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, 1998
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.
<PAGE>
The aggregate market value of the voting stock held by non-affiliates of the
Registrant at September 24, 1998 was $14,725,776.
The number of shares issued and outstanding of the Registrant's Common Stock as
of September 24, 1998 was 1,252,874.
DOCUMENTS INCORPORATED BY REFERENCE
Annual Report to Shareholders for fiscal year ended June 30, 1998 - Parts I, II
and IV.
Definitive Proxy Statement for the Annual Meeting of Stockholders to be held
October 26, 1998 - 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 ................28
PART II
Item 5. Market for Registrant's Common Equity and Related Shareholder
Matters...........................................................29
Item 6. Selected Financial Data.............................................29
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.............................................29
Item 8. Financial Statements and Supplementary Data.........................29
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure..........................................29
PART III
Item 10. Directors and Executive Officers of the Registrant..................30
Item 11. Executive Compensation..............................................30
Item 12. Security Ownership of Certain Beneficial Owners and Management......30
Item 13. Certain Relationships and Related Transactions......................30
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.....31
Signatures...................................................................33
<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, 1998, the Corporation had
$102.5 million of total assets, $92.2 million of total liabilities, including
$76.0 million of deposits, and $10.3 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, 1998, the Association's limit on loans-to-one
borrower was approximately $1.1 million and its five largest loans or groups of
loans-to-one borrower, including related entities, aggregated $635,000,
$596,000, $371,000, $354,000 and $318,000. All of these loans or groups of loans
were performing in accordance with their terms at June 30, 1998.
1
<PAGE>
Loan Portfolio Composition. The increase in net loans outstanding over
the prior year was $7.1 million, $10.2 million, and $6.4 million in fiscal 1998,
1997 and 1996, 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,
1998 1997 1996
Amount % Amount % Amount %
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Mortgage loans:
Secured by one-to-four family residences $67,205 78.7% $62,584 79.8% $51,999 76.5%
Secured by other residential properties 500 0.6 1,093 1.4 1,007 1.5
Construction loans 1,026 1.2 1,284 1.6 2,438 3.6
Nonresidential 4,744 5.6 4,039 5.2 3,347 4.9
------ ------- ------- ------- ------- -------
Total mortgage loans 73,475 86.1 69,000 88.0 58,791 86.5
Other loans:
Mobile homes 1,988 2.3 3,003 3.8 3,535 5.3
Commercial 1,357 1.6 1,114 1.4 819 1.2
Automobile 3,133 3.7 3,013 3.8 1,928 2.8
Home equity and improvement 1,732 2.0 550 .7 357 .5
Other 3,690 4.3 1,721 2.3 2,552 3.7
------ ------- ------- ------- ------- -------
Total other loans 11,900 13.9 9,401 12.0 9,191 13.5
------ ------ ------- ------ ------- -------
Total loans 85,375 100.0% 78,401 100.0% 67,982 100.0%
===== ===== =====
Less:
Net deferred loan origination fees 308 340 329
Undisbursed loan funds 930 1,137 939
Allowance for loan losses 563 478 459
------ -------- --------
Loans receivable - net $83,574 $76,446 $66,255
====== ====== ======
</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, 1998. 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
Secured by Secured by
One-to-four Other
Family Residential Construction Non-
Residences Properties Loan Residential
(In thousands)
<S> <C> <C> <C> <C>
Amounts due in:
One year or less $48,339 $ 48 $1,026 $2,765
After one year through two years 1,080 19 - 29
After two years through three years 1,168 21 - 32
After three years through five years 2,630 47 - 72
After five years through ten years 8,691 158 - 238
After ten years through twenty years 5,297 207 - 312
Over twenty years - - - -
------- -- ----- -----
Total(1) $67,205 $500 $1,026 $3,448
====== === ===== =====
Interest rate terms on amounts due after one year:
Fixed
Adjustable
</TABLE>
<TABLE>
<CAPTION>
Other Loans
Consumer
Mobile and
Homes Commercial Other Total
(In thousands)
<S> <C> <C> <C> <C>
Amounts due in:
One year or less $1,959 $1,109 $5,587 $60,833
After one year through two years 23 187 3,729 5,067
After two years through three years 6 - 596 1,823
After three years through five years - - - 2,749
After five years through ten years - - - 9,087
After ten years through twenty years - - - 5,816
Over twenty years - - - -
----- ----- ----- ------
Total(1) $1,988 $1,296 $9,912 $85,375
===== ===== ===== ======
Interest rate terms on amounts
due after one year:
Fixed $24,542
Adjustable 52,626
------
$77,168
======
</TABLE>
(1) Does not include adjustments relating to loans in process, the allowance for
loan losses, unearned interest and discounts and deferred loan origination fees.
