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 December 31, 1997
-------------------------------------------
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.
(Exact name of registrant as specified in its charter)
Ohio 34-1779309
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
119 South Sandusky Avenue
Bucyrus, Ohio 44820
(Address of principal (Zip Code)
executive office)
Issuers' telephone number, including area code: (419) 562-7055
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
As of February 6, 1998, the latest practicable date, 902,371 shares of the
registrant's common stock, $.01 par value, were issued and outstanding.
Page 1 of 17 pages
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INDEX
Page
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 10
PART II - OTHER INFORMATION 16
SIGNATURES 17
2
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<TABLE>
Community Investors Bancorp, Inc.
<CAPTION>
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In thousands, except share data)
December 31, June 30,
ASSETS 1997 1997
<S> <C> <C>
Cash and due from banks $ 1,673 $ 480
Federal funds sold 60 60
Interest-bearing deposits in other financial institutions 201 1,870
-------- -------
Cash and cash equivalents 1,934 2,410
Investment securities available for sale - at market 477 1,498
Investment securities - at amortized cost, approximate market value of
$8,697 and $8,216 as of December 31, 1997 and June 30, 1997 8,654 8,258
Mortgage-backed securities - at amortized cost, approximate market value
of $1,541 and $1,714 as of December 31, 1997 and June 30, 1997 1,603 1,732
Loans receivable - net 81,292 76,446
Property acquired in settlement of loans 41 71
Office premises and equipment - at depreciated cost 611 618
Federal Home Loan Bank stock - at cost 796 768
Accrued interest receivable on loans 81 89
Accrued interest receivable on mortgage-backed securities 9 12
Accrued interest receivable on investments and interest-bearing deposits 149 142
Prepaid expenses and other assets 77 146
Deferred federal income taxes 152 114
-------- --------
Total assets $95,876 $92,304
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $75,247 $72,911
Advances from the Federal Home Loan Bank 8,917 7,810
Advances by borrowers for taxes and insurance 20 7
Accrued interest payable 315 290
Other liabilities 141 149
Accrued federal income taxes 130 24
-------- ---------
Total liabilities 84,770 81,191
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; 1,107,171 shares issued 11 11
Additional paid-in capital 6,854 6,827
Retained earnings, restricted 7,452 7,142
Shares acquired by stock benefit plans (830) (890)
Less 204,800 and 177,800 shares of treasury stock - at cost (2,374) (1,971)
Unrealized losses on securities designated as available for sale, net of related
tax effects (7) (6)
---------- ----------
Total stockholders' equity 11,106 11,113
------ ------
Total liabilities and stockholders' equity $95,876 $92,304
====== ======
</TABLE>
3
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<TABLE>
Community Investors Bancorp, Inc.
<CAPTION>
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except share data)
Six months ended Three months ended
December 31, December 31,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Interest income
Loans $3,258 $2,909 $1,627 $1,480
Mortgage-backed securities 51 77 28 38
Investment securities 343 606 181 307
Interest-bearing deposits and other 7 16 4 7
-------- ------- -------- --------
Total interest income 3,659 3,608 1,840 1,832
Interest expense
Deposits 1,784 1,634 900 823
Borrowings 245 356 123 193
------ ------ ------ ------
Total interest expense 2,029 1,990 1,023 1,016
----- ----- ----- -----
Net interest income 1,630 1,618 817 816
Provision for losses on loans 56 96 54 50
------- ------- ------- -------
Net interest income after provision
for losses on loans 1,574 1,522 763 766
Other income
Gain (loss) on sale of repossessed assets (2) 1 (4) -
Other operating 95 66 54 41
------- ------- ------- -------
Total other income 93 67 50 41
General, administrative and other expense
Employee compensation and benefits 485 388 246 227
Occupancy and equipment 63 61 31 31
Federal deposit insurance premiums 23 532 12 30
Franchise taxes 70 75 31 42
Expenses of property acquired in settlement of loans 15 41 6 22
Data processing 80 76 37 34
Other operating 248 245 134 122
------ ------ ------ ------
Total general, administrative and other expense 984 1,418 497 508
------ ----- ------ ------
Earnings before income taxes 683 171 316 299
Federal income taxes
Current 273 34 152 50
Deferred (38) 23 (48) 32
------- ------- ------- -------
Total federal income taxes 235 57 104 82
------ ------- ------ -------
NET EARNINGS $ 448 $ 114 $ 212 $ 217
====== ====== ====== ======
EARNINGS PER SHARE
Basic $.53 $.12 $.25 $.24
=== === === ===
Diluted $.52 $.12 $.25 $.24
=== === === ===
</TABLE>
4
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<TABLE>
Community Investors Bancorp, Inc.
