<PAGE>
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JUNE 30, 1996
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 No.: 0-25470
COMMUNITY INVESTORS BANCORP, INC.
(Exact name of registrant as specified in its charter)
OHIO 34-1779309
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
119 SOUTH SANDUSKY AVENUE
BUCYRUS, OHIO 44820
(Address) (Zip Code)
Registrant's telephone number, including area code: (419) 562-7055
Securities registered pursuant to Section 12(b) of the Act:
NOT APPLICABLE
Securities registered pursuant to Section 12(g) of the Act
COMMON STOCK (PAR VALUE $.01 PER SHARE)
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports required
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
The aggregate market value of the voting stock held by non-affiliates of the
Registrant at September 10, 1996 was $10,021,324.
The number of shares issued and outstanding of the Registrant's Common Stock as
of September 10, 1996 was 666,246.
DOCUMENTS INCORPORATED BY REFERENCE
Annual Report to Shareholders for fiscal year ended June 30, 1996 - Parts I, II
and IV.
Definitive Proxy Statement for the Annual Meeting of Stockholders to be held
October 21, 1996 - Part III.
- --------------------------------------------------------------------------------
<PAGE>
COMMUNITY INVESTORS BANCORP, INC.
FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PART I
Item 1. Business of Community Investors Bancorp, Inc.........................1
Item 2. Properties..........................................................28
Item 3. Legal Proceedings ..................................................28
Item 4. Submission of Matters to a Vote of Security Holders ................29
PART II
Item 5. Market for Registrant's Common Equity and Related Shareholder
Matters........................................................30
Item 6. Selected Financial Data.............................................30
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations...............................................30
Item 8. Financial Statements and Supplementary Data.........................30
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.......................................30
PART III
Item 10. Directors and Executive Officers of the Registrant..................31
Item 11. Executive Compensation..............................................31
Item 12. Security Ownership of Certain Beneficial Owners and Management......31
Item 13. Certain Relationships and Related Transactions......................31
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.....32
Signatures...................................................................34
<PAGE>
PART I
ITEM 1. BUSINESS OF COMMUNITY INVESTORS BANCORP, INC.
GENERAL
Community Investors Bancorp, Inc. (the Corporation) was organized in
September 1994 at the direction of the Board of Directors of First Federal
Savings and Loan Association of Bucyrus (the Association) for the purpose of
acquiring all of the capital stock to be issued by the Association upon its
conversion from a federally-chartered mutual savings and loan to a federally-
chartered stock association (the "Conversion"). Upon completion of the
Conversion on February 6, 1995, the Corporation has conducted business as a
unitary savings and loan holding company. At June 30, 1996, the Corporation had
$91.8 million of total assets, $80.3 million of total liabilities, including
$69.9 million of deposits, and $11.5 million of stockholders' equity.
The Association is a traditional savings and loan association primarily
engaged in attracting deposits from the general public through its offices and
using those and other available sources of funds to originate loans secured by
single-family residences primarily located in Crawford County. To a lesser
extent, the Association originates other real estate loans secured by non-
residential real estate and construction loans and non-real estate loans,
primarily consumer loans. The Association also invests in U. S. Treasury and
federal government agency obligations and mortgage-backed securities which are
issued or guaranteed by federal agencies.
LENDING ACTIVITIES
GENERAL
A savings association generally may not make loans to one borrower and
related entities in an amount which exceeds 15% of its unimpaired capital and
surplus, although loans in an amount equal to an additional 10% of unimpaired
capital and surplus may be made to a borrower if the loans are fully secured by
readily marketable securities. See "Regulation - Federal Regulation of Savings
Associations." At June 30, 1996, the Association's limit on loans-to-one
borrower was approximately $1.5 million and its five largest loans or groups of
loans-to-one borrower, including related entities, aggregated $584,000,
$428,000, $339,000, $312,000 and $301,000. All of these loans or groups of loans
were performing in accordance with their terms at June 30, 1996.
<PAGE>
LOAN PORTFOLIO COMPOSITION. The increase in net loans outstanding over the
prior year was $6.4 million, $3.1 million, and $2.3 million in fiscal 1996, 1995
and 1994, respectively. The loan portfolio contains no foreign loans nor any
concentrations to identified borrowers engaged in the same or similar
industries exceeding 10% of total loans.
The following table sets forth the composition of the Association's loan
portfolio by type of loan at the dates indicated.
<TABLE>
<CAPTION>
JUNE 30,
----------------------------------------------------------
1996 1995 1994
----------------- ----------------- ------------------
AMOUNT % AMOUNT % AMOUNT %
------- ----- ------- ----- ------- ------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Mortgage loans:
Secured by one-to-four family residences $51,999 76.5% $48,378 79.3% $44,995 77.7%
Secured by other residential properties 1,007 1.5 743 1.2 774 1.3
Construction loans 2,438 3.6 414 .7 910 1.6
Other, nonresidential 3,347 4.9 3,087 5.1 2,123 3.6
------- ----- ------- ----- ------- ------
Total mortgage loans 58,791 86.5 52,622 86.3 48,802 84.2
Other loans:
Mobile homes 3,535 5.3 3,941 6.5 4,651 8.2
Commercial 819 1.2 862 1.4 929 1.6
Automobile 1,928 2.8 1,042 1.7 778 1.3
Home equity and improvement 357 .5 388 .6 306 .5
Other 2,552 3.7 2,137 3.5 2,471 4.2
------- ----- ------- ----- ------- ------
Total other loans 9,191 13.5 8,370 13.7 9,135 15.8
------- ----- ------- ----- ------- ------
Total loans 67,982 100.0% 60,992 100.0% 57,937 100.0%
----- ----- -----
----- ----- -----
Less:
Net deferred loan origination fees 329 286 259
Undisbursed loan funds 939 435 537
Allowance for loan losses 459 399 393
------- ------- -------
Loans receivable - net $66,255 $59,872 $56,747
------- ------- -------
------- ------- -------
</TABLE>
2
<PAGE>
CONTRACTUAL MATURITIES AND/OR REPRICINGS. The following table sets forth
the scheduled contractual maturities and repricing of the Association's loan
portfolio at June 30, 1996. Demand loans, loans having no stated schedule of
repayments and no stated maturity and overdraft loans are reported as due in one
year or less and adjustable rate loans are reported as of the repricing date.
The amounts shown for each period do not take into account loan prepayments and
normal amortization of the Association's loan portfolio.
<TABLE>
<CAPTION>
MORTGAGE LOANS OTHER LOANS
----------------------------------------------------- --------------------------------------------------------
SECURED BY SECURED BY
ONE-TO-FOUR OTHER HOME EQUITY
FAMILY RESIDENTIAL CONSTRUCTION OTHER, NON- MOBILE AND
RESIDENCES PROPERTIES LOANS RESIDENTIAL HOMES COMMERCIAL AUTOMOBILE IMPROVEMENT OTHER TOTAL
----------- ----------- ------------ ----------- ------ ---------- ---------- ----------- ------ -------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Amounts due in:
One year or less $17,621 $55 $2,438 $3,085 $3,182 $737 $ 368 $357 $2,552 $30,395
After one year
through two years 15,502 -- -- 262 353 82 75 -- -- 16,274
After two years
through three years 3,368 581 -- -- -- -- 161 -- -- 4,110
After three years
through five years 921 16 -- -- -- -- 1,324 -- -- 2,261
After five years
through ten years 3,622 121 -- -- -- -- -- -- -- 3,743
After ten years
through twenty years 10,825 234 -- -- -- -- -- -- -- 11,059
Over twenty years 140 -- -- -- -- -- -- -- -- 140
----------- ----------- ------------ ----------- ------ ---------- ---------- ----------- ------ -------
Total(1) $51,999 $1,007 $2,438 $3,347 $3,535 $819 $1,928 $357 $2,552 $67,982
----------- ----------- ------------ ----------- ------ ---------- ---------- ----------- ------ -------
----------- ----------- ------------ ----------- ------ ---------- ---------- ----------- ------ -------
Interest rate terms on amounts due
after one year:
Fixed $13,087
Adjustable 24,500
-------
$37,587
-------
-------
</TABLE>
(1) Does not include adjustments relating to loans in process, the allowance for
loan losses, unearned interest and discounts and deferred fee income.
3
<PAGE>
ORIGINATION, PURCHASE AND SALE OF LOANS
The lending activities of the Association are subject to the written-non-
discriminatory, underwriting standards and loan origination procedures
established by the Association's Board of Directors and management. Loan
originations are obtained primarily through real estate brokers, existing
customers, walk-in customers and branch managers. Appraisals are performed on
all real estate loans of $50,000 or more. Property valuations are always
performed by independent outside appraisers approved by the Association's Board
of Directors. Hazard insurance is required on substantially all property that
serves as collateral. The Association has local counsel perform a title search
on each loan and issue a legal opinion as to good and marketable title. The
Association, however, does not require title insurance on such loans.
Substantially all of the Association's loans are secured by property located in
its market area. The Association has not been an active purchaser or seller of
loans.
All real estate loans are reviewed by the Executive Committee and, provided
they are within the Association's guidelines regarding amount and do not raise
other special considerations requiring Board of Director approval, may be
approved by that committee. The Association's managing officer is authorized to
approve letters of credit of $10,000 or less and open-end additions in any
amount provided that the total outstanding amount does not exceed the amount of
the original mortgage. The consumer loan officer is authorized to approve
consumer loans of $10,000 or less. Any loan in excess of $250,000 or any other
loan that, after funded, would result in a borrower having total loans in excess
of $250,000 must be approved by the Board of Directors. All other loans must be
ratified by the Board, including those loans approved by the Executive
Committee.
The Association has emphasized the origination of one-to-four family
residential ARMs for several years. However, originations of such loans as a
percentage of total one-to-four family residential loan originations has
decreased since 1991 due to the preference of the Association's customers for
fixed-rate residential mortgage loans in the low interest rate environment
existing during that period. As a result, in recent years, fixed-rate loans with
terms of 10 to 20 years have constituted a significant portion of total loan
originations. Such loan originations amounted to $4.5 million, $5.0 million and
$5.6 million during fiscal 1996, 1995 and 1994, respectively. All real estate
mortgage loans are originated for portfolio, usually under terms and conditions
which did not permit the immediate sale of such loans to the Federal Home Loan
Mortgage Corporation ("FHLMC") or the Federal National Mortgage Association
("FNMA").
4
<PAGE>
The following table shows origination, purchase and sale activity of the
Association with respect to its loans during the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------------
1996 1995 1994
-------- -------- -------
(In Thousands)
<S> <C> <C> <C>
Mortgage loan originations:
Secured by one-to-four family residences $11,202 $ 9,380 $12,233
Construction loans 1,510 776 1,653
Other, nonresidential 1,299 1,232 1,081
-------- -------- -------
Total mortgage loan originations 14,011 11,388 14,967
Other loan originations:
Mobile homes 185 292 245
Commercial 240 -- 250
Automobiles 492 554 538
Home equity and improvement 58 45 19
Other 1,920 2,507 1,898
-------- -------- -------
Total other loans 2,895 3,398 2,950
Purchases of loan participations 672 -- 150
--------- -------- -------
Total loans originated and purchased 17,578 14,786 18,067
Less:
Loan principal repayments 10,701 10,550 14,696
Sales of whole loans and participations -- -- 250
Transferred to real estate, mobile homes and
other assets held for sale 275 306 482
Other, net 219 805 325
-------- -------- -------
Net increase in total loans $ 6,383 $ 3,125 $ 2,314
-------- -------- -------
-------- -------- -------
</TABLE>
5
<PAGE>
ASSET QUALITY
The Association's credit policy establishes guidelines to manage credit
risk and asset quality. These guidelines include loan review and early
identification of problem loans to ensure sound credit decisions. The
Association's credit policies and procedures are meant to minimize the risk and
uncertainties inherent in lending. In following these policies and procedures,
management must rely on estimates, appraisals and evaluations of loans and the
possibility that changes in these could occur quickly because of changing
economic conditions.
Interest receivable is accrued on all loans and credited to income as
earned. Unpaid amounts for real estate mortgage loans are added to principal
balances. When a loan is delinquent three payments or more, the unpaid interest
is fully reserved by a provision to the allowance for uncollected interest. A
nonmortgage loan is generally charged off after it becomes delinquent 120 days.
Loans may be reinstated to accrual status when all payments are brought current
and, in the opinion of management, collection of the remaining balances can be
reasonably expected. The Association did not have any accruing loans 90 or more
days delinquent at June 30, 1996, 1995 or 1994.
6
<PAGE>
DELINQUENT LOANS
The following table sets forth information concerning delinquent loans at
the dates indicated, in dollar amounts and as a percentage of each category of
the Association's loan portfolio. The amounts presented represent the total
outstanding principal balances of the related loans, rather than the actual
payment amounts which are past due.
<TABLE>
<CAPTION>
JUNE 30, 1996 JUNE 30, 1995
-----------------------------------------------------------------------------------------------------------
30-59 DAYS 60-89 DAYS 90 OR MORE DAYS 30-59 DAYS 60-89 DAYS 90 OR MORE DAYS
----------------- ----------------- ----------------- ----------------- ----------------- -----------------
PERCENT OF PERCENT OF PERCENT OF PERCENT OF PERCENT OF PERCENT OF
LOAN LOAN LOAN LOAN LOAN LOAN
AMOUNT CATEGORY AMOUNT CATEGORY AMOUNT CATEGORY AMOUNT CATEGORY AMOUNT CATEGORY AMOUNT CATEGORY
------ ---------- ------ ---------- ------ ---------- ------ ---------- ------ ---------- ------ ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mortgage loans:
Secured by one-to-
four family
residences $ 81 .16% $ 151 .29% $487 0.94% $ 486 1.00% $ 8 .02% $264 .55%
Secured by other
residential
properties -- -- -- -- 32 3.18 -- -- -- -- 33 4.44
Construction loans -- -- -- -- -- -- -- -- -- -- -- --
Other, nonresidential -- -- -- -- 14 0.42 -- -- -- -- -- --
--- ---- --- ---- --- ---- ----- ---- --- ---- --- ----
Total mortgage loans 81 .14 151 .26 533 0.78 486 .92 8 .02 297 .56
Other loans:
Mobile homes 620 17.54 40 1.13 78 2.21 746 18.93 90 2.28 67 1.7
Commercial -- -- -- -- -- -- 43 4.99 -- -- -- --
Automobile 15 0.78 8 0.41 -- -- 27 2.59 4 .38 -- --
Home equity and
improvement 3 0.84 -- -- -- -- 2 .52 -- -- -- --
Other 55 2.51 30 1.37 25 0.98 31 1.45 9 .42 2 .09
--- ---- --- ---- --- ---- ----- ---- --- ---- --- ----
Total other loans 693 7.84 78 0.88 103 1.12 849 10.14 103 1.23 69 .08
--- ---- --- ---- --- ---- ----- ---- --- ---- --- ----
Total $774 1.14% $229 0.34% $636 0.94% $1,335 2.19% $111 .18% $366 .60%
--- ---- --- ---- --- ---- ----- ---- --- ---- --- ----
--- ---- --- ---- --- ---- ----- ---- --- ---- --- ----
</TABLE>
7
<PAGE>
The following table sets forth the amounts and categories of the
Association's non-performing assets and troubled debt restructurings at the
dates indicated.
<TABLE>
<CAPTION>
JUNE 30,
----------------------------
1996 1995 1994
-------- -------- --------
(Dollars in Thousands)
<S> <C> <C> <C>
Non-accruing loans:
Secured by one-to-four family residences $487 $264 $ 246
Secured by other residential properties 32 33 35
Other, nonresidential 14 -- --
Mobile homes 78 67 142
Automobile -- -- 5
Other 25 2 3
Accruing loans 90 days or more delinquent -- -- --
--- --- ----
Total non-performing loans 636 366 431
Real estate owned 81 107 237
--- --- ----
Total non-performing assets 717 473 668
Troubled debt restructurings -- 95 95
--- --- ----
Total $717 $ 568 $ 763
--- --- ----
--- --- ----
Total non-performing loans and troubled
debt restructurings as a percentage of
total loans 0.94% 0.76% 0.91%
--- --- ----
--- --- ----
Total non-performing assets and troubled
debt restructurings as a percentage of
total assets 0.78% 0.67% 0.69%
--- --- ----
--- --- ----
</TABLE>
- --------------------------
Additional interest income that would have been recognized had such loans
performed in accordance with its original terms amounted to approximately
$22,000 for the year ended June 30, 1996.
8
<PAGE>
CLASSIFIED ASSETS
Federal regulations require that each insured savings association classify
its assets on a regular basis. In addition, in connection with examinations of
insured institutions, federal examiners have authority to identify problem
assets and, if appropriate, classify them. There are three classifications for
problem assets: "substandard," "doubtful" and "loss." Substandard assets have
one or more defined weaknesses and are characterized by the distinct possibility
that the insured institution will sustain some loss if the deficiencies are not
corrected. Doubtful assets have the weaknesses of substandard assets with the
additional characteristic that the weaknesses make collection or liquidation in
full on the basis of currently existing facts, conditions and values
questionable, and there is a high possibility of loss. An asset classified loss
is considered uncollectible and of such little value that continuance as an
asset of the institution is not warranted. Another category designated "watch"
also may be established and maintained for assets which do not currently expose
an insured institution to a sufficient degree of risk to warrant classification
as substandard, doubtful or loss. At June 30, 1996, the Association had $646,000
of classified assets consisting of $618,000 of substandard, $6,000 of doubtful
and $22,000 of loss. As of that same date, the Association had $227,000 of
assets on its "watch" list.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is maintained at a level believed adequate by
management to absorb potential losses in the loan portfolio. Management's
determination of the adequacy of the allowance is based on an evaluation of the
portfolio, past loan loss experience, current economic conditions, volume,
growth and composition of the loan portfolio, and other relevant factors. The
allowance is increased by provisions for loan losses charged against earnings.
While management uses available information to recognize losses on loans, future
additions to the allowance may be necessary based on changes in economic
conditions. In addition, various regulatory agencies, as an integral part of
their examination process, periodically review the Association's allowance for
losses on loans. Such agencies may require the Association to recognize
additions to the allowance based on their judgments of information available to
them at the time of their examination. For additional information, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in the Corporation's Annual Report to Shareholders.
9
<PAGE>
The following table summarizes changes in the allowance for possible loan
losses and other selected statistics for the periods presented.
<TABLE>
<CAPTION>
YEAR ENDING JUNE 30,
------------------------------
1996 1995 1994
-------- -------- --------
(Dollars in Thousands)
<S> <C> <C> <C>
Average loans, net $62,012 $57,828 $55,527
====== ====== ======
Allowance for loan losses, beginning of
year $ 399 $ 393 $ 458
Charged-off loans:
Secured by one-to-four family residences 17 1 57
Mobile homes 75 136 69
Automobiles 9 6 --
Home equity and improvement -- -- 47
Other 3 30 76
------ ------ ------
Total charged-off loans 102 173 249
Recoveries on loans previously charged off:
Secured by one-to-four family residences 1 1 --
Secured by other residential properties -- -- 2
Mobile homes -- 6 2
Automobiles -- 4 1
Other 2 8 3
------ ------ ------
Total recoveries 3 19 8
------ ------ ------
Net loans charged-off 99 154 241
Provision for loan losses 159 160 176
------ ------ ------
Allowance for loan losses, end of period $ 459 $ 399 $ 393
------ ------ ------
------ ------ ------
Net loans charged-off to average loans, net .16% .27% .43%
Allowance for loan losses to total loans .68% .65% .68%
Allowance for loan losses to nonperforming
loans 77.5% 109.0% 91.2%
Net loans charged-off to allowance for loan
losses 21.6% 38.6% 61.3%
</TABLE>
10
<PAGE>
The following table presents the allocation of the allowance for loan losses
to the total amount of loans in each category listed at the dates indicated.
