UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended September 30, 1996
Commission file number 33-65608
INTERCOUNTY BANCSHARES, INC.
(Exact name of small business issuer as specified in its charter)
OHIO 31-1004998
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
48 North South Street, Wilmington, Ohio 45177
(Address of principal executive offices) (Zip Code)
(513) 382-1441
(Issuer's telephone number, including area code)
Indicate by check mark whether the Issuer (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 issuer was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
The number of shares outstanding of the issuer's common stock, without par
value, as of November 1, 1996, the latest practicable date, was 1,540,039
shares.
<PAGE>
INTERCOUNTY BANCSHARES, INC.
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets -
September 30, 1996, December 31, 1995
and September 30, 1995 . . . . . . . . . . . . . . . . . 1
Consolidated Statements of Income -
Three and Nine Months Ended September 30, 1996 and 1995 . 2
Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1996 and 1995 . . . . . . 3
Notes to Consolidated Financial Statements . . . . . . . . 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . 5-9
Part II. Other Information
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . 10
Item 2. Changes in Securities. . . . . . . . . . . . . . . . . . 10
Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . . 10
Item 4. Submission of Matters to a Vote of Security Holders. . . 10
Item 5. Other Information. . . . . . . . . . . . . . . . . . . . 10
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . 10
<PAGE>
Part I - Financial Information
Item 1. Financial Statements
<TABLE>
INTERCOUNTY BANCSHARES, INC. and
THE NATIONAL BANK & TRUST COMPANY
CONSOLIDATED BALANCE SHEETS
At September 30, 1996, December 31, 1995 and September 30, 1995
(thousands)
<CAPTION>
September 30, December 31, September 30,
1996 1995 1995
(unaudited) (a) (unaudited)
<S> <C> <C> <C>
ASSETS:
Cash and due from banks $ 11,798 13,680 14,571
Federal funds sold 10,087 4,527 1,154
------- ------- -------
Total cash and cash equivalents 21,885 18,207 15,725
Interest-bearing deposits in banks 137 133 113
Securities available for sale, at
market value 74,058 82,569 71,651
Securities held to maturity (market
value-$8,189, $9,058, and $12,032) 7,554 8,191 11,154
------- ------- -------
Total securities 81,612 90,760 82,805
Loans 268,361 242,507 220,778
Less-allowance for loan losses 2,732 2,644 2,635
------- ------- -------
Net loans 265,629 239,863 218,143
Premises and equipment 8,563 7,505 6,648
Earned income receivable 3,368 3,248 3,026
Other assets 1,523 555 1,334
------- ------- -------
TOTAL ASSETS $ 382,717 360,271 327,794
======= ======= =======
LIABILITIES:
Demand deposits $ 36,456 36,188 33,857
Savings, NOW, and money market
deposits 111,017 103,954 100,408
Certificates $100,000 and over 21,784 21,110 18,394
Other time deposits 140,707 130,251 127,741
------- ------- -------
Total deposits 309,964 291,503 280,400
Short-term borrowings 33,887 31,110 11,351
Long-term debt 1,044 1,108 1,237
Other liabilities 2,523 2,716 2,289
------- ------- -------
TOTAL LIABILITIES 347,418 326,437 295,277
------- ------- -------
SHAREHOLDERS' EQUITY:
Preferred stock-no par value,
authorized 100,000 shares; none
issued
Common stock-no par value,
authorized 3,000,000 shares;
issued 1,909,475 shares 1,000 1,000 1,000
Surplus 7,241 7,224 7,194
Net unrealized gain on securities
available for sale 354 1,405 1,075
Unearned ESOP shares, at cost (841) (845) (956)
Retained earnings 30,604 27,863 27,037
Treasury shares, at cost, 369,436
shares at September 30, 1996;
360,498 at December 31, 1995;
362,985 shares at September 30, 1995 (3,059) (2,813) (2,833)
------- ------- -------
TOTAL SHAREHOLDERS' EQUITY 35,299 33,834 32,517
------- ------- -------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $382,717 360,271 327,794
======= ======= =======
(a) Financial information as of December 31, 1995, has been derived from
the audited, consolidated financial statements of the Registrant.