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 $75,000 or more and may be performed on certain loans
less than $75,000. 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 $25,000 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 $250,000must 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 ARM loans for several
years. As a result, at June 30, 1998, approximately 87.8% of mortgage loans in
the Association's portfolio were comprised of ARM loans. 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,
1998 1997 1996
(In thousands)
<S> <C> <C> <C>
Mortgage loan originations:
Secured by one-to-four family residences $17,323 $19,119 $11,202
Construction loans 1,774 2,316 1,510
Nonresidential 1,486 949 1,299
------- -------- ------
Total mortgage loan originations 20,583 22,384 14,011
Other loan originations:
Mobile homes 82 120 185
Commercial 493 261 240
Automobiles 2,392 1,231 492
Home equity and improvement 2,132 275 58
Other 2,050 2,568 1,920
------- ------- -------
Total other loans 7,149 4,455 2,895
Purchases of loan participations - 250 672
------- -------- -------
Total loans originated and purchased 27,732 27,089 17,578
Less:
Loan principal repayments 20,421 16,529 10,701
Sales of whole loans and participations - - -
Transferred to real estate, mobile homes and
other assets held for sale 177 265 275
Other, net (6) 104 219
---------- -------- ------
Net increase in total loans $ 7,128 $10,191 $ 6,383
======= ====== ======
</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. 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, 1998, 1997 or 1996.
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, 1998
------------------------------------------------------------------------------------------
30 - 59 Days 60 - 89 Days 90 or More Days
------------------------- ------------------------ ------------------------
Percent of Percent of Percent of
Loan Loan Loan
Amount Category Amount Category Amount Category
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Mortgage loans:
Secured by one-to-four
family residences $412 .61% $324 .48% $377 .56%
Secured by other
residential properties - - - - - -
Construction loans - - - - - -
Other, nonresidential - - - - - -
-- -- --
Total mortgage loans 412 .56 324 .44 377 .51
Other loans:
Mobile homes 222 11.17 116 5.84 166 8.35
Commercial - - - - - -
Automobile 53 1.69 39 1.24 - -
Home equity and
improvement - - - - - -
Other 28 .76 7 .19 57 .27
---- ----- ----
Total other loans 303 2.55 162 1.36 223 1.87
--- --- ---
Total $715 .84% $486 .57% $600 .70%
=== ======= === ===== === =====
</TABLE>
<TABLE>
<CAPTION>
June 30, 1997
------------------------------------------------------------------------------------------
30 - 59 Days 60 - 89 Days 90 or More Days
------------------------- ------------------------ ---------------------
Percent of Percent of Percent of
Loan Loan Loan
Amount Category Amount Category Amount Category
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Mortgage loans:
Secured by one-to-four
family residences $ 596 .95% $307 .49% $364 .58%
Secured by other
residential properties - - - - - -
Construction loans - - - - - -
Other, nonresidential - - - - - -
----- -- --
Total mortgage loans 596 .86 307 .45 364 .53
Other loans:
Mobile homes 400 13.32 54 1.80 98 3.26
Commercial - - - - - -
Automobile 45 1.49 25 .83 1 .03
Home equity and
improvement - - - - - -
Other 18 1.05 6 .35 45 2.61
------- ----- ----
Total other loans 463 4.93 85 .90 144 1.53
------ ---- ---
Total $1,059 1.35% $392 .50% $508 .65%
===== ====== === ===== === =====
</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,
1998 1997 1996
(Dollars in thousands)
<S> <C> <C> <C>
Non-accruing loans:
Secured by one-to-four family residences $377 $364 $487
Secured by other residential properties - - 32
Nonresidential - - 14
Mobile homes 166 98 78
Automobile - 1 -
Other 57 45 25
Accruing loans 90 days or more delinquent - - -
-- -- -
Total non-performing loans 600 508 636
Property acquired in settlement of loans 58 71 81
---- ---- ----
Total non-performing assets 658 579 717
Troubled debt restructurings 34 - -
---- -- -
Total $692 $579 $717
=== === ===
Total non-performing loans and troubled
debt restructurings as a percentage of
total loans 0.74% 0.65% 0.94%
==== ==== ====
Total non-performing assets and troubled
debt restructurings as a percentage of
total assets 0.67% 0.63% 0.78%
==== ==== ====
</TABLE>
Additional interest income that would have been recognized had such
loans performed in accordance with their original terms amounted to
approximately $29,000, $16,000 and $22,000 for the fiscal years ended June 30,
1998, 1997 and 1996, respectively.