<TABLE>
<CAPTION>
JUNE 30,
-----------------------------------------------------------
1996 1995 1994
-----------------------------------------------------------
% OF % OF % OF
LOANS IN LOANS IN LOANS IN
EACH EACH EACH
CATEGORY CATEGORY CATEGORY
TO TOTAL TO TOTAL TO TOTAL
AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS
-------- ---------- -------- ---------- -------- ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Secured by one-to-four
family residences $198 76.5% $182 79.3% $163 77.7%
Secured by other
residential properties 21 1.5 39 1.2 10 1.3
Construction loans -- 3.6 -- .7 2 1.6
Other, nonresidential -- 4.9 -- 5.1 4 3.6
Mobile homes 182 5.3 143 6.5 124 8.2
Commercial -- 1.2 -- 1.4 17 1.6
Automobile 10 2.8 7 1.7 21 1.3
Home equity and
improvement -- 0.5 -- .6 7 .5
Other 48 3.7 28 3.5 45 4.2
--- ----- --- ----- --- -----
Total $459 100.0% $399 100.0% $393 100.0%
--- ----- --- ----- --- -----
--- ----- --- ----- --- -----
</TABLE>
INVESTMENT ACTIVITIES
The Association has the authority as a federal association to invest in a
wide range of mortgage securities products and low risk U. S. Government and
agency securities. The Corporation adopted SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities" as of June 30, 1994. In
accordance with SFAS No. 115, management determines the appropriate
classification of debt securities at the time of purchase. Debt securities
are classified as held to maturity when either the Corporation or the
Association has the positive intent and ability to hold the securities to
maturity. Held to maturity securities are stated at amortized cost. Debt
securities not classified as held to maturity and equity securities are
classified as available for sale. Available for sale securities are stated at
fair value with any unrealized gain or loss recorded to stockholders' equity,
net of related tax effects.
The Corporation's securities portfolio is managed in accordance with a
written policy adopted by the Board of Directors. All securities transactions
must be approved by the Board of Directors.
11
<PAGE>
The Corporation's investment portfolio includes two collaterialized
mortgage obligation (CMO) issues totalling $289,000, both of which are fully
amortizable securities, and six separate agencies securities totalling $2.3
million which have a step-up feature. All such investments are considered
derivative securities. None of the Corporation's investments are considered
to be high risk and management does not believe the risks associated with
these investments to be significantly different from risks associated with
other pass-through mortgage-backed or agency securities. The Corporation does
not invest in off-balance sheet derivative securities.
For additional information regarding the Corporation's investment
portfolio refer to Notes A-2 and B to the consolidated financial statements.
SOURCES OF FUNDS
GENERAL - Deposits are the primary source of the Corporation's funds for
lending and other investment purposes. In addition to deposits, the
Corporation derives funds from principal repayments and prepayments on loans
and mortgage-backed securities. Repayments on loans and mortgage-backed
securities are a relatively stable source of funds, while deposits inflows
and outflows are significantly influenced by general interest rates and money
market conditions. Borrowings may be used on a short-term basis to compensate
for reductions in the availability of funds from other sources including the
FHLB of Cincinnati.
DEPOSITS - The Corporation's deposit products include a broad selection
of deposit instruments, including passbooks, NOW and super NOW accounts,
money market demand accounts and term certificate accounts. Deposit account
terms vary, with the principal differences being the minimum balance
required, the time periods the funds must remain on deposit and the interest
rate.
The Corporation considers its primary market area to be Crawford County,
Ohio. The Corporation attracts deposit accounts by offering a wide variety of
accounts, competitive interest rates, and convenient office locations and
service hours. The Corporation does not advertise for deposits outside of its
primary market area or utilize the services of deposit brokers. Management
believes that an insignificant amount of deposits was held by non-residents
of Ohio at June 30, 1996.
The Corporation has been competitive in the types of accounts and in
interest rates it has offered on its deposit products but does not
necessarily seek to match the highest rates paid by competing institutions.
12
<PAGE>
The following table shows the distribution of, and certain other
information relating to, the Corporation's deposits by type of deposit as of
the dates indicated.
<TABLE>
<CAPTION>
JUNE 30,
-----------------------------------------------
1996 1995 1994
--------------- --------------- ---------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------- ------- ------- ------- ------- -------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Passbook $14,951 21.4% $15,378 21.8% $17,445 25.4%
Money market demand,
NOW and super NOW 6,173 8.8 6,378 9.1 5,981 8.7
Certificates of deposit 48,787 69.8 48,708 69.1 45,317 65.9
------ ----- ------ ----- ------ -----
Total deposits at end of
period $69,911 100.0% $70,464 100.0% $68,743 100.0%
------ ----- ------ ----- ------ -----
------ ----- ------ ----- ------ -----
</TABLE>
The following table sets forth the Corporation's net deposit flows during
the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------
1996 1995 1994
-------- -------- --------
(In Thousands)
<S> <C> <C> <C>
Net decrease before interest credited $(3,587) $(1,167) $(1,348)
Interest credited 3,034 2,887 2,509
------ ----- -----
Net deposits increase (decrease) $ (553) $ 1,720 $ 1,161
------ ----- -----
------ ----- -----
</TABLE>
The following table sets forth maturities of the Corporation's
certificates of deposit of $100,000 or more at June 30, 1996 by time
remaining to maturity.
<TABLE>
<CAPTION>
AMOUNT IN THOUSANDS
-----------------------
<S> <C>
Three months or less $ 182
Over three months through six months 810
Over six months through 12 months 565
Over 12 months 279
-----
Total $1,836
=====
</TABLE>
13
<PAGE>
The following table presents, by various interest rate categories, the
amount of certificates of deposit at June 30, 1996 and the amounts at June
30, 1996 which mature during the periods indicated.
<TABLE>
<CAPTION>
AMOUNTS AT JUNE 30, 1996
MATURING WITHIN
-------------------------------------------
CERTIFICATES OF JUNE 30, THREE
DEPOSIT 1996 ONE YEAR TWO YEARS YEARS THEREAFTER
- ------------------------- --------- ---------- --------- --------- ----------
(In Thousands)
<S> <C> <C> <C> <C> <C>
4.0% or less $ 2,323 $ 2,095 $ 228 -- --
4.01% to 6.0% 35,462 29,931 4,782 $ 176 $ 573
6.01% to 8.0% 11,002 5,352 3,961 1,144 545
------ ------ ----- ----- -----
Total certificate accounts $48,787 $37,378 $8,971 $1,320 $1,118
------ ------ ----- ----- -----
------ ------ ----- ----- -----
</TABLE>
BORROWINGS - The Association may obtain advances from the FHLB of
Cincinnati upon the security of the common stock it owns in the FHLB and
certain of its residential mortgage loans, provided certain standards related
to creditworthiness have been met. Such advances are made pursuant to several
credit programs, each of which has its own interest rate and range of
maturities. Such advances are generally available to meet seasonal and other
withdrawals of deposit accounts and to permit increased lending. Programs are
also available to match maturities on certain loans with payments on advances
secured from the FHLB.
The following table sets forth the maximum month-end balance and average
balance of the Corporation's FHLB advances during the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------
1996 1995 1994
-------- -------- --------
(Dollars in Thousands)
<S> <C> <C> <C>
Maximum balance $9,884 $1,591 $1,764
Average balance 2,123 1,551 1,659
Weighted average interest rate of
FHLB advances 6.08% 6.65% 6.69%
</TABLE>
14
<PAGE>
The following table sets forth certain information as to the
Corporation's FHLB advances at the dates indicated.
<TABLE>
<CAPTION>
JUNE 30,
------------------------------
1996 1995 1994
-------- -------- --------
(Dollars in Thousands)
<S> <C> <C> <C>
FHLB advances $9,884 $1,515 $1,591
Weighted average interest rate of
FHLB advances 6.01% 6.69% 6.69%
</TABLE>
All of the FHLB of Cincinnati advances on June 30, 1996 were made as part
of the matched maturities program.
EMPLOYEES
The Corporation had 19 full-time employees and 5 part-time employees at
June 30, 1996. None of these employees is represented by a collective
bargaining agent, and the Corporation believes that it enjoys good relations
with its personnel.
15
<PAGE>
REGULATION
Set forth below is a brief description of material laws and regulations
which currently relate to the regulation of the Association. The description
of these laws and regulations, as well as descriptions of laws and
regulations contained elsewhere herein, does not purport to be complete and
is qualified in its entirety by reference to applicable laws and regulations.
GENERAL
The Association, as a federally chartered savings association, is subject
to federal regulation and oversight by the OTS extending to all aspects of
its operations. The Association also is subject to regulation and examination
by the FDIC, which insures the deposits of the Association to the maximum
extent permitted by law, and requirements established by the Federal Reserve
Board. The laws and regulations governing the Association generally have been
promulgated to protect depositors and the deposit insurance funds and not for
the purpose of protecting stockholders.
FEDERAL SAVINGS ASSOCIATION REGULATION
The investment and lending authority of a federally chartered savings
association is prescribed by federal laws and regulations, and it is
prohibited from engaging in any activities not permitted by such laws and
regulations. These laws and regulations generally are applicable to all
federally-chartered savings associations and many also apply to
state-chartered savings associations.
Among other things, OTS regulations provide that no savings association
may invest in corporate debt securities not rated in one of the four highest
rating categories by a nationally recognized rating organization. In
addition, HOLA provides that loans secured by nonresidential real property
may not exceed 400% of regulatory capital, subject to increase by the OTS on
a case-by-case basis.
The Association is subject to limitations on the aggregate amount of
loans that it can make to any one borrower, including related entities.
Applicable regulations generally do not permit loans-to-one borrower to
exceed 15% of unimpaired capital and surplus, provided that loans in an
amount equal to an additional 10% of unimpaired capital and surplus also may
be made to a borrower if the loans are fully secured by readily marketable
securities. The OTS by regulation has amended the loans-to-one borrower rule
to permit savings associations meeting certain requirements, including fully
phased-in capital requirements, to extend loans-to-one borrower in additional
amounts under circumstances limited essentially to loans to develop or
complete residential housing units. At June 30, 1996, the Association was in
compliance with applicable loans-to-one borrower limitations.
16
<PAGE>
REGULATORY CAPITAL REQUIREMENTS - As a federally insured savings
association, the Association is required to maintain minimum levels of
regulatory capital. The regulatory capital standards for savings associations
generally must be as stringent as the comparable capital requirements imposed
on national banks. The OTS also is authorized to impose capital requirements
in excess of these standards on individual associations on a case-by-case
basis.
The Association must satisfy three different OTS capital requirements;
"tangible" capital equal to 1.5% of adjusted total assets, "core" capital
equal to 3% of adjusted total assets and "risk-based" capital (a combination
of core and "supplementary" capital) equal to 8% of "risk-weighted" assets.
Any savings association that fails any of the capital requirements is subject
to possible enforcement actions by the OTS or the FDIC. Such actions could
include a capital directive, a cease and desist order, civil money penalties,
the establishment of restrictions on an association's operations, termination
of federal deposit insurance and the appointment of a conservator or
receiver.
In August 1993 the OTS adopted final regulations which incorporate an
interest rate risk ("IRR") component into the current risk-based capital
requirement. The IRR component is a dollar amount that will be deducted from
total capital for the purpose of calculating an institution's risk-based
capital requirement. The IRR component will be equal to one-half of the
difference between an institution's "measured exposure" and a "normal" level
of exposure, in each case as measured in terms of the sensitivity of an
institution's net portfolio value ("NPV") to changes in interest rates. The
OTS will calculate changes in an institution's NPV based on financial data
submitted by the institution on a quarterly basis and guidance provided by
the OTS. An institution's measured IRR is expressed as the change that occurs
in the NPV as a result of a hypothetical 200 basis point increase or decrease
in interest rates (whichever leads to a lower NPV) divided by the estimated
economic value (present value) of its assets. An institution with a "normal"
level of interest rate risk is defined as one whose measured IRR is less than
2%, as estimated by the OTS model, and only institutions whose measured IRR
exceeds 2% will be required to maintain an IRR component. Since the
regulations were issued requiring the IRR component, the OTS has continually
waived the required adjustment. In August 1995, the OTS issued Thrift
Bulletin No. 67 which allows eligible institutions to request an adjustment
to their IRR component, as calculated by the OTS, or to request to use their
own computer model to calculate their IRR component. The OTS also indicated
that it will delay invoking its IRR rule requiring institutions with above
normal IRR exposure to adjust their regulatory capital requirement until the
new procedures are implemented and evaluated. The OTS has not yet established
an effective date for the capital deduction. Had the IRR component been
required as of March 31, 1996, the date of the latest available information,
there would have been no reduction in risk based capital.
17
<PAGE>
PROMPT CORRECTIVE ACTION
Under Section 38 of the FDIA, as added by the Federal Deposit Insurance
Corporation Improvement Act of 1991 ("FDICIA"), each federal banking agency
is required to implement a system of prompt corrective action for
institutions which it regulates. In September 1992, the federal banking
agencies adopted substantially similar regulations which are intended to
implement the system of prompt corrective action established by Section 38 of
the FDIA, which became effective on December 19, 1992. Under the regulations,
an institution shall be deemed to be (i) "well capitalized" if it has a total
risk-based capital ratio of 10.0% or more, has a Tier I risk-based capital
ratio of 6.0% or more, has a Tier I leverage capital ratio of 5.0% or more
and is not subject to specified requirements to meet and maintain a specific
capital level for any capital measure, (ii) "adequately capitalized" if it
has a total risk-based capital ratio of 8.0% or more, a Tier I risk-based
capital ratio of 4.0% or more and a Tier I leverage capital ratio of 4.0% or
more (3.0% under certain circumstances) and does not meet the definition of
"well capitalized," (iii) "undercapitalized" if it has a total risk-based
capital ratio that is less than 8.0%, a Tier I risk-based capital ratio that
is less than 4.0% or a Tier I leverage capital ratio that is less than 4.0%
(3.0% under certain circumstances), (iv) "significantly undercapitalized" if
it has a total risk-based capital ratio that is less than 6.0%, a Tier I
risk-based capital ratio that is less than 3.0% or a Tier I leverage capital
ratio that is less than 3.0%, and (v) "critically undercapitalized" if it has
a ratio of tangible equity to total assets that is equal to or less than 2.0%.
Section 38 of the FDIA and the implementing regulations also provide that
a federal banking agency may, after notice and an opportunity for a hearing,
reclassify a well capitalized institution as adequately capitalized and may
require an adequately capitalized institution or an undercapitalized
institution to comply with supervisory actions as if it were in the next
lower category if the institution is in an unsafe or unsound condition or
engaging in an unsafe or unsound practice. (The FDIC may not, however,
reclassify a significantly undercapitalized institution as critically
undercapitalized.)
An institution generally must file a written capital restoration plan
which meets specified requirements, as well as a performance guaranty by each
company that controls the institution, with the appropriate federal banking
agency within 45 days of the date that the institution receives notice or is
deemed to have notice that it is undercapitalized, significantly
undercapitalized or critically undercapitalized. Immediately upon becoming
undercapitalized, an institution shall become subject to the provisions of
Section 38 of the FDIA, which sets forth various mandatory and discretionary
restrictions on its operations.
At June 30, 1996, the Association was a "well capitalized" institution
under the prompt corrective action regulations of the OTS.
18
<PAGE>
STANDARDS FOR SAFETY AND SOUNDNESS - The FDICIA requires the federal
banking regulatory agencies to prescribe, by regulation, standards for all
insured depository institutions and depository institution holding companies
relating to: (i) internal controls, information systems and internal audit
systems; (ii) loan documentation; (iii) audit underwriting; (iv) interest
rate risk exposure; (v) asset growth; and (vi) compensation, fees and
benefits. The compensation standards would prohibit employment contracts,
compensation or benefit arrangements, stock options plans, fee arrangements
or other compensatory arrangements that would provide excessive compensation,
fees or benefits or could lead to material financial loss. In addition, the
federal banking regulatory agencies would be required to prescribe by
regulation standards specifying: (i) maximum classified assets to capital
ratios; (ii) minimum earnings sufficient to absorb losses without impairing
capital; and (iii) to the extent feasible, a minimum ratio of market value to
book value for publicly traded shares of depository institutions and
depository institution holding companies.
LIQUIDITY REQUIREMENTS
All savings associations are required to maintain an average daily
balance of liquid assets equal to a certain percentage of the sum of its
average daily balance of net withdrawable deposit accounts and borrowings
payable in one year or less. The liquidity requirement may vary from time to
time (between 4% and 10%) depending upon economic conditions and savings
flows of all savings associations. At the present time, the required liquid
asset ratio is 5%.
Liquid assets for purposes of this ratio include specified short-term
assets (E.G., cash, certain time deposits, certain banker's acceptances and
short-term U. S. Government obligations), and long-term assets (E.G., U.S.
Government obligations of more than one and less than five years and state
agency obligations with a minimum term of 18 months). Short-term liquid
assets currently must constitute at least 1% of an association's average
daily balance of net withdrawable deposit accounts and current borrowings.
Monetary penalties may be imposed upon associations for violations of
liquidity requirements.
At June 30, 1996, the Association's regulatory liquidity totaled $20.6
million, or 25.8%, which exceeded the minimum regulatory requirement by $16.6
million.
19
<PAGE>
QUALIFIED THRIFT LENDER TEST
All savings associations are required to meet a qualified thrift lender
("QTL") test set forth in Section 10(m) of the HOLA and regulations of the
OTS thereunder to avoid certain restrictions on their operations. A savings
association that does not meet the QTL test set forth in the HOLA and
implementing regulations must either convert to a bank charter or comply with
the following restrictions on its operations: (i) the association may not
engage in any new activity or make any new investment, directly or
indirectly, unless such activity or investment is permissible for a national
bank; (ii) the branching powers of the association shall be restricted to
those of a national bank; (iii) the association shall not be eligible to
obtain any advances from its FHLB; and (iv) payment of dividends by the
association shall be subject to the rules regarding payment of dividends by a
national bank. Upon the expiration of three years from the date the
association ceases to be a QTL, it must cease any activity and not retain any
investment not permissible for a national bank and immediately repay any
outstanding FHLB advances (subject to safety and soundness considerations).
In addition, within one year of the date on which a savings association
controlled by a company ceases to be a QTL, the company must register as a
bank holding company and becomes subject to the rules applicable to such
companies.
Currently, the QTL test requires that 65% of an institution's "portfolio
assets" (as defined) consist of certain housing and consumer-related assets
on a monthly average basis in nine out of every 12 months. Assets that
qualify without limit for inclusion as part of the 65% requirement are loans
made to purchase, refinance, construct, improve or repair domestic
residential housing and manufactured housing; home equity loans;
mortgage-backed securities (where the mortgages are secured by domestic
residential housing or manufactured housing); FHLB stock; and direct or
indirect obligations of the FDIC. In addition, the following assets, among
others, may be included in meeting the test subject to an overall limit of
20% of the savings institution's portfolio assets: 50% of residential
mortgage loans originated and sold within 90 days of origination; 100% of
consumer and educational loans (limited to 10% of total portfolio assets);
and stock issued by the FHLMC or the FNMA. Portfolio assets consist of total
assets minus the sum of (i) goodwill and other intangible assets, (ii)
property used by the savings institution to conduct its business, and (iii)
liquid assets up to 20% of the institution's total assets. At June 30, 1996,
the qualified thrift investments of the Association were approximately 85% of
its portfolio assets.
RESTRICTIONS ON CAPITAL DISTRIBUTIONS
An OTS regulation governs capital distributions by savings associations,
which include cash dividends, stock redemptions or repurchases, cash-out
mergers, interest payments on certain convertible debt and other transactions
charged to the capital account of a savings association to make capital
distributions. Generally, the regulation creates a safe harbor for specified
levels of capital distributions from associations meeting at least their
minimum capital requirements, so long as such associations notify the OTS and
receive no objection to the distribution from the OTS. Associations and
distributions that do not qualify for the
20
<PAGE>
safe harbor are required to obtain prior OTS approval before making any
capital distributions.
Generally, a savings association that before and after the proposed
distribution meets or exceeds its fully phased-in capital requirements (a
"Tier I institution") may make capital distributions during any calendar year
up to the higher of (a) 100% of net income for the calendar year-to-date plus
50% of its "surplus capital ratio" at the beginning of the calendar year or
(b) 75% of net income over the most recent four-quarter period. The "surplus
capital ratio" is defined to mean the percentage by which the association's
ratio of total capital to assets exceeds the ratio of its fully phased-in
capital requirement to assets, and "fully phased-in capital requirement" is
defined to mean an association's capital requirement under the statutory and
regulatory standards to be applicable on December 31, 1994, as modified to
reflect any applicable individual minimum capital requirement imposed upon
the association. Failure to meet fully phased-in or minimum capital
requirements will result in further restrictions on capital distributions,
including possible prohibition of capital distributions without specific OTS
approval. At June 30, 1996, the Association was a Tier I association under
the OTS capital distribution regulation.