The accompanying notes to financial statements are an integral part of these
statements.
</TABLE>
-1-
<PAGE>
Part I - Financial Information
(Continued)
Item 1. Financial Statements
<TABLE>
INTERCOUNTY BANCSHARES, INC. and
THE NATIONAL BANK & TRUST COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(thousands)
(unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1996 1995 1996 1995
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 5,790 4,941 16,535 14,270
Interest on securities available
for sale-taxable 1,344 1,231 4,216 3,128
Interest on securities held to
maturity-
Taxable - 20 - 56
Non-taxable 159 212 472 653
Interest on deposits in banks 2 2 7 5
Interest on federal funds sold 46 80 108 245
----- ----- ------ ------
TOTAL INTEREST INCOME 7,341 6,486 21,338 18,357
----- ----- ------ ------
INTEREST EXPENSE:
Interest on savings, NOW and money
market deposits 783 677 2,213 1,912
Interest on time certificates
$100,000 and over 285 293 789 818
Interest on other deposits 1,995 1,914 5,876 5,038
Interest on short-term borrowings 435 120 1,282 328
Interest on long-term debt 21 26 65 80
----- ----- ------ ------
TOTAL INTEREST EXPENSE 3,519 3,030 10,225 8,176
----- ----- ------ ------
NET INTEREST INCOME 3,822 3,456 11,113 10,181
PROVISION FOR LOAN LOSSES 150 90 450 270
----- ----- ------ ------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 3,672 3,366 10,663 9,911
----- ----- ------ ------
NON-INTEREST INCOME:
Trust income 193 162 532 469
Service charges on deposits 288 249 804 736
Other service charges and fees 79 78 230 217
Securities gains - 18 86 18
Other 147 83 411 289
----- ----- ------ ------
TOTAL NON-INTEREST INCOME 707 590 2,063 1,729
----- ----- ------ ------
NON-INTEREST EXPENSES:
Salaries 1,123 1,036 3,223 3,038
Pension and benefits 238 253 685 819
Equipment 265 198 663 620
Occupancy 163 145 470 420
Deposit insurance 106 (6) 126 269
State franchise tax 123 112 369 335
Advertising 67 51 196 192
Other 761 608 2,215 1,740
----- ----- ------ ------
TOTAL NON-INTEREST EXPENSE 2,846 2,397 7,947 7,433
----- ----- ------ ------
INCOME BEFORE INCOME TAX 1,533 1,559 4,779 4,207
INCOME TAX 445 421 1,395 1,162
----- ----- ------ ------
NET INCOME $ 1,088 1,138 3,384 3,045
===== ===== ====== ======
Earnings per common share $ 0.71 0.74 2.21 1.99
Dividends declared per
common share $ 0.14 0.10 0.42 0.28
Average shares outstanding 1,527,500 1,530,436 1,531,845 1,530,266
The accompanying notes to financial statements are an integral part of these
statements.
</TABLE>
-2-
<PAGE>
Part I - Financial Information
(Continued)
Item 1. Financial Statements
<TABLE>
INTERCOUNTY BANCSHARES, INC. and
THE NATIONAL BANK & TRUST COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, 1996
(thousands)
(unaudited)
<CAPTION>
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,384 3,045
Adjustments for non-cash items-
Depreciation and amortization 541 508
Provision for loan losses 450 270
Net discount accretion of securities held for sale (211) (266)
Net discount accretion of securities held to maturity (76) (183)
Net realized gains from sale of securities available
for sale (86) (18)
Increase in interest receivable (138) (551)
Increase (decrease) in interest payable (106) 206
Increase in income taxes payable 25 224
Increase (decrease) in other accrued expenses (187) 199
Increase in other assets (421) (510)
FHLB stock dividends (155) (24)
------ ------
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,020 2,900
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase in interest-bearing deposits in banks (4) (11)
Proceeds from maturities of securities available
for sale 13,514 5,123
Proceeds from sales of securities available for sale 5,395 1,000
Purchases of securities available for sale (11,538) (30,689)
Proceeds from maturities of securities held to
maturity 713 1,687
Purchases of securities held to maturity - (376)
Net increase in loans (26,216) (12,820)
Purchases of premises and equipment (1,547) (735)
------ ------
NET CASH USED IN INVESTING ACTIVITIES (19,683) (36,821)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 18,461 31,459
Repayment of capital lease obligation (65) (62)
Net increase in short-term borrowings 2,777 2,615
Cash dividends paid (589) (402)
Proceeds from stock options exercised 6 73
Purchase of treasury shares (249) (94)
------ ------
NET CASH PROVIDED BY FINANCING ACTIVITIES 20,341 33,589
------ ------
NET CHANGE IN CASH AND CASH EQUIVALENTS 3,678 (332)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 18,207 16,057
------ ------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 21,885 15,725
====== ======
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 10,331 7,970
Income taxes paid 1,370 947
The accompanying notes to financial statements are an integral part of these
statements.
