<PAGE>
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
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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. 33-84132
COMMUNITY INVESTORS BANCORP, INC.
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(Exact name of registrant as specified in its charter)
Ohio 34-1779309
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
119 South Sandusky Avenue
Bucyrus, Ohio 44820
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(Address of principal (Zip Code)
executive office)
Issuers' telephone number, including area code: (419) 562-7055
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Check whether the issuer (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports)
and (2) has been subject to such filing requirements for the past 90 days.
YES X NO
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As of May 9, 1997, the latest practicable date, 632,946 shares of the
registrant's common stock, $.01 par value, were issued and outstanding.
Page 1 of 16 Pages
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INDEX
PAGE
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PART I - FINANCIAL INFORMATION
Consolidated Statements of Financial Condition 3
Consolidated Statements of Earnings 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 7
Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II - OTHER INFORMATION 15
SIGNATURES 16
2
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Community Investors Bancorp, Inc.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In thousands, except share data)
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1997 1996
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<S> <C> <C>
ASSETS
Cash and due from banks.................................................. $2,076 $ 1,094
Federal funds sold....................................................... 60 21
Interest-bearing deposits in other financial institutions................ 832 794
------ ------
Cash and cash equivalents............................................ 2,968 1,909
Investment securities available for sale -- at market.................... 6,499 6,201
Investment securities--at amortized cost, approximate market value of
$9,667 and $12,728 as of March 31, 1997 and June 30, 1996............ 9,829 12,891
Mortgage-backed securities--at amortized cost, approximate market value
of $1,928 and $2,794 as of March 31, 1997 and June 30, 1996.......... 1,952 2,783
Loans receivable--net.................................................... 74,110 66,255
Property acquired in settlement of loans................................. 57 81
Office premises and equipment--at depreciated cost....................... 566 525
Federal Home Loan Bank stock--at cost.................................... 742 575
Accrued interest receivable on loans..................................... 78 66
Accrued interest receivable on mortgage-backed securities................ 17 19
Accrued interest receivable on investments and interest-bearing deposits. 323 251
Prepaid expenses and other assets........................................ 209 109
Deferred federal income taxes............................................ 96 122
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Total assets........................................................ $97,446 $91,787
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LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits................................................................. $72,015 $ 69,911
Advances from the Federal Home Loan Bank................................. 13,631 9,884
Advances by borrowers for taxes and insurance............................ 12 6
Accrued interest payable................................................. 331 290
Other liabilities........................................................ 97 156
Accrued federal income taxes............................................. 139 54
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Total liabilities.................................................... 86,225 80,301
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.............................................. 6,831 6,800
Retained earnings, restricted........................................... 6,975 6,796
Shares acquired by stock benefit plans.................................. (890) (995)
Less 105,200 and 71,900 shares of treasury stock--at cost............... (1,709) (1,117)
Unrealized gains (losses) on securities designated as available for sale,
net of related tax effects........................................... 7 (5)
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Total stockholders' equity.......................................... 11,221 11,486
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Total liabilities and stockholders' equity.......................... $97,446 $ 91,787
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</TABLE>
3
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Community Investors Bancorp, Inc.