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, 1998, the
Association had approximately $861,000 of classified assets, net of specific
loss allowances, consisting of $781,000 of substandard and $17,000 of doubtful.
There were no assets categorized as "loss" at June 30, 1998. As of that same
date, the Association had $63,000 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 loan losses
and other selected statistics for the periods presented.
<TABLE>
<CAPTION>
Year ending June 30,
1998 1997 1996
(Dollars in thousands)
<S> <C> <C> <C>
Average loans, net $81,586 $71,710 $62,012
====== ======= =======
Allowance for loan losses, beginning of
year $ 478 $ 459 $ 399
Charged-off loans:
Secured by one-to-four family residences 29 5 17
Mobile homes 29 88 75
Automobiles 9 14 9
Other 20 24 3
--------- --------- ----------
Total charged-off loans 87 131 102
Recoveries on loans previously charged off:
Secured by one-to-four family residences 9 - 1
Secured by other residential properties - - -
Mobile homes - 5 -
Automobiles 2 - -
Other 5 3 2
---------- ---------- --------
Total recoveries 16 8 3
--------- ---------- --------
Net loans charged-off 71 123 99
Provision for loan losses 156 142 159
-------- -------- -------
Allowance for loan losses, end of period $ 563 $ 478 $ 459
======== ======== ========
Net loans charged-off to average loans, net .09% .17% .16%
Allowance for loan losses to total loans .66% .61% .68%
Allowance for loan losses to nonperforming
loans 93.8% 94.1% 72.2%
Net loans charged-off to allowance for loan
losses 12.6% 25.7% 21.6%
</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,
1998 1997 1996
% of Loans % of Loans % of Loans
In Each In Each In 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 $272 78.7% $195 79.8% $198 76.5%
Secured by other
residential properties - 0.6 35 1.4 21 1.5
Construction loans - 1.2 - 1.6 - 3.6
Other, nonresidential 18 5.6 - 5.2 - 4.9
Mobile homes 234 2.3 186 3.8 182 5.3
Commercial - 1.6 - 1.4 - 1.2
Automobile - 3.7 12 3.8 10 2.8
Home equity and
improvement 7 2.0 - 0.7 - 0.5
Other 32 4.3 50 2.3 48 3.7
---- ------- ---- ------- ---- -------
Total $563 100.0% $478 100.0% $459 100.0%
=== ===== === ===== === =====
</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 accounts for investment and mortgage-backed
securities in accordance with SFAS No. 115, "Accounting for Certain Investments
in Debt and Equity Securities." 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 one collateralized
mortgage obligation (CMO) issue totaling $10,000, which is a fully amortizable
security, and one separate agency security totaling $250,000 which has 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, 1998.
