UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-QSB
(Mark One)
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 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
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
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 September 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
September 30, 1997 & June 30, 1997
(unaudited)
ASSETS 9/30/97 6/30/97
CASH AND CASH EQUIVALENTS
Cash and due from banks $ 431,780 $ 402,235
Federal funds sold 2,116,000 1,946,000
Total cash and cash equivalents 2,547,780 2,348,235
INVESTMENT SECURITIES
Available-for-sale, at market value 1,198,054 1,393,653
Held-to-maturity, at amortized cost 1,995,460 1,994,649
Total investment securities 3,193,514 3,388,302
LOANS RECEIVABLE, net of allowance for
loan losses of $110,000 and $80,000
respectfully 10,227,343 7,319,778
PREMISES AND EQUIPMENT, net 2,438,557 2,429,859
OTHER ASSETS 381,473 466,713
TOTAL ASSETS $18,788,667 $15,952,887
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits: $13,271,496 $10,182,162
Capital lease obligations 2,482,729 2,500,000
Accrued interest, taxes and
other liabilities 193,132 127,201
Total liabilities 15,947,357 12,809,363
STOCKHOLDERS' EQUITY
Common stock, without par value,
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 (1,644,784) (1,338,487)
Net unrealized holding gain/(loss) on investment
securities available-for-sale 3,561 (372)
Total stockholders' equity 2,841,310 3,143,524
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $18,788,667 $15,952,887
ITEM 1. Consolidated Statement of Operations
TOWNE BANCORP, INC
Consolidated Statement of Operations
For the period ended September 30, 1997 and June 30, 1997
(unaudited)
Nine Third Second
Months Quarter Quarter
9/30/97 9/30/97 6/30/97
INTEREST INCOME
Interest and fees on loans $ 472,654 $ 231,958 $ 158,688
Interest and dividends on
investment securities 148,416 46,582 51,030
Interest on deposits in other banks,
escrow acct. 0 0 0
Interest on federal funds sold 146,117 24,588 50,991
Total interest income 767,187 303,128 260,709
INTEREST EXPENSE
Deposits 388,767 146,958 124,224
Total interest expense 388,767 146,958 124,224
Net interest income 378,420 156,170 136,485
PROVISION FOR LOAN LOSSES 90,000 30,000 30,000
Net interest income after provision for
loan losses 288,420 126,170 106,485
NON-INTEREST INCOME
Service charges 7,956 3,311 2,877
Other operating income 18,595 4,894 10,147
Total non-interest income 26,551 8,205 13,024
NON-INTEREST EXPENSE
Employee expense 334,550 102,533 118,288
Net occupancy expense 352,423 173,832 93,881
Other operating expense 491,558 164,307 193,727
Total non-interest expense 1,178,531 440,672 405,896
Income (loss) before federal income taxes (863,560) (306,297) (286,387)
PROVISION(CREDIT) FOR FEDERAL
INCOME TAXES - - -
NET INCOME (LOSS) $ (863,560) $(306,297) $(286,387)
NET INCOME (LOSS) PER SHARE $ (2.33) $ (.83) $ (.77)
ITEM 1. Consolidated Statement of Cash Flows
TOWNE BANCORP, INC.
Consolidated Statements of Cash Flow
For period ended September 30, 1997 & June 30, 1997
(unaudited)
Quarter Ended Quarter Ended
Sept 30, 1997 June 30, 1997
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income(loss) $ (306,297) $ (286,387)
Adjustments to reconcile net income(loss)
to net cash provided by (used in)
operating activities:
Depreciation & Amortization 45,369 36,482
Provision for loan losses 30,000 30,000
Accretion of investment securities, net of
premium amortization (1,134) (855)
Increase in other assets 78,534 (221,952)
Increase(decrease) in accrued interest, taxes
& other liabilities 65,931 (19,753)
Net cash provided by (used in )
operating activities 218,700 (462,465)
CASH FLOWS FROM INVESTING ACTIVITIES
Maturities of investment securities
Available for Sale - -
Held to Maturity 200,000 -
Net increase in loans receivable (2,937,565) (2,617,778)
Additions to premises and equipment (47,356) (324)
Net cash used in investing activities (2,784,921) (2,618,102)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 3,089,334 258,802
Prinicipal payments on capital lease (17,271) -
Net cash provided by financing activities 3,072,063 258,802
INCREASE IN CASH AND CASH EQUIVALENTS 199,545 (2,821,765)
CASH & CASH EQUIVALENTS AT BEGINNING
OF PERIOD 2,348,235 5,170,000
CASH & CASH EQUIVALENTS AT END OF
PERIOD $2,547,780 $ 2,348,235
ITEM 1. Notes to Consolidated Financial Statements
TOWNE BANCORP, INC
Notes to Consolidated Financial Statements
September 30, 1997
(unaudited)
(1) Consolidated Financial Statements
The consolidated balance sheet as of September 30, 1997, the consolidated
statements of operations for the nine-month period ended September 30, 1997
have been prepared by Towne Bancorp, Inc. (the "Company") without audit.
