---------
Cash and cash equivalents at end of period $ 17,560 $ 12,739
-------- ---------
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest 11,420 9,718
Income taxes 976 2,089
Supplemental schedule of non-cash investing activities:
Additions to other real estate 200 762
Transfer of AFS Securities to HTM Securities -- 5,744
</TABLE>
See accompanying notes to condensed consolidated financial statements
7
<PAGE>
IROQUOIS BANCORP, INC. AND SUBSIDIARIES
Notes to Condensed Unaudited Consolidated Financial Statements
1) Financial Statements
--------------------
The interim financial statements contained herein are unaudited, but in the
opinion of management of the Company, include all adjustments (consisting
only of normal recurring adjustments) necessary for a fair presentation of
the results of operations for these periods. The results of operations for
the interim periods are not necessarily indicative of the results of
operations for the full year.
The data in the consolidated balance sheet for December 31, 1999 was
derived from the Company's 1999 Annual Report to Shareholders. That data,
along with the other interim financial information presented in the
consolidated balance sheets, statements of income, shareholders' equity and
comprehensive income and statements of cash flows should be read in
conjunction with the consolidated financial statements, including the notes
thereto, contained in the 1999 Annual Report to Shareholders.
8
<PAGE>
IROQUOIS BANCORP, INC.
AND CONSOLIDATED SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
-------
Iroquois Bancorp Inc. ("Iroquois" or the "Company") is a bank holding company
with two financial institutions: Cayuga Bank of Auburn, New York, a New York
state-chartered commercial bank and trust company, and The Homestead Savings
(FA) of Utica, New York, a federally-chartered savings association.
On March 26, 2000, the Company signed a definitive agreement with First Niagara
Financial Group, Inc., (formerly Niagara Bancorp, Inc.) under which First
Niagara Financial Group will, subject to regulatory approval and other
conditions set forth in the agreement, acquire all of the outstanding shares of
the Company for $33.25 per share and Iroquois will be merged into First Niagara.
As a result of the merger, Cayuga Bank will become a wholly-owned subsidiary of
First Niagara. The Homestead Savings will be merged into Cayuga Bank. The
transaction is expected to be completed during the fourth quarter of 2000.
RESULTS OF OPERATIONS
---------------------
Three months ended June 30, 2000 compared to June 30, 1999
----------------------------------------------------------
Net income for the three months ended June 30, 2000 was $941,000, or $.41 basic
earnings per share, compared to net income of $1,248,000, or $.52 basic earnings
per share, for the three months ended June 30, 1999. Diluted earnings per share
were $.40 and $.52 for the three months ended June 30, 2000 and 1999,
respectively. Second quarter 2000 net income was reduced by $92,000 of merger
related expenses comprised primarily of legal fees relative to the Company's
announced acquisition of Iroquois stock by First Niagara Financial Group, Inc.
Net interest income was $4,888,000 for the second quarter of 2000, compared to
$5,067,000 for the second quarter of 1999. Net interest margin for the second
quarter of 2000 was 3.47%, compared to 3.77% in 1999. Asset yields increased to
7.62% for the current quarter, compared to 7.46% the year earlier. Interest-
bearing liability costs were 4.50% for the current quarter compared to 4.03% the
year earlier. The Company's net interest margin declined year over year
primarily due to an increase in funding costs caused by higher short term
interest rates.
Interest income increased 7.3%, to $10,820,000, for the three months ended June
30, 2000, compared to $10,088,000 for the same period the year earlier. Average
earning assets increased $28.9 million, or 5.3%, to $572.9 million in 2000, from
$544.0 million in 1999. Average residential mortgage loans increased $30.8
million, or 11.5%, while the yield on mortgages decreased slightly from 7.39% in
the second quarter of 1999, to 7.38% in the current quarter. Average commercial
mortgage loans declined $2.3 million while average consumer loans increased $3.0
million in the same period. Residential mortgage loans represented 52.2% of
9
<PAGE>
average earning assets for the three months ended June 30, 2000, compared to
49.3% for the same three months in 1999.
Interest expense on deposits and borrowings increased 18.1%, to $5,932,000, for
the three months ended June 30, 2000, compared to $5,021,000 for the three
months ended June 30, 1999. The increase was due to the growth in average
deposits and borrowings combined with an increase in the average cost of
interest-bearing funds. Average deposit balances increased 1.8%, from $457.5
million to $466.0 million, while the average cost of interest-bearing deposits
increased from 3.50% in 1999 to 3.88% in 2000. Average borrowings increased
29.4% from $74.2 million in 1999 to $96.0 million in 2000. The average cost of
borrowings increased from 5.55% for the three months ended June 30, 1999 to
6.00% for the three months ended June 30, 2000.