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended December 31,
(In thousands)
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net earnings for the period $ 448 $ 114
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 (19) (11)
Amortization of deferred loan origination fees (46) (48)
Depreciation and amortization 24 18
Provision for losses on loans 56 96
Amortization expense of stock benefit plans 87 34
(Gain) loss on sale of repossessed assets 2 (1)
Federal Home Loan Bank stock dividends (28) (22)
Increase (decrease) in cash due to changes in:
Accrued interest receivable on loans 8 (18)
Accrued interest receivable on mortgage-backed securities 3 2
Accrued interest receivable on investments and
interest-bearing deposits (7) 65
Prepaid expenses and other assets 94 67
Accrued interest payable 25 22
Other liabilities (8) 26
Federal income taxes
Current 106 (35)
Deferred (38) 23
--------- ---------
Net cash provided by operating activities 707 332
Cash flows provided by (used in) investing activities:
Proceeds from maturity of investment securities 1,700 2,564
Purchase of investment securities designated as available for sale - (1,030)
Purchase of investment securities designated as held to maturity (1,082) (500)
Principal repayments on mortgage-backed securities 129 896
Loan principal repayments 8,688 8,939
Loan disbursements (13,557) (15,080)
Purchase of office premises and equipment (17) (56)
Proceeds from sale of repossessed assets 41 167
Purchase of Federal Home Loan Bank stock - (144)
------- --------
Net cash used in investing activities (4,098) (4,244)
------- -------
Net cash used in operating and investing
activities (subtotal carried forward) (3,391) (3,912)
------- -------
</TABLE>
5
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<TABLE>
Community Investors Bancorp, Inc.
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
For the six months ended December 31,
1997 1996
<S> <C> <C>
Net cash used in operating and investing
activities (subtotal brought forward) $(3,391) $(3,912)
Cash flows provided by (used in) financing activities:
Net increase in deposit accounts 2,336 441
Proceeds from Federal Home Loan Bank advances 9,300 5,250
Repayment of Federal Home Loan Bank advances (8,193) (1,143)
Advances by borrowers for taxes and insurance 13 12
Purchase of treasury stock (403) (593)
Dividends on common stock (138) (129)
------- -------
Net cash provided by financing activities 2,915 3,838
------ ------
Net decrease in cash and cash equivalents (476) (74)
Cash and cash equivalents at beginning of period 2,410 1,909
------ ------
Cash and cash equivalents at end of period $ 1,934 $ 1,835
====== ======
Supplemental disclosure of cash flow information: Cash paid during the period
for:
Federal income taxes $ 185 $ 100
======= =======
Interest on deposits and borrowings $ 2,004 $ 1,968
====== ======
Supplemental disclosure of noncash investing activities:
Transfers from loans to repossessed assets $ 13 $ 176
======== =======
Unrealized gains (losses) on securities designated as available
for sale, net of related tax effects $ (1) $ 1
========= =========
</TABLE>
6
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Community Investors Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the six and three months ended December 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 Community Investors Bancorp, Inc.
(the "Corporation") included in the Annual Report on Form 10-KSB for the
year ended June 30, 1997. 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 six and three month periods
ended December 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
the Corporation and First Federal Savings and Loan Association of Bucyrus
(the "Association"). All significant intercompany items have been
eliminated.
3. Earnings Per Share
Basic earnings per share is computed based upon the weighted-average common
shares outstanding during the period less shares in the ESOP that are
unallocated and not committed to be released. Weighted-average common shares
deemed outstanding, which gives effect to 70,763 unallocated ESOP shares,
totaled 842,133 and 834,815 for the six and three month periods ended
December 31, 1997, respectively. Weighted-average common shares deemed
outstanding, which gives effect to 84,152 unallocated ESOP shares, totaled
912,500 and 896,493 for each of the six and three month periods ended
December 31, 1996.
