<PAGE>
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 March 31, 1996
Commission file number 0-23134
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 March 31, 1996 was 1,548,977 shares.
<PAGE>
INTERCOUNTY BANCSHARES, INC.
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets -
March 31, 1996, December 31, 1995
and March 31, 1995 . . . . . . . . . . . . . . . . . . . .1
Consolidated Statements of Income -
Three Months Ended March 31, 1996 and 1995. . . . . . . . .2
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1996 and 1995 . . . . . . . .3
Notes to Consolidated Financial Statements . . . . . . . . .4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. . . . . 5-7
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
<PAGE>
Part I - Financial Information
Item 1. Financial Statements
<TABLE>
INTERCOUNTY BANCSHARES, INC. and
THE NATIONAL BANK & TRUST COMPANY
CONSOLIDATED BALANCE SHEETS
At March 31, 1996, December 31, 1995 and March 31, 1995
(thousands)
<CAPTION>
March 31, December 31, March 31,
1996 1995 1995
(unaudited) (unaudited)
<S> <C> <C> <C>
ASSETS:
Cash and due from banks $ 15,108 13,680 12,784
Federal funds sold 9,555 4,527 3,842
------- ------- -------
Total cash and cash equivalents 24,663 18,207 16,626
Interest-bearing deposits in banks 133 133 112
Securities available for sale, at
market value 80,690 82,569 53,292
Securities held to maturity (market
value-$8,321, $9,058, and $12,519) 7,566 8,191 11,640
------- ------- -------
Total securities 88,256 90,760 64,932
Loans 246,694 242,507 211,685
Less-allowance for loan losses (2,626) (2,644) (2,606)
------- ------- -------
Net loans 244,068 239,863 209,079
Premises and equipment 8,090 7,505 6,249
Earned income receivable 3,202 3,248 2,377
Other assets 566 555 1,274
------- ------- -------
TOTAL ASSETS $368,978 360,271 300,649
======= ======= =======
LIABILITIES:
Demand deposits $ 34,523 36,188 30,134
Savings, NOW, and money market
deposits 109,960 103,954 96,339
Certificates $100,000 and over 18,988 21,110 19,414
Other time deposits 133,934 130,251 112,325
------- ------- -------
Total deposits 297,405 291,503 258,212
Short-term borrowings 33,807 31,110 8,726
Long-term debt 1,087 1,108 1,279
Other liabilities 2,576 2,716 2,206
------- ------- -------
TOTAL LIABILITIES 334,875 326,437 270,423
------- ------- -------
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 7,228 7,224 7,143
Net unrealized gain on securities
available for sale 807 1,405 503
Unearned ESOP shares, at cost (844) (845) (970)
Retained earnings 28,725 27,863 25,318
Treasury shares, at cost, 360,498
shares at March 31, 1996 and
December 31, 1995; 362,389 shares
at March 31, 1995 (2,813) (2,813) (2,768)
------- ------- -------
TOTAL SHAREHOLDERS' EQUITY 34,103 33,834 30,226
------- ------- -------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $368,978 360,271 300,649
======= ======= =======
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
Three Months Ended March 31,
(thousands)
(unaudited)
<CAPTION>
1996 1995
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 5,306 4,576
Interest on securities held for sale - taxable 1,458 881
Interest on securities held to maturity -
non-taxable 157 224
Interest on deposits in banks 2 1
Interest on federal funds sold 38 67
----- -----
TOTAL INTEREST INCOME 6,961 5,749
----- -----
INTEREST EXPENSE:
Interest on savings, NOW and money
market deposits 703 601
Interest on time certificates $100,000 and over 262 230
Interest on other deposits 1,948 1,402
Interest on short-term borrowings 437 102
Interest on long-term debt 21 27
----- -----
TOTAL INTEREST EXPENSE 3,371 2,362
----- -----
NET INTEREST INCOME 3,590 3,387
PROVISION FOR LOAN LOSSES 150 90
----- -----
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 3,440 3,297
----- -----
NON-INTEREST INCOME:
Trust income 165 158
Service charges on deposits 241 237
Other service charges and fees 75 69
Other 148 129
----- -----
TOTAL NON-INTEREST INCOME 629 593
----- -----
NON-INTEREST EXPENSES:
Salaries 1,051 1,013
Pension and benefits 291 290
Equipment 188 212
Occupancy 148 137
Deposit insurance 10 137
State franchise tax 128 111
Advertising 63 50
Other 669 555
----- -----
TOTAL NON-INTEREST EXPENSE 2,548 2,505
----- -----
INCOME BEFORE INCOME TAX 1,521 1,385
INCOME TAX 444 360
----- -----
NET INCOME $ 1,077 1,025
===== =====
Earnings per common share $ 0.70 0.67
Dividends declared per common share $ 0.14 0.08
Average shares outstanding 1,533,626 1,529,192
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
Three Months Ended March 31,
(thousands)
(unaudited)
<CAPTION>
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,077 1,025
Adjustments for non-cash items-
Depreciation and amortization 160 169
Provision for loan losses 150 90
Net discount accretion of securities available
for sale (105) (85)
Net discount accretion of securities held to maturity (25) (64)
Decrease in interest receivable 23 97
Increase (decrease) in interest payable (121) 64
Increase in income taxes payable 444 627
Decrease in other accrued expenses (182) (46)
Increase in other assets (33) (222)
------ ------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,388 1,655
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase in interest-bearing deposits in banks - (10)
Proceeds from maturities of securities available
for sale 7,130 -