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except share data)
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, MARCH 31,
-------------------- --------------------
<S> <C> <C> <C> <C>
1997 1996 1997 1996
--------- --------- --------- ---------
Interest income
Loans.................................................................... $ 4,398 $ 3,845 $ 1,489 $ 1,217
Mortgage-backed securities............................................... 109 139 32 44
Investment securities.................................................... 917 967 311 403
Interest-bearing deposits and other...................................... 20 66 4 25
--------- --------- --------- ---------
Total interest income................................................. 5,444 5,017 1,836 1,689
Interest expense
Deposits................................................................. 2,451 2,668 817 864
Borrowings............................................................... 566 78 210 29
--------- --------- --------- ---------
Total interest expense................................................ 3,017 2,746 1,027 893
--------- --------- --------- ---------
Net interest income................................................... 2,427 2,271 809 796
Provision for losses on loans.............................................. 118 137 22 44
--------- --------- --------- ---------
Net interest income after provision for losses on loans............... 2,309 2,134 787 752
Other income
Gain on sale of investment securities designated as available for sale... -- 59 -- --
Gain on sale of other repossessed assets................................. 1 -- -- --
Other operating.......................................................... 99 106 33 33
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Total other income.................................................... 100 165 33 33
General, administrative and other expense
Employee compensation and benefits....................................... 615 552 227 207
Occupancy and equipment.................................................. 97 77 36 25
SAIF recapitalization assessment......................................... 458 -- -- --
Federal deposit insurance premiums....................................... 84 121 10 41
Franchise taxes.......................................................... 118 62 43 23
Expenses of property acquired in settlement of loans..................... 54 45 13 16
Data processing.......................................................... 118 109 42 40
Other operating.......................................................... 324 384 79 112
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Total general, administrative and other expense....................... 1,868 1,350 450 464
--------- --------- --------- ---------
Earnings before income taxes.......................................... 541 949 370 321
Federal income taxes
Current.................................................................. 163 330 129 123
Deferred................................................................. 19 -- (4) --
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Total federal income taxes............................................ 182 330 125 123
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NET EARNINGS.......................................................... $ 359 $ 619 $ 245 $ 198
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EARNINGS PER SHARE.................................................... $ .60 $ .91 $ .41 $ .29
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</TABLE>
4
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Community Investors Bancorp, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended March 31,
(In thousands)
<TABLE>
<CAPTION>
1997 1996
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<S> <C> <C>
Cash flows from operating activities:
Net earnings for the period............................................ $ 359 $ 619
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...................................... (20) 8
Amortization of deferred loan origination fees....................... (63) (41)
Depreciation and amortization........................................ 32 28
Provision for losses on loans........................................ 118 137
Amortization expense of stock benefit plans.......................... 148 109
Gain on sale of investment securities................................ -- (59)
Federal Home Loan Bank stock dividends............................... (22) (29)
Increase (decrease) in cash due to changes in:
Accrued interest receivable on loans............................... (12) (1)
Accrued interest receivable on mortgage-backed securities.......... 2 8
Accrued interest receivable on investments and interest-bearing
deposits......................................................... (72) 64
Prepaid expenses and other assets.................................. (100) (57)
Accrued interest payable........................................... 41 11
Other liabilities.................................................. (59) (61)
Federal income taxes
Current.......................................................... 85 (49)
Deferred......................................................... 19 --
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Net cash provided by operating activities.......................... 456 687
Cash flows provided by (used in) investing activities:
Proceeds from maturity of investment securities........................ 4,332 6,095
Proceeds from sale of securities designated as available for sale...... -- 2,659
Purchase of investment securities designated as available for sale..... (1,030) --
Purchase of investment securities designated as held to maturity....... (500) (4,568)
Principal repayments on mortgage-backed securities..................... 832 1,440
Loans purchased........................................................ -- (359)
Loan principal repayments.............................................. 12,619 9,196
Loan disbursements..................................................... (20,705) (12,679)
Purchase of office premises and equipment.............................. (73) (168)
Proceeds from sale of other repossessed assets......................... 200 132
Purchase of Federal Home Loan Bank stock............................... (145) --
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Net cash provided by (used in) investing activities................ (4,470) 1,748
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Net cash provided by (used in) operating and investing activities
(subtotal carried forward)....................................... (4,014) 2,435
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</TABLE>
5
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Community Investors Bancorp, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
For the nine months ended March 31,
(In thousands)
<TABLE>
<CAPTION>
1997 1996
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<S> <C> <C>
Net cash provided by (used in) operating and investing activities