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,
1998 1997 1996
Amount Percent Amount Percent Amount Percent
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Passbook $16,139 21.2% $15,454 21.2% $14,951 21.4%
Money market demand,
NOW and super NOW 8,757 11.6 7,710 10.6 6,173 8.8
Certificates of deposit 51,059 67.2 49,747 68.2 48,787 69.8
------ ------ ------ ------ ------ ------
Total deposits at end of
period $75,955 100.0% $72,911 100.0% $69,911 100.0%
====== ===== ====== ===== ====== =====
</TABLE>
The following table sets forth the Corporation's net deposit flows
during the periods indicated.
<TABLE>
<CAPTION>
Year ended June 30,
1998 1997 1996
(In thousands)
<S> <C> <C> <C>
Net decrease before interest credited $ (131) $ (57) $(3,587)
Interest credited 3,175 3,057 3,034
----- ----- ------
Net deposits increase (decrease) $3,044 $3,000 $ (553)
===== ===== ======
</TABLE>
The following table sets forth maturities of the Corporation's
certificates of deposit of $100,000 or more at June 30, 1998 by time remaining
to maturity.
<TABLE>
<CAPTION>
(Amount in thousands)
<S> <C>
Three months or less $ 108
Over three months through six months 1,059
Over six months through 12 months 324
Over 12 months 1,354
-----
Total $2,845
=====
</TABLE>
13
<PAGE>
The following table presents, by various interest rate categories, the
amount of certificates of deposit at June 30, 1998 and the amounts at June 30,
1998 which mature during the periods indicated.
<TABLE>
<CAPTION>
Amounts at June 30, 1998
Maturing Within
June 30, One Two Three
Certificates of Deposit 1998 Year Year Years Thereafter
<S> <C> <C> <C> <C> <C>
4.01% to 6.0% $48,746 $39,849 $7,218 $1,258 $ 421
6.01% to 8.0% 2,313 597 724 226 766
------- -------- ------ ------ ------
Total certificate accounts $51,059 $40,446 $7,942 $1,484 $1,187
====== ====== ===== ===== =====
</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,
1998 1997 1996
(Dollars in thousands)
<S> <C> <C> <C>
Maximum balance $15,558 $14,099 $9,884
Average balance 10,695 11,537 2,123
Weighted average interest rate of
FHLB advances 5.61% 6.68% 6.08%
</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,
1998 1997 1996
(Dollars in thousands)
<S> <C> <C> <C>
FHLB advances $15,558 $7,810 $9,884
Weighted average interest rate of
FHLB advances 5.58% 6.46% 6.01%
</TABLE>
All of the FHLB of Cincinnati advances on June 30, 1998 were made as
part of the matched maturities program.
Employees
The Corporation had 23 full-time employees and 9 part-time employees at
June 30, 1998. 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, 1998, 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 June 30, 1998,
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, 1998, 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 in each calendar quarter equal to a certain percentage
of the sum of its average daily balance of net withdrawable accounts and
short-term borrowings. 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
4%. In addition to meeting the minimum liquidity requirement, each savings
association must maintain sufficient liquidity to ensure its safe and sound
operation.
Liquid assets for purposes of this ratio include cash, certain
deposits, certain banker's acceptances, U.S. Government obligations, and state
and state agency obligations with a maximum term of two years. Monetary
penalties may be imposed upon associations for violations of liquidity
requirements.
At June 30, 1998, the Association's regulatory liquidity totaled $15.8
million, or 18.1%, which exceeded the minimum regulatory requirement by $12.3
million.
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.
19
<PAGE>
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; direct or indirect obligations of the FDIC and loans for
educational purposes, loans to small businesses, and loans made through credit
cards or credit card accounts. 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; loans for personal, family or
homehold purposes (other than those included in the 100% basket above); 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, 1998, the qualified thrift
investments of the Association were approximately 98.7% 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 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, 1998, 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 totaling 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 totaling up to 50% of net income
over the four quarter period.
20
<PAGE>
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, 1998, the Association had
advances of $15.6 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, 1998, the Association had
$825,000 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, 1998 totaled $57,000.
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, 1998, 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
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.
23
<PAGE>
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.
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.
25
<PAGE>
Under the Percentage Method, the bad debt deduction with respect to
qualifying real property loans was 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 was able to 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 was 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.