Diluted earnings per share is computed taking into consideration common
shares outstanding and dilutive potential common shares, i.e. the
Corporation's stock option plan. Weighted-average common shares deemed
outstanding for purposes of computing diluted earnings per share totaled
862,000 and 854,682 for the six and three month periods ended December 31,
1997, respectively, and 915,652 and 902,804 for the six and three month
periods ended December 31, 1996, respectively. Weighted-average common
shares outstanding for the six and three month periods ended December 31,
1996, have been restated to give effect to the Corporation's three-for-two
stock split in fiscal 1997.
7
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Community Investors Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the six and three months ended December 31, 1997 and 1996
4. Effects of Recent Accounting Pronouncements (continued)
In June 1996, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 125, "Accounting
for Transfers and Servicing of Financial Assets and Extinguishments 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 adopted SFAS No. 125 effective January 1, 1998, as
required, without material effect on the Corporation's consolidated
financial position or results of operations.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." SFAS No. 130 establishes standards for reporting and display of
comprehensive income and its components (revenues, expenses, gains and
losses) in a full set of general-purpose financial statements. SFAS No. 130
requires that all items that are required to be recognized under accounting
standards as components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial
statements. It does not require a specific format for that financial
statement but requires that an enterprise display an amount representing
total comprehensive income for the period in that financial statement.
8
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Community Investors Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the six and three months ended December 31, 1997 and 1996
4. Effects of Recent Accounting Pronouncements (continued)
SFAS No. 130 requires that an enterprise (a) classify items of other
comprehensive income by their nature in a financial statement and (b)
display the accumulated balance of other comprehensive income separately
from retained earnings and additional paid-in capital in the equity section
of a statement of financial position. SFAS No. 130 is effective for fiscal
years beginning after December 15, 1997. Reclassification of financial
statements for earlier periods provided for comparative purposes is
required. SFAS No. 130 is not expected to have a material impact on the
Corporation's financial statements.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." SFAS No. 131 significantly changes
the way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about reportable segments in interim financial
reports issued to shareholders. It also establishes standards for related
disclosures about products and services, geographic areas and major
customers. SFAS No. 131 uses a "management approach" to disclose financial
and descriptive information about the way that management organizes the
segments within the enterprise for making operating decisions and assessing
performance. For many enterprises, the management approach will likely
result in more segments being reported. In addition, SFAS No. 131 requires
significantly more information to be disclosed for each reportable segment
than is presently being reported in annual financial statements and also
requires that selected information be reported in interim financial
statements. SFAS No. 131 is effective for fiscal years beginning after
December 15, 1997. SFAS No. 131 is not expected to have a material impact on
the Corporation's financial statements.
9
<PAGE>
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 and adequacy of the allowance
for losses on loans, the effect of the year 2000 on certain information
technology systems and the effect of certain recent accounting pronouncements.
Discussion of Financial Condition Changes from June 30, 1997 to
December 31, 1997
At December 31, 1997, the Corporation's assets totaled $95.9 million, an
increase of $3.6 million, or 3.9%, over the $92.3 million of total assets
reported at June 30, 1997. The increase in assets was funded primarily through
growth in the deposit portfolio of $2.3 million, coupled with an increase in
advances from the Federal Home Loan Bank of $1.1 million.
Liquid assets (i.e. cash, interest-bearing deposits and investment securities)
decreased by $1.1 million during the six month period, to a total of $11.1
million at December 31, 1997, as investment securities purchases of $1.1 million
were offset by maturities totaling $1.7 million. Excess liquidity was redeployed
primarily to fund growth in the loan portfolio. Regulatory liquidity amounted to
13.9% at December 31, 1997.
Loans receivable increased by $4.8 million, or 6.3%, during the six month
period, to a total of $81.3 million at December 31, 1997. Loan disbursements
amounted to $13.6 million and were partially offset by principal repayments of
$8.7 million. Loan disbursements decreased by $1.5 million, or 10.1%, during the
six months ended December 31, 1997, as compared to the same period in 1996. The
allowance for loan losses totaled $510,000 at December 31, 1997, as compared to
$478,000 at June 30, 1997. Nonperforming loans totaled $578,000 at December 31,
1997, as compared to $508,000 at June 30, 1997. The allowance for loan losses
represented 88.2% of nonperforming loans as of December 31, 1997 and 94.1% at
June 30, 1997. Although management believes that its allowance for loan losses
at December 31, 1997, is adequate based upon the available facts and
circumstances, there can be no assurance that additions to such allowance will
not be necessary in future periods, which could adversely affect the
Corporation's results of operations.