(subtotal brought forward)........................................ $ (4,014) $ 2,435
Cash flows provided by financing activities:
Net increase in deposit accounts........................................ 2,104 1,084
Proceeds from Federal Home Loan Bank advances........................... 7,250 500
Repayment of Federal Home Loan Bank advances............................ (3,503) (60)
Advances by borrowers for taxes and insurance........................... 6 3
Purchase of treasury stock.............................................. (592) (566)
Purchase of stock for employee benefit plans............................ -- (464)
Dividends on common stock............................................... (192) (87)
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Net cash provided by financing activities........................... 5,073 410
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Net increase in cash and cash equivalents................................. 1,059 2,845
Cash and cash equivalents at beginning of period.......................... 1,909 1,077
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Cash and cash equivalents at end of period................................ $ 2,968 $ 3,922
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Supplemental disclosure of cash flow information:
Cash paid during the period for:
Federal income taxes.................................................... $ 107 $ 385
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Interest on deposits and borrowings..................................... $ 2,976 $ 2,735
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Supplemental disclosure of noncash investing activities:
Transfers from loans to other repossessed assets........................ $ 176 $ 120
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Unrealized gains on securities designated as available for sale, net of
related tax effects................................................... $ 12 $ 38
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</TABLE>
6
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COMMUNITY INVESTORS BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the nine and three months ended March 31, 1997 and 1996
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements were
prepared in accordance with instructions for Form 10-QSB and, therefore, do
not include information or footnotes necessary for a complete presentation of
consolidated financial position, results of operations and cash flows in
conformity with generally accepted accounting principles. Accordingly, these
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto of the Corporation included in the
Annual Report on Form 10-KSB for the year ended June 30, 1996. However, in
the opinion of management, all adjustments (consisting of only normal
recurring accruals) which are necessary for a fair presentation of the
financial statements have been included. The results of operations for the
nine and three month periods ended March 31, 1997 and 1996 are not
necessarily indicative of the results which may be expected for an entire
fiscal year.
2. PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts
of Community Investors Bancorp, Inc. (the "Corporation") and First Federal
Savings and Loan Association of Bucyrus (the "Association"). All significant
intercompany items have been eliminated.
3. EARNINGS PER SHARE
Earnings per share is computed 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, which gives
effect to 47,174 unallocated ESOP shares, totaled 600,967 and 585,772 for the
nine and three month periods ended March 31, 1997, respectively.
Weighted-average common shares deemed outstanding, which gives effect to
56,101 unallocated ESOP shares, totaled 682,045 for each of the nine and
three month periods ended March 31, 1996. There is no dilutive effect
associated with the Corporation's stock option plan.
4. EFFECTS OF RECENT ACCOUNTING PRONOUNCEMENTS
In October 1995, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock-Based Compensation", establishing financial accounting
and reporting standards for stock-based compensation plans. SFAS No. 123
encourages all entities to adopt a new method of accounting to measure
compensation cost of all 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.
7
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COMMUNITY INVESTORS BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the nine and three months ended March 31, 1997 and 1996
4. EFFECTS OF RECENT ACCOUNTING PRONOUNCEMENTS (continued)
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 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, 1997, 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.
In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share",
which requires companies to present basic earnings per share and, if
applicable, diluted earnings per share, instead of primary and fully diluted
earnings per share, respectively. Basic earnings per share is computed
without including potential common shares, i.e., no dilutive effect. Diluted
earnings per share is computed taking into consideration common shares
outstanding and dilutive potential common shares, including options,
warrants, convertible securities and contingent stock agreements. SFAS No.
128 is effective for periods ending after December 15, 1997. Early adoption
is not permitted. Based upon the provisions of SFAS No. 128, the
Corporation's basic and diluted earnings per share for the nine month period
ended March 31, 1997 would have each been $.60. Basic and diluted earnings
per share for the three month period ended March 31, 1997 would have each
been $.41.
8
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Community Investors Bancorp, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
In addition to historical information contained herein, the following
discussion contains forward-looking statements that involve risks and
uncertainties. Economic circumstances, the Corporation's operations and the
Corporation's actual results could differ significantly from those discussed
in the forward-looking statements. Some of the factors that could cause or
contribute to such differences are discussed herein but also include changes
in the economy and interest rates in the nation and the Corporation's market
area generally.
Some of the forward-looking statements included herein are the statements
regarding management's determination of the amount of allowance for losses on
loans, legislative changes with respect to the federal thrift charter and the
effect of certain accounting pronouncements.
DISCUSSION OF FINANCIAL CONDITION CHANGES FROM JUNE 30, 1996 TO MARCH 31, 1997
At March 31, 1997, the Corporation's assets totaled $97.4 million, an
increase of $5.7 million, or 6.2%, over the $91.8 million of total assets at
June 30, 1996. The increase in assets was funded through growth in the
deposit portfolio of $2.1 million coupled with an increase in advances from
the Federal Home Loan Bank of $3.7 million.