</TABLE>
-3-
<PAGE>
PART I. FINANCIAL INFORMATION
(Continued)
Item 1. Notes to Consolidated Financial Statements
INTERCOUNTY BANCSHARES, INC. and
THE NATIONAL BANK & TRUST COMPANY
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and the instructions to Form 10-QSB and
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, the unaudited
consolidated financial statements include all adjustments (consisting of
normal, recurring accruals) considered necessary for a fair presentation of
financial position, results of operations and cash flows for the interim
periods.
Results of operations for the three and nine month periods ended
September 30, 1996 and cash flows for the nine month period ended
September 30, 1996 are not necessarily indicative of the results to be
expected for the full year to end December 31, 1996. These unaudited
consolidated financial statements should be read in conjunction with the
consolidated financial statements, accounting policies and financial notes
thereto included in the Company's Annual Report and Form 10-KSB for the year
ended December 31, 1995 filed with the Commission.
WEIGHTED AVERAGE SHARES OUTSTANDING
Earnings per common share (EPS) is calculated by dividing net income by the
weighted average number of shares of common stock outstanding during the
period. The assumed exercise of stock options would not have a material
dilutive effect. In accordance with generally accepted accounting
principles, certain shares held in suspense by the Company's employee stock
ownership plan (ESOP) are not considered outstanding until they are
committed to be released for allocation to participants' accounts. The
following table shows the computation of the weighted average shares
outstanding.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Weighted Average Shares:
Common shares issued 1,541,666 1,547,064 1,546,604 1,547,520
Unreleased common shares
held by ESOP (14,166) (16,628) (14,759) (17,254)
--------- --------- --------- ---------
Common shares
outstanding 1,527,500 1,530,436 1,531,845 1,530,266
========= ========= ========= =========
</TABLE>
RECENTLY ISSUED ACCOUNTING STANDARD
The Company adopted Statement of Financial Accounting Standards (SFAS) No.
123, "Accounting for Stock-Based Compensation" effective January 1, 1996.
This statement encourages, but does not require, adoption of a fair-value-
based accounting method for employee stock options. Management has elected
to continue to recognize compensation cost using the intrinsic-value-based
method of accounting in Accounting Principles Board (APB) Opinion No. 25,
"Accounting for Stock Issued to Employees." In accordance with SFAS No.
123, the Company will disclose in the 1996 annual Consolidated Financial
Statements pro forma net income and earnings per share as if the fair-value-
based method had been applied in recognizing compensation cost. The pro
forma disclosures are not expected to differ materially from the results
reported under APB No. 25.
-4-
<PAGE>
PART I. FINANCIAL INFORMATION
(Continued)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
INTERCOUNTY BANCSHARES, INC. and
THE NATIONAL BANK & TRUST COMPANY
FORWARD-LOOKING STATEMENTS
Certain matters disclosed herein may be deemed to be forward-looking
statements that involve risks and uncertainties, including regulatory policy
changes, interest rate fluctuations, loan demand, loan delinquencies and
other risks. Actual strategies and results in future time periods may
differ materially from those currently expected. Such forward-looking
statements represent the Company's judgment as of the current date. The
Company disclaims, however, any intent or obligation to update such forward-
looking statements.