The provision for loan losses decreased from $366,000 for the quarter ended June
30, 1999, to $331,000 for the same period in 2000, and is consistent with the
overall decline in delinquency and nonperforming loan levels year over year.
Total noninterest income including net gains on the sale of assets was $909,000
for the quarter ended June 30, 2000, compared to $933,000 for the quarter ended
June 30, 1999. Net gains on sales of securities and loans contributed $15,000 to
noninterest income for the three months ended June 30, 2000, compared to $5,000
for second quarter of 1999. The decline in noninterest income resulted primarily
from a decrease in loan related fees.
Total noninterest expense was $4,016,000 for the quarter ended June 30, 2000,
compared to $3,731,000 for the quarter ended June 30, 1999. Excluding $92,000 of
merger related expenses referenced above, noninterest expense was $3,924,000 for
the three months ended June 30, 2000, compared to $3,731,000 in the second
quarter of 1999, an increase of 5.2%. The growth in noninterest expense came
principally from increases in salaries and benefits which included an $80,000
fair market value adjustment relating to the Company's Employee Stock Ownership
Plan contribution expense.
The provision for income taxes for the three months ended June 30, 2000 was
$509,000, an effective tax rate of 35.1%, compared to $655,000, or an effective
tax rate of 34.4%, for the three months ended June 30, 1999.
Six months ended June 30, 2000 compared to June 30, 1999
--------------------------------------------------------
Net income for the six months ended June 30, 2000 was $1,656,000, or $.72 basic
earnings per share, compared to $2,358,000, or $.98 basic earnings per share,
for the six months ended June 30, 1999. Diluted earnings per share were $.71 and
$.98 for the six months ended June 30, 2000 and 1999, respectively. Net income
for the six months ended June 30, 2000 was negatively impacted by $372,000 of
merger related expenses.
Net interest income was $9,733,000 for the first six months of 2000, compared to
$10,097,000 for the first six months of 1999. The yield on interest earning
assets increased from 7.47% for the six months ended June 30, 1999, to 7.56% for
the six months ended June 30, 2000. The cost of
10
<PAGE>
interest bearing liabilities increased from 4.03% to 4.43% for the same period.
The net interest margin declined from 3.81% in 1999 to 3.49% in 2000.
Interest income was $21,317,000 for the six months ended June 30, 2000, compared
to $19,914,000 for the six months ended June 30, 1999, an increase of 7.1%. The
increase was primarily due to the 5.9% increase in average earning assets, from
$536.4 million for the six months ended June 30, 1999 to $568.1 million for the
six months ended June 30, 2000. Average residential mortgages increased 12.0%,
from $263.2 million for the first six months of 1999 to $294.8 million for the
same period in 2000. The average securities portfolio increased 2.2%, or $2.6
million, while average commercial mortgages and commercial loans declined $2.7
million and $4.0 million, respectively, during the same period.
Interest expense on deposits and borrowings increased 18.0%, from $9,817,000 for
the six months ended June 30, 1999 to $11,584,000 for the six months ended June
30, 2000. Combined increases in public deposits and commercial deposits of $14.3
million, and $1.8 million, respectively, offset declines of $3.9 million in
retail deposits resulting in a $12.7 million, or 2.8% increase in average
deposits for the first six months of 2000 compared to the same period the year
earlier. The average cost of deposits increased from 3.52% in 1999 to 3.83% in
2000. Average borrowings increased 33.2%, from $69.8 million for the six months
ended June 30, 1999 to $93.0 million for the six months ended June 30, 2000. The
average cost of borrowings was 5.89% for the first six months of 2000, compared
to 5.57% in 1999.
The provision for loan losses decreased 5.4% from $724,000 for the six months
ended June 30, 1999 to $685,000 for the six months ended June 30, 2000.
Total noninterest income excluding net gains on sales of assets was $1,740,000
for the first six months of 2000, compared to $1,705,000 for the first six
months of 1999. Increases in 2000 from deposit service fees, trust and
investment brokerage fees, and corporate-owned life insurance offset declines in
loan related service fees when compared to the first six months of 1999.