Tier 2 associations, which are associations that before and after the
proposed distribution meet or exceed their minimum capital requirements, may
make capital distributions over the most recent four quarter period up to a
specified percentage of their net income during that four quarter period,
depending on how close the association is to meeting its fully phased-in
capital requirements. Tier 2 associations that meet OTS risk-based capital
requirements are permitted to make distributions totalling up to 75% of net
income over the most recent four quarter period. Tier 2 associations that
meet the January 1, 1991 capital requirements (including the 7.2% risk-based
requirement and the then-applicable exclusions of non-permissible subsidiary
investments and goodwill) are permitted to make distributions totalling up to
50% of net income over the four quarter period.
In order to make distributions under these safe harbors, Tier 1 and Tier
2 associations must submit 30 days written notice to the OTS prior to making
the distribution. The OTS may object to the distribution during that 30-day
period based on safety and soundness concerns. In addition, a Tier 1
association deemed to be in need of more than normal supervision by the OTS
may be downgraded to a Tier 2 or Tier 3 association as a result of such a
determination.
Tier 3 associations, which are associations that do not meet current
minimum capital requirements, or that have capital in excess of either their
fully phased-in capital requirement or minimum capital requirement but which
have been notified by the OTS that it will be treated as a Tier 3 association
because they are in need of more than normal supervision, cannot make any
capital distribution without obtaining OTS approval prior to making such
distributions.
21
<PAGE>
On December 5, 1994, the OTS published a notice of proposed rulemaking to
amend its capital distribution regulation. Under the proposal, institutions
would only be permitted to make capital distributions that would not result
in their capital being reduced below the level required to remain "adequately
capitalized," as defined under "- Prompt Corrective Action" above. Because
the Association is a subsidiary of a holding company, the proposal would
require the Association to provide notice to the OTS of its intent to make a
capital distribution. The Association does not believe that the proposal will
adversely affect its ability to make capital distributions if it is adopted
substantially as proposed.
FEDERAL HOME LOAN BANK SYSTEM
The Association is a member of the FHLB of Cincinnati, which is one of 12
regional FHLBs that administers the home financing credit function of savings
associations. Each FHLB serves as a reserve or central bank for its members
within its assigned region. It is funded primarily from proceeds derived from
the sale of consolidated obligations of the FHLB System. It makes loans to
members (I.E., advances) in accordance with policies and procedures
established by the Board of Directors of the FHLB. At June 30, 1996, the
Association had advances of $9.9 million from the FHLB of Cincinnati.
As a member, the Association is required to purchase and maintain stock
in the FHLB of Cincinnati in an amount equal to a least 1% of its aggregate
unpaid residential mortgage loans, home purchase contracts or similar
obligations at the beginning of each year. At June 30, 1996, the Association
had $575,000 in FHLB stock, which was in compliance with this requirement.
The FHLBs are required to provide funds for the resolution of troubled
savings associations and to contribute to affordable housing programs through
direct loans or interest subsidies on advances targeted for community
investment and low and moderate-income housing projects. These contributions
have adversely affected the level of FHLB dividends paid and could continue
to do so in the future. These contributions also could have an adverse effect
on the value of FHLB stock in the future. Dividends paid by the FHLB of
Cincinnati to the Association for the fiscal year ended June 30, 1996
totalled $38,000.
BRANCHING BY FEDERAL SAVINGS INSTITUTIONS
Effective May 11, 1992, the OTS amended its Policy Statement on Branching
by Federal Savings Institutions to permit interstate branching to the full
extent permitted by statute (which is essentially unlimited). Prior policy
permitted interstate branching for federal savings institutions only to the
extent allowed for state-chartered institutions in the states where the
institution's home office was located and where the branch was sought. Prior
policy also permitted healthy out-of-state federal institutions to branch
into another state, regardless of the law in that state, provided the branch
office was the result of a purchase of an institution that was in danger of
default.
22
<PAGE>
Generally, federal law prohibits federal savings institutions from
establishing, retaining or operating a branch outside the state in which the
federal institution has its home office unless the institution meets the
Internal Revenue Service's ("IRS") domestic building and loan test
(generally, 60% of a thrift's assets must be housing-related) ("IRS Test").
The IRS Test requirement does not apply if: (i) the branch(es) result(s) from
an emergency acquisition of a troubled savings institution (however, if the
troubled savings institution is acquired by a bank holding company, does not
have its home office in the state of the bank holding company bank subsidiary
and does not qualify under the IRS Test, its branching is limited to the
branching laws for state-chartered banks in the state where the savings
institution is located); (ii) the branch was authorized for the federal
savings association prior to October 15, 1982; (iii) the law of the state
where the branch would be located would permit the branch to be established
if the federal savings institution were chartered by the state in which its
home office is located; or (iv) the branch was operated lawfully as a branch
under state law prior to the savings institution's conversion to a federal
charter.
Furthermore, the OTS will evaluate a branching applicant's record of
compliance with the Community Reinvestment Act of 1977 ("CRA"). An
unsatisfactory CRA record may be the basis for denial of a branching
application.
FEDERAL RESERVE SYSTEM
The Federal Reserve Board requires all depository institutions to
maintain reserves against their transaction accounts (primarily NOW and Super
NOW checking accounts) and non-personal time deposits. Currently, reserves of
3% must be maintained against total transaction accounts of $51.9 million or
less (after a $4.0 million exemption), and an initial reserve of 10% (subject
to adjustment by the Federal Reserve Board to a level between 8% and 14%)
must be maintained against that portion of total transaction accounts in
excess of such amount. At June 30, 1996, the Association was in compliance
with applicable requirements.
The balances maintained to meet the reserve requirements imposed by the
Federal Reserve Board may be used to satisfy applicable liquidity
requirements. Because required reserves must be maintained in the form of
vault cash or a non interest-bearing account at a Federal Reserve Bank, the
effect of this reserve requirement is to reduce the Association's earning
assets.
TRANSACTIONS WITH AFFILIATES
The Association is subject to certain restrictions on loans to the
Corporation or its non-bank subsidiaries, on investments in the stock or
securities thereof, on the taking of such stock or securities as collateral
for loans to any borrower, and on the issuance of a guarantee or letter of
credit on behalf of the Corporation or its non-bank subsidiaries. The
Association also is subject to certain restrictions on most types of
transactions with the
23
<PAGE>
Corporation or its non-bank subsidiaries, requiring that the terms of such
transactions be substantially equivalent to terms of similar transactions
with non-affiliated firms. In addition, the Association is subject to
restrictions on loans to its executive officers, directors and principal
stockholders.
MISCELLANEOUS
In addition to requiring a new system of risk-based insurance assessments
and a system of prompt corrective action with respect to undercapitalized
banks, as discussed above, recent legislation requires federal banking
regulators to adopt regulations in a number of areas to ensure bank safety
and soundness, including: internal controls; credit underwriting; asset
growth; management compensation; ratios of classified assets to capital; and
earnings. Recent legislation also contains provisions which are intended to
enhance independent auditing requirements; restrict the activities of
state-chartered insured banks; amend various consumer banking laws; limit the
ability of "undercapitalized banks" to borrow from the Federal Reserve
Board's discount window; and require regulators to perform annual on-site
bank examinations and set standards for real estate lending.
REGULATORY ENFORCEMENT AUTHORITY
The enforcement powers available to federal banking regulators is
substantial and includes, among other things, the ability to assess civil
monetary penalties, to issue cease-and-desist or removal orders and to
initiate injunctive actions against banking organizations and
institution-affiliated parties, as defined. In general, these enforcement
actions must be initiated for violations of laws and regulations and unsafe
or unsound practices. Other actions or inactions may provide the basis for
enforcement action, including misleading or untimely reports filed with
regulatory authorities. Applicable law also requires public disclosure of
final enforcement actions by the federal banking agencies.
24
<PAGE>
FEDERAL AND STATE TAXATION
GENERAL
The Corporation and the Association are subject to the generally
applicable corporate tax provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), as well as certain additional provisions of the Code
which apply to thrifts and other types of financial institutions. The
following is a discussion of material tax aspects applicable to the
Corporation and the Association. It is intended only as a summary and does
not purport to be a comprehensive description of the tax rules applicable to
the Corporation and the Association.
FISCAL YEAR - The Corporation and the Association will file federal
income tax returns on a separate company basis and on the basis of the fiscal
year ending on June 30.
METHOD OF ACCOUNTING - The Corporation maintains its books and records
for federal income tax purposes using the accrual method of accounting. The
accrual method of accounting generally requires that items of income be
recognized when all events have occurred that establish the right to receive
the income and the amount of income can be determined with reasonable
accuracy, and that items of expense be deducted at the later of (i) the time
when all events have occurred that establish the liability to pay the expense
and the amount of such liability can be determined with reasonable accuracy
or (ii) the time when economic performance with respect to the item of
expense has occurred.
BAD DEBT RESERVES - Under applicable provisions of the Code, savings
institutions such as the Association are permitted to establish reserves for
bad debts and to make annual additions thereto which qualify as deductions
from taxable income. The bad debt deduction is generally based on a savings
institution's actual loss experience (the "Experience Method").
Alternatively, provided that certain definitional tests relating to the
composition of assets and the nature of its business are met, a savings
institution may elect annually to compute its allowable addition to its bad
debt reserves for qualifying real property loans (generally loans secured by
improved real estate) by reference to a percentage of its taxable income (the
"Percentage Method").
Under the Experience Method, the deductible annual addition is the amount
necessary to increase the balance of the reserve at the close of the taxable
year to the greater of (i) the amount which bears the same ratio to loans
outstanding at the close of the taxable year as the total net charge-offs
sustained during the current and five preceding taxable years bear to the sum
of the loans outstanding at the close of those six years or (ii) the balance
in the reserve account at the close of the Association's "base year," which
was its tax year ended December 31, 1987.
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<PAGE>
Under the Percentage Method, the bad debt deduction with respect to
qualifying real property loans is computed as a percentage of the
Association's taxable income before such deduction, as adjusted for certain
items (such as capital gains and the dividends received deduction). Under
this method, a qualifying institution such as the Association generally may
deduct 8% of its taxable income. The availability of the Percentage Method
has permitted a qualifying savings institution, such as the Association, to
be taxed at an effective federal income tax rate of 31.3%, as compared to 34%
for corporations generally.
The Percentage Method deduction is limited to the excess of 12% of
savings accounts at year end over the sum of surplus, undivided profits and
reserves at the beginning of the year. For taxable years ended on or before
June 30, 1994, the Association has generally elected to use the Percentage
Method to compute the amount of its bad debt deduction with respect to its
qualifying real property loans. As a result of the 12% limitation, the
Association may be constrained from taking the Percentage Method deduction in
future years.
Pursuant to certain legislation which was recently enacted and which will
be effective for tax years beginning after 1995, a small thrift institution
(one with an adjusted basis of assets of less than $500 million), such as the
Association, would no longer be permitted to make additions to its tax bad
debt reserve under the percentage of taxable income method. Such
institutions would be permitted to use the experience method in lieu of
deducting bad debts only as they occur. Such legislation will require the
Association to realize increased tax liability over a period of at least six
years, beginning in 1996. Specifically, the legislation will require a small
thrift institution to recapture (i.e., take into income) over a multi-year
period the balance of its bad debt reserves in excess of the lesser of (i)
the balance of such reserves as of the end of its last taxable year ending
before 1988 or (ii) an amount that would have been the balance of such
reserves had the institution always computed its additions to its reserves
using the experience method. The recapture requirement would be suspended
for each of two successive taxable years beginning January 1, 1996 in which
the Association originates an amount of certain kinds of residential loans
which in the aggregate are equal to or greater than the average of the
principal amounts of such loans made by the Association during its six
taxable years preceding 1996. It is anticipated that any recapture of the
Association's bad debt reserves accumulated after 1987 would not have a
material adverse effect on the Association's financial condition and results
of operations.
DISTRIBUTIONS - If the Association were to distribute cash or property to
its sole stockholder having a total fair market value in excess of its
accumulated tax-paid earnings and profits, or were to distribute cash or
property to its stockholder in redemption of its stock, the Association would
generally be required to recognize as income an amount which, when reduced by
the amount of federal income tax that would be attributable to the inclusion
of such amount in income, is equal to the lesser of: (i) the amount of the
distribution or (ii) the sum of (a) the amount of the accumulated bad debt
reserve of the Association with respect to qualifying real property loans (to
the extent that additions to
26
<PAGE>
such reserve exceed the additions that would be permitted under the
experience method) and (b) the amount of the Association's supplemental bad
debt reserve.
As of June 30, 1996, the Association's accumulated bad debt reserve for
qualifying real property loans and its supplemental bad debt reserve balances
were approximately $808,000 and $294,000, respectively. The Association
believes it has approximately $4.0 million of accumulated earnings and
profits as of June 30, 1996, which would be available for dividend
distributions, provided regulatory restrictions applicable to the payment of
dividends are met. See "Dividend Policy."
MINIMUM TAX - The Code imposes an alternative minimum tax at a rate of
20% on a base of regular taxable income plus certain tax preferences
("alternative minimum taxable income" or "AMTI"). The alternative minimum tax
is payable to the extent such AMTI is in excess of an exemption amount. The
Code provides that an item of tax preference is the excess of the bad debt
deduction allowable for a taxable year pursuant to the percentage of taxable
income method over the amount allowable under the experience method. The
other items of tax preference that constitute AMTI include (a) tax exempt
interest on newly-issued (generally, issued on or after August 8, 1986)
private activity bonds other than certain qualified bonds and (b) for taxable
years beginning after 1989, 75% of the excess (if any) of (i) adjusted
current earnings as defined in the Code, over (ii) AMTI (determined without
regard to this preference and prior to reduction by net operating losses).
Net operating losses can offset no more than 90% of AMTI. Certain payments of
alternative minimum tax may be used as credits against regular tax
liabilities in future years.
AUDIT BY IRS - The Association's consolidated federal income tax returns
for taxable years through December 31, 1992 have been closed for the purpose
of examination by the IRS.
OTHER MATTERS - Other recent changes in the system of federal taxation
that could affect the Association's business include a provision that an
individual taxpayer will generally not be permitted to deduct personal
interest paid or accrued during the taxable year unless, subject to certain
limitations, the interest is paid or accrued on indebtedness which is secured
by the principal or secondary residence of the taxpayer or indebtedness
incurred by the taxpayer to pay for certain medical and educational expenses.
The deductibility of losses generated by investments in certain passive
activities of a taxpayer and the deduction for contributions to individual
retirement accounts of a taxpayer if the taxpayer is a participant in an
employer-maintained retirement plan is now limited. The Association does not
believe that these changes will have a material adverse effect on its
operations.
STATE TAXATION
The Association is subject to an Ohio franchise taxed based on its equity
capital plus certain reserve amounts. Total capital for this purpose is
reduced by certain exempted assets. The resultant net taxable value was taxed
at a rate of 1.5% for 1996 and 1995.
27
<PAGE>
ITEM 2. PROPERTIES
At June 30, 1996, the Corporation conducted its business from its
executive offices in Bucyrus, Ohio and two branch offices which include a
full-service office and a limited service facility that does not offer loan
products. All of these offices are located in Crawford County, Ohio.
The following table sets forth certain information with respect to the
Corporation's office properties at June 30, 1996.
<TABLE>
<CAPTION>
NET BOOK
LEASED/ VALUE OF AMOUNT OF
DESCRIPTION/ADDRESS OWNED PROPERTY DEPOSITS
- ----------------------------- ----------- ------------ -----------
(In Thousands)
<S> <C> <C> <C>
Main Office Owned $230 $58,235
119 South Sandusky Avenue
Bucyrus, Ohio 44820
South Branch Office Owned 147 5,886
South Sandusky and Marion Road
Bucyrus, Ohio 44820
New Washington Branch(1) Owned 64 5,790
115 South Kibler Street
New Washington, Ohio 44854
Automated Teller Machine Owned
1661 Marion Road (machine $ 84 --
Bucyrus, Ohio only) --- ------
$525 $69,911
--- ------
--- ------
</TABLE>
(1) Limited-service branch office.
ITEM 3. LEGAL PROCEEDINGS
The Corporation is involved in routine legal proceedings occurring in the
ordinary course of business which, in the aggregate, are believed by
management to be immaterial to the Corporation's financial condition.
28
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
No matters were submitted to a vote of securities holders during the
fourth quarter of fiscal 1996.
29
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information required herein is incorporated by reference from page 4
of the Corporation's Annual Report to Stockholders for fiscal 1996 ("Annual
Report"), which is included herein as Exhibit 13.
ITEM 6. SELECTED FINANCIAL DATA
The information required herein is incorporated by reference from pages 5
and 6 of the Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required herein is incorporated by reference from pages 7
through 11 of the Annual Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements required herein are incorporated by reference
from pages 20 through 48 of the Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The information required herein is incorporated by reference from page 13
of the Company's Proxy Statement for its 1996 Annual Meeting of Shareholders.
30
<PAGE>
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The information required herein is incorporated by reference from pages 4
to 7 of the Registrant's Proxy Statement dated September 20, 1996 ("Proxy
Statement").
ITEM 11. EXECUTIVE COMPENSATION
The information required herein is incorporated by reference from pages
10 to 12 of the Registrant's Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required herein is incorporated by reference from pages 8
and 9 of the Registrant's Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required herein is incorporated by reference from pages
12 and 13 of the Registrant's Proxy Statement.
31
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) Financial Statements
The following financial statements are incorporated herein by reference
from pages 20 through 48 of the Annual Report:
Report of Independent Certified Public Accountants
Consolidated Statements of Financial Condition as of June 30, 1996 and
1995
Consolidated Statements of Earnings for the years ended June 30, 1996,
1995 and 1994
Consolidated Statements of Changes in Stockholders' Equity for the years
ended June 30, 1996, 1995 and 1994
Consolidated Statements of Cash Flows for the years ended June 30, 1996,
1995 and 1994
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under
the related instructions or are included in the Notes to Financial Statements
incorporated herein by reference and therefore have been omitted.
(3) Exhibits
The following exhibits are either filed as a part of this report or are
incorporated herein by reference to documents previously filed as indicated
below:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- -------- ---------------------------------------------------------------- ----
<S> <C> <C>
3.1 Articles of Incorporation *
3.2 Code of Regulations of Community Investors Bancorp, Inc. *
3.3 Bylaws of Community Investors Bancorp, Inc. *
4.1 Specimen Stock Certificate of Community Investors
Bancorp, Inc. *
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- -------- ---------------------------------------------------------------- ----
<S> <C> <C>
10.1 Form of Severance Agreement between Community
Investors Bancorp, Inc. and John W. Kennedy and Brian R. Buckley *
10.5 Employee Stock Ownership Plan *
13 Annual Report to Stockholders E-1
</TABLE>
* Incorporated by reference from the Registrant's Registration Statement on
Form S-1 (File No. 33-84132) filed with the Securities and Exchange
Commission on September 16, 1994, as amended.
(b) Reports on Form 8-K
There were no reports on Form 8-K for the quarter ended June 30, 1996.
(c) See (a)(3) above for all exhibits filed herewith or incorporated herein
by reference to documents previously filed and the Exhibit Index.
(d) There are no other financial statements and financial statement schedules
which were excluded from the Annual Report to Stockholders which are required
to be included herein.
33
<PAGE>
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) 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.
FIRST FEDERAL SAVINGS AND LOAN
September 25, 1996 By: /s/ John W. Kennedy
-------------------
John W. Kennedy
President and Managing Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on September 26, 1996.
Signature Title
/s/ John W. Kennedy President and Managing Officer
- -------------------
John W. Kennedy
/s/ Brian R. Buckley Vice President and Treasurer
- -------------------
Brian R. Buckley
/s/ Dale C. Hoyles Chairman of the Board
- -------------------
Dale C. Hoyles
/s/ David M. Auck Vice Chairman of the Board
- -------------------
David M. Auck
/s/ Richard L. Cory Director
- -------------------
Richard L. Cory
/s/ Phillip E. Harris Director
- -------------------
Phillip E. Harris
/s/ Herbert Kraft Director
- -------------------
Herbert Kraft
/s/ Thomas P. Moore Director
- -------------------
Thomas P. Moore
34
<PAGE>
[LOGO]
ANNUAL
1996
REPORT
<PAGE>
TABLE OF CONTENTS
President's Letter to Stockholders . . . . . . . . . . . . . . 1
The Business of Community Investors Bancorp, Inc. and
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . 3
Market for Common Stock . . . . . . . . . . . . . . . . . . . . 4
Selected Consolidated Financial Data . . . . . . . . . . . . . 5
Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . 7
Comparison of Results of Operations for Fiscal Years Ended
June 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . 8
Comparison of Results of Operations for Fiscal Years Ended
June 30, 1995 and 1994 . . . . . . . . . . . . . . . . . . . 9
Average Yield Analysis . . . . . . . . . . . . . . . . . . . . 12
Rate/Volume Table . . . . . . . . . . . . . . . . . . . . . . . 13
Asset and Liability Management . . . . . . . . . . . . . . . . 14
Net Portfolio Value . . . . . . . . . . . . . . . . . . . . . . 15
Liquidity and Capital Resources . . . . . . . . . . . . . . . . 16
Impact of Inflation and Changing Prices . . . . . . . . . . . . 17
Proposed Legislation . . . . . . . . . . . . . . . . . . . . . 17
Impact of Recent Accounting Pronouncements . . . . . . . . . . 18
Report of Independent Certified Public Accountants . . . . . . 20
Consolidated Financial Statements . . . . . . . . . . . . . . . 21
Directors and Officers . . . . . . . . . . . . . . . . . . . . 49
Stockholder Services . . . . . . . . . . . . . . . . . . . . . 50
<PAGE>
[LETTERHEAD]
Dear Stockholder:
We are very pleased to present Community Investors Bancorp, Inc.'s (CIBI) Annual
Report to Shareholders for the fiscal year ended June 30, 1996.