RESULTS OF OPERATIONS
Net income for the third quarter of 1996 was $1,088,000, a decrease of 4.4%
from the $1,138,000 earned in the third quarter of 1995. The primary
reasons for the decrease in earnings were an increase in provision for loan
losses and an increase in deposit insurance expense. The Bank has increased
its provision to reflect slightly higher net charge-offs this year and
growth in the loan portfolio. During the third quarter of 1995, the Bank
received a refund of deposit insurance which resulted in a negative $6,000
expense for the quarter, while during the third quarter of 1996, the Bank
incurred a one-time $97,000 assessment for deposits obtained by the Bank in
1993 when it merged with The Williamsburg Building & Loan Company, which
contributed to an expense of $106,000 for the quarter. Also during the
quarter, the Bank achieved a 10.6% increase in net interest income, a 19.7%
increase in non-interest income, and an 18.7% increase in non-interest
expense. Net income per share decreased 4.1% to $.71 from $.74 for the
third quarter of 1995. Net income for the first nine months of 1996 was
$3.4 million, an increase of 11.2% from the $3.0 million earned in the
first nine months of 1995.
Net interest income for the third quarter of 1996 was $3.8 million, 10.6%
above the third quarter of 1995 due to average interest-earning assets
increasing $48.7 million (16.1%) to $350.3 million. This increase consisted
primarily of $46.0 million in loans and $4.6 million in securities. The
average yield decreased from 8.53% to 8.34%. This decrease in yield was the
result of a general decline in market rates. Prime rate averaged 75 basis
points more during the third quarter of 1995 than the third quarter of 1996.
Average interest-bearing liabilities increased 18.2% to $301.9 million and
their cost decreased to 4.64% from 4.71% in the third quarter of 1995. The
$46.5 million growth in average interest-bearing liabilities from the third
quarter of last year was primarily in higher costing money market deposits,
fixed rate certificates, and borrowings from the Federal Home Loan Bank. As
a result, the third quarter net interest margin decreased from 4.55% in 1995
to 4.34% in 1996.
Net interest income for the first nine months of 1996 increased 9.2% from the
same period last year. Average interest-earning assets increased 19.4% from
last year, and the yield on these decreased from 8.55% to 8.32%. Interest-
bearing liabilities increased 21.3%, while the cost increased from 4.50% to
4.64%. The net interest margin averaged 4.33% for the first nine months of
1996 versus 4.74% for the first nine months of 1995.
The provision for loan losses was increased to $150,000 for the third quarter
of 1996, compared to $90,000 for the same period in 1995, reflecting the
growth of the Bank's loan portfolio. Net charge-offs for the first nine
months of 1996 were .14% of average loans, compared to .09% for the first
nine months of the prior year.
-5-
<PAGE>
PART I. FINANCIAL INFORMATION
(Continued)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
(Continued)
Installment loans are generally charged off if four payments have been missed.
Generally, all other loans are placed on non-accrual status if they are 90
days or more delinquent. A loan may remain on an accrual status after it is
90 days delinquent if it is reasonably certain the account will be settled in
its entirety or brought current within a 30-day period. The current year's
accrued interest on loans placed on non-accrual status is charged against
earnings. The previous year's accrued interest is charged against the
allowance for loan losses. Cash payments received on non-accrual loans are
applied against principal until the balance is repaid. Any remaining
payments are credited to earnings. Non-performing loans include non-accrual
loans, renegotiated loans and ninety days or more past due loans. All loans,
except one-to four-family real estate, which are ten days delinquent are
sent to the Collections Department for collection. One- to four-family real
estate loans are sent when they are fifteen days delinquent. Management
uses an outside servicer for delinquent credit card collections. As of
September 30, 1996, management knew of no significant loans not now disclosed
that would cause management to have serious doubts as to the ability of the
borrowers to comply with present loan repayment terms.