Deposits totaled $75.2 million at December 31, 1997, an increase of $2.3
million, or 3.2%, over June 30, 1997 levels. Management continued its efforts to
achieve a moderate rate of growth through marketing and pricing strategies.
10
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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, 1997 to December 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 December 31, 1997, the Association's tangible and core capital totaled $10.5
million, or 11.0%, of adjusted total assets, which exceeded the minimum
requirements of $1.4 million and $2.9 million by $9.1 million and $7.7 million,
respectively. The Association's risk-based capital of $11.0 million, or 20.7% of
risk-weighted assets, exceeded the current 8% requirement by $6.7 million.
Comparison of Operating Results for the Six Month Periods Ended December 31,
1997 and 1996
General
The Corporation's net earnings totaled $448,000 for the six months ended
December 31, 1997, an increase of $334,000, or 293%, over the $114,000 of net
earnings reported for the same period in 1996. The increase in earnings resulted
primarily from a $304,000 one-time after tax charge recorded in the 1996 period
reflecting the assessment to recapitalize the Savings Association Insurance Fund
(SAIF), coupled with a $12,000 increase in net interest income and a $26,000
increase in other income, which were partially offset by a $24,000 increase in
general, administrative and other expense (other than the one-time SAIF
recapitalization pre-tax charge of $458,000) and a $178,000 increase in the
provision for federal income taxes.
Net Interest Income
Net interest income increased by $12,000, or .7%, for the six months ended
December 31, 1997, compared to the 1996 period. Interest income on loans
increased by $349,000, or 12.0%, due primarily to a $10.6 million increase in
the average balance of loans outstanding year-to-year, partially offset by a
decline in the average yield. Interest income on investment and mortgage-backed
securities and interest-bearing deposits decreased by $298,000, or 42.6%, due
primarily to a $10.0 million decrease in the average portfolio balance
outstanding.
Interest expense on deposits increased by $150,000, or 9.2%, due primarily to a
$4.2 million increase in the weighted-average balance of deposits outstanding,
which was partially offset by a decline in the cost of deposits year-to-year.
Interest expense on borrowings decreased by $111,000, or 31.2%, during the
current period, due primarily to a $3.7 million decrease in the weighted-average
balance of advances from the Federal Home Loan Bank outstanding.
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 Six Month Periods Ended December 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 $12,000, or .7%, to a total of $1.6 million for
the six months ended December 31, 1997. The interest rate spread amounted to
approximately 3.02% in the 1997 six month period, as compared to 3.05% during
the 1996 period, while the net interest margin totaled approximately 3.53% in
1997, as compared to 3.54% 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 $56,000 provision for losses on loans during the six month period ended
December 31, 1997, a decline of $40,000, or 41.7%, from the comparable 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 increased by $26,000, or 38.8%, for the six months ended December
31, 1997, compared to the same period in 1996, due primarily to an increase in
service fees on deposit accounts and transactions.
General, Administrative and Other Expense
General, administrative and other expense decreased by $434,000, or 30.6%,
during the six months ended December 31, 1997, compared to the same period in
1996. This decrease resulted primarily from the $458,000 one-time charge
recorded in 1996 attendant to the aforementioned SAIF recapitalization
Excluding the SAIF recapitalization assessment effects, general, administrative
and other expense increased by $24,000, or 2.5%, due primarily to a $97,000, or
25.0%, increase in employee compensation and benefits, which was partially
offset by a $51,000 decrease in federal deposit insurance premiums and a
$26,000, or 63.4%, decrease in expenses of property acquired in settlement of
loans. The increase in employee compensation and benefits resulted primarily
from increased management staffing levels year to year, coupled with increased
costs attendant to stock benefit plans and normal merit increases. The special
one-time assessment to recapitalize the SAIF caused federal deposit insurance
premiums to be significantly reduced beginning January 1, 1997.
12
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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 Six Month Periods Ended December 31,
1997 and 1996 (continued)
Federal Income Taxes
The provision for federal income taxes increased by $178,000, or 312%, for the
six months ended December 31, 1997, as compared to the same period in 1996. This
increase resulted primarily from the increase in net earnings before taxes of
$512,000, or 299%. The effective tax rates were 34.4% and 33.3% for the six
months ended December 31, 1997 and 1996, respectively.