Our operating results during our first full fiscal year as a public company were
most gratifying to your Board and management. Net earnings for fiscal 1996 of
$886,000, or $1.32 per share, represented a second consecutive record
performance, surpassing our prior fiscal year earnings by $134,000, or 17.8%.
Total assets also reached an unprecedented level of $91.8 million which is
clearly reflective of the favorable trend that has resulted in asset growth of
$15.9 million, or 20.9%, over the last two fiscal years.
We have utilized our growth to further our position as the leader in residential
financing in the community. Our loan portfolio increased by $6.4 million, or
10.7%, over the fiscal year. We are portfolio lenders and are the only
financial institution in our community making open-end mortgages. This type of
mortgage allows customers immediate access to the equity in their homes and, in
many cases, provides tax advantages of home interest deductions. These
mortgages allowed us to increase our portfolio balances while maintaining our
interest rate spread at a level in excess of 3%.
We have also strived to enhance shareholder value, both as a result of excellent
earnings over the past year, as well as the aggressive stance your Board of
Directors has taken in buying back 71,900 shares of stock, or 10% of the
outstanding stock, during the past year. We have been able to repurchase our
stock at less than book, which we feel is an excellent investment and
utilization of our stockholders' funds. We now have 666,246 in shares
outstanding, down from 738,146 shares outstanding.
The economic picture in Bucyrus, Ohio has been improving over the past several
years, however the past fiscal year has been most rewarding because two new
companies have announced that they will be locating in Bucyrus, and those
facilities are currently under construction. Housing is in short supply and we
believe this translates into a continuation of excellent loan demand. Our
officers and directors have continued their active involvement in this
industrial development, as well as all facets of the community.
1
<PAGE>
As with any business, customer service is very important to a successful
financial institution. It is especially true for a community financial
institution. During the past fiscal year, we opened our first free standing ATM
facility in the Southern Lights Shopping Center in Bucyrus. We believe the ATM
will provide better service to our current and local customers, as well as
generating additional fee income from the thousands who pass through our
community on their way to Cedar Point Amusement Park. We have also remodeled
parts of our main office which provides the additional space for projected
future growth.
Our strong earnings performance in fiscal 1996 enabled your Board to increase
your dividend from $0.16 per share annually to $0.40 per share annually, an
increase of 250%. While this percentage increase cannot be expected every year,
your Board of Directors continues to monitor our dividend policy in an effort to
maximize your return on investment.
The accompanying pages discuss in detail the political turmoil surrounding the
BIF/SAIF deposit insurance disparity. While we cannot predict the outcome of
this seemingly endless saga, we can optimistically state our belief that we will
be operating on a level playing field with the commercial banks during the
coming fiscal year. We view an end to this inequity as a critical factor toward
our long term success.
In conclusion, your Board and management remain committed to maximizing the
value of your investment in CIBI. We continue to believe that this overriding
objective will be obtained by maintaining our niche as a community based
financial institution. With your continued support, we will be able to grow and
strengthen both your investment and our community.
Very truly yours,
/s/ Dale C. Hoyles
Dale C. Hoyles
Chairman
/s/ John W. Kennedy
John W. Kennedy
President and Chief Executive Officer
2
<PAGE>
BUSINESS OF COMMUNITY INVESTORS BANCORP, INC. AND SUBSIDIARY
GENERAL
Community Investors Bancorp, Inc. (the Corporation) was organized in fiscal 1995
at the direction of the Board of Directors of First Federal Savings and Loan
Association of Bucyrus (the Association) for the purpose of acquiring all of the
common stock to be issued by the Association upon its conversion from a
federally-chartered mutual savings and loan to a federally-chartered stock
association (the Conversion). Since completion of the Conversion on February 6,
1995, the Corporation has conducted business as a unitary savings and loan
holding company. At June 30, 1996, the Corporation had $91.8 million of total
assets, $80.3 million of total liabilities, including $69.9 million of deposits,
and $11.5 million of stockholders' equity.
The Association is a traditional savings and loan association primarily engaged
in attracting deposits from the general public through its offices and using
those and other available sources of funds to originate loans secured by single-
family residences primarily located in Crawford County, Ohio. To a lesser
extent, the Association originates other real estate loans secured by non-
residential real estate and construction loans and non-real estate loans,
primarily consisting of consumer loans. The Association also invests in U.S.
Government and agency obligations and mortgage-backed securities which are
issued or guaranteed by federal agencies.
As a savings and loan holding company, the Corporation is subject to regulation,
supervision and examination by the Office of Thrift Supervision of the United
States Department of the Treasury (the OTS). As a savings association chartered
under the laws of the United States, the Association is subject to regulation,
supervision and examination by the OTS and the FDIC. The Association is also a
member of the Federal Home Loan Bank (the FHLB) of Cincinnati.
LENDING ACTIVITIES
A savings association generally may not make loans to one borrower and related
entities in an amount which exceeds 15% of its unimpaired capital and surplus,
although loans in an amount equal to an additional 10% of unimpaired capital and
surplus may be made to a borrower if the loans are fully secured by readily
marketable securities. At June 30, 1996, the Association's limit on loans-to-
one borrower was approximately $1.5 million and its five largest loans or groups
of loans-to-one borrower, including related entities, aggregated $584,000,
$428,000, $339,000, $312,000, and $301,000. All of these loans or groups of
loans were performing in accordance with contractual terms at June 30, 1996.
3
<PAGE>
MARKET FOR COMMON STOCK
Shares of common stock of Community Investors Bancorp, Inc. are traded
nationally under the symbol "CIBI" on the Nasdaq SmallCap Market System. At
September 5, 1996, the Corporation had 666,246 shares of common stock
outstanding and 458 stockholders of record.
The following tables set forth the reported high and low sale prices of a share
of the Corporation's common stock as reported by Nasdaq (the common stock
commenced trading on February 6, 1995) and cash dividends paid per share of
common stock during the periods indicated.
FISCAL YEAR ENDED JUNE 30, 1996
QUARTER ENDED HIGH LOW DIVIDEND
September 30, 1995 $16.75 $14.75 $.04
December 31, 1995 16.50 14.75 .04
March 31, 1996 15.50 14.50 .04
June 30, 1996 16.00 14.75 .04
FISCAL YEAR ENDED JUNE 30, 1995
QUARTER ENDED HIGH LOW DIVIDEND
March 31, 1995 $12.50 $10.50 $-
June 30, 1995 13.50 11.50 .04
In addition to certain federal income tax considerations, OTS regulations impose
limitations on the payment of dividends and other capital distributions by
savings associations. Under OTS regulations applicable to converted savings
associations, the Association is not permitted to pay a cash dividend on its
common shares if the Association's regulatory capital would, as a result of the
payment of such dividend, be reduced below the amount required for the
liquidation account (which was established for the purpose of granting a limited
priority claim on the assets of the Association in the event of a complete
liquidation to those members of the Association before the Conversion) who
maintain a savings account at the Association after the Conversion or applicable
regulatory capital requirements prescribed by the OTS.
OTS regulations applicable to all savings associations provide that a savings
association which immediately prior to, and on a pro forma basis after giving
effect to, a proposed capital distribution (including a dividend) has total
capital (as defined by OTS regulations) that is equal to or greater than the
amount of its capital requirements is generally permitted without OTS approval
(but subsequent to 30 days' prior notice to the OTS) to make capital
distributions, including dividends, during a calendar year in an amount not to
exceed the greater of (1) 100% of its net earnings to date during the calendar
year, plus an amount equal to one-half the amount by which its total capital to
assets ratio exceeded its required capital to assets ratio at the beginning of
the calendar year, or (2) 75% of its net earnings for the most recent four-
quarter period. Savings associations with total capital in excess of the
capital requirements that have been notified by the OTS that they are in need of
more than normal supervision will be subject to restrictions on dividends. A
savings association that fails to meet current minimum capital requirements is
prohibited from making any capital distributions without the prior approval of
the OTS.
The Association currently meets all of its regulatory capital requirements and,
unless the OTS determines that the Association is an institution requiring more
than normal supervision, the Association may pay dividends in accordance with
the foregoing provisions of the OTS regulations.
4
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following tables set forth certain selected consolidated financial and other
data of the Corporation at the dates and for the periods indicated. For
additional financial information about the Corporation, reference is made to
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements of the Corporation and
related notes included elsewhere herein.
<TABLE>
<CAPTION>
AT JUNE 30,
SELECTED CONSOLIDATED FINANCIAL
CONDITION DATA: 1996 1995 1994 1993 1992
(In thousands)
<S> <C> <C> <C> <C> <C>
Total assets $91,787 $84,741 $75,915 $74,379 $73,179
Cash and cash equivalents 1,909 1,077 1,162 1,297 1,630
Securities:
Available-for-sale 6,201 3,840 1,210 - -
Held-to-maturity 15,674 18,326 15,188 17,314 17,257
Loans receivable - net 66,255 59,872 56,747 54,433 52,975
Deposits 69,911 70,464 68,743 67,582 68,382
Federal Home Loan Bank advances 9,884 1,515 1,591 1,764 225
Stockholders' equity, restricted (1) 11,486 12,296 5,262 4,578 3,846
YEAR ENDED JUNE 30,
SELECTED CONSOLIDATED OPERATING DATA: 1996 1995 1994 1993 1992
(In thousands)
Total interest income $6,770 $6,061 $5,538 $5,743 $6,371
Total interest expense 3,626 3,385 3,000 3,382 4,139
------ ------ ------ ------ ------
Net interest income 3,144 2,676 2,538 2,361 2,232
Provision for losses on loans 159 160 176 57 179
------ ------ ------ ------ ------
Net interest income after provision for
losses on loans 2,985 2,516 2,362 2,304 2,053
Other income 164 131 111 141 143
General, administrative and other expense 1,805 1,511 1,436 1,348 1,365
------ ------ ------ ------ ------
Earnings before income taxes 1,344 1,136 1,037 1,097 831
Federal income taxes 458 384 339 365 272
------ ------ ------ ------ ------
Net earnings $ 886 $ 752 $ 698 $ 732 $ 559
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Earnings per share (2) $1.32 $.62 N/A N/A N/A
------ ------ ------ ------ ------
------ ------ ------ ------ ------
</TABLE>
(1) Consisted solely of retained earnings at June 30, 1992 through 1994,
inclusive.
(2) Earnings per share for fiscal 1995 is based on weighted-average number
of shares outstanding (as adjusted) and net earnings since February 6,
1995, the date of the conversion to the stock form of ownership.
5
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
SELECTED FINANCIAL RATIOS AND
OTHER DATA: (1) 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Return on average assets 1.05% .94% .92% .99% .78%
Return on average equity 7.44 10.24 14.17 17.31 15.85
Average equity to average assets (2) 14.06 9.16 6.50 5.74 4.90
Interest rate spread (2) 3.02 3.12 3.26 3.15 3.08
Net interest margin (2) 3.73 3.44 3.44 3.32 3.22
Non-performing assets and troubled debt
restructuring to total assets at end of period (3) .78 .56 .88 1.44 .65
Non-performing loans and troubled debt
restructuring to total loans (3) .94 .60 .93 1.90 .75
Average interest-earning assets to average
interest-bearing liabilities 116.57 107.42 104.28 103.68 103.00
Net interest income after provision for loan
losses and other income to total general,
administrative and other expenses 174.46 175.18 172.21 181.38 160.88
General, administrative and other expenses to
average total assets 2.13 1.88 1.90 1.83 1.90
Book value per share $17.24 $16.66 n/a n/a n/a
</TABLE>
(1) With the exception of end of period ratios, all ratios are based on average
monthly balances during the periods.
(2) Interest rate spread represents the difference between the weighted-average
yield on interest-earning assets and the weighted-average rate on interest-
bearing liabilities. Net interest margin represents net interest income as
a percentage of average interest-earning assets. The ratio of equity to
assets and the interest rate spreads are calculated based on average
balances.
(3) Non-performing loans consist of non-accrual loans that are contractually
past due 90 days or more, and non-performing assets consist of non-
performing loans and real estate, mobile homes and other assets acquired by
foreclosure or deed-in-lieu thereof.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The operating results of the Corporation depend primarily upon its net interest
income, which is determined by the difference between interest and dividend
income on interest-earning assets, principally loans, investment and mortgage-
backed securities, and interest expense on interest-bearing liabilities,
consisting of deposits and borrowings. The Corporation's net earnings are also
affected by its provision for losses on loans, as well as the level of its other
income and its general, administrative and other expense, such as employee
compensation and benefits, occupancy and equipment expense, federal deposit
insurance premiums, other operating expenses, and income and franchise taxes.
CHANGES IN FINANCIAL CONDITION
The Corporation's total assets amounted to $91.8 million at June 30, 1996, an
increase of $7.0 million, or 8.3%, over the $84.7 million total at June 30,
1995. The increase in assets was funded primarily through an increase in
advances from the Federal Home Loan Bank of $8.4 million, which was partially
offset by a decline in deposits of $553,000 and a reduction in stockholders'
equity of $810,000.
Cash and cash equivalents and investment securities totaled $21.0 million at
June 30, 1996, an increase of $1.6 million, or 8.0%, over 1995 levels. During
fiscal 1996, the Corporation purchased $10.1 million of investment securities,
while $9.3 million of securities matured. During fiscal 1996, a three-year term
Federal Home Loan Mortgage Corporation participation certificate totaling $5.0
million and yielding 6.95%, was acquired utilizing the proceeds from a one year
term, 6.15% Federal Home Loan Bank advance.
Mortgage-backed securities declined by $1.0 million, or 26.6%, during fiscal
1996, as net proceeds from principal repayments were redeployed to partially
fund growth in the loan portfolio.
Loans receivable totaled $66.3 million at June 30, 1996, an increase of $6.4
million, or 10.7%, over the $59.9 million total at June 30, 1995. Loan
disbursements during fiscal 1996 totaled $16.9 million, which were partially
offset by principal repayments of $10.7 million. Growth in the loan portfolio
was comprised primarily of one-to-four family and multi-family loans, which
increased by $5.9 million during fiscal 1996.
At June 30, 1996, the Corporation's allowance for loan losses totaled $459,000,
which represented .68% of total loans and 72.2% of nonperforming loans. The
allowance totaled $399,000 at June 30, 1995, which represented .65% of total
loans and 109.0% of nonperforming loans at that date. Nonperforming loans
totaled $636,000 and $366,000 at June 30, 1996 and 1995, respectively, which
represented .94% and .60% of total loans at those respective dates. Although
management believes that its allowance for loan losses at June 30, 1996, was
adequate based on facts and circumstances available to it, there can be no
assurances that additions to such allowance will not be necessary in future
periods, which could adversely affect the Corporation's results of operations.
Deposits totaled $69.9 million at June 30, 1996, a decrease of $553,000, or .8%,
from the $70.5 million total reported at June 30, 1995.
Advances from the Federal Home Loan Bank increased by $8.4 million during fiscal
1996, to a total of $9.9 million. Management utilized a $5.0 million advance to
fund the acquisition of a FHLMC bond as previously discussed, while the balance
of the increase was utilized to fund growth in the loan portfolio.
7
<PAGE>
COMPARISON OF RESULTS OF OPERATIONS
FOR THE FISCAL YEARS ENDED JUNE 30, 1996 AND 1995
GENERAL
The Corporation's net earnings for the fiscal year ended June 30, 1996 totaled
$886,000, an increase of $134,000, or 17.8%, over the $752,000 in net earnings
reported in fiscal 1995. The increase in net earnings resulted primarily from a
$468,000 increase in net interest income and a $33,000 increase in other income,
which were partially offset by a $294,000 increase in general, administrative
and other expense and a $74,000 increase in the provision for federal income
taxes.
NET INTEREST INCOME
Total interest income for the year ended June 30, 1996, amounted to $6.8
million, an increase of $709,000, or 11.7%, over the $6.1 million recorded in
fiscal 1995. Interest income on loans increased by $634,000, or 13.4%, to a
total of $5.4 million in fiscal 1996. The increase resulted primarily from a
$4.2 million, or 7.2%, increase in the average balance outstanding, coupled with
a 47 basis point increase in yield, to 8.67% in 1996. Interest income on
investment securities and interest-bearing deposits increased by $127,000, or
11.7%, due primarily to a $2.2 million increase in the average outstanding
balance, which was partially offset by a decline in yield of 32 basis points, to
6.27% in 1996 from 6.59% in 1995.
Total interest expense for the fiscal year ended June 30, 1996 amounted to $3.6
million, an increase of $241,000, or 7.1%, over the $3.4 million recorded in
fiscal 1995. Interest expense on deposits increased by $216,000, or 6.6%, to a
total of $3.5 million in fiscal 1996. This increase resulted primarily from a
35 basis point increase in the average cost of funds, from 4.63% in 1995 to
4.98% in 1996, which was partially offset by a $745,000 decrease in the average
outstanding balance year-to-year. Interest expense on borrowings increased by
$25,000, or 24.0%, due primarily to a $560,000 increase in the average balance
outstanding.
As a result of the foregoing changes in interest income and interest expense,
net interest income increased by $468,000, or 17.5%, to a total of $3.1 million
for the fiscal year ended June 30, 1996, as compared to $2.7 million for fiscal
1995. The interest rate spread declined by 10 basis points, from 3.12% in 1995
to 3.02% in 1996, while the net interest margin increased by 29 basis points,
from 3.44% in 1995 to 3.73% in fiscal 1996.
PROVISION FOR LOSSES ON LOANS
A provision for losses on loans is charged to earnings in an amount necessary to
bring the total allowance for loan losses to a level considered appropriate by
management based on historical experience, the volume and type of lending
conducted by the Association, the status of past due principal and interest
payments, general economic conditions, particularly as such conditions relate to
the Association's market area, and other factors related to the collectibility
of the Association's loan portfolio. The provision for losses on loans totaled
$159,000 for the fiscal year ended June 30, 1996, a decrease of $1,000, or .6%,
from the amount recorded in fiscal 1995. There can be no assurance that the
loan loss allowance will be adequate to absorb losses on known nonperforming
assets or that the allowance will be adequate to cover losses on nonperforming
assets in the future.
8
<PAGE>
COMPARISON OF RESULTS OF OPERATIONS
FOR THE FISCAL YEARS ENDED JUNE 30, 1996 AND 1995 (CONTINUED)
OTHER INCOME
Other income totaled $164,000 for the fiscal year ended June 30, 1996, a
$33,000, or 25.2%, increase over the $131,000 total recorded in fiscal 1995.
The increase was due primarily to a $65,000 increase in gain on sale of
investment securities, which was partially offset by a $37,000 decline in gain
on sale of repossessed assets, which was comprised of a $27,000 gain in fiscal
1995 and a $10,000 loss in fiscal 1996.
GENERAL, ADMINISTRATIVE AND OTHER EXPENSE
General, administrative and other expense totaled $1.8 million for the fiscal
year ended June 30, 1996, an increase of $294,000, or 19.5%, over the $1.5
million recorded in fiscal 1995. The increase resulted primarily from a
$100,000, or 15.9%, increase in employee compensation and benefits, a $43,000,
or 59.7%, increase in franchise taxes and a $127,000, or 34.7%, increase in
other operating expense. The increase in employee compensation and benefits
resulted primarily from expense related to employee stock benefit plans and
normal merit salary increases, which were partially offset by an increase in
deferred loan origination costs attendant to increased loan origination volume
year-to-year. The increase in franchise taxes was due to the increase in
stockholders' equity over the period, while the increase in other operating
expense related primarily to the professional and printing costs related to the
public reporting requirements for registrants reporting to the SEC.