Pursuant to certain legislation which was 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, is no longer
permitted to make additions to its tax bad debt reserve under the percentage of
taxable income method. Such institutions are permitted to use the experience
method in lieu of deducting bad debts only as they occur. Such legislation
requires the Association to realize increased tax liability over a period of at
least six years, beginning in 1996. Specifically, the legislation requires 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. The recapture of the
Association's bad debt reserves accumulated after 1987 will 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
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.
26
<PAGE>
As of June 30, 1998, 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 $2.5 million of accumulated earnings and profits as of June
30, 1998, 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 federal income tax returns for taxable
years through June 30, 1994 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 1998 and 1997.
27
<PAGE>
Item 2. Properties
At June 30, 1998, the Corporation conducted its business from its
executive offices in Bucyrus, Ohio and two full-service branch offices. 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, 1998.
<TABLE>
<CAPTION>
Net Book
Leased/ Value of Amount of
Owned Property Deposits
<S> <C> <C> <C>
Main Office Owned $310 $63,206
119 South Sandusky Avenue
Bucyrus, Ohio 44820
South Branch Office Owned 157 6,081
South Sandusky and Marion Road
Bucyrus, Ohio 44820
New Washington Branch Owned 59 6,668
115 South Kibler Street
New Washington, Ohio 44854
Automated Teller Machine Owned 74 -
1661 Marion Road (machine
Bucyrus, Ohio only) --- ------
$600 $75,955
=== ======
</TABLE>
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.
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 1998.
28
<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
5 of the Corporation's Annual Report to Stockholders for fiscal 1998 ("Annual
Report"), which is included herein as Exhibit [13].
Item 6. Selected Financial Data
The information required herein is incorporated by reference from pages
7 and 8 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
9 through 14 of the Annual Report.
Item 8. Financial Statements and Supplementary Data
The financial statements required herein are incorporated by reference
from pages 24 through 52 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
14 of the Company's Proxy Statement for its 1998 Annual Meeting of Shareholders.
29
<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
5 to 6 of the Registrant's Proxy Statement dated September 22, 1998 ("Proxy
Statement").
Item 11. Executive Compensation
The information required herein is incorporated by reference from pages
11 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
9 and 10 of the Registrant's Proxy Statement.
Item 13. Certain Relationships and Related Transactions
The information required herein is incorporated by reference from pages
5 and 6 of the Registrant's Proxy Statement.
30
<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 24 through 52 of the Annual Report:
Report of Independent Certified Public Accountants
Consolidated Statements of Financial Condition as of June 30, 1998 and
1997
Consolidated Statements of Earnings for the years ended June 30, 1998,
1997 and 1996
Consolidated Statements of Changes in Stockholders' Equity for the
years ended June 30, 1998, 1997 and 1996
Consolidated Statements of Cash Flows for the years ended June 30,
1998, 1997 and 1996
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:
Exhibit
Number Description
3.1 Articles of Incorporation *
3.2 Code of Regulations of Community Investors Bancorp, Inc. *
3.3 Bylaws of Community Investors Bancorp, Inc. *
31
<PAGE>
4.1 Specimen Stock Certificate of Community Investors Bancorp, Inc. *
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
27 Financial Data Schedule
* 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, 1998.
(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.
32
<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 28, 1998 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, 1998.
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
33
1998
ANNUAL
REPORT
COMMUNITY INVESTORS BANCORP, INC.
<PAGE>
TABLE OF CONTENTS
President's Letter to Stockholders....................................... 2
The Business of Community Investors Bancorp, Inc. and Subsidiary.......... 4
Market for Common Stock.................................................. 5
Selected Consolidated Financial Data..................................... 7
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................................ 9
Discussion of Financial Condition Changes from June 30, 1997 to
June 30, 1998.......................................................... 10
Comparison of Results of Operations for Fiscal Years Ended
June 30, 1998 and 1997................................................. 11
Comparison of Results of Operations for Fiscal Years Ended
June 30, 1997 and 1996................................................. 13
Average Yield Analysis................................................... 15
Rate/Volume Table........................................................ 16
Asset and Liability Management........................................... 17
Liquidity and Capital Resources.......................................... 19
Impact of Inflation and Changing Prices.................................. 20
Recent Accounting Pronouncements......................................... 20
Other Matters............................................................ 21
Report of Independent Certified Public Accountants........................ 23
Consolidated Financial Statements......................................... 24
Directors and Officers.................................................... 52
Stockholder Services...................................................... 53
1
<PAGE>
Dear Stockholder:
We are very pleased to present to our stockholders, the results of the third
year of operation for Community Investors Bancorp, Inc. ("CIBI").