Liquid assets (i.e. cash, interest-bearing deposits and investment
securities) decreased by $1.7 million over the nine month period, to a total
of $19.3 million at March 31, 1997, as investment securities purchases of
$1.5 million were offset by maturities totaling $4.3 million. Regulatory
liquidity amounted to 22.5% at March 31, 1997.
Loans receivable increased by $7.9 million, or 11.9%, during the nine
month period, to a total of $74.1 million at March 31, 1997. Loan
disbursements amounted to $20.7 million and were partially offset by
principal repayments of $12.6 million. Loan disbursements increased by $8.0
million, or 63.3%, during the nine months ended March 31, 1997, as compared
to the same period in 1996. The allowance for loan losses totaled $460,000 at
March 31, 1997, as compared to $459,000 at June 30, 1996. Nonperforming loans
totaled $645,000 at March 31, 1997, as compared to $636,000 at June 30, 1996.
The allowance for loan losses represented 71.3% of nonperforming loans as of
March 31, 1997 and 72.2% at June 30, 1996. Although management believes that
its allowance for loan losses at March 31, 1997 is adequate based upon the
available facts and circumstances, 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 $72.0 million at March 31, 1997, an increase of $2.1
million, or 3.0%, over June 30, 1996 levels. Management continued its effort
to achieve a moderate rate of growth in the deposit portfolio through
marketing and pricing strategies.
9
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Community Investors Bancorp, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
DISCUSSION OF FINANCIAL CONDITION CHANGES FROM JUNE 30, 1996 TO
MARCH 31, 1997 (continued)
The Association is required to meet each of three minimum capital
standards promulgated by the Office of Thrift Supervision (OTS), hereinafter
described as the tangible capital requirement, the core capital requirement
and the risk-based capital requirement. The tangible capital requirement
mandates maintenance of stockholders' equity less all intangible assets equal
to 1.5% of adjusted total assets. The core capital requirement provides for
the maintenance of tangible capital plus certain forms of supervisory
goodwill equal to 3% of adjusted total assets, while the risk-based capital
requirement mandates maintenance of core capital plus general loan loss
allowances equal to 8% of risk-weighted assets as defined by OTS regulations.
At March 31, 1997, the Association's tangible and core capital totaled
$10.2 million, or 10.4%, of adjusted total assets, which exceeded the minimum
requirements of $1.5 million and $2.9 million by $8.7 million and $7.5
million, respectively. The Association's risk-based capital of $10.6 million,
or 20.6% of risk-weighted assets, exceeded the current 8% requirement by $6.5
million.
COMPARISON OF OPERATING RESULTS FOR THE NINE MONTH PERIODS ENDED
MARCH 31, 1997 AND 1996
GENERAL
The Corporation's net earnings totaled $359,000 for the nine months ended
March 31, 1997, a decrease of $260,000, or 42.0%, from the $619,000 of net
earnings reported for the same period in 1996. The decline in earnings
resulted primarily from a $458,000 charge recorded in the current period
reflecting the assessment to recapitalize the Savings Association Insurance
Fund (the "SAIF"), coupled with a $60,000 increase in general, administrative
and other expense (excluding the above assessment), a $65,000 decrease in
other income, which were partially offset by a $156,000 increase in net
interest income, a $19,000 decrease in the provision for losses on loans and
a $148,000 decrease in the provision for federal income taxes.
NET INTEREST INCOME
Net interest income increased by $156,000, or 6.9%, for the nine months
ended March 31, 1997, compared to the 1996 period. Interest income on loans
and mortgage-backed securities increased by $523,000, or 13.1%, due primarily
to a $10.8 million increase in the average balance of loans and
mortgage-backed securities outstanding year-to-year. Interest income on
investment securities and interest-bearing deposits decreased by $96,000, or
9.3%, due primarily to a 158 basis point decrease in the average yield, to
6.40% in the 1997 period, which was partially offset by a $2.3 million
increase in the average portfolio balance outstanding.