FEDERAL INCOME TAXES
The provision for federal income taxes amounted to $458,000 for the fiscal year
ended June 30, 1996, an increase of $74,000, or 19.3%, over the $384,000
provision recorded in fiscal 1995. The increase was a result of the $208,000,
or 18.3%, increase in pretax earnings. The Corporation's effective tax rates
were 34.1% and 33.8% for the fiscal years ended June 30, 1996 and 1995,
respectively.
COMPARISON OF RESULTS OF OPERATIONS
FOR THE FISCAL YEARS ENDED JUNE 30, 1995 AND 1994
GENERAL
The Corporation's net earnings amounted to $752,000 for the fiscal year ended
June 30, 1995, an increase of $54,000, or 7.7%, over the $698,000 of net
earnings recorded in fiscal 1994. The increase in net earnings resulted
primarily from a $138,000 increase in net interest income, a $20,000 increase in
other income and a $16,000 decrease in the provision for losses on loans, which
were partially offset by a $75,000 increase in general, administrative and other
expense and a $45,000 increase in the provision for federal income taxes.
NET INTEREST INCOME
The Corporation's net interest income amounted to $2.7 million for fiscal 1995,
compared to $2.5 million for fiscal 1994. The $138,000, or 5.4%, increase in
fiscal 1995 was due to a $4.1 million increase in average interest-earning
assets, largely as a result of the offering of common stock which was completed
in February 1995. The increase in average interest-earning assets outpaced the
growth in average interest-bearing liabilities, primarily relating to deposits,
which increased by $1.8 million.
9
<PAGE>
COMPARISON OF RESULTS OF OPERATIONS
FOR THE FISCAL YEARS ENDED JUNE 30, 1995 AND 1994 (CONTINUED)
NET INTEREST INCOME (continued)
Interest income on loans increased by $317,000, or 7.2%, to $4.7 million in
fiscal 1995 compared to fiscal 1994. The increase in interest income on loans
was due primarily to a $2.3 million, or 4.1%, increase in the weighted average
balance of loans to $57.8 million for fiscal 1995 from $55.5 million in fiscal
1994. The average yield on loans increased by 23 basis points to 8.20% as
result of the higher interest rate environment in fiscal 1995.
Interest income on investment securities increased by $273,000, or 34.0%, during
fiscal 1995 compared to fiscal 1994. Such increase was due both to an increase
of 46 basis points in the weighted average yield earned thereon, to 6.64% for
fiscal 1995 from 6.18% in fiscal 1994, and an increase of $2.0 million, or
11.3%, in the average balance of such securities. The increase in average yield
reflects higher market rates of interest while the increase in the average
balance resulted from the proceeds from the offering of common stock of the
Corporation.
Interest income on other interest-earning assets, including FHLB stock and
interest-bearing deposits in other institutions, declined by $8,000 in fiscal
1995 as compared to fiscal 1994, due to declines in both the average balance
outstanding and the average yield.
Interest expense increased $385,000, or 12.8%, to $3.4 million in fiscal 1995,
compared to $3.0 million in fiscal 1994. Such increase was primarily due to an
increase of 44 basis points in the average rate paid on deposits, to 4.63% in
fiscal 1995 from 4.19% in fiscal 1994, reflecting increases in the prevailing
market rate of interest during such time.
As a result of the foregoing changes in interest income and interest expense,
net interest income increased by $138,000, or 5.4%, for the fiscal year ended
June 30, 1996, as compared to fiscal 1995. The Corporation's interest rate
spread declined 14 basis points to 3.12%, while its net yield on interest-
earning assets remained unchanged at 3.44%. The yield remained unchanged due to
the increase in the ratio of interest-earning assets to interest-bearing
liabilities offsetting the decline in interest rate spread.
PROVISION FOR LOAN LOSSES
The Corporation's provision for loan losses amounted to $160,000 and $176,000
for fiscal 1995 and 1994, respectively. Such provisions reflected management's
assessment of the adequacy of the allowance for loan losses after examining the
risks inherent in the loan portfolio. Such provisions also reflected the net
loan charge-offs of $154,000 and $241,000 during fiscal 1995 and 1994,
respectively.
10
<PAGE>
COMPARISON OF RESULTS OF OPERATIONS FOR THE
FISCAL YEARS ENDED JUNE 30, 1995 AND 1994 (CONTINUED)
OTHER INCOME
Other income totaled $131,000 for the fiscal year ended June 30, 1995, a
$20,000, or 18.0%, increase over the $111,000 total recorded in fiscal 1994.
The increase was due primarily to a $27,000 increase in gain on sale of other
repossessed assets, which was partially offset by a $6,000 loss related to the
sale of investment securities.
GENERAL, ADMINISTRATIVE AND OTHER EXPENSE
General, administrative and other expense totaled $1.5 million for the fiscal
year ended June 30, 1995, an increase of $75,000, or 5.2%, over the $1.4 million
recorded in fiscal 1994. The increase resulted primarily from a $35,000, or
5.9%, increase in employee compensation and benefits, a $32,000, or 36.4%,
increase in data processing, and a $38,000, or 11.6%, increase in other
operating expense, which were partially offset by a $24,000, or 17.9%, decrease
in occupancy and equipment expenses. The increase in employee compensation and
benefits expense was due primarily to normal merit increases coupled with the
costs attendant to employee stock benefit plans, while other operating expense
increased due to professional and printing costs related to the reporting
requirements of public stock companies.
FEDERAL INCOME TAXES
The provision for federal income taxes amounted to $384,000 for the fiscal year
ended June 30, 1995, an increase of $45,000, or 13.3%, over the $339,000
provision recorded in fiscal 1994. The increase was a result of the $99,000, or
9.5%, increase in pretax earnings. The Corporation's effective tax rates were
33.8% and 32.7% for the fiscal years ended June 30, 1995 and 1994, respectively.
11
<PAGE>
AVERAGE YIELD ANALYSIS
The following average balance sheet table sets forth for the periods indicated,
information on the Corporation regarding: (i) the total dollar amounts of
interest income on interest-earning assets and the resulting average yields;
(ii) the total dollar amounts of interest expense on interest-bearing
liabilities and the resulting average costs; (iii) net interest income; (iv)
interest rate spread; (v) net interest-earning assets; (vi) the net interest
margin; and (vii) the ratio of total interest-earning assets to total interest-
bearing liabilities. Additional interest income that would have been recognized
had non-accruing loans performed in accordance with original terms has not been
included in the table. Interest income from non-accruing loans is a component
of interest income in the period received. The loan is returned to accruing
status upon payment of all delinquent interest. Information is based on average
monthly balances during the period presented.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
1996 1995 1994
AVERAGE INTEREST AVERAGE INTEREST AVERAGE INTEREST
OUTSTANDING EARNED/ YIELD/ OUTSTANDING EARNED/ YIELD/ OUTSTANDING EARNED/ YIELD/
BALANCE PAID RATE BALANCE PAID RATE BALANCE PAID RATE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable $62,012 $5,376 8.67% $57,828 $4,742 8.20% $55,527 $4,425 7.97%
Investment securities 20,370 1,313 6.45 19,710 1,309 6.64 17,705 1,095 6.18
Other interest-earning assets (1) 1,871 81 4.33 301 10 3.32 466 18 3.86
------- ------ ------ ------- ------ ------ ------- ------ ------
Total interest-earning assets 84,253 6,770 8.04 77,839 6,061 7.79 73,698 5,538 7.51
Non-interest-earning assets 419 2,331 2,047
------- ------- -------
Total assets $84,672 $80,170 $75,745
------- ------- -------
------- ------- -------
Interest-bearing liabilities:
Deposits $70,151 3,497 4.98 $70,896 3,281 4.63 $69,015 2,889 4.19
FHLB advances 2,123 129 6.08 1,563 104 6.65 1,659 111 6.69
------- ------ ------ ------- ------ ------ ------- ------ ------
Total interest-bearing
liabilities 72,274 3,626 5.02 72,459 3,385 4.67 70,674 3,000 4.25
------ ------ ------ ------ ------ ------
Non-interest-bearing liabilities 495 370 145
------- ------- -------
Total liabilities 72,769 72,829 70,819
Stockholders' equity 11,903 7,341 4,926
------- ------- -------
Total liabilities and
stockholders' equity $84,672 $80,170 $75,745
------- ------- -------
------- ------- -------
Net interest income/interest
rate spread $3,144 3.02% $2,676 3.12% $2,538 3.26%
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
Net interest margin (2) 3.73% 3.44% 3.44%
------ ------ ------
------ ------ ------
Ratio of interest-earning
assets to interest-bearing
liabilities 116.57% 107.42% 104.28%
------ ------ -------
------ ------ -------
</TABLE>
(1) Includes FHLB stock and interest-bearing deposits.
(2) Net interest income divided by average interest-earning assets.
12
<PAGE>
RATE/VOLUME TABLE
The following table describes the extent to which changes in interest rates and
changes in volume of interest-earning assets and liabilities have affected the
Corporation's interest income and expense during the periods indicated. For
each category of interest-earning assets and interest-bearing liabilities,
information is provided on changes attributable to (i) changes in volume (change
in volume multiplied by prior year rate), (ii) changes in rate (change in rate
multiplied by prior year volume), (iii) changes in rate/volume (changes in rate
multiplied by changes in volume) and (iv) total changes in rate and volume.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
1996 VS. 1995 1995 VS. 1994
INCREASE INCREASE
(DECREASE) TOTAL (DECREASE) TOTAL
DUE TO INCREASE/ DUE TO INCREASE/
RATE VOLUME (DECREASE) RATE VOLUME (DECREASE)
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans $281 $353 $634 $130 $187 $317
Investment securities (37) 41 4 86 128 214
Interest-earning deposits and other 15 56 71 (3) (5) (8)
---- ---- ---- ---- ---- ----
Total interest-earning assets 259 450 709 213 310 523
Interest-bearing liabilities:
Deposits 255 (39) 216 311 81 392
Advances from Federal Home Loan Bank (7) 32 25 (1) (6) (7)
---- ---- ---- ---- ---- ----
Total interest-bearing liabilities $248 $ (7) 241 $310 $ 75 385
---- ---- ---- ---- ---- ----
---- ---- ---- ---- ---- ----
Increase in net interest income $468 $138
---- ----
---- ----
</TABLE>
13
<PAGE>
ASSET AND LIABILITY MANAGEMENT
The lending activities of savings institutions have historically emphasized
long-term, fixed-rate loans secured by single-family residences, and the primary
source of funds of such institutions has been deposits. The deposit accounts of
savings institutions generally bear interest rates that reflect market rates and
largely mature or are subject to repricing within a short period of time. This
factor, in combination with substantial investments in long-term, fixed-rate
loans, has historically caused the income earned by savings institutions on
their loan portfolios to adjust more slowly to changes in interest rates than
their cost of funds.
In order to minimize the potential for adverse effects of material and prolonged
increases in interest rates on the Corporation's results of operations, the
Corporation's management has implemented and continues to monitor asset and
liability management policies to better match the maturities and repricing terms
of the Corporation's interest-earning assets and interest-bearing liabilities.
Such policies have consisted primarily of: (i) emphasizing investment in
Adjustable Rate Mortgages (ARMs); (ii) emphasizing the retention of lower-
costing savings accounts and other core deposits and lengthening the term of
liabilities by participating in the mortgage matched advances program offered by
the Federal Home Loan Bank (FHLB) of Cincinnati; and (iii) maintaining a
significant level of liquid assets that can be readily invested in higher
yielding investments should interest rates rise.
Although the Corporation emphasizes the origination of single-family residential
ARMs, originations of such loans decreased in fiscal 1992 through fiscal 1994
due to the preference of the Corporation's customers for fixed-rate residential
mortgage loans in the low interest rate environment that prevailed during those
years. Despite this increase in fixed-rate originations, as a consequence of
management's continuing efforts, $34.3 million, or 65.4%, of the Corporation's
portfolio of one-to-four family residential mortgage loans consisted of ARMs at
June 30, 1996. In addition, at June 30, 1996, another $4.4 million, or 6.5%, of
the Corporation's total loan portfolio consisted of other types of loans with
adjustable interest rates.
The Corporation prices deposit accounts based upon the availability of prudent
investment opportunities. Pursuant to this policy, the Corporation has
generally neither engaged in sporadic increases or decreases in interest rates
paid nor offered the highest rates available in its deposit market. In
addition, the Corporation does not pursue an aggressive growth strategy which
has assisted it in controlling the cost of funds.
The Corporation generally maintains a high level of liquidity to respond to
investment opportunities as interest rates and lending activities permit and to
fund deposit withdrawals. Management believes that this flexibility will allow
the Corporation to maintain its profitability over a wide range of interest rate
environments.
14
<PAGE>
NET PORTFOLIO VALUE
The Association's interest rate sensitivity is monitored by management through
selected interest rate risk ("IRR") measures produced by an independent third
party service bureau. Using data from the Association's quarterly Thrift
Financial Reports, the Association receives a report which measures the
Association's IRR by modeling the change in net portfolio value (NPV) over a
variety of interest rate scenarios. NPV is the present value of expected cash
flows from assets, liabilities and off-balance sheet contracts. A NPV ratio, in
any interest rate scenario, is defined as the NPV in that rate scenario divided
by the market value of assets in the same scenario. Under OTS regulations, an
institution's "normal" level of interest rate risk in the event of an assumed
change in interest rates is a decrease in the institution's NPV in an amount not
exceeding 2% of the present value of its assets. As of March 31, 1996, the
latest date for which such information is available, the Association's exposure
to a 200 basis point interest rate increase (which would result in the greater
pro forma decrease in NPV) was 10% of the present value of its assets which
results in a decline in its NPV from 13.20% to 12.18%.
The table below shows the increase and decrease of NPV under different interest
rate scenarios at March 31, 1996.
<TABLE>
<CAPTION>
ESTIMATED
CHANGE IN NPV AS A
INTEREST RATES ESTIMATED PERCENTAGE AMOUNT
(BASIS POINTS) NPV OF ASSETS OF CHANGE PERCENT
<S> <C> <C> <C> <C>
+400 $ 7,970 9.95% $(3,238) (29)%
+300 9,117 11.17 (2,092) (19)
+200 10,112 12.18 (1,097) (10)
+100 10,823 12.87 (385) (3)
- 11,209 13.20 - -
- -100 11,418 13.34 209 2
- -200 11,661 13.51 452 4
- -300 12,087 13.86 878 8
- -400 12,755 14.42 1,546 14
</TABLE>
15
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Corporation's primary sources of funds are deposits, repayments, prepayments
and maturities of outstanding loans and mortgage-backed securities and funds
provided by operations. While scheduled loan and investment securities
repayments are relatively predictable sources of funds, deposit flows and loan
prepayments are greatly influenced by the movement of interest rates in general,
economic conditions and competition. The Corporation manages the pricing of its
deposits to maintain a deposit balance deemed appropriate and desirable. In
addition, the Corporation invests excess funds in FHLB overnight deposits and
other short-term interest-earning assets which provide liquidity to meet lending
requirements. The Corporation has been able to generate enough cash through the
retail deposit market, its traditional funding source, to offset the cash
utilized in investing activities. As an additional source of funds, the
Association may borrow from the FHLB of Cincinnati and has access to the Federal
Reserve Bank discount window. The Association has borrowed from the FHLB of
Cincinnati as part of its asset/liability management strategy to match payments
on the advances to the stream of income from its recently originated fixed rate
one-to-four family residential loan portfolio. As of June 30, 1996, the
Association had $9.9 million of advances outstanding.
Liquidity management is both a daily and long-term function. Excess liquidity
is generally invested in short-term investments such as FHLB of Cincinnati
overnight deposits. On a longer term basis, the Corporation maintains a
strategy of investing in various investment securities and lending products. At
June 30, 1996, the total approved mortgage-loan commitments outstanding amounted
to $7.6 million. At the same date, the Corporation had maximum exposure for
loan commitments under unfunded loans and unused lines of credit totaling $1.2
million.
During fiscal 1996, the Corporation had positive cash flows from operating and
financing activities, and negative cash flows from investing activities which
resulted in a net increase in cash and cash equivalents for the year totaling
$832,000.
During fiscal 1995, the Corporation had positive cash flows from operating
activities and financing activities and negative cash flows from investing
activities which resulted in a net decrease in cash and cash equivalents for the
year totaling $85,000.
Operating activities provided cash as net interest income exceeded general and
administrative expenses. Investing activities used cash primarily as a result
of loan originations and purchases of investment securities exceeding principal
repayments. Cash flows from financing activities for the above periods
increased primarily due to the proceeds from the issuance of common stock in
fiscal 1995, and net increases in the balance of deposits and borrowings in both
fiscal 1996 and 1995.
The Association is required by the Office of Thrift Supervision (OTS) to
maintain average daily balances of liquid assets and short-term liquid assets
(as defined) in amounts equal to 5% and 1%, respectively, of net withdrawable
deposits and borrowings payable in one year or less to assure its ability to
meet demand for withdrawals and repayment of short-term borrowings. The
liquidity requirements may vary from time to time at the direction of the OTS
depending upon economic conditions and deposit flows. The Association generally
attempts to maintain a liquidity ratio of between 5% and 10% of its net
withdrawable deposits and borrowings payable in one year or less. The
Association's average monthly liquidity ratio and short-term liquid assets ratio
at June 30, 1996 was 15.5%.
16
<PAGE>
IMPACT OF INFLATION AND CHANGING PRICES
The consolidated financial statements of the Corporation and related notes
presented herein have been prepared in accordance with generally accepted
accounting principles (GAAP) which substantially require the measurement of
financial position and operating results in terms of historical dollars, without
considering changes in the relative purchasing power of money over time due to
inflation.
Unlike most industrial companies, substantially all of the assets and
liabilities of the Corporation are monetary in nature. As a result, interest
rates have a more significant impact on a financial institution's performance
than the effects of general levels of inflation. Interest rates do not
necessarily move in the same direction or in the same magnitude as the prices of
goods and services since such prices are affected by inflation to a larger
extent than interest rates. In the current interest rate environment, liquidity
and the maturity structure of the Corporation's assets and liabilities are
critical to the maintenance of acceptable performance levels.
PROPOSED LEGISLATION
The deposit accounts of the Association and of other savings associations are
insured by the FDIC in the Savings Association Insurance Fund ("SAIF"). The
reserves of the SAIF are presently below the level required by law, because a
significant portion of the assessments paid into the fund are used to pay the
cost of prior thrift failures. The deposit accounts of commercial banks are
insured by the FDIC in the Bank Insurance Fund ("BIF"), except to the extent
such banks have acquired SAIF deposits. The reserves of the BIF met the level
required by law in May 1995. As a result of the respective reserve levels of
the funds, deposit insurance assessments paid by healthy savings associations
exceeded those paid by healthy commercial banks by approximately $.19 per $100
in deposits in 1995. In 1996, no BIF assessments are required for healthy
commercial banks except for a $2,000 minimum fee. A continuation of this
premium disparity could have a negative competitive impact on the Association
and other institutions with SAIF deposits.
Congress is considering legislation to recapitalize the SAIF and eliminate the
significant premium disparity. Currently, that recapitalization plan provides
for a special assessment estimated to range from approximately $.69 to $.71 per
$100 of SAIF deposits held at March 31, 1995, in order to increase SAIF reserves
to the level required by law. In addition, the cost of prior thrift failures
would be shared by both the SAIF and the BIF. This would likely increase BIF
assessments by $.02 to $.025 per $100 in deposits. SAIF assessments would
initially be set at the same level as BIF assessments and could never be reduced
below the level for BIF assessments. These projected assessment levels may
change if commercial banks holding SAIF deposits are provided some relief from
the special assessment or are allowed to transfer SAIF deposits to the BIF.
A component of the recapitalization plan provides for the merger of the SAIF and
BIF on January 1, 1998. However, the SAIF recapitalization legislation
currently provides for an elimination of the thrift charter or the separate
federal regulation of thrifts prior to the merger of the deposit insurance
funds. As a result, the Association would be regulated as a bank under federal
laws which would subject it to the more restrictive activity limits imposed on
national banks. Under separate legislation recently enacted, the Association is
required to recapture, as taxable income, approximately $26,000 of its bad debt
reserve, which represents the post-1987 additions to the reserve, and will be
unable to utilize the percentage of earnings method to compute its reserve in
the future. The Association has provided deferred taxes for this amount and
will be permitted to amortize the recapture of the bad debt reserve over six
years.