The results of operations in fiscal 1998 reflected another year of good
performance. We earned $879,000, or $0.70 per basic share. We had another
three-for-two stock split this year and the market has reacted most favorably.
As of June 30, 1998, stockholders who invested in the initial offering of CIBI
have experienced an annualized return of 33%, assuming they sold the shares at
the fiscal year end.
In last year's report, we spoke about new industries moving into our community.
The three that built here are in our Crossroads Industrial Park and are doing
very well. This industrial park continues to welcome new industry and is
answering inquiries every week. Our community also has added a WalMart Store and
a Carter Lumber in the past year.
First Federal Savings & Loan Association of Bucyrus has been busy adding new
services for our customers. In just the last year or so, we have added: credit
card services for our customers, a merchant program for commercial accounts, and
we now have the ability to send and receive fed wires. We have also entered into
an agreement with a regional bank to offer trust services through our Bucyrus
office, and are now the only financial institution in Crawford County to offer
trust services. Further, we now offer our customers a telephone information
system, called "Teller At A Touch," which allows the customers to get account
information and transfer funds twenty-four hours a day. Finally, we have been
successful in increasing our commercial checking accounts, and we are currently
expanding our physical space at our main office. All of these new services were
designed to bring increased fee income to the Corporation.
First Federal of Bucyrus continues to be a major lender of single family homes
in Crawford County and a portfolio lender. This past year, we have shown a net
gain of $4,600,000 in mortgage loans for an increase of 6.8%. We must point out
that we continue to be able to write the majority of these loans as adjustable
rate mortgages which limits our income now, but when rates do increase we will
be in a most positive position to keep our spread. Our consumer loan portfolio
has increased by 25% during the past year which allows us to take advantage of
short term loans with usually higher interest rates.
The Year 2000 compliance matter is progressing satisfactorily. We have an
internal committee which includes an outside director who meet regularly and
report to the board as needed or at least quarterly. All of our internal systems
have been checked and some have been updated to meet requirements. Our service
bureau has purchased a new main frame computer that is Year 2000 compliant, and
they are in the process of testing all of their customers to make sure the
system is working as planned. We continue to work with all of our suppliers to
assure that our customers will have no interruption of services on January 3,
2000.
We are proud that others have recognized our efforts as Community Investors
Bancorp, Inc. was named to the top 100 companies by Standard & Poor's Compustat
of Englewood, Colo.
2
<PAGE>
In conclusion, your Board and management remain committed to maximizing the
value of your investment by exploiting our niche as an independent
community-based provider of financial services. We appreciate your support in
pursuit of our goals over the past year and look forward to a very good 1999.
Very truly,
Dale C. Hoyles
Chairman
John W. Kennedy
President
3
<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, 1998, the Corporation had $102.5 million of total
assets, $92.2 million of total liabilities, including $76.0 million of deposits,
and $10.3 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 Federal Deposit
Insurance Corporation (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, 1998, the Association's limit on loans-to-one
borrower was approximately $1.1 million and its five largest loans or groups of
loans-to-one borrower, including related entities, aggregated $635,000,
$596,000, $370,000, $354,000, and $318,000. All of these loans or groups of
loans were performing in accordance with contractual terms at June 30, 1998.
4
<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
("Nasdaq"). At September 9, 1998, the Corporation had 1,266,320
shares of common stock outstanding and 443 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 and cash dividends paid
per share of common stock during the periods indicated. All share prices and
dividends per share have been adjusted for the 3-for-2 stock splits effected
during each of fiscal 1998 and 1997.