The following table sets forth certain information regarding the past-due,
non-accrual and renegotiated loans of the Bank at the dates indicated
(in thousands):
<TABLE>
<CAPTION>
September 30 December 31 September 30
1996 1995 1995
<S> <C> <C> <C>
Loans accounted for on
non-accrual basis $ 559 314 272
Accruing loans which are
past due 90 days or more 318 208 163
Renegotiated loans - - -
--- --- ---
Total $ 877 522 435
=== === ===
</TABLE>
The increase in non-accrual loans at September 30, 1996, is principally
attributable to two commercial borrowers with loans totaling $413,000.
Management believes the value of the related collateral, if necessary to
collect the principal outstanding, limits the Bank's exposure to a potential
loss of less than $60,000, including costs of collection. The increase in
90 days past due loans was primarily concentrated in credit card loans.
In 1996, the responsibility for collection of these loans was changed to an
outside servicer whose results during the third quarter were less than
expected. Management is considering alternatives to strengthen credit card
collection efforts including taking collection efforts back from the
outside servicer.
-6-
<PAGE>
PART I. FINANCIAL INFORMATION
(Continued)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
(Continued)
At September 30, 1996, the Bank's allowance for loan losses totaled $2.7
million and was allocated primarily to the consumer segment of the loan
portfolio. A similar allocation existed for all other dates presented. The
following table sets forth an analysis of the Bank's allowance for losses on
loans for the periods indicated (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Balance, beginning of period $ 2,647 2,641 2,644 2,561
Charge-offs:
Commercial (12) 23 31 48
Residential real estate - - 1 -
Installment 109 82 386 246
Credit card 49 29 119 50
Other 1 7 2 9
----- ----- ----- -----
Total 147 141 539 353
----- ----- ----- -----
Recoveries:
Commercial 42 2 50 7
Residential real estate - - - 5
Installment 36 32 113 123
Credit card 4 3 8 13
Other - 8 6 9
----- ----- ----- -----
Total 82 45 177 157
----- ----- ----- -----
Net charge-offs (65) (96) (362) (196)
Provision for loan losses 150 90 450 270
----- ----- ----- -----
Balance, end of period $ 2,732 2,635 2,732 2,635
===== ===== ===== =====
</TABLE>
Non-interest income was $707,000 for the third quarter 1996, an increase of
19.7% from the $590,000 earned in the third quarter of 1995. Although all
categories in this section have shown increases, increased trust income,
deposit service charges, and income from miscellaneous recoveries accounted
for the majority of the improvement. For the first nine months of 1996,
non-interest income increased 19.3% from the same period in 1995.
Non-interest expense increased 18.7% for the quarter over the same period in
1995. Salaries and benefits increased 6.0% for the quarter due mostly to an
increase in eleven full-time equivalent employees. Equipment expense
increased 33.8% from last year as a result of our continued investment in
current technology. Occupancy expense increased 12.4% for the quarter due
to the opening of the Batavia office earlier this year, and the main office
renovation. Deposit insurance was $112,000 more than last year due to the
assessment mentioned earlier. State franchise tax has increased 9.9% due to
the increase in Company capital on which it is based. Other expense has
increased 25.1% from the third quarter of last year. Included in that
category were increased loan related processing costs, data processing fees,
deposit account losses, and office supplies. For the first nine months of
1996, total non-interest expense increased 6.9% from the same period last
year.
-7-
<PAGE>
PART I. FINANCIAL INFORMATION
(Continued)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
(Continued)
Performance ratios for the third quarter of 1996 included a return on assets
of 1.16%, and a return on equity of 12.37%, compared to 1.41% and 14.05%,
respectively, for the third quarter of 1995. For the first nine months of
1996, return on assets and return on equity were 1.24% and 13.02%,
respectively, compared to 1.33% and 13.25% for the first nine months of 1995.
Financial Condition
Total assets grew 16.8% from the end of the third quarter 1995, to a total
of $382.7 million at September 30, 1996. Total loans increased to $268.4
million, an increase of 21.6% from September 30, 1995. Commercial and
personal loans continue to provide the majority of the internal growth.