17
<PAGE>
PROPOSED LEGISLATION (CONTINUED)
The Association had $70.2 million in deposits at March 31, 1995. If the special
assessment level is finalized at $.71 per $100 in deposits, the Association will
pay an assessment of approximately $500,000. This assessment should be tax
deductible, but it will reduce earnings and capital for the quarter in which it
is recorded.
No assurances can be given that the SAIF recapitalization plan will be enacted
into law or in what form it may be enacted. In addition, the Association can
give no assurances that the disparity between BIF and SAIF assessments will be
eliminated.
IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS
In 1993, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 114, "Accounting by Creditors for
Impairment of a Loan". This promulgation, which was effective for fiscal
years beginning after December 15, 1994, requires that impaired loans be
measured based on the present value of expected future cash flows discounted
at the loan's effective interest rate or, as an alternative, at the loan's
observable market price or fair value of the collateral. Loans which might
be affected are collateral dependent, and the Association's current
procedures for evaluating impaired loans result in carrying such loans at the
lower of cost or fair value. The Corporation adopted SFAS No. 114 on July 1,
1995, as required, without material adverse effect on consolidated financial
position or results of operations.
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation", establishing financial accounting and reporting standards for
stock-based employee compensation plans. SFAS No. 123 encourages all entities
to adopt a new method of accounting to measure compensation cost of all employee
stock compensation plans based on the estimated fair value of the award at the
date it is granted. Companies are, however, allowed to continue to measure
compensation cost for those plans using the intrinsic value based method of
accounting, which generally does not result in compensation expense recognition
for most plans. Companies that elect to remain with the existing accounting are
required to disclose in a footnote to the financial statements pro forma net
earnings and, if presented, earnings per share, as if SFAS No. 123 had been
adopted. The accounting requirements of SFAS No. 123 are effective for
transactions entered into during fiscal years that begin after December 15,
1995; however, companies are required to disclose information for awards granted
in their first fiscal year beginning after December 15, 1994. Management has
determined that the Corporation will continue to account for stock-based
compensation pursuant to Accounting Principles Board Opinion No. 25, and
therefore the disclosure provisions of SFAS No. 123 will have no effect on its
consolidated financial condition or results of operations.
In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers of
Financial Assets, Servicing Rights, and Extinguishment of Liabilities", that
provides accounting guidance on transfers of financial assets, servicing of
financial assets, and extinguishment of liabilities. SFAS No. 125 introduces an
approach to accounting for transfers of financial assets that provides a means
of dealing with more complex transactions in which the seller disposes of only a
partial interest in the assets, retains rights or obligations, makes use of
special purpose entities in the transaction, or otherwise has continuing
involvement with the transferred assets. The new accounting method, the
financial components approach, provides that the carrying
18
<PAGE>
IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)
amount of the financial assets transferred be allocated to components of the
transaction based on their relative fair values. SFAS No. 125 provides criteria
for determining whether control of assets has been relinquished and whether a
sale has occurred. If the transfer does not qualify as a sale, it is accounted
for as a secured borrowing. Transactions subject to the provisions of SFAS No.
125 include, among others, transfers involving repurchase agreements,
securitizations of financial assets, loan participations, factoring
arrangements, and transfers of receivables with recourse.
An entity that undertakes an obligation to service financial assets recognizes
either a servicing asset or liability for the servicing contract (unless related
to a securitization of assets, and all the securitized assets are retained and
classified as held-to-maturity). A servicing asset or liability that is
purchased or assumed is initially recognized at its fair value. Servicing
assets and liabilities are amortized in proportion to and over the period of
estimated net servicing income or net servicing loss and are subject to
subsequent assessments for impairment based on fair value.
SFAS No. 125 provides that a liability is removed from the balance sheet only if
the debtor either pays the creditor and is relieved of its obligation for the
liability or is legally released from being the primary obligor.
SFAS No. 125 is effective for transfers and servicing of financial assets and
extinguishment of liabilities occurring after December 31, 1996, and is to be
applied prospectively. Earlier or retroactive application is not permitted.
Management does not believe that adoption of SFAS No. 125 will have a material
adverse effect on the Corporation's consolidated financial position or results
of operations.
19
<PAGE>
[LETTERHEAD]
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Community Investors Bancorp, Inc.
We have audited the accompanying consolidated statement of financial
condition of Community Investors Bancorp, Inc. and Subsidiary as of June
30, 1996, and the related consolidated statements of earnings,
stockholders' equity, and cash flows for the year then ended. These
consolidated financial statements are the responsibility of the
Corporation's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits. The
consolidated financial statements as of June 30, 1995 and for the years
ended June 30, 1995 and 1994, were audited by other auditors, whose report
thereon dated July 28, 1995, expressed an unqualified opinion on those
statements and included an explanatory paragraph relative to a change in
the method of accounting for certain debt and equity securities.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Community
Investors Bancorp, Inc. and Subsidiary as of June 30, 1996, and the
consolidated results of their operations and their consolidated cash flows
for the year then ended, in conformity with generally accepted accounting
principles.
/s/ Grant Thornton LLP
Cincinnati, Ohio
September 10, 1996
20
<PAGE>
Board of Directors
Community Investors Bancorp., Inc.
Formerly First Federal Savings and Loan Association
of Bucyrus
We have audited the consolidated statements of financial condition of
Community Investors Bancorp., Inc. (formerly First Federal Savings and Loan
Association of Bucyrus) and subsidiary as of June 30, 1995 and 1994, and the
related consolidated statements of income, changes in stockholders' equity
and cash flows for each of the three years in the period ended June 30, 1995.
These financial statements are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Community Investors Bancorp., Inc. (formerly First Federal Savings and
Loan Association of Bucyrus) and subsidiary at June 30, 1995 and 1994, and
the consolidated results of their operations and cash flows for each of the
three years in the period ended June 30, 1995, in conformity with generally
accepted accounting principles.
As discussed in Note 3 to the consolidated financial statements, in 1994
the Corporation changed its method of accounting for investment securities.
ERNST & YOUNG
Toledo, Ohio
July 28, 1995
20-A
<PAGE>
COMMUNITY INVESTORS BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
June 30,
(In thousands, except share data)
<TABLE>
<CAPTION>
ASSETS 1996 1995
-------- ------
<S> <C> <C>
Cash and due from banks $ 1,094 $ 859
Federal funds sold 21 33
Interest-bearing deposits in other financial institutions 794 185
-------- ------
Cash and cash equivalents 1,909 1,077
Investment securities available for sale - at market 6,201 3,840
Investment securities - at amortized cost, approximate
market value of $12,728 and $14,496 as of
June 30, 1996 and 1995 12,891 14,534
Mortgage-backed securities - at amortized cost,
approximate market value of $2,794 and
$3,734 as of June 30, 1996 and 1995 2,783 3,792
Loans receivable - net 66,255 59,872
Property acquired in settlement of loans 81 107
Office premises and equipment - at depreciated cost 525 332
Federal Home Loan Bank stock - at cost 575 537
Accrued interest receivable on loans 66 79
Accrued interest receivable on mortgage-backed securities 19 27
Accrued interest receivable on investments and
interest-bearing deposits 251 312
Prepaid expenses and other assets 109 103
Deferred federal income taxes 122 129
-------- ------
Total assets $91,787 $84,741
-------- ------
-------- ------
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995
-------- -------
<S> <C> <C>
Deposits $69,911 $70,464
Advances from the Federal Home Loan Bank 9,884 1,515
Advances by borrowers for taxes and insurance 6 12
Accrued interest payable 290 316
Other liabilities 156 132
Accrued federal income taxes 54 6
-------- ------
Total liabilities 80,301 72,445
Commitments - -
Stockholders' equity
Preferred stock, 1,000,000 shares authorized, no par value;
no shares issued - -
Common stock, 4,000,000 shares authorized, $.01 par value;
738,146 shares issued 7 7
Additional paid-in capital 6,800 6,785
Retained earnings, restricted 6,796 6,028
Shares acquired by stock benefit plans (995) (561)
Less 71,900 shares of treasury stock - at cost (1,117) -
Unrealized gain (loss) on securities designated as available for sale,
net of related tax effects (5) 37
-------- ------
Total stockholders' equity 11,486 12,296
-------- ------
Total liabilities and stockholders' equity $91,787 $84,741
-------- ------
-------- ------
</TABLE>
The accompanying notes are an integral part of these statements.
22
<PAGE>
COMMUNITY INVESTORS BANCORP, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
For the year ended June 30,
(In thousands, except share data)
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- ------
<S> <C> <C> <C>
Interest income
Loans $5,376 $4,742 $4,425
Mortgage-backed securities 181 233 292
Investment securities 1,132 1,076 803
Interest-bearing deposits and other 81 10 18
------- ------- ------
Total interest income 6,770 6,061 5,538
Interest expense
Deposits 3,497 3,281 2,889
Borrowings 129 104 111
------- ------- ------
Total interest expense 3,626 3,385 3,000
------- ------- ------
Net interest income 3,144 2,676 2,538
Provision for losses on loans 159 160 176
------- ------- ------
Net interest income after provision
for losses on loans 2,985 2,516 2,362
Other income
Gain (loss) on sale of investment securities designated
as available for sale 59 (6) -
Gain (loss) on sale of other repossessed assets (10) 27 -
Other operating 115 110 111
------- ------- ------
Total other income 164 131 111
General, administrative and other expense
Employee compensation and benefits 727 627 592
Occupancy and equipment 105 110 134
Federal deposit insurance premiums 162 159 156
Franchise taxes 115 72 65
Expenses of property acquired in settlement of loans 58 57 73
Data processing 145 120 88
Other operating 493 366 328
------- ------- ------
Total general, administrative and other expense 1,805 1,511 1,436
------- ------- ------
Earnings before income taxes 1,344 1,136 1,037
Federal income taxes
Current 429 375 380
Deferred 29 9 (41)
------- ------- ------
Total federal income taxes 458 384 339
------- ------- ------
NET EARNINGS $ 886 $ 752 $ 698
------- ------- ------
------- ------- ------
EARNINGS PER SHARE $1.32 $.62 N/A
------- ------- ------
------- ------- ------
</TABLE>
The accompanying notes are an integral part of these statements.
23
<PAGE>
COMMUNITY INVESTORS BANCORP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the years ended June 30, 1996, 1995 and 1994
(In thousands, except share data)
<TABLE>
<CAPTION>
UNREALIZED
GAIN (LOSS)
SHARES ON SECURITIES
ADDITIONAL ACQUIRED DESIGNATED
COMMON PAID-IN RETAINED BY STOCK TREASURY AS AVAILABLE
STOCK CAPITAL EARNINGS BENEFIT PLANS SHARES FOR SALE TOTAL
------ ---------- -------- ------------- -------- ------------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at July 1, 1993 $- $ - $4,578 $ - $- $- $4,578
Designation of securities as available for
sale upon adoption of SFAS No. 115, net
of related tax effects - - - - - (14) (14)
Net earnings for the year ended June 30, 1994 - - 698 - - - 698
------ ---------- -------- ------------- -------- ------------- ------
Balance at June 30, 1994 - - 5,276 - - (14) 5,262
Net proceeds from issuance of common stock 7 6,779 - (591) - - 6,195
Net earnings for the year ended June 30, 1995 - - 752 - - - 752
Amortization expense of stock benefit plans - 6 - 30 - - 36
Unrealized gain on securities designated
as available for sale, net of related
tax effects - - - - - 51 51
------ ---------- -------- ------------- -------- ------------- ------
Balance at June 30, 1995 7 6,785 6,028 (561) - 37 12,296
Purchase of shares for recognition and
retention plan - - - (464) - - (464)
Purchase of treasury shares, at cost - - - - (1,117) - (1,117)
Amortization expense of stock benefit plans - 15 - 30 - - 45
Net earnings for the year ended June 30, 1996 - - 886 - - - 886
Cash dividends paid of $.16 per share - - (118) - - - (118)
Unrealized loss on securities designated
as available for sale, net of related
tax effects - - - - - (42) (42)
------ ---------- -------- ------------- -------- ------------- ------
Balance at June 30, 1996 $7 $6,800 $6,796 $(995) $(1,117) $ (5) $11,486
------ ---------- -------- ------------- -------- ------------- ------
------ ---------- -------- ------------- -------- ------------- ------
</TABLE>
The accompanying notes are an integral part of these statements.
24
<PAGE>
COMMUNITY INVESTORS BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the year ended June 30,
(In thousands)
<TABLE>
<CAPTION>
1996 1995 1994
--------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings for the year $ 886 $ 752 $ 698
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Amortization of discounts and premiums on loans,
investments and mortgage-backed securities - net (49) 17 (16)
Amortization of deferred loan origination fees (54) (38) (35)
Depreciation and amortization 39 34 27
Provision for losses on loans 159 160 176
Amortization expense of stock benefit plans 45 36 -
Gain (loss) on sale of other repossessed assets 10 (27) -
Federal Home Loan Bank stock dividends (38) (33) (24)
Increase (decrease) in cash due to changes in:
Accrued interest receivable on loans 13 (11) 5
Accrued interest receivable on mortgage-backed securities 8 4 (4)
Accrued interest receivable on investments and
interest-bearing deposits 61 (89) (60)
Prepaid expenses and other assets (6) (20) 10
Accrued interest payable (26) 144 (22)
Other liabilities 24 - -
Federal income taxes
Current 48 5 (42)
Deferred 29 9 (41)
--------- -------- --------
Net cash provided by operating activities 1,149 907 672
Cash flows provided by (used in) investing activities:
Proceeds from maturity of investment securities 9,257 2,761 6,255
Proceeds from sale of available-for-sale securities 224 638 -
Purchase of investment securities designated as available for sale (5,000) (3,197) -
Purchase of investment securities designated as held to maturity (5,100) (5,901) (5,333)
Principal repayments on mortgage-backed securities 1,009 749 258
Purchase of loans (672) - (150)
Loan principal repayments 10,701 10,550 14,946
Loan disbursements (16,906) (14,786) (17,917)
Purchase of office premises and equipment (232) (30) (30)
Proceeds from sale of other repossessed assets 291 377 176
--------- -------- --------
Net cash used in investing activities (6,428) (8,839) (1,795)
--------- -------- --------
Net cash used in operating and investing
activities (subtotal carried forward) (5,279) (7,932) (1,123)
--------- -------- --------
--------- -------- --------
</TABLE>
25
<PAGE>
COMMUNITY INVESTORS BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
For the year ended June 30,
<TABLE>
<CAPTION>
1996 1995 1994
--------- -------- --------
<S> <C> <C> <C>
Net cash used in operating and investing activities
(subtotal brought forward) $(5,279) $(7,932) $(1,123)
Cash flows provided by financing activities:
Net increase (decrease) in deposit accounts (553) 1,727 1,161
Net proceeds from the issuance of common stock - 6,786 -
Purchase of shares for management recognition plan (464) (591) -
Purchase of treasury stock (1,117) - -
Proceeds from Federal Home Loan Bank advances 8,950 - -
Repayment of Federal Home Loan Bank advances (581) (75) (173)
Advances by borrowers for taxes and insurance (6) - -
Dividends on common stock (118) - -
--------- -------- --------
Net cash provided by financing activities 6,111 7,847 988
--------- -------- --------
Net increase (decrease) in cash and cash equivalents 832 (85) (135)
Cash and cash equivalents at beginning of year 1,077 1,162 1,297
--------- -------- --------
Cash and cash equivalents at end of year $ 1,909 $ 1,077 $ 1,162
--------- -------- --------
--------- -------- --------
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Federal income taxes $ 400 $ 345 $ 500
--------- -------- --------
--------- -------- --------
Interest on deposits and borrowings $ 3,652 $ 3,248 $ 3,031
--------- -------- --------
--------- -------- --------
Supplemental disclosure of noncash investing activities:
Transfers from loans to other repossessed assets $ 275 $ 306 $ 482
--------- -------- --------
--------- -------- --------
Transfers of investments to an available for sale
classification $ - $ - $ 1,230
--------- -------- --------
--------- -------- --------
Unrealized gain (loss) on securities designated as available
for sale, net of related tax effects $ (42) $ 51 $ (14)
--------- -------- --------
--------- -------- --------
</TABLE>
The accompanying notes are an integral part of these statements.
26
<PAGE>
COMMUNITY INVESTORS BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996, 1995 and 1994
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
During fiscal 1995, the Board of Directors of First Federal Savings and
Loan Association of Bucyrus (the Association) adopted a plan of conversion
(the Plan) whereby the Association would convert to the stock form of
ownership (the Conversion), followed by the issuance of all of the
Association's outstanding stock to a newly formed holding company,
Community Investors Bancorp, Inc. (the Corporation), and the issuance of
common shares of the Corporation to subscribing members of the Association.
The conversion to the stock form of ownership was completed on February 6,
1995, culminating in the Corporation's issuance of 738,146 common shares.
Condensed financial statements of the Corporation as of and for the periods
ended June 30, 1996 and 1995 are presented in Note L. Future references
are made to either the Corporation or the Association as applicable.
The Corporation is a savings and loan holding company whose activities are
primarily limited to holding the stock of the Association. The Association
conducts a general banking business in northcentral Ohio which consists of
attracting deposits from the general public and applying those funds to the
origination of loans for residential, consumer and nonresidential purposes.
The Association's profitability is significantly dependent on net interest
income, which is the difference between interest income generated from
interest-earning assets (i.e. loans and investments) and the interest
expense paid on interest-bearing liabilities (i.e. customer deposits and
borrowed funds). Net interest income is affected by the relative amount of
interest-earning assets and interest-bearing liabilities and the interest
received or paid on these balances. The level of interest rates paid or
received by the Association can be significantly influenced by a number of
environmental factors, such as governmental monetary policy, that are
outside of management's control.
The consolidated financial information presented herein has been prepared
in accordance with generally accepted accounting principles (GAAP) and
general accounting practices within the financial services industry. In
preparing consolidated financial statements in accordance with GAAP,
management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements and revenues
and expenses during the reporting period. Actual results could differ from
such estimates.
The following is a summary of the Corporation's significant accounting
policies which have been consistently applied in the preparation of the
accompanying consolidated financial statements.
1. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the
Corporation and the Association. All significant intercompany balances and
transactions have been eliminated.
27
<PAGE>
COMMUNITY INVESTORS BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
June 30, 1996, 1995 and 1994
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2. INVESTMENT SECURITIES AND MORTGAGE-BACKED SECURITIES
Prior to June 30, 1994, investment securities and mortgage-backed
securities were carried at cost, adjusted for amortization of premiums and
accretion of discounts. The investments and mortgage-backed securities
were carried at cost, as it was management's intent and the Association had
the ability to hold the securities until maturity. Investment securities
and mortgage-backed securities held for indefinite periods of time, or
which management utilized as part of its asset/liability management
strategy, or that would be sold in response to changes in interest rates,
prepayment risk, or the perceived need to increase regulatory capital were
classified as held for sale at the point of purchase and carried at the
lower of cost or market.
In May 1993, the Financial Accounting Standards Board (the FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 115 "Accounting for
Certain Investments in Debt and Equity Securities". SFAS No. 115 requires
that investments in debt and equity securities be categorized as
held-to-maturity, trading, or available for sale. Securities classified as
held-to-maturity are to be carried at cost only if the Corporation has the
positive intent and ability to hold these securities to maturity. Trading
securities and securities designated as available for sale are carried at
fair value with resulting unrealized gains or losses recorded to operations
or stockholders' equity, respectively. The Association adopted SFAS No.
115 as of June 30, 1994. The initial effect of adoption was to decrease
retained earnings by approximately $14,000, representing the unrealized
market value decline on securities designated as available for sale, net of
applicable tax effects. At June 30, 1996 and 1995, the Corporation's
stockholders' equity reflected a net unrealized loss totaling $5,000 and a
net unrealized gain of $51,000, respectively.
Realized gains or losses on sales of securities are recognized using the
specific identification method.
3. LOANS RECEIVABLE
Loans receivable are stated at the principal amount outstanding, adjusted
for deferred loan origination fees and the allowance for loan losses.
Interest is accrued as earned unless the collectibility of the loan is in
doubt. Interest on loans that are contractually past due is charged off,
or an allowance is established based on management's periodic evaluation.
The allowance is established by a charge to interest income equal to all
interest previously accrued, and income is subsequently recognized only to
the extent that cash payments are received until, in management's judgment,
the borrower's ability to make periodic interest and principal payments has
returned to normal, in which case the loan is returned to accrual status.