Purchases of securities available for sale (6,052) (7,821)
Proceeds from maturities of securities held to
maturity 650 1,615
Purchases of securities held to maturity - (376)
Net increase in loans (4,355) (3,576)
Purchases of premises and equipment (728) (35)
------ ------
NET CASH USED IN INVESTING ACTIVITIES (3,355) (10,203)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 5,902 9,271
Repayment of capital lease obligation (21) (20)
Net increase (decrease) in short-term borrowings 2,697 (10)
Cash dividends paid (155) (124)
------ ------
NET CASH PROVIDED BY FINANCING ACTIVITIES 8,423 9,117
------ ------
NET CHANGE IN CASH AND CASH EQUIVALENTS 6,456 569
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 18,207 16,057
------ ------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 24,663 16,626
====== ======
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 3,492 2,298
Income taxes paid (refunded) - (267)
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 month period ended March 31, 1996
and cash flows for the three month period ended March 31, 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
March 31
1996 1995
<S> <C> <C>
Weighted Average Shares:
Common shares issued 1,548,977 1,547,086
Unreleased common shares
held by ESOP (15,351) (17,894)
--------- ---------
Common shares outstanding 1,533,626 1,529,192
========= =========
</TABLE>
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
Results of Operations
Net income for the first quarter of 1996 was $1,077,000, an increase
of 5.1% from the $1,025,000 earned in the first quarter of 1995. The
primary reasons for the increase in earnings are a 6.0% increase in
net interest income, a 6.1% increase in non-interest income, and only
a 1.7% increase in non-interest expense. Net income per share
increased 4.5% to $.70 from $.67 for the first quarter of 1995.
Net interest income was $3.6 million, 6.0% above the first quarter of
1995 due to average interest-earning assets increasing $63 million
(23.1%) to $335.9 million. Of this increase, $32.3 million was in
loans and $30.7 million was in securities. The average yield
decreased from 8.54% to 8.34%. This decrease in yield was the result
of a general decline in market rates. Prime rate was down 75 basis
points from the end of the first quarter of 1995, and the five-year
Treasury was down about 70 basis points from that same period.
Average interest-bearing liabilities increased 24.7% to $288.2 million
and their cost increased to 4.71% from 4.17% in the first quarter of
1995. The $57.1 million growth from last year was primarily in higher
costing money market deposits and fixed rate certificates. As a
result, net interest margin decreased from 5.03% in the first quarter
of 1995 to 4.30% in 1996.
The provision for loan losses was increased to $150,000 for the first
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 three months of 1996 were .07% of average loans,
compared to .02% for the prior year.
Non-interest income was $629,000 for the first quarter 1996, an
increase of 6.1% from the $593,000 earned in the first quarter of
1995. All categories in this section have shown increases; however,
increased income from loan related processing and insurance fees
accounted for the majority of the improvement.
Non-interest expense increased a modest 1.7% for the quarter over the
same period in 1995. Salaries and benefits increased 3.0% for the
quarter due in part to an increase of 2.9 in average full-time
equivalent employees. Equipment expense has decreased 11.3% for the
quarter due to fewer maintenance costs. Occupancy expense increased
8.0% for the quarter due primarily to increases in general repairs and
maintenance and utilities. Deposit insurance was $127,000 less than
last year due to the fully funded status of the Bank Insurance Fund.
5
<PAGE>
PART I. FINANCIAL INFORMATION
(Continued)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
(Continued)
State franchise tax has increased 15.3% due to the increase in company
capital on which it is based. Other expense has increased 17.8% from
the first quarter of last year. Included in that category were
increased data processing fees, supplies, and telephone expense.
Performance ratios for the first quarter of 1996 included a return on
assets of 1.22%, and a return on equity of 12.61%, compared to 1.43%
and 14.20%, respectively, for the first quarter of 1995.
Financial Condition
Total assets grew 22.7% from the first quarter 1995, to a total of
$369.0 million. Total loans increased to $246.7 million, an increase
of 16.5%. Commercial and personal loans continue to provide the
majority of the growth in loans originated by the Bank. Loan growth
was also attributable to the Bank purchasing, in November 1995, $21
million of 1-4 family real estate loans in the secondary market.
Total deposits increased 15.2% to $297.4 million. Non-interest
bearing deposits increased $4.4 million, or 14.6%. Interest-bearing
accounts grew $34.8 million, or 15.3%. Other borrowings increased
$25.1 million, principally as a result of borrowing $21 million from
the Federal Home Loan Bank to fund the real estate loan purchase.
Total equity increased 12.8% to $34.1 million at March 31, 1996. Book
value per share was $22.02, an increase of 12.7% from $19.54 for the
first quarter last year. Equity to assets was 9.24% compared to
10.05% as of the end of the same quarter last year.