Average commercial loans during the first nine months of 1996, grew $11.5
million (13.6%), and average personal loans grew $12.8 million (19.2%)
compared to the first nine months of 1995. In November 1995, the Bank
purchased $20 million of 1-4 family real estate loans in the secondary
market; $11.1 million of that portfolio remains. The decline is
attributable to normal principal amortization and prepayments. The
securities portfolio average for the first nine months of 1996 has grown
5.8% over the same period in 1995 through the use of excess liquidity.
Total deposits increased 10.5% from September 30, 1995 to $310.0 million
at September 30, 1996. Non-interest bearing deposits increased $2.6
million or 7.7% since September 30, 1995. Interest-bearing accounts
grew $27.0 million, or 10.9%. Other borrowings increased $22.5 million as
a result of borrowing $21.3 million from Federal Home Loan Bank in
November 1995, to match fund the real estate loan purchase. Total equity
increased 8.6% since September 30, 1995 to $35.3 million at September 30,
1996. Book value per share at September 30, 1996, was $22.92, an increase
of 9.0% from $21.03 at the end of the third quarter last year. The ratio
of equity to assets at September 30, 1996, was 9.22% compared to 9.92% as
of the end of the same quarter last year.
The material changes that have occurred in InterCounty's financial condition
during 1996 are as follows (in thousands):
<TABLE>
<CAPTION>
September 30 December 31
1996 1995 Amount Percent
<S> <C> <C> <C> <C>
Federal funds sold $10,087 4,527 5,560 123
Securities 81,612 90,760 (9,148) (10)
Loans 268,361 242,507 25,854 11
Premises and equipment 8,563 7,505 1,058 14
Savings, NOW, MMDA deposits 111,017 103,954 7,063 7
Other time deposits 140,707 130,251 10,456 8
</TABLE>
Deposit mix changes have resulted in increases in interest-bearing
transaction accounts and retail certificates of deposit. The securities
portfolio has decreased because of normal maturities and called bonds,
which have been used to fund loans. Loan growth has primarily been in
commercial and personal areas. Increased premises and equipment are due
to main office renovations and computer hardware and software purchases.
-8-
<PAGE>
PART I. FINANCIAL INFORMATION
(Continued)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
(Continued)
Liquidity and Capital Resources
The maintenance of an adequate level of liquidity is necessary to ensure that
sufficient funds are available to meet customers' loan demand and deposit
withdrawal. InterCounty manages liquidity on both the asset and liability
side of the balance sheet. The loan to total funds ratio at September 30,
1996 was 78%, compared to 76% for the same date in 1995. Management strives
to keep this ratio below 80%. The securities portfolio is primarily
"available for sale" securities that are readily marketable. Approximately
47% of the portfolio is pledged to secure public deposits and for other
purposes as required by law. The balance of the "available for sale"
portfolio could be sold if necessary for liquidity purposes. Also a stable
deposit base, consisting of 93% core deposits, makes the Bank less
susceptible to large fluctuations in funding needs.
The Federal Reserve Board has adopted risk-based capital guidelines which
assign risk weightings to assets and off-balance sheet items and also define
and set minimum capital requirements (risk-based capital ratios). Bank
holding companies must maintain total risk-based, Tier 1 risk-based and Tier
1 leverage ratios of 8%, 4% and 3%, respectively. At September 30, 1996,
InterCounty had a total risk-based capital ratio of 13.46%, a Tier 1 risk-
based capital ratio of 12.48%, and a Tier 1 leverage ratio of 9.1%.
-9-
<PAGE>
PART II. OTHER INFORMATION
INTERCOUNTY BANCSHARES, INC. and
THE NATIONAL BANK & TRUST COMPANY
Item 1. Legal Proceedings - Not Applicable
Item 2. Changes in Securities - Not Applicable
Item 3. Defaults Upon Senior Securities - Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders - Not Applicable
Item 5. Other Information - Not Applicable
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
<TABLE>
<CAPTION>
Exhibit SB 601 Page
No. Ref. No. Description No.