If the ultimate collectibility of the loan is in doubt, in whole or in
part, all payments received on nonaccrual loans are applied to reduce
principal until such doubt is eliminated.
28
<PAGE>
COMMUNITY INVESTORS BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
June 30, 1996, 1995 and 1994
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
4. LOAN ORIGINATION FEES
The Association accounts for loan origination fees in accordance with SFAS
No. 91 "Accounting for Nonrefundable Fees and Costs Associated with
Originating or Acquiring Loans and Initial Direct Cost of Leases".
Pursuant to the provisions of SFAS No. 91, origination fees received from
loans, net of direct origination costs, are deferred and amortized to
interest income using the level-yield method, giving effect to actual loan
prepayments. Additionally, SFAS No. 91 generally limits the definition of
loan origination costs to the direct costs attributable to originating a
loan, i.e., principally actual personnel costs. Fees received for loan
commitments that are expected to be drawn upon, based on the Association's
experience with similar commitments, are deferred and amortized over the
life of the loan using the level-yield method. Fees for other loan
commitments are deferred and amortized over the loan commitment period on a
straight-line basis.
5. ALLOWANCE FOR LOSSES ON LOANS
It is the Association's policy to provide valuation allowances for
estimated losses on loans based on past loss experience, trends in the
level of delinquent and problem loans, adverse situations that may affect
the borrower's ability to repay, the estimated value of any underlying
collateral and current and anticipated economic conditions in the primary
lending area. When the collection of a loan becomes doubtful, or otherwise
troubled, the Association records a loan valuation allowance equal to the
difference between the fair value of the property securing the loan and the
loan's carrying value. Major loans (including development projects) and
major lending areas are reviewed periodically to determine potential
problems at an early date. The allowance for loan losses is increased by
charges to earnings and decreased by charge-offs (net of recoveries).
In June 1993, the FASB issued SFAS No. 114, "Accounting by Creditors for
Impairment of a Loan". SFAS No. 114 requires that impaired loans be
measured based upon the present value of expected future cash flows
discounted at the loan's effective interest rate or, as an alternative, at
the loan's observable market price or fair value of the collateral. The
Association's current procedures for evaluating impaired loans result in
carrying such loans at the lower of cost or fair value.
The Association adopted SFAS No. 114, as subsequently amended, on July 1,
1995, as required, without material effect on consolidated financial
condition or results of operations.
A loan is defined under SFAS No. 114 as impaired when, based on current
information and events, it is probable that a creditor will be unable to
collect all amounts due according to the contractual terms of the loan
agreement. In applying the provisions of SFAS No. 114, the Association
considers its investment in one-to-four family residential loans and
consumer installment loans to be homogeneous and therefore excluded from
separate identification for evaluation of impairment. With respect to the
Association's investment in impaired multi-family and nonresidential loans,
such loans are collateral dependent and as a result are carried as a
practical expedient at the lower of cost or fair value.
29
<PAGE>
COMMUNITY INVESTORS BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
June 30, 1996, 1995 and 1994
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
5. ALLOWANCE FOR LOSSES ON LOANS (continued)
It is the Association's policy to charge off unsecured credits that are
more than ninety days delinquent. Similarly, collateral dependent loans
which are more than ninety days delinquent are considered to constitute
more than a minimum delay in repayment and are evaluated for impairment
under SFAS No. 114 at that time.
At June 30, 1996, the Association had no loans that would be defined as
impaired under SFAS No. 114.
6. OFFICE PREMISES AND EQUIPMENT
Office premises and equipment are carried at cost and include expenditures
which extend the useful lives of existing assets. Maintenance, repairs and
minor renewals are expensed as incurred. For financial reporting,
depreciation and amortization are provided on the straight-line method over
the useful lives of the assets, estimated to be up to fifty years for
buildings, five to fifty years for building improvements, and five to
twenty years for furniture and equipment. An accelerated method is used
for tax reporting purposes.
7. PROPERTY ACQUIRED IN SETTLEMENT OF LOANS
Property acquired in settlement of loans is carried at the lower of the
loan's unpaid principal balance (cost) or fair value less estimated selling
expenses at the date of acquisition. Loss provisions are recorded if the
properties' fair value subsequently declines below the amount determined at
the recording date. In determining the lower of cost or fair value at
acquisition, costs relating to development and improvement of property are
capitalized. Costs relating to holding property acquired through
foreclosure, net of rental income, are charged against earnings as
incurred.
8. FEDERAL INCOME TAXES
The Corporation accounts for federal income taxes in accordance with the
provisions of SFAS No. 109, "Accounting for Income Taxes". SFAS No. 109
established financial accounting and reporting standards for the effects of
income taxes that result from the Corporation's activities within the
current and previous years. Pursuant to the provisions of SFAS No. 109, a
deferred tax liability or deferred tax asset is computed by applying the
current statutory tax rates to net taxable or deductible differences
between the tax basis of an asset or liability and its reported amount in
the financial statements that will result in taxable or deductible amounts
in future periods. Deferred tax assets are recorded only to the extent
that the amount of net deductible temporary differences or carryforward
attributes may be utilized against current
30
<PAGE>
COMMUNITY INVESTORS BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
June 30, 1996, 1995 and 1994
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
8. FEDERAL INCOME TAXES (continued)
period earnings, carried back against prior years earnings, offset against
taxable temporary differences reversing in future periods, or utilized to
the extent of management's estimate of future taxable income. A valuation
allowance is provided for deferred tax assets to the extent that the value
of net deductible temporary differences and carryforward attributes exceeds
management's estimates of taxes payable on future taxable income. Deferred
tax liabilities are provided on the total amount of net temporary
differences taxable in the future.
The Corporation's principal temporary differences between pretax financial
income and taxable income result from different methods of accounting for
deferred loan origination fees and costs, Federal Home Loan Bank stock
dividends, the general loan loss allowance and percentage of earnings bad
debt deductions. Additional temporary differences result from depreciation
computed using accelerated methods for tax purposes.
9. RETIREMENT PLANS AND STOCK OPTION PLANS
In conjunction with its common stock offering, the Corporation implemented
an Employee Stock Ownership Plan (ESOP). The ESOP provides retirement
benefits for substantially all full-time employees who have completed one
year of service and have attained the age of 21. Expense recognized
related to the plan totaled approximately $86,000 and $35,000 for the years
ended June 30, 1996 and 1995, respectively.
During fiscal 1995, the Corporation implemented Statement of Position 93-6,
"Employers' Accounting for Employee Stock Ownership Plans". SOP 93-6
changes the measure of compensation expense recorded by employers from the
cost of allocated ESOP shares to the fair value of ESOP shares allocated to
participants during a fiscal year. Adoption of SOP 93-6 resulted in a
$43,000 and $6,000 increase in compensation expense recorded for the fiscal
years ended June 30, 1996 and 1995, respectively, from the amount computed
under the prior accounting method.
The Corporation also has a Management Recognition Plan (MRP). Subsequent
to the offering the MRP purchased 29,525 shares of the common stock in the
open market. A total of 14,580 shares available under the plan were
granted to executive officers of the Corporation effective upon
consummation of the offering, leaving 14,945 shares available for
allocation. Common stock granted under the MRP vests ratably over a five
year period, commencing in November 1995. A provision of $27,000 related
to the MRP was charged to expense for the year ended June 30, 1996.
31
<PAGE>
COMMUNITY INVESTORS BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
June 30, 1996, 1995 and 1994
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
9. RETIREMENT PLANS AND STOCK OPTION PLANS (continued)
Also, the Board of Directors adopted a Stock Option Plan that provided for
the issuance of 73,815 shares of authorized, but unissued shares of common
stock at fair market value at the date of grant. During fiscal 1996, the
Corporation granted options to purchase 18,450 shares to members of the
Board of Directors at an option price of $16.50 per share, and the
Corporation granted 23,800 shares to certain employees at an option price
of $14.88 per share. As of June 30, 1996, none of the stock options
granted had been exercised.
10. EARNINGS PER SHARE
Primary earnings per share for the year ended June 30, 1996 is based upon
the weighted-average shares outstanding during the period plus those stock
options that are dilutive, less shares in the ESOP that are unallocated and
not committed to be released. Weighted-average common shares deemed
outstanding totaled 671,417 and 680,597 for the years ended June 30, 1996
and 1995, respectively.
The provisions of Accounting Principles Board Opinion No. 15 "Earnings Per
Share" are not applicable to the fiscal years ended June 30, 1994, as the
Corporation completed its conversion from mutual to stock form in February
1995.
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments",
requires disclosure of the fair value of financial instruments, both assets
and liabilities whether or not recognized in the consolidated statement of
financial condition, for which it is practicable to estimate that value.
For financial instruments where quoted market prices are not available,
fair values are based on estimates using present value and other valuation
methods.
The methods used are greatly affected by the assumptions applied, including
the discount rate and estimates of future cash flows. Therefore, the fair
values presented may not represent amounts that could be realized in an
exchange for certain financial instruments.
The following methods and assumptions were used by the Corporation in
estimating its fair value disclosures for financial instruments at June 30,
1996:
CASH AND CASH EQUIVALENTS: The carrying amounts presented in the
consolidated statement of financial condition for cash and cash
equivalents are deemed to approximate fair value.
32
<PAGE>
COMMUNITY INVESTORS BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
June 30, 1996, 1995 and 1994
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
11. FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)
INVESTMENT AND MORTGAGE-BACKED SECURITIES: For investment and
mortgage-backed securities, fair value is deemed to equal the quoted
market price.
LOANS RECEIVABLE: The loan portfolio has been segregated into
categories with similar characteristics, such as one-to-four family
residential, multi-family residential and nonresidential real estate.
These loan categories were further delineated into fixed-rate and
adjustable-rate loans. The fair values for the resultant loan
categories were computed via discounted cash flow analysis, using
current interest rates offered for loans with similar terms to
borrowers of similar credit quality. For loans on deposit accounts
and consumer and other loans, fair values were deemed to equal the
historic carrying values. The historical carrying amount of accrued
interest on loans is deemed to approximate fair value.
FEDERAL HOME LOAN BANK STOCK: The carrying amount presented in the
consolidated statement of financial condition is deemed to
approximate fair value.
DEPOSITS: The fair value of NOW accounts and passbook accounts is
deemed to approximate the amount payable on demand. Fair values for
fixed-rate certificates of deposit have been estimated using a
discounted cash flow calculation using the interest rates currently
offered for deposits of similar remaining maturities.
ADVANCES FROM FEDERAL HOME LOAN BANK: The fair value of these
advances is estimated using the rates currently offered for similar
advances of similar remaining maturities or, when available, quoted
market prices.
COMMITMENTS TO EXTEND CREDIT: For fixed-rate and adjustable-rate loan
commitments, the fair value estimate considers the difference between
current levels of interest rates and committed rates. The difference
between the fair value and notional amount of outstanding loan
commitments at June 30, 1996 was not material.
33
<PAGE>
COMMUNITY INVESTORS BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
June 30, 1996, 1995 and 1994
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
11. FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)
Based on the foregoing methods and assumptions, the carrying value and fair
value of the Corporation's financial instruments at June 30, 1996, are as
follows:
CARRYING FAIR
VALUE VALUE
(In thousands)
Financial assets
Cash and cash equivalents $ 1,909 $ 1,909
Investment securities 19,092 18,929
Mortgage-backed securities 2,783 2,794
Loans receivable 66,255 68,736
Stock in Federal Home Loan Bank 575 575
------- -------
$90,614 $92,943
------- -------
------- -------
Financial liabilities
Deposits $69,911 $70,340
Advances from the Federal Home Loan Bank 9,884 9,951
Advances by borrowers for taxes and insurance 6 6
------- -------
$79,801 $80,297
------- -------
------- -------
12. CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, cash and cash equivalents include cash
and due from banks, federal funds sold and interest-bearing deposits due from
other financial institutions with original maturities of less than ninety
days.
13. RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the 1996
consolidated financial statement presentation.
34
<PAGE>
COMMUNITY INVESTORS BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
June 30, 1996, 1995 and 1994
NOTE B - INVESTMENTS AND MORTGAGE-BACKED SECURITIES
Carrying values and approximate market values of investment securities held
to maturity at June 30 are summarized as follows:
1996 1995
CARRYING MARKET CARRYING MARKET
VALUE VALUE VALUE VALUE
(In thousands)
U. S. Government and
agency obligations $12,610 $12,447 $14,498 $14,460
Municipal obligations 281 281 36 36
------- ------- ------- -------
$12,891 $12,728 $14,534 $14,496
------- ------- ------- -------
------- ------- ------- -------
At June 30, 1996, the market value decline of the Corporation's investment
securities below cost carrying value totaled $163,000, consisting of $48,000
in gross unrealized gains and $211,000 in gross unrealized losses. At June
30, 1995, the market value decline of the Corporation's investment securities
below cost carrying value totaled $38,000, consisting of $110,000 in gross
unrealized gains and $148,000 in gross unrealized losses.
The amortized cost, gross unrealized gains, gross unrealized losses, and
market values of investment securities designated as available for sale at
June 30, are summarized as follows:
1996
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
(In thousands)
U.S. Government and
agency obligations $5,721 $ 8 $ - $5,729
Mutual funds 488 - 16 472
------ ----- ------ ------
$6,209 $ 8 $ 16 $6,201
------ ----- ------ ------
------ ----- ------ ------
1995
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
(In thousands)
U.S. Government and
agency obligations $3,115 $ 48 $ - $3,163
Mutual funds 488 - 15 473
FNMA stock 165 24 - 189
Other 15 - - 15
------ ----- ------ ------
$3,783 $ 72 $ 15 $3,840
------ ----- ------ ------
------ ----- ------ ------
35
<PAGE>
COMMUNITY INVESTORS BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
June 30, 1996, 1995 and 1994
NOTE B - INVESTMENTS AND MORTGAGE-BACKED SECURITIES (continued)
The amortized cost and market value of U.S. Government agency and municipal
obligations designated as held to maturity, by contractual term to maturity
at June 30 are shown below:
1996 1995
AMORTIZED MARKET AMORTIZED MARKET
COST VALUE COST VALUE
(In thousands)
Due in three years or less $ 5,868 $ 5,831 $ 5,394 $ 5,380
Due after three years through
five years 2,427 2,422 6,039 6,021
Due after five years 4,596 4,475 3,101 3,095
------- ------- ------- -------
$12,891 $12,728 $14,534 $14,496
------- ------- ------- -------
------- ------- ------- -------
The amortized cost and market value of U.S. Government and agency
securities, designated as available for sale, by contractual terms to
maturity at June 30 are shown below:
1996 1995
AMORTIZED MARKET AMORTIZED MARKET
COST VALUE COST VALUE
(In thousands)
Due in three years or less $5,220 $5,221 $2,615 $2,661
Due after three years through
five years 501 508 500 502
------- ------- ------- -------
$5,721 $5,729 $3,115 $3,163
------- ------- ------- -------
------- ------- ------- -------
The amortized cost, gross unrealized gains, gross unrealized losses and
market values of mortgage-backed securities at June 30, 1996 and 1995 are
summarized as follows:
1996
GROSS GROSS
AMORTIZED UNREALIZED NREALIZED MARKET
COST GAINS LOSSES VALUE
HELD TO MATURITY: (In thousands)
Federal Home Loan
Mortgage Corporation
participation certificates $ 942 $ 13 $ 1 $ 954
Government National
Mortgage Association
participation certificates 576 34 - 610
Federal National
Mortgage Association
participation certificates 1,265 14 49 1,230
------- ---- ---- -------
Total mortgage-backed
securities $2,783 $ 61 $ 50 $2,794
------- ---- ---- -------
------- ---- ---- -------
36
<PAGE>
COMMUNITY INVESTORS BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
June 30, 1996, 1995 and 1994
NOTE B - INVESTMENTS AND MORTGAGE-BACKED SECURITIES (continued)
1995
GROSS GROSS
AMORTIZED UNREALIZED NREALIZED MARKET
COST GAINS LOSSES VALUE
HELD TO MATURITY: (In thousands)
Federal Home Loan
Mortgage Corporation
participation certificates $2,214 $ 21 $ 81 $ 2,154
Government National
Mortgage Association
participation certificates 722 33 - 755
Federal National
Mortgage Association
participation certificates 856 19 50 825
------- ---- ---- -------
Total mortgage-backed
securities $3,792 $ 73 $131 $ 3,734
------- ---- ---- -------
------- ---- ---- -------
The amortized cost of mortgage-backed securities, by contractual terms to
maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers may generally prepay obligations
without prepayment penalties.
JUNE 30,
1996 1995
(In thousands)
Due within three years $ 142 $ 194
Due in three to five years 112 153
Due in five to ten years 355 484
Due in ten to twenty years 1,200 1,635
Due after twenty years 974 1,326
------ ------
$2,783 $3,792
------ ------
------ ------
37
<PAGE>
COMMUNITY INVESTORS BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
June 30, 1996, 1995 and 1994
NOTE C - LOANS RECEIVABLE
The composition of the loan portfolio at June 30 is as follows:
1996 1995
(In thousands)
Residential real estate
One-to-four family $52,356 $48,766
Multi-family 1,007 743
Construction 2,438 414
Nonresidential real estate and land 4,166 3,949
Mobile home loans 3,535 3,941
Consumer and other 4,480 3,179
------- -------
67,982 60,992
Less:
Undisbursed portion of loans in process 939 435
Deferred loan origination fees 329 286
Allowance for loan losses 459 399
------- ------
$66,255 $59,872
------- -------
------- -------
The Association's lending efforts have historically focused on one-to-four
family and multi-family residential real estate loans, which comprise
approximately $54.1 million, or 82%, of the total loan portfolio at June 30,
1996 and $48.8 million, or 82%, of the total loan portfolio at June 30, 1995.
Generally, such loans have been underwritten on the basis of no more than an
80% loan-to-value ratio, which has historically provided the Association with
adequate collateral coverage in the event of default. Nevertheless, the
Association, as with any lending institution, is subject to the risk that
real estate values could deteriorate in its primary lending area of
northcentral Ohio, thereby impairing collateral values. However, management
is of the belief that residential real estate values in the Association's
primary lending area are presently stable.
In the normal course of business, the Association has made loans to some of
its directors, officers and employees. Related party loans are made on
substantially the same terms, including interest rates and collateral, as
those prevailing at the time for comparable transactions with unrelated
persons and do not involve more than the normal risk of collectibility. The
aggregate dollar amount of loans outstanding to directors and officers
totaled approximately $736,000 and $377,000 at June 30, 1996 and 1995,
respectively.
38
<PAGE>
COMMUNITY INVESTORS BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
June 30, 1996, 1995 and 1994
NOTE D - ALLOWANCE FOR LOAN LOSSES
The activity in the allowance for loan losses is summarized as follows for
the years ended June 30:
1996 1995 1994
(In thousands)
Balance at beginning of year $399 $393 $458
Provision for loan losses 159 160 176
Charge-offs of loans (102) (173) (249)
Recoveries 3 19 8
---- ---- ----
Balance at end of year $459 $399 $393
---- ---- ----
---- ---- ----
As of June 30, 1996, the Association's allowance for loan losses was
comprised of a general loss allowance of $395,000, which is includible as a
component of regulatory risk-based capital and a specific loss allowance of
$64,000.
Nonperforming and nonaccrual loans for which interest has been reduced
totaled approximately $636,000, $366,000 and $431,000 at June 30, 1996, 1995
and 1994, respectively.
During the years ended June 30, 1996, 1995 and 1994, interest income of
approximately $22,000, $18,000 and $6,000, respectively, would have been
recognized had nonperforming loans been performing in accordance with
contractual terms.