In the opinion of management, all adjustments(which include only normal
recurring adjustments) necessary to present fairly the Company's financial
position as of September 30, 1997 and its results of operations for the periods
ended September 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 September 30, 1997 are not necessarily indicative of the
operating results for the full year.
(2) Potential Contingent Liability
The Company has a potential contingent liability related to the sale of common
stock in its initial public offering (the "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.
In connection with the Offering, the Company's Board of Directors recommended
an amendment to the Company's First Amended Articles of Incorporation to
increase the authorized number of common shares, without par value, but share-
holder approval was not obtained and the necessary filing with the Ohio
Secretary of State was not made. The Company is taking necessary steps to
approve an amendment to the First Amended Articles of Incorporation and to
make the appropriate filings with the Ohio Secretary of State to increase the
authorized common shares, without par value, to 800,000.
ITEM 2. Management's Discussion and Analysis
General
Total assets at September 30, 1997 were $18,788,667 compared to $15,952,887
at June 30, 1997. Total deposits increased to $13,271,496 from $10,182,162 at
June 30, and total loans increased $10,227,343 from $7,319,778 at June 30.
Stockholders equity at September 30, 1997 decreased from $3,143,524 to
$2,841,310. The investment securities decreased in the third quarter of 1997
from $3,388,302 to $3,193,514. The Federal Funds Sold increased to $2,116,000
from $1,946,000 as of September 30, 1997. This was due to the increased
deposit volume.
Net loss for the quarter ended September 30, 1997 was $(306,297). 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 $110,000 at the end of the quarter, based on the
growing loan portfolio. The net interest income was $126,170 for the third
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
[ARTICLE] 9
<TABLE>
<S> <C> <C>
[PERIOD-TYPE] 3-MOS 3-MOS
[FISCAL-YEAR-END] DEC-31-1997 DEC-31-1997
[PERIOD-END] SEPT-30-1997 JUNE-30-1997
[CASH] 431,780 402,235
[INT-BEARING-DEPOSITS] 0 0
[FED-FUNDS-SOLD] 2,116,000 1,946,000
[TRADING-ASSETS] 0 0
[INVESTMENTS-HELD-FOR-SALE] 1,995,460 1,994,649
[INVESTMENTS-CARRYING] 0 0
[INVESTMENTS-MARKET] 1,198,054 1,393,653
[LOANS] 10,337,343 7,399,778
[ALLOWANCE] (110,000) (80,000)
[TOTAL-ASSETS] 18,788,667 15,952,887
[DEPOSITS] 13,271,496 10,182,162
[SHORT-TERM] 0 0
[LIABILITIES-OTHER] 2,675,861 2,627,201
[LONG-TERM] 0 0
[PREFERRED-MANDATORY] 0 0
[PREFERRED] 0 0
[COMMON] 370,761 370,761
[OTHER-SE] 2,466,988 2,773,285
[TOTAL-LIABILITIES-AND-EQUITY] 18,788,667 15,952,887
[INTEREST-LOAN] 472,654 240,696
[INTEREST-INVEST] 294,533 223,363
[INTEREST-OTHER] 0 0
[INTEREST-TOTAL] 767,187 464,059
[INTEREST-DEPOSIT] 388,767 241,809
[INTEREST-EXPENSE] 388,767 241,809
[INTEREST-INCOME-NET] 378,420 222,250
[LOAN-LOSSES] 90,000 60,000
[SECURITIES-GAINS] 0 0
[EXPENSE-OTHER] 1,178,531 737,859
[INCOME-PRETAX] (863,560) (557,263)
[INCOME-PRE-EXTRAORDINARY] (863,560) (557,263)
[EXTRAORDINARY] 0 0
[CHANGES] 0 0
[NET-INCOME] (863,560) (557,263)
[EPS-PRIMARY] (2.33) (1.50)
[EPS-DILUTED] (2.33) (1.50)
[LOANS-NON] 0 0
[LOANS-PAST] 104,200 0
[LOANS-TROUBLED] 0 0
[LOANS-PROBLEM] 0 0
[ALLOWANCE-OPEN] 80,000 50,000
[CHARGE-OFFS] 0 0
[RECOVERIES] 0 0
[ALLOWANCE-CLOSE] 110,000 80,000
[ALLOWANCE-DOMESTIC] 0 0
[ALLOWANCE-FOREIGN] 0 0
[ALLOWANCE-UNALLOCATED] 110,000 80,000
</TABLE>
SI[EPS-PRIMARY]
[EPS-DILUTED]
SIGNATURES
In[EPS-DILUTED]
SIGNATURES
In accordance w
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.
NOVEMBER 13, 1997
Date Jerome C. Bechstein, President and CEO
