UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-QSB
(Mark One)
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997.
Commission file number 0000887203
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
TOWNE BANCORP, INC.
(Name of small business issuer in its charter)
Ohio 34-1704637
(State of Incorporation) (I.R.S. Employer Identification No.)
610 East South Boundary, Perrysburg, Ohio 43551
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (419) 874-2090
Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
None None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, Without Par Value
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
The aggregate market value of the voting stock held by non-affiliates was
$5,287,498 as of January 31, 1997.
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date - 370,761 shares of common
stock, without par value (as of June 30, 1997).
DOCUMENTS INCORPORATED BY REFERENCE
Transitional Small Business Disclosure Format (Check One). Yes X No
INDEX
Page
PART I Financial Information
Item 1. Financial Statements:
Consolidated Balance Sheet 3
Consolidated Statement of Operations 4
Consolidated Statement of Cash Flows 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis 7
PART II Other Information
Item 1. Legal Proceedings 8
Item 2. Changes in Securities 8
Item 3. Defaults Upon Senior Securities 8
Item 4. Submission of Matters to a Vote of Security Holders 8
Item 5. Other Information 8
Item 6. Exhibits and Reports on Form 8-K 8
PART I
ITEM 1. Consolidated Balance Sheet
TOWNE BANCORP, INC.
Consolidated Balance Sheet
June 30, 1997 & March 31, 1997
(unaudited)
ASSETS 6/30/97 3/31/97
CASH AND CASH EQUIVALENTS
Cash and due from banks $ 402,235 $ 523,000
Federal funds sold 1,946,000 4,647,000
Total cash and cash equivalents 2,348,235 5,170,000
INVESTMENT SECURITIES
Available-for-sale, at market value 1,393,653 1,387,000
Held-to-maturity, at amortized cost 1,994,649 1,994,000
Total investment securities 3,388,302 3,381,000
LOANS RECEIVABLE, net of allowance for
loan losses of $80,000 and $50,000
respectfully 7,319,778 4,732,000
PREMISES AND EQUIPMENT, net 2,429,859 2,465,333
OTHER ASSETS 466,713 244,761
TOTAL ASSETS $15,952,887 $15,993,094
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits: $10,182,162 $ 9,923,360
Capital lease obligations 2,500,000 2,500,000
Accrued interest, taxes and other
liabilities 127,201 146,954
Total liabilities 12,809,363 12,570,314
STOCKHOLDERS' EQUITY
Common stock, without par value, Authorized
800,000 shares; issued and outstanding
370,761 shares at stated value 370,761 370,761
Surplus 4,111,772 4,111,772
Accumulated deficit (1,338,487) (1,052,101)
Net unrealized holding gain/(loss) on investment
securities available-for-sale (372) (7,652)
Total stockholders' equity 3,143,524 3,422,780
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $15,952,887 $15,993,094
ITEM 1. Consolidated Statement of Operations
TOWNE BANCORP, INC
Consolidated Statement of Operations
For the period ended June 30, 1997 and March 31, 1997
(unaudited)
Six Second First
Months Quarter Quarter
6/30/97 6/30/97 3/31/97
INTEREST INCOME
Interest and fees on loans $ 240,696 $ 158,688 $ 82,008
Interest and dividends on
investment securities 101,834 51,030 50,804
Interest on deposits in other banks,
escrow acct. 0 0 0
Interest on federal funds sold 121,529 50,991 70,538
Total interest income 464,059 260,709 203,350
INTEREST EXPENSE
Deposits 241,809 124,224 117,585
Total interest expense 241,809 124,224 117,585
Net interest income 222,250 136,485 85,765
PROVISION FOR LOAN LOSSES 60,000 30,000 30,000
Net interest income after provision for
loan losses 162,250 106,485 55,765
NON-INTEREST INCOME
Service charges 4,645 2,877 1,768
Other operating income 13,701 10,147 3,554
Total non-interest income 18,346 13,024 5,322
NON-INTEREST EXPENSE
Employee expense 232,017 118,288 113,729
Net occupancy expense 178,591 93,881 84,710
Other operating expense 327,251 193,727 133,524
Total non-interest expense 737,859 405,896 331,963
Income (loss) before federal
income taxes (557,263) (286,387) (270,876)
PROVISION(CREDIT) FOR FEDERAL
INCOME TAXES - - -
NET INCOME (LOSS) $ (557,263) $(286,387) $ (270,876)
NET INCOME (LOSS) PER SHARE $ (1.50) $ (.77) $ (.73)
ITEM 1. Consolidated Statement of Cash Flows
TOWNE BANCORP, INC.