<TABLE>
<CAPTION>
Fiscal Year Ended June 30, 1998
Quarter Ended High Low Dividend
<S> <C> <C> <C>
September 30, 1997 $10.83 $ 8.50 $.053
December 31, 1997 11.33 9.83 .053
March 31, 1998 13.50 10.67 .053
June 30, 1998 16.67 12.67 .053
</TABLE>
<TABLE>
<CAPTION>
Fiscal Year Ended June 30, 1997
Quarter Ended High Low Dividend
<S> <C> <C> <C>
September 30, 1996 $7.33 $6.67 $.045
December 31, 1996 8.11 7.11 .045
March 31, 1997 8.11 6.89 .045
June 30, 1997 9.67 7.67 .045
</TABLE>
<TABLE>
<CAPTION>
Fiscal Year Ended June 30, 1996
Quarter Ended High Low Dividend
<S> <C> <C> <C>
September 30, 1995 $7.45 $5.67 $.018
December 31, 1995 7.33 6.55 .018
March 31, 1996 7.11 6.33 .018
June 30, 1996 7.11 6.55 .018
</TABLE>
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.
5
<PAGE>
MARKET FOR COMMON STOCK (CONTINUED)
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.
6
<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: 1998 1997 1996 1995 1994
(In thousands)
<S> <C> <C> <C> <C> <C>
Total assets $102,535 $92,304 $91,787 $84,741 $75,915
Cash and cash equivalents 2,793 2,410 1,909 1,077 1,162
Securities:
Available-for-sale 5,485 1,498 6,201 3,840 1,210
Held-to-maturity 8,554 9,990 15,674 18,326 15,188
Loans receivable - net 83,574 76,446 66,255 59,872 56,747
Deposits 75,955 72,911 69,911 70,464 68,743
Federal Home Loan Bank advances 15,558 7,810 9,884 1,515 1,591
Stockholders' equity, restricted (1) 10,343 11,113 11,486 12,296 5,262
</TABLE>
<TABLE>
<CAPTION>
Year ended June 30,
Selected Consolidated Operating Data: 1998 1997 1996 1995 1994
(In thousands, except share data)
<S> <C> <C> <C> <C> <C>
Total interest income $7,511 $7,288 $6,770 $6,061 $5,538
Total interest expense 4,153 4,069 3,626 3,385 3,000
----- ----- ----- ----- -----
Net interest income 3,358 3,219 3,144 2,676 2,538
Provision for losses on loans 156 142 159 160 176
------ ------ ------ ------ ------
Net interest income after provision for
losses on loans 3,202 3,077 2,985 2,516 2,362
Other income 197 140 164 131 111
SAIF recapitalization assessment - 458 - - -
General, administrative and other expense 2,076 1,862 1,805 1,511 1,436
----- ----- ----- ----- -----
Earnings before income taxes 1,323 897 1,344 1,136 1,037
Federal income taxes 444 308 458 384 339
------ ------ ------ ------ ------
Net earnings $ 879 $ 589 $ 886 $ 752 $ 698
====== ====== ====== ====== ======
Earnings per share (2)
Basic $.70 $.44 $.59 $.27 N/A
=== === === === ===
Diluted $.68 $.44 $.59 $.27 N/A
=== === === === ===
</TABLE>
(1) Consisted solely of retained earnings at June 30, 1994.
(2) Earnings per share for fiscal 1995 is based on the 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. Earnings
per share for the years ended June 30, 1997, 1996 and 1995 have been
restated to give effect to the 3-for-2 stock splits effected during fiscal
1998 and 1997.