Comparison of Operating Results for the Three Month Periods Ended December 31,
1997 and 1996
General
The Corporation reported net earnings totaling $212,000 for the three months
ended December 31, 1997, a decrease of $5,000, or 2.3%, from the $217,000 of net
earnings reported for the same period in 1996. The decline in earnings resulted
primarily from a $22,000 increase in the provision for federal income taxes,
which was partially offset by a $1,000 increase in net interest income, a $9,000
increase in other income and an $11,000 decrease in general, administrative and
other expense.
Net Interest Income
Net interest income increased by $1,000, or .1%, for the three months ended
December 31, 1997, compared to the 1996 period. Interest income on loans
increased by $147,000, or 9.9%, due primarily to an increase in the average
balance of loans outstanding year-to-year. Interest income on investment and
mortgage-backed securities and interest-bearing deposits decreased by $139,000,
or 39.5%, due primarily to a decrease in the average portfolio balance
outstanding.
Interest expense on deposits increased by $77,000, or 9.4%, due primarily to an
increase in the average outstanding balance of deposits year-to-year. Interest
expense on borrowings decreased by $70,000 during the current period, due
primarily to a decrease in the average balance of 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 $54,000 provision for losses on loans during the three month period ended
December 31, 1997, an increase of $4,000, or 8.0%, over the comparable 1996
quarter. 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.
13
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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 Three Month Periods Ended December 31,
1997 and 1996 (continued)
Other Income
Other income increased by $9,000, or 22.0%, for the three months ended December
31, 1997, compared to the same period in 1996, due primarily to an increase in
service fees on deposit accounts and transactions year to year.
General, Administrative and Other Expense
General, administrative and other expense decreased by $11,000, or 2.2%, during
the three months ended December 31, 1997, compared to the same period in 1996.
The decrease resulted primarily from an $18,000, or 60.0%, decrease in federal
deposit insurance premiums and a $16,000, or 72.7%, decrease in expenses of
property acquired in settlement of loans, which were partially offset by a
$19,000, or 8.4%, increase in employee compensation and benefits. The increase
in employee compensation and benefits resulted primarily from an increase in
management staffing levels, coupled with an increase in costs attendant to stock
benefit plans and normal merit increases.
Federal Income Taxes
The provision for federal income taxes increased by $22,000, or 26.8%, for the
three months ended December 31, 1997, as compared to the same period in 1996.
The effective tax rates were 32.9% and 27.4% for the three months ended December
31, 1997 and 1996, respectively.
Other Matters
As with all providers of financial services, the Association's operations are
heavily dependent on information technology systems. The Association is
addressing the potential problems associated with the possibility that the
computers that control or operate the Association's information technology
system and infrastructure may not be programmed to read four-digit date codes
and, upon arrival of the year 2000, may recognize the two-digit code "00" as the
year 1900, causing systems to fail to function or to generate erroneous data.
The Association is working with the companies that supply or service its
information technology systems to identify and remedy any year 2000 related
problems.
As of the date of this Form 10-QSB, the Association has not identified any
specific expenses that are reasonably likely to be incurred by the Association
in connection with this issue and does not expect to incur significant expense
to implement the necessary corrective measures. No assurance can be given,
however, that significant expense will not be incurred in future periods. In the
event that the Association is ultimately required to purchase replacement
computer systems, programs and equipment, or incur substantial expense to make
the Association's current systems, programs and equipment year 2000 compliant,
the Association's net earnings and financial condition could be adversely
affected.
14
<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 December 31,
1997 and 1996 (continued)
Other Matters (continued)
In addition to possible expense related to its own systems, the Association
could incur losses if loan payments are delayed due to year 2000 problems
affecting any major borrowers in the Association's primary market area. Because
the Association's loan portfolio is highly diversified with regard to individual
borrowers and types of businesses and the Association's primary market area is
not significantly dependent upon one employer or industry, the Association does
not expect any significant or prolonged difficulties that will affect net
earnings or cash flow.
15
<PAGE>
Community Investors Bancorp, Inc.
PART II
ITEM 1. Legal Proceedings
Not applicable
ITEM 2. Changes in Securities and Use of Proceeds
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 Information
None
ITEM 6. Exhibits and Reports on Form 8-K
Reports on Form 8-K: None.
Exhibits: Financial Data Schedule for the six
months ended December 31,1997.
16
<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: February 6, 1998 By: /s/John W. Kennedy
------------------------ ------------------
John W. Kennedy
President and Chief
Executive Officer
Date: February 6, 1998 By: /s/Robert W. Siegel
------------------------ -------------------
Robert W. Siegel
Controller
17
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