<S> <C> <C>
11 601(b)(11) Computation of Consolidated
Earnings Per Common Share
For the Three and Nine Months
Ended September 30, 1996 and
1995 11
27 601(b)(27) Financial Data Schedule for
the Nine Months Ended
September 30, 1996. 12
</TABLE>
b. The Company was not required to file Form 8-K during the quarter
ended September 30, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Issuer has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INTERCOUNTY BANCSHARES, INC.
Issuer
Date: November 14, 1996 Charles L. Dehner
Treasurer, Executive Vice President
and Principal Accounting Officer
-10-
<PAGE>
Exhibit 11
<TABLE>
InterCounty Bancshares, Inc.
Computation of Consolidated Earnings Per Common Share
(in thousands, except shares and per share data)
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net income $ 1,088 1,138 $ 3,384 3,045
========= ========= ========= =========
Weighted average shares:
Common shares issued 1,541,666 1,547,064 1,546,604 1,547,520
Unreleased common shares
held by ESOP 14,166 16,628 14,759 17,254
--------- --------- --------- ---------
Common shares outstanding 1,527,500 1,530,436 1,531,845 1,530,266
Add - common equivalent shares
representing shares
issuable upon exercise
of employee stock options 41,801 32,614 38,391 28,024
--------- --------- --------- ---------
Adjusted weighted average
number of shares outstanding
used in calculation of earnings
per common and common
equivalent share 1,569,301 1,563,050 1,570,236 1,558,290
Add - incremental shares
representing shares
issuable upon exercise
of employee stock options
based on September 30
estimated fair value (1) 426 1,963 3,923 6,946
--------- --------- --------- ---------
Adjusted weighted average number
of shares outstanding used in
calculation of earnings per
common share - assuming full
dilution 1,569,727 1,565,013 1,574,159 1,565,236
========= ========= ========= =========
Earnings per common share -
assuming no dilution $ .71 .74 2.21 1.99
Earnings per common and
common equivalent share $ .69 .73 2.16 1.95
Earnings per common share -
assuming full dilution $ .69 .73 2.15 1.95
(1) There is presently no active public trading market for the Company's
shares, nor are the prices at which common shares have been traded
published by any national securities association or quotation service.
Fair value for earnings per common share purposes was assumed to be
$27.50 at September 30, 1996, and $24.00 at September 30, 1995.
</TABLE>
-11-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
QUARTERLY REPORT FOR INTERCOUNTY BANCSHARES, INC. ON FORM 10-QSB FOR THE
QUARTER ENDED SEPTEMBER 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000908837
<NAME> INTERCOUNTY BANCSHARES
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 11,798
<INT-BEARING-DEPOSITS> 137
<FED-FUNDS-SOLD> 10,087
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 74,058
<INVESTMENTS-CARRYING> 7,554
<INVESTMENTS-MARKET> 8,189
<LOANS> 268,361
<ALLOWANCE> 2,732
<TOTAL-ASSETS> 382,717
<DEPOSITS> 309,964
<SHORT-TERM> 33,887
<LIABILITIES-OTHER> 2,523
<LONG-TERM> 1,044
0
0
<COMMON> 1,000
<OTHER-SE> 34,299
<TOTAL-LIABILITIES-AND-EQUITY> 382,717
<INTEREST-LOAN> 16,535
<INTEREST-INVEST> 4,688
<INTEREST-OTHER> 115
<INTEREST-TOTAL> 21,338
<INTEREST-DEPOSIT> 8,878
<INTEREST-EXPENSE> 10,225
<INTEREST-INCOME-NET> 11,113
<LOAN-LOSSES> 450
<SECURITIES-GAINS> 86
<EXPENSE-OTHER> 7,947
<INCOME-PRETAX> 4,779
<INCOME-PRE-EXTRAORDINARY> 4,779
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,384
<EPS-PRIMARY> 2.21
<EPS-DILUTED> 0.00
<YIELD-ACTUAL> 8.32
<LOANS-NON> 559
<LOANS-PAST> 318
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,644
<CHARGE-OFFS> 539
<RECOVERIES> 177
<ALLOWANCE-CLOSE> 2,732
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,732
</TABLE>