Noninterest expense increased 10.6%, from $7,482,000 for the six months ended
June 30, 1999 to $8,275,000 for the six months ended June 30, 2000. Excluding
$372,000 of merger related expenses referenced above, noninterest expense
increased 5.6%, from $7,482,000 for the six months ended June 30, 1999 to
$7,903,000 for the six months ended June 30, 2000. The increase was attributable
primarily to increased salary and benefit and legal expenses.
The provision for income taxes was $971,000, for an effective tax rate of 37.0%
for the six months ended June 30, 2000, compared to $1,253,000, or an effective
tax rate of 34.7%, for the six months ended June 30, 1999. The increase in the
Company's effective tax rate in 2000 is a result of the merger expenses being a
non-tax deductible expense item.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
----------------------------------------------------
Consolidated assets were $615.0 million at June 30, 2000, compared to $595.1
million at December 31, 1999, an increase of $19.9 million, or 3.4%.
11
<PAGE>
Loans increased $16.8 million, or 3.8%, to $452.9 million at June 30, 2000,
compared to $436.1 million at year end 1999. Residential mortgage loans
increased $14.1 million, from $289.5 million at year end 1999, to $303.6 million
at June 30, 2000. Commercial mortgage loans and commercial loans increased $1.0
million and $1.4 million ending the period at $37.9 million and $36.9 million,
respectively, at June 30, 2000.
The allowance for loan losses increased from $3.3 million at December 31, 1999,
to $3.5 million at June 30, 2000. Nonperforming loans remained constant at $2.9
million. The percentage of nonperforming loans to total loans decreased from
.67% at December 31, 1999, to .63% at June 30, 2000. Residential mortgage loans
represented 40.6% of total nonperforming loans at June 30, 2000, while
commercial mortgages represented 21.7% and consumer and commercial loans
represented 24.8% and 12.9%, respectively.
Total securities increased slightly, from $117.0 million at year end 1999 to
$117.9 million at June 30, 2000. Securities available for sale decreased to
$65.3 million at June 30, 2000, from $65.8 million at December 31, 1999, while
in the same period securities held to maturity increased from $51.1 million to
$52.6 million. Holdings of U.S. Government Agency securities and state and
municipal obligations increased, while holdings of U.S. Government securities
and mortgage-backed securities declined compared to year end 1999.
Total deposits increased $11.1 million, or 2.4%, to $472.2 million at June 30,
2000, compared to $461.1 million at December 31, 1999. The increase in deposits
was primarily attributable to continued growth in public deposits which
increased $11.0 million, or 19.5%, ending the period at $67.2 million. Money
market, demand and time deposits increased $1.0 million, $6.3 million and $3.1
million respectively from year end 1999 to June 30, 2000.
Borrowings at June 30, 2000 were $100.6 million compared to $92.5 million at
December 31, 1999. Term advances from the Federal Home Loan Bank ("FHLB")
decreased $4.0 million, while advances against overnight lines of credit with
the FHLB increased $11.1 million. Borrowings represented 16.4% of total assets
at June 30, 2000, compared to 15.5% at year end 1999.
At June 30, 2000, Iroquois had total shareholders' equity of $40.0 million,
compared to $38.9 million at December 31, 1999. The Company's regulatory Tier 1
capital to average assets ratio increased from 6.35% at December 31, 1999 to
6.53% at June 30, 2000. The Company's ratio of Tier 1 Capital to risk weighted
assets increased from 10.59% to 10.73% during the same period. As of June 30,
2000, the capital ratios of Iroquois and both of its banking subsidiaries
continued to exceed the capital requirements for classification as "well
capitalized" under applicable regulatory provisions.
At June 30, 2000, the Company held securities maturing in one year or less
(excluding estimated payments from amortizing securities) of $23.5 million,
compared to $25.6 million at December 31, 1999. The Company considers its
current level of liquidity along with other available sources of funds as both
sufficient and within acceptable ranges.
12
<PAGE>
Forward-looking Statements
--------------------------
The information set forth above contains certain "forward-looking statements"
covered by the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995. The Company is making this statement for the express purpose
of availing itself of the safe harbor protection with respect to any and all of
such forward-looking statements, including without limitation, those contained
in Management's Discussion and Analysis which describe future plans or
strategies and include the Company's expectations of future financial results.
The words "believe," "expect," "anticipate," "estimate," "project," and similar
expressions identify forward-looking statements. The Company's ability to
predict results or the effect of future plans or strategies is inherently
uncertain. Factors that could affect actual results include interest rate
trends, the general economic climate in the Company's market areas or in the
country as a whole, loan delinquency rates, and changes in federal and state
regulation. These factors should be considered in evaluating the forward-looking
statements, and undue reliance should not be placed on such statements.