7
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA (CONTINUED)
<TABLE>
<CAPTION>
At or for the year ended June 30,
Selected financial ratios and
other data: (1) 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Return on average assets (4) .90% .62% 1.05% .94% .92%
Return on average equity (4) 8.05 5.21 7.44 10.24 14.17
Average equity to average assets (2) 11.20 11.97 14.06 9.16 6.50
Interest rate spread (2) 3.07 3.06 3.02 3.12 3.26
Net interest margin (2) 3.54 3.53 3.73 3.44 3.44
Non-performing assets and troubled debt
restructuring to total assets at end of period (3) .64 .63 .78 .56 .88
Non-performing loans and troubled debt
restructuring to total loans (3) .70 .65 .94 .60 .93
Average interest-earning assets to average
interest-bearing liabilities 110.58 110.40 116.57 107.42 104.28
Net interest income after provision for loan
losses and other income to total general,
administrative and other expense (4) 163.73 138.66 174.46 175.18 172.21
General, administrative and other expense to
average total assets (4) 2.13 2.46 2.13 1.88 1.90
Book value per share (5) $8.17 $7.97 $7.66 $7.40 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 and accruing 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.
(4) Before consideration of the SAIF recapitalization assessment the ratios set
forth below for the fiscal year ended June 30, 1997, would have been as
follows:
Return on average assets .95%
Return on average equity 7.90
Net interest income after provision for
loan losses and other income to total
general, administrative and other expense 165.25
General, administrative and other expense
to average total assets 1.97
(5) Adjusted to give effect to the 3-for-2 stock splits effected during fiscal
1998 and 1997.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
The principal asset of Community Investors Bancorp, Inc. (the "Corporation") is
its ownership of First Federal Savings and Loan Association of Bucyrus (the
"Association"). Accordingly, the Corporation's results of operations are
primarily dependent upon the results of operations of the Association. The
Association conducts a general banking business that consists of attracting
deposits from the general public and using those funds to originate loans for
primarily residential and consumer purposes.
The Association's profitability depends primarily on its net interest income,
which is the difference between interest income generated from interest-earning
assets (i.e., loans, investments and mortgage-backed securities) less the
interest expense incurred on interest-bearing liabilities (i.e., deposits and
borrowed funds). Net interest income is affected by the relative amounts of
interest-earning assets and interest-bearing liabilities, and the interest rates
paid on these balances.
Additionally, and to a lesser extent, the Association's profitability is
affected by such factors as the level of non-interest income and expenses, the
provision for losses on loans, and the effective tax rate. Non-interest income
consists primarily of service charges and other fees. Non-interest expenses
consist of compensation and benefits, occupancy-related expenses, FDIC deposit
insurance premiums and other operating expenses.
Management's discussion and analysis of earnings and related financial data are
presented herein to assist investors in understanding the consolidated financial
condition and results of operations of the Corporation for the fiscal years
ended June 30, 1998 and 1997. This discussion should be read in conjunction with
the consolidated financial statements and related footnotes presented elsewhere
in this report.
Forward-Looking Statements
In the following pages, management presents an analysis of the Corporation's
financial condition as of June 30, 1998, and the results of operations for the
year ended June 30, 1998 as compared to prior periods. In addition to this
historical information, the following discussion contains forward-looking
statements that involve risks and uncertanties. 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 in the Corporation's general market area.
Without limiting the foregoing, some of the forward-looking statements include
the following:
Management's establishment of an allowance for loan losses and its
statements regarding the adequacy of such allowance for loan losses.
Management's opinions as to the financial statement effect of certain
recent accounting pronouncements.
Management's opinion as to the effect of the Year 2000 on its
information technology systems.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Discussion of Financial Condition Changes from June 30, 1997 to June 30, 1998
The Corporation's total assets amounted to $102.5 million as of June 30, 1998,
an increase of $10.2 million, or 11.1%, over the $92.3 million total at June 30,
1997. The increase in assets was funded primarily through growth in deposits of
$3.0 million, coupled with an increase in advances from the Federal Home Loan
Bank of $7.7 million, which were partially offset by a reduction in
stockholders' equity of $770,000.
Cash and cash equivalents and investment securities totaled $15.6 million at
June 30, 1998, an increase of $3.4 million, or 27.9%, over 1997 levels. The
increase resulted primarily from purchases of investment securities during
fiscal 1998 totaling $8.6 million, which were partially offset by maturities of
$5.6 million. Purchases during fiscal 1998 include a $5.0 million U.S.
government agency three year bond, bearing interest at a rate of 6.00%, which
was financed via a 5.15% fixed-rate advance from the