NOTE E - OFFICE PREMISES AND EQUIPMENT
Office premises and equipment at June 30 are comprised of the following:
1996 1995
(In thousands)
Land and improvements $ 69 $ 69
Office buildings and improvements 417 411
Furniture, fixtures and equipment 545 322
------ ----
1,031 802
Less accumulated depreciation and
amortization 506 470
------ ----
$ 525 $332
------ ----
------ ----
39
<PAGE>
COMMUNITY INVESTORS BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
June 30, 1996, 1995 and 1994
NOTE F - DEPOSITS
Deposits consist of the following major classifications at June 30:
DEPOSIT TYPE AND WEIGHTED-
AVERAGE INTEREST RATE 1996 1995
(In thousands)
NOW accounts
1996 - 2.42% $ 6,173
1995 - 3.20% $ 6,378
Passbook
1996 - 3.25% 14,951
1995 - 3.75% 15,378
------- -------
Total demand, transaction and
passbook deposits 21,124 21,756
Certificates of deposit
Original maturities of:
Less than 12 months
1996 - 4.80% 7,664
1995 - 5.36% 7,511
12 months to 24 months
1996 - 5.44% 22,382
1995 - 5.65% 23,032
30 months to 36 months
1996 - 5.78% 3,697
1995 - 5.33% 3,426
More than 36 months
1996 - 6.21% 2,190
1995 - 6.32% 1,992
Individual retirement accounts
1996 - 5.50% 12,854
1995 - 6.00% 12,747
------- -------
Total certificates of deposit 48,787 48,708
------- -------
Total deposit accounts $69,911 $70,464
------- -------
------- -------
40
<PAGE>
COMMUNITY INVESTORS BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
June 30, 1996, 1995 and 1994
NOTE F - DEPOSITS (continued)
Interest expense on deposits for the year ended June 30 is summarized as
follows:
1996 1995 1994
(In thousands)
Passbook $ 544 $ 614 $ 603
NOW accounts 180 213 198
Certificates of deposit 2,773 2,454 2,088
----- ----- -----
$3,497 $3,281 $2,889
------ ------ ------
------ ------ ------
Maturities of outstanding certificates of deposit at June 30 are summarized
as follows:
1996 1995
(In thousands)
Less than one year $37,378 $38,940
One to three years 10,291 8,511
Over three years 1,118 1,257
------- -------
$48,787 $48,708
------- -------
------- -------
NOTE G - ADVANCES FROM THE FEDERAL HOME LOAN BANK
Advances from the Federal Home Loan Bank, collateralized at June 30, 1996
by pledges of certain residential mortgage loans totaling $14.8 million,
and the Association's investment in Federal Home Loan Bank stock, are
summarized as follows:
MATURING YEAR
INTEREST RATE ENDING JUNE 30, 1996 1995
(In thousands)
5.06 - 6.15% 1997 $8,450 $ -
6.20 - 7.05% 2008 1,434 1,515
------ ------
$9,884 $1,515
------ ------
------ ------
Weighted-average interest rate 6.01% 6.69%
------ ------
------ ------
41
<PAGE>
COMMUNITY INVESTORS BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
June 30, 1996, 1995 and 1994
NOTE H - FEDERAL INCOME TAXES
Federal income taxes differ from the amounts computed at the statutory
corporate tax rate as follows:
<TABLE>
<CAPTION>
JUNE 30,
1996 1995 1994
(In thousands)
<S> <C> <C> <C>
Federal income taxes computed at
statutory rate $457 $386 $353
Increase (decrease) in taxes resulting from:
Other 1 (2) (14)
------ ------ ------
Federal income tax provision per consolidated
statements of earnings $458 $384 $339
------ ------ ------
------ ------ ------
</TABLE>
The composition of the Corporation's net deferred tax asset at June 30 is
as follows:
1996 1995
(In thousands)
Taxes (payable) refundable on temporary
differences at estimated corporate tax rate:
Deferred tax assets:
General loan loss allowance $134 $120
Deferred loan origination fees 81 108
Unrealized loss on securities designated as
available for sale 3 -
Other 9 12
------ ------
Total deferred tax assets 227 240
Deferred tax liabilities:
Percentage of earnings bad debt deduction (9) (9)
Federal Home Loan Bank stock dividends (96) (83)
Unrealized gain on securities designated as
available for sale - (19)
------ ------
Total deferred tax liabilities (105) (111)
------ ------
Net deferred tax asset $122 $129
------ ------
------ ------
42
<PAGE>
COMMUNITY INVESTORS BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
June 30, 1996, 1995 and 1994
NOTE H - FEDERAL INCOME TAXES (continued)
The Association is allowed a special bad debt deduction, generally limited to
8% of otherwise taxable income, and subject to certain limitations based on
aggregate loans and deposit account balances at the end of the year. If the
amounts that qualify as deductions for federal income taxes are later used
for purposes other than bad debt losses, including distributions in
liquidation, such distributions will be subject to federal income taxes at
the then current corporate income tax rate. Retained earnings at June 30,
1996 include approximately $1.2 million for which federal income taxes have
not been provided. The approximate amount of unrecognized deferred tax
liability relating to the cumulative bad debt deduction was $400,000 at June
30, 1996.
NOTE I - LOAN COMMITMENTS
The Association is a party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs of their
customers including commitments to extend credit. Such commitments involve,
to varying degrees, elements of credit and interest-rate risk in excess of
the amount recognized in the consolidated statement of financial condition.
The contract or notional amounts of the commitments reflect the extent of the
Association's involvement in such financial instruments.
The Association's exposure to credit loss in the event of nonperformance by
the other party to the financial instrument for commitments to extend credit
is represented by the contractual notional amount of those instruments. The
Association uses the same credit policies in making commitments and
conditional obligations as those utilized for on-balance-sheet instruments.
At June 30, 1996, the Association had outstanding commitments of
approximately $7.6 million to originate loans. Additionally, the Association
was obligated under unused lines of credit totaling $213,000. In the opinion
of management all loan commitments equaled or exceeded prevalent market
interest rates as of June 30, 1996, and will be funded from normal cash flow
from operations.
43
<PAGE>
COMMUNITY INVESTORS BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
June 30, 1996, 1995 and 1994
NOTE J - STOCKHOLDERS' EQUITY AND REGULATORY CAPITAL
The Association is subject to minimum regulatory capital requirements
promulgated by the Office of Thrift Supervision (OTS). Such minimum capital
standards generally require the maintenance of regulatory capital sufficient
to meet each of three tests, hereinafter described as the tangible capital
requirement, the core capital requirement and the risk-based capital
requirement. The tangible capital requirement provides for minimum tangible
capital (defined as stockholders' equity less all intangible assets) equal to
1.5% of adjusted total assets. The core capital requirement provides for
minimum core capital (tangible capital plus certain forms of supervisory
goodwill and other qualifying intangible assets such as capitalized mortgage
servicing rights) equal to 3.0% of adjusted total assets. A recent OTS
proposal, if adopted in present form, would increase the core capital
requirement to a range of 4% - 5% of adjusted total assets for substantially
all savings institutions. Management anticipates no material change to the
Association's present excess regulatory capital position as a result of this
change in the regulatory capital requirement. The risk-based capital
requirement provides for the maintenance of core capital plus general loss
allowances equal to 8.0% of risk-weighted assets. In computing risk-weighted
assets, the Association multiplies the value of each asset on its statement
of financial condition by a defined risk-weighting factor, e.g., one-to-four
family residential loans carry a risk-weighted factor of 50%.
As of June 30, 1996, the Association's regulatory capital exceeded all
minimum regulatory capital requirements as shown in the following table:
<TABLE>
<CAPTION>
REGULATORY CAPITAL
TANGIBLE CORE RISK-BASED
CAPITAL PERCENT CAPITAL PERCENT CAPITAL PERCENT
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Capital under generally accepted
accounting principles $9,694 $9,694 $9,694
Unrealized losses on securities
designated as available for sale 10 10 10
Additional capital items
General valuation
allowances - - 395
------- ------ ---------
Regulatory capital computed 9,704 10.7 9,704 10.7 10,099 20.2
Minimum capital requirement 1,359 1.5 2,718 3.0 4,006 8.0
------- ----- ------ ---- --------- -------
Regulatory capital - excess $8,345 9.2 $6,986 7.7 $6,093 12.2
------- ----- ------ ---- --------- -------
------- ----- ------ ---- --------- -------
</TABLE>
44
<PAGE>
COMMUNITY INVESTORS BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
June 30, 1996, 1995 and 1994
NOTE J - STOCKHOLDERS' EQUITY AND REGULATORY CAPITAL (continued)
The deposit accounts of the Association and of other savings associations are
insured by the FDIC in the Savings Association Insurance Fund ("SAIF"). The
reserves of the SAIF are below the level required by law, because a
significant portion of the assessments paid into the fund are used to pay the
cost of prior thrift failures. The deposit accounts of commercial banks are
insured by the FDIC in the Bank Insurance Fund ("BIF"), except to the extent
such banks have acquired SAIF deposits. The reserves of the BIF met the
level required by law in May 1995. As a result of the respective reserve
levels of the funds, deposit insurance assessments paid by healthy savings
associations exceeded those paid by healthy commercial banks by approximately
$.19 per $100 in deposits in 1995. In 1996, no BIF assessments are required
for healthy commercial banks except for a $2,000 minimum fee. A continuation
of this premium disparity could have a negative competitive impact on the
Association and other institutions with SAIF deposits.
Congress is considering legislation to recapitalize the SAIF and eliminate
the significant premium disparity. Currently, that recapitalization plan
provides for a special assessment ranging from approximately $.69 to $.71 per
$100 of SAIF deposits held at March 31, 1995, in order to increase SAIF
reserves to the level required by law. In addition, the cost of prior thrift
failures would be shared by both the SAIF and the BIF. This would likely
increase BIF assessments by $.02 to $.025 per $100 in deposits. SAIF
assessments would initially be set at the same level as BIF assessments and
could never be reduced below the level for BIF assessments. These projected
assessment levels may change if commercial banks holding SAIF deposits are
provided some relief from the special assessment or are allowed to transfer
SAIF deposits to the BIF.
A component of the recapitalization plan provides for the merger of the SAIF
and BIF on January 1, 1998. However, the SAIF recapitalization legislation
currently provides for an elimination of the thrift charter or of the
separate federal regulation of thrifts prior to the merger of the deposit
insurance funds. As a result, the Association would be regulated as a bank
under Federal laws which would subject it to the more restrictive activity
limits imposed on national banks. Under separate legislation recently
enacted, the Association is required to recapture, as taxable income,
approximately $26,000 of its bad debt reserve, which represents the post-1987
additions to the reserve, and will be unable to utilize the percentage of
earnings method to compute its reserve in the future. The Association has
provided deferred taxes for this amount and will be permitted to amortize the
recapture of its bad debt reserve over six years.
The Association had $70.2 million in deposits at March 31, 1995. If the
special assessment level is finalized at $.71 per $100 in deposits, the
Association will pay an assessment of approximately $500,000. This
assessment should be tax deductible, but it will reduce earnings and capital
for the quarter in which it is recorded.
No assurances can be given that the SAIF recapitalization plan will be
enacted into law or in what form it may be enacted. In addition, the
Association can give no assurances that the disparity between BIF and SAIF
assessments will be eliminated.
45
<PAGE>
COMMUNITY INVESTORS BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
June 30, 1996, 1995 and 1994
NOTE K - CORPORATE REORGANIZATION AND CONVERSION TO STOCK FORM
During fiscal 1995, the Association's Board of Directors adopted a plan of
conversion (the Plan) whereby the Association would convert to the stock form
of ownership, followed by the issuance of all of the Association's
outstanding stock to a newly formed holding company, Community Investors
Bancorp, Inc. Pursuant to the Plan, as amended, the Association offered for
sale up to 840,000 common shares to its depositors and members of the
community. The stock offering was completed on February 6, 1995, culminating
in the sale of 738,146 common shares and the receipt of $6.2 million of net
equity capital after consideration of offering costs and shares acquired by
the employee stock ownership plan.
At the completion of the conversion to stock form, the Association
established a liquidation account in an amount equal to retained earnings
contained in the final offering circular. The liquidation account will be
maintained for the benefit of eligible savings account holders who maintain
deposit accounts in the Association after conversion.
In the event of a complete liquidation (and only in such event), each
eligible savings account holder will be entitled to receive a liquidation
distribution from the liquidation account in the amount of the then current
adjusted balance of deposit accounts held, before any liquidation
distribution may be made with respect to common stock. Except for the
repurchase of stock and payment of dividends by the Association, the
existence of the liquidation account will not restrict the use or application
of such retained earnings. The Association may not declare, pay a cash
dividend on, or repurchase any of its common stock, if the effect thereof
would cause retained earnings to be reduced below either the amount required
for the liquidation account or the regulatory capital requirements for SAIF
insured institutions.
46
<PAGE>
COMMUNITY INVESTORS BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
June 30, 1996, 1995 and 1994
NOTE L - CONDENSED FINANCIAL STATEMENTS OF COMMUNITY INVESTORS BANCORP, INC.
The following condensed financial statements summarize the financial position
of Community Investors Bancorp, Inc. as of June 30, 1996 and 1995, and the
results of its operations for the periods then ended.
COMMUNITY INVESTORS BANCORP, INC.
STATEMENTS OF FINANCIAL CONDITION
June 30,
(In thousands)
<TABLE>
<CAPTION>
ASSETS 1996 1995
<S> <C> <C>
Interest-bearing deposits in First Federal Savings and
Loan Association of Bucyrus $ 88 $ 83
Interest-bearing deposits in other financial institutions 445 144
Investment securities available for sale 709 2,658
Loan receivable from ESOP 532 556
Investment in First Federal Savings and Loan Association of Bucyrus 9,694 8,839
Prepaid expenses and other 47 56
------- -------
Total assets $11,515 $12,336
------- -------
------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
Other liabilities $ 29 $ 40
Stockholders' equity
Common stock and additional paid-in capital 11,882 11,837
Retained earnings 1,190 422
Shares acquired by employee benefit plan (464) -
Less treasury shares (1,117) -
Unrealized gain (loss) on securities designated as available for sale,
net of related tax effects (5) 37
------- -------
Total stockholders' equity 11,486 12,296
------- -------
Total liabilities and stockholders' equity $11,515 $12,336
------- -------
------- -------
</TABLE>
COMMUNITY INVESTORS BANCORP, INC.
STATEMENTS OF EARNINGS
Period ended June 30,
(In thousands)
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Revenue
Interest income $ 200 $ 89
Equity in earnings of First Federal Savings and Loan
Association of Bucyrus 855 373
------- -------
Total revenue 1,055 462
General and administrative expenses 151 14
------- -------
Earnings before income taxes 904 448
Federal income taxes 18 26
------- -------
NET EARNINGS $ 886 $ 422
------- -------
------- -------
</TABLE>
47
<PAGE>
COMMUNITY INVESTORS BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
June 30, 1996, 1995 and 1994
NOTE L - CONDENSED FINANCIAL STATEMENTS OF COMMUNITY INVESTORS BANCORP, INC.
(continued)
Community Investors Bancorp, Inc.
STATEMENTS OF CASH FLOWS
Period ended June 30,
(In thousands)
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Cash flows provided by (used in) operating activities:
Net earnings for the period $ 886 $ 422
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Undistributed earnings of consolidated subsidiary (855) (373)
Amortization of expense related to employee
benefit plans 45 -
Increases (decreases) in cash due to changes in:
Prepaid expenses and other assets 23 (62)
Other liabilities (11) 61
Other (24) 2
------ -----
Cash provided by operating activities 64 50
Cash flows provided by (used in) investing activities:
Purchase of securities available for sale - (2,615)
Maturities of investment securities 1,917 -
Investment in subsidiary - (3,403)
------ -------
Net cash provided by (used in) investing activities 1,917 (6,018)
Cash flows provided by (used in) financing activities:
Proceeds from issuance of common stock - 6,195
Repayments on ESOP loan 24 -
Dividends on common stock (118) -
Purchase of shares for management recognition plans (464) -
Purchase of treasury stock (1,117) -
------- ------
Net cash provided by (used in) financing activities (1,675) 6,195
------- ------
Net increase in cash and cash equivalents 306 227
Cash and cash equivalents at beginning of year 227 -
------- -------
Cash and cash equivalents at end of year $ 533 $ 227
------- -------
------- -------
</TABLE>
48
<PAGE>
BOARD OF DIRECTORS GENERAL COUNSEL
John W. Kennedy Cory and Cory
PRESIDENT AND CHIEF EXECUTIVE 221 S. Poplar Street
OFFICER OF FIRST FEDERAL Bucyrus, Ohio 44820
SAVINGS & LOAN ASSOCIATION
Dale C. Hoyles SPECIAL LEGAL COUNSEL
CHAIRMAN OF THE BOARD, RETIRED Elias, Matz, Tiernan & Herrick LLP
SENIOR VICE PRESIDENT/TREASURER 734 15th Street, N.W., 12th Floor
OF CENTURION FINANCIAL Washington, DC 20005
TRANSFER AGENT AND REGISTRAR
David M. Auck Registrar & Transfer Company
VICE CHAIRMAN OF THE BOARD 10 Commerce Drive
CO-OWNER AUCK DOSTAL AGENCY Cranford, NJ 07016
Richard L. Cory INDEPENDENT AUDITORS
ATTORNEY AT LAW - CORY AND CORY Grant Thornton LLP
Suite 900
Philip E. Harris 625 Eden Park Drive
PLANT MANAGER, DISTRIBUTION Cincinnati, Ohio 45202
CENTER - THE TIMKEN COMPANY
INVESTMENT BANKER & FINANCIAL ADVISOR
D. Brent Fissel Charles Webb & Company
DENTIST 211 Bradenton
Dublin, Ohio 43017
Thomas P. Moore MAJOR MARKET MAKERS
PRESIDENT AND GENERAL MANAGER - The Ohio Company
BROKENSWORD BROADCASTING CO. McDonald & Company Sec., Inc.
Friedman, Billings, Ramsey & Company
HONORARY DIRECTORS
John T. Bridges
RETIRED PLANT MANAGER -
GENERAL ELECTRIC COMPANY
Herbert Kraft
FARMER AND RETIRED SALESMAN -
MOORMAN FEED SALES
EXECUTIVE OFFICERS
John W. Kennedy
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
Brian R. Buckley
VICE PRESIDENT AND TREASURER
ASSISTANT VICE PRESIDENTS
Jane A. Cremeans
Timothy G. Heydinger
Kimberly B. Roe
49
<PAGE>
ANNUAL REPORT ON FORM 10-KSB
A copy of Community Investors Bancorp, Inc.'s Annual Report on Form 10-KSB,
as filed with the Securities and Exchange Commission, is available without
charge to stockholders of record by writing to:
Brian R. Buckley
Vice President and Treasurer
Community Investors Bancorp, Inc.
P.O. Box 749
119 S. Sandusky Avenue
Bucyrus, Ohio 44820
BRANCH ADDRESSES AND MANAGERS
Main Office
P.O. Box 749
119 S. Sandusky Avenue
Bucyrus, Ohio 44820
South Branch - DIEANN FROST New Washington - SHARON CARMAN
Sandusky Avenue & Marion Road 115 S. Kibler Street
Bucyrus, Ohio 44820 New Washington, Ohio 44854
STOCKHOLDER SERVICES
Registrar and Transfer serves as primary transfer agent and as dividend
disbursing agent for Community Inventors Bancorp, Inc. shares.
Communications regarding changes of address, transfer of shares, lost
certificates and dividends should be sent to:
Registrar and Transfer Company
10 Commerce Drive
Cranford, NJ 07016
1 (800) 525-7686
50
<PAGE>
[LOGO]
P.O. BOX 749
119 S. Sandusky Avenue
Bucyrus, Ohio 44820
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<CASH> 1,094
<INT-BEARING-DEPOSITS> 794
<FED-FUNDS-SOLD> 21
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 6,201
<INVESTMENTS-CARRYING> 15,674
<INVESTMENTS-MARKET> 15,522
<LOANS> 66,255
<ALLOWANCE> 459
<TOTAL-ASSETS> 91,787
<DEPOSITS> 69,911
<SHORT-TERM> 0
<LIABILITIES-OTHER> 0
<LONG-TERM> 9,884
0
0
<COMMON> 7
<OTHER-SE> 11,479
<TOTAL-LIABILITIES-AND-EQUITY> 91,787
<INTEREST-LOAN> 5,376
<INTEREST-INVEST> 1,313
<INTEREST-OTHER> 81
<INTEREST-TOTAL> 6,770
<INTEREST-DEPOSIT> 3,497
<INTEREST-EXPENSE> 3,626
<INTEREST-INCOME-NET> 3,144
<LOAN-LOSSES> 159
<SECURITIES-GAINS> 59
<EXPENSE-OTHER> 1,805
<INCOME-PRETAX> 1,344
<INCOME-PRE-EXTRAORDINARY> 1,344
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 886
<EPS-PRIMARY> 1.32
<EPS-DILUTED> 1.32
<YIELD-ACTUAL> 8.04
<LOANS-NON> 636
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 227
<ALLOWANCE-OPEN> 399
<CHARGE-OFFS> 102
<RECOVERIES> 3
<ALLOWANCE-CLOSE> 459
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 459
</TABLE>