13
<PAGE>
Item 3. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is the risk of loss from adverse changes in market prices and
rates. The Company's market risk arises primarily from interest rate risk
inherent in its lending and deposit activities. Other types of market risk,
such as foreign currency exchange rate risk and commodity price risk, do
not arise in the normal course of the Company's business activities.
Managing interest rate risk is of primary importance to Iroquois. The
Company's asset and liability management program includes a process for
identifying and measuring potential risks to earnings and to the market
value of equity due to changes in interest rates. Interest rate risk is
measured and managed for each bank and monitored from a holding company
perspective. The goal of interest rate risk analysis is to minimize the
potential loss in net interest income and net portfolio value that could
arise from changes in interest rates. Iroquois' asset/liability management
strategies emphasize balancing the mix and repricing characteristics of its
loans, securities, deposits and borrowings to ensure that exposure to
interest rate risk is limited within acceptable levels. Iroquois determines
sensitivity of earnings and capital to changes in interest rates by
utilizing various tools.
A simulation model is the primary tool used to assess the impact of changes
in interest rates on net interest income. The Company also uses a net
portfolio value ("NPV") analysis as another means of measuring and
monitoring its interest rate risk, and in addition also uses a cumulative
gap analysis to measure interest rate sensitivity. The Company establishes
guidelines to monitor the results to ensure interest rate risk is limited
within acceptable levels. At June 30, 2000, the Company's interest rate
risk as measured by the above mentioned analyses was within established
guidelines.
The table below sets forth at June 30, 2000 the analysis of the Company's
interest rate risk as measured by the estimated changes in NPV resulting
from instantaneous and sustained parallel shifts in the interest rate yield
curve. The NPV represents the difference between the present value of the
Company's liabilities and the present value of the expected cash flows from
its assets. For purposes of the NPV table, assumptions similar to those
used in the 1999 Annual Report, adjusted to reflect current market
conditions, were used.
NET PORTFOLIO VALUE ANALYSIS at June 30, 2000
($ in thousands)
<TABLE>
<CAPTION>
Changes in interest Estimated Change in NPV
rate (basis points) NPV Amount %
---------------------- ------------ ---------------------
<S> <C> <C>
+200 $46,353 (13,307) (22.3)
+100 53,284 (6,376) (10.7)
0 59,660 -- --
-100 65,348 5,688 9.5
-200 69,767 10,107 16.9
</TABLE>
14
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings - None
In the normal course of business, various unresolved legal proceedings
remained during the period covered by this report. In the opinion of
management based on review with counsel, the proceedings should not
have a material effect on the financial condition, liquidity or results
of operations of the Company.
Item 2. Changes in Securities - None
Item 3. Defaults upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Shareholders of the Company was held on
April 27, 2000
(b) At the Annual Meeting, three directors were elected to three year
terms: Brian D. Baird, John Bisgrove, Jr., Richard D. Callahan
(c) On the proposal for the election of the two directors, the
following votes were cast:
For Withheld
--- --------
Brian D. Baird 1,900,733 62,287
John Bisgrove, Jr. 1,869,683 93,037
Richard D. Callahan 1,858,711 104,008
On the proposal to approve the selection of KPMG LLP as
independent auditors, the following votes were cast:
For Against Abstain
--- ------- -------
1,902,712 48,588 11,389
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
Number Description
------ -----------
11 Statement Regarding Computation of Earnings per Common
Share
27 Financial Data Schedule
b) Reports on Form 8-K
The Company filed on April 6, 2000, a Current Report on Form 8-K,
which disclosed that it had entered into an Agreement and Plan of
Merger with First Niagara Financial Group, Inc. (formerly Niagara
Bancorp, Inc.) and Niagara Merger Corp. dated March 26, 2000. Such
Current Report included copies of the Agreement and Plan of Merger
dated March 26, 2000, the Stock Option Agreement also dated March
26, 2000, and the form of letter voting agreement as an Item 7
exhibit.
15
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Iroquois Bancorp, Inc.
Registrant
Date: July 31, 2000 /s/ Richard D. Callahan
-------------------------------
Richard D. Callahan
President & CEO
Date: July 31, 2000 /s/ Marianne R. O'Connor
-------------------------------
Marianne R. O'Connor
Treasurer & CFO
16
<PAGE>
EXHIBIT INDEX
-------------
Number Description
------ -----------
11 Statement Regarding Computation of Earnings per Common Share
27 Financial Data Schedule
17