Interest expense on deposits decreased by $217,000, or 8.1%, due
primarily to a 46 basis point decline in the cost of deposits year-to-year,
to 4.57% in the 1997 period. Interest expense on borrowings increased by
$488,000 during the current period, due primarily to a $12.0 million increase
in the weighted-average balance of advances from the Federal Home Loan Bank
outstanding.
10
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Community Investors Bancorp, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
COMPARISON OF OPERATING RESULTS FOR THE NINE MONTH PERIODS ENDED
MARCH 31, 1997 AND 1996 (continued)
NET INTEREST INCOME (continued)
As a result of the foregoing changes in interest income and interest
expense, net interest income increased by $156,000, or 6.9%, to a total of
$2.4 million for the nine months ended March 31, 1997. The interest rate
spread decreased to approximately 2.84% from 3.00% during the respective 1997
and 1996 periods, while the net interest margin totaled approximately 2.53%
in 1997, as compared to 2.73% in 1996.
PROVISION FOR LOSSES ON LOANS
A provision for losses on loans is charged to earnings 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. As a result of such analysis, management
recorded a $118,000 provision for losses on loans during the nine month
period ended March 31, 1997, a decrease of $19,000, or 13.9%, from the 1996
period. There can be no assurance that the loan loss allowance of the
Association will be adequate to cover losses on nonperforming assets in the
future.
OTHER INCOME
Other income decreased by $65,000, or 39.4%, for the nine months ended
March 31, 1997, compared to the same period in 1996, due primarily to the
recognition of a $59,000 gain on sale of investment securities in the 1996
period.
GENERAL, ADMINISTRATIVE AND OTHER EXPENSE
General, administrative and other expense increased by $518,000, or
38.4%, during the nine months ended March 31, 1997, compared to the same
period in 1996. This increase resulted primarily from the $458,000 charge
recorded in September 1996 attendant to the aforementioned SAIF
recapitalization. The deposit accounts of the Association and of other
savings associations are insured by the FDIC in the SAIF. The reserves of the
SAIF were 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 were required for healthy
commercial banks except for a $2,000 minimum fee.
11
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Community Investors Bancorp, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
COMPARISON OF OPERATING RESULTS FOR THE NINE MONTH PERIODS ENDED
MARCH 31, 1997 AND 1996 (continued)
GENERAL, ADMINISTRATIVE AND OTHER EXPENSE (continued)
Congress enacted legislation to recapitalize the SAIF and eliminate the
significant premium disparity. The recapitalization plan provided for a
special assessment of $.657 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 will 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.
The Association had $70.2 million in deposits at March 31, 1995. The
special assessment level was finalized at $.657 per $100 in deposits,
resulting in an assessment totaling $458,000, or $304,000 after-tax, which
was recorded on September 30, 1996 and paid in November 1996. The special
one-time assessment to recapitalize the SAIF is expected to cause federal
deposit insurance premiums to be significantly reduced in future quarters,
beginning January 1, 1997.
A component of the recapitalization plan provides for the merger of the
SAIF and BIF on January 1, 1999, if no insured depository institution is a
savings association on that date. If the Association is required to convert
to a bank charter, its operations and those of the Corporation will become
subject to the applicable statutory and regulatory provisions of commercial
banks and bank holding companies, respectively. Unless special grandfathering
provisions are included in applicable legislation or regulations, the
Corporation would become subject to the more restrictive activities
limitations imposed on bank holding companies and the Association would
become subject to general commercial banking rules. Those latter rules
generally provide for less restrictive commercial and consumer lending
authority but are more restrictive in such areas as service corporations
investments. Under separate but related legislation, the Association is
required to recapture, as taxable income, approximately $26,000 of its
percentage of earnings bad debt deduction, which represents post-1987
additions, and is unable to utilize the percentage of earnings method to
compute its bad debt deduction in the future. The Association has provided
deferred taxes for this amount and is permitted to amortize the recapture of
its percentage of earnings bad debt deduction over nine years.
Additionally, the increase in general, administrative and other expense
resulted from a $63,000, or 11.4%, increase in employee compensation and
benefits and a $56,000, or 90.3%, increase in franchise taxes, which were
partially offset by a $60,000, or 15.6%, decrease in other operating expense.
The increase in employee compensation and benefits resulted primarily from
increased costs attendant to stock benefit plans, coupled with normal merit
increases, while the increase in franchise taxes reflects the growth in the
Corporation's equity year-to-year.