<TABLE>
The material changes that have occurred in InterCounty's financial
condition during 1996 are as follows (in thousands):
<CAPTION>
March 31 December 31
1996 1995 Amount Percent
<S> <C> <C> <C> <C>
Federal funds sold $ 9,555 $ 4,527 $ 5,028 111%
Securities 88,256 90,760 (2,504) (3)
Loans 246,694 242,507 4,187 2
Savings, NOW, MMDA
deposits 109,960 103,954 6,006 6
CD's $100,000 and over 18,988 21,110 (2,112) (10)
Other time deposits 133,934 130,251 3,683 3
</TABLE>
6
<PAGE>
PART I. FINANCIAL INFORMATION
(Continued)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
(Continued)
Small deposit mix changes have resulted in increases in interest-
bearing transaction accounts and retail certificates of deposit.
Large CD's are primarily public entities who, in some instances, have
withdrawn their funds as they matured. The securities portfolio has
decreased because of normal maturities and called bonds and these
funds have been kept short in anticipation of loan growth. Loan
growth has primarily been in the commercial and personal loan
portfolios.
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
deposit ratio at March 31, 1996 was 83%, compared to 82% for the same
date in 1995. Management strives to keep this ratio below 85%. The
securities portfolio is primarily "available for sale" securities that
are readily marketable. Approximately 45% 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.
InterCounty had a total risk-based capital ratio of 13.94% at
March 31, 1996, compared to the minimum required by the Federal
Reserve of 8%.
7
<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.
<C> <C> <S> <C>
11 601(b)(11) Computation of Consolidated
Earnings Per Common Share
For the Three Months Ended
March 31, 1996 and 1995 9
27 601(b)(27) Financial Data Schedule for
the Three Months Ended
March 31, 1996. 10
</TABLE>
b. The Company was not required to file Form 8-K during the quarter
ended March 31, 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.
Registrant
Date: May 6, 1996 Charles L. Dehner
Charles L. Dehner
Treasurer, Executive Vice President
and Principal Accounting Officer
8
<PAGE>
Exhibit 11
InterCounty Bancshares, Inc.
Computation of Consolidated Earnings Per Common Share
For the Three Months Ended March 31, 1996 and 1995
(in thousands, except shares and per share data)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
1996 1995
<S> <C> <C>
Net income $1,077 $1,025
Weighted average shares:
Common shares issued 1,548,977 1,547,086
Unreleased common shares
held by ESOP 15,351 17,894
--------- ---------
Common shares outstanding 1,533,626 1,529,192
Add -common equivalent shares
representing shares issuable
upon exercise of employee
stock options 34,800 22,002
--------- ---------
Adjusted weighted average number
of shares outstanding used in
calculation of earnings per common
and common equivalent share 1,568,426 1,551,194
Add -incremental shares representing
shares issuable upon exercise
of employee stock options based
on March 31 estimated fair value (1) 825 2,396
--------- ---------
Adjusted weighted average number of
shares outstanding used in calculation
of earnings per common share - assuming
full dilution 1,569,251 1,553,590
========= =========
Earnings per common share - assuming
no dilution $.70 $.67
Earnings per common and common
equivalent share .69 .66
Earnings per common share - assuming
full dilution .69 .66
<FN>
(1) Since 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 $24.00 at March 31, 1996, and book value or $19.54 at March 31,
1995.
</FN>
</TABLE>
9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION OF INTERCOUNTY
BANCSHARES, INC. EXTRACTED FROM THE COMPANY'S QUARTERLY REPORT ON
FORM 10-QSB FOR THE QUARTER ENDED MARCH 31, 1996, AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 908837
<NAME> INTERCOUNTY BANCSHARES
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 15,108
<INT-BEARING-DEPOSITS> 133
<FED-FUNDS-SOLD> 9,555
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 80,690
<INVESTMENTS-CARRYING> 7,566
<INVESTMENTS-MARKET> 8,321
<LOANS> 246,694
<ALLOWANCE> 2,626
<TOTAL-ASSETS> 368,978
<DEPOSITS> 297,405
<SHORT-TERM> 33,807
<LIABILITIES-OTHER> 2,576
<LONG-TERM> 1,087
0
0
<COMMON> 1,000
<OTHER-SE> 33,103
<TOTAL-LIABILITIES-AND-EQUITY> 368,978
<INTEREST-LOAN> 5,306
<INTEREST-INVEST> 1,615
<INTEREST-OTHER> 40
<INTEREST-TOTAL> 6,961
<INTEREST-DEPOSIT> 2,913
<INTEREST-EXPENSE> 3,371
<INTEREST-INCOME-NET> 3,590
<LOAN-LOSSES> 150
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,548
<INCOME-PRETAX> 1,521
<INCOME-PRE-EXTRAORDINARY> 1,521
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,077
<EPS-PRIMARY> .69
<EPS-DILUTED> .69
<YIELD-ACTUAL> 4.30
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,644
<CHARGE-OFFS> 223
<RECOVERIES> 55
<ALLOWANCE-CLOSE> 2,626
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,626
</TABLE>