Consolidated Statements of Cash flow
For period ended June 30, 1997 & March 31, 1997
Quarter Ended Quarter Ended
June 30, 1997 March 31, 1997
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income(loss) $ (286,387) $ (270,876)
Adjustments to reconcile net income(loss)
to net cash provided by (used in)
operating activities:
Depreciation & Amortization 33,111 33,327
Provision for loan losses 30,000 30,000
Accretion of investment securities, net of
premium amortization (902) (929)
Increase in other assets (221,952) (54,749)
Increase(decrease) in accrued interest, taxes
& other liabilities (19,753) (138,021)
Net cash provided by (used in )
operating activities (465,883) (401,248)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investment securities
Available for Sale - -
Held to Maturity - -
Net increase in loans receivable (2,617,778) (3,659,087)
Additions to premises and equipment 3,094 -
Net cash used in investing activities (2,614,684) (3,659,087)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 258,802 3,417,788
Purchase of common stock - -
Net cash provided by financing activities 258,802 3,417,788
INCREASE IN CASH AND CASH EQUIVALENTS (2,821,765) (642,547)
CASH & CASH EQUIVALENTS AT BEGINNING
OF PERIOD 5,170,000 5,812,547
CASH & CASH EQUIVALENTS AT END OF
YEAR $2,348,235 $ 5,170,000
ITEM 1. Notes to Consolidated Financial Statements
TOWNE BANCORP, INC
Notes to Consolidated Financial Statements
June 30, 1997
(unaudited)
(1) Consolidated Financial Statements
The consolidated balance sheet as of June 30, 1997, the consolidated
statements of operations for the six-month period ended June 30, 1997
have been prepared by the Corporation without audit. In the opinion of
management, all adjustments(which include only normal recurring
adjustments) necessary to present fairly the Corporation's financial
position as of June 30, 1997 and its results of operations for the periods
ended June 30, 1997 have been made.
Certain informations and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been omitted. Accordingly, the financial
statements should be read in conjunction with the annual report for the
year ended December 31, 1996. The results of operations for
the period ended June 30, 1997 are not necessarily indicative of the
operating results for the full year.
(2) Potential Contingent Liability
Towne Bancorp, Inc. (the "Company") has a potential contingent liability
related to the sale of common stock in its initial public offering, as a
result of possible defects in its registration with the Securities and Exchange
Commission and various state securities authorities. The maximum potential
contingent liability would be the full purchase price of all 378,614 shares
sold by the Company, or $4,753,471, plus interest. The Company has discussed
this matter, and its potential adverse impact on the Company's capital
structure, with a representative of its banking regulators. The Company has
retained special securities law counsel to advise it with respect to the
matter and is exploring alternatives to remove or reduce, to the extent
practical, any contingent liability, including any possible defenses and
the possibility of undertaking a rescission offer to existing shareholders.
The Company believes it can undertake a successful rescission offer to
eliminate or materially reduce this potential contingent liability. However,
no assurance can be made in that regard.
ITEM 2. Management's Discussion and Analysis
General
Total assets at June 30, 1997 totaled $15,952,887 compared to $15,993,094 at
March 31, 1997. Total deposits increased to $10,182,162 from $9,923,360 at
March 31, and total loans increased $7,319,778 from $4,732,000 at March 31.
Stockholders equity at June 30, 1997 decreased from $3,422,780 to $3,143,524.
The investment securities stayed stable for the second quarter of 1997 at
$3,388,302. The Federal Funds Sold decreased to $1,946,000 from $4,647,000 as
of June 30, 1997. This was due to the increased loan volume.
Net loss for the quarter ended June 30, 1997 was $(286,387). The interest
income is growing as a result of the increase in loan activity. Also, as a
result in deposit growth the interest expense has increased. The provision
for loan loss increased to $80,000 at the end of the quarter, based on the
growing loan portfolio. The net interest income was $106,485 for the second
quarter. The non-interest income increased due to the growth of both the loan
portfolio and the deposits. The non-interest expenses consisting of employee,
occupancy and other expenses have stabilized.
PART II
ITEM 1. Legal Proceedings
The Company, certain officers and a former board member of the Company have been
named as defendants in a civil action in United States District Court for the
Northern District of Ohio, Western Division. The Complaint alleges a breach of
duty as a result of the failure to hire an individual, who was one of the
original organizers of the Company, as an employee. The plaintiff seeks lost
wages and punitive damages. The Company denies the charges and asserts that
the plaintiff voluntarily left the project of establishing a community owned
bank.
ITEM 2. Change in Securities
None.
ITEM 3. Defaults Upon Senior Securities
None.
ITEM 4. Submission of Matters to a Vote of Security Holders
None
ITEM 5. Other Information
None.
ITEM 6. Exhibits and Reports on Form 8-K
(A) Exhibits - None.
(B) Reports on Form 8-K - None
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
TOWNE BANCORP, INC.
AUGUST 14, 1997 /s/ JEROME C. BECHSTEIN
Date Jerome C. Bechstein, President and CEO
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