FEDERAL INCOME TAXES
The provision for federal income taxes declined by $148,000, or 44.8%,
for the nine months ended March 31, 1997, as compared to the same period in
1996. This decline resulted primarily from the decrease in net earnings
before taxes of $408,000, or 43.0%. The effective tax rates were 33.6% and
34.8% for the nine months ended March 31, 1997 and 1996, respectively.
12
<PAGE>
Community Investors Bancorp, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTH PERIODS ENDED MARCH 31,
1997 AND 1996
GENERAL
The Corporation reported net earnings totaling $245,000 for the three
months ended March 31, 1997, an increase of $47,000, or 23.7%, from the
$198,000 of net earnings reported for the same period in 1996. The increase
in earnings resulted primarily from a $13,000 increase in net interest
income, a $22,000 decline in the provision for loan losses and a $14,000
decrease in general, administrative and other expense, which were partially
offset by a $2,000 increase in the provision for federal income taxes.
NET INTEREST INCOME
Net interest income increased by $13,000, or 1.6%, for the three months
ended March 31, 1997, compared to the 1996 period. Interest income on loans
and mortgage-backed securities increased by $260,000, or 20.6%, due primarily
to an increase in the average balance of loans outstanding year-to-year.
Interest income on investment securities and interest-bearing deposits
decreased by $113,000, or 26.4%, due primarily to an increase in the average
portfolio balance outstanding.
Interest expense on deposits decreased by $47,000, or 5.4%, due primarily
to a decline in the cost of deposits year-to-year. Interest expense on
borrowings increased by $181,000 during the current period, due primarily to
an increase in advances from the Federal Home Loan Bank.
PROVISION FOR LOSSES ON LOANS
A provision for losses on loans is charged to earnings 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. As a result of such analysis, management
recorded a $22,000 provision for losses on loans during the three month
period ended March 31, 1997. There can be no assurance that the loan loss
allowance of the Association will be adequate to cover losses on
nonperforming assets in the future.
OTHER INCOME
Other income remained constant, totaling $33,000, for the three months
ended March 31, 1997 and 1996.
13
<PAGE>
Community Investors Bancorp, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTH PERIODS ENDED MARCH 31,
1997 AND 1996 (continued)
GENERAL, ADMINISTRATIVE AND OTHER EXPENSE
General, administrative and other expense decreased by $14,000, or 3.0%,
during the three months ended March 31, 1997, compared to the same period in
1996.
The decrease resulted primarily from a decrease of $31,000, or 75.6%, in
federal deposit insurance premiums and a $33,000, or 29.5%, decrease in other
operating expense which were partially offset by a $20,000, or 9.7%, increase
in employee compensation and benefits and a $20,000, or 87.0%, increase in
franchise taxes. The increase in employee compensation and benefits resulted
primarily from an increase in costs attendant to stock benefit plans and
normal merit increases. The increase in franchise taxes resulted from the
growth in stockholders' equity year-to-year.
FEDERAL INCOME TAXES
The provision for federal income taxes increased by $2,000, or 1.6%, for
the three months ended March 31, 1997, as compared to the same period in
1996. This increase resulted primarily from the increase in net earnings
before taxes of $49,000, or 15.3%. The effective tax rates were 33.8% and
38.3% for the three months ended March 31, 1997 and 1996, respectively.
14
<PAGE>
Community Investors Bancorp, Inc.
PART II
ITEM 1. Legal Proceedings
Not applicable
ITEM 2. Changes in Securities
Not applicable
ITEM 3. Defaults Upon Senior Securities
Not applicable
ITEM 4. Submission of Matters to a Vote of Security Holders
None
ITEM 5. Other Materially Important Events
None
ITEM 6. Exhibits and Reports on Form 8-K
None
15
<PAGE>
Community Investors Bancorp, Inc.
SIGNATURES
Pursuant to the requirements 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.
Date: May 12, 1997 By: /s/John W. Kennedy
--------------------
John W. Kennedy
President and Chief
Executive Officer
Date: May 12, 1997 By: /s/Robert W. Siegel
--------------------
Robert W. Siegel
Controller
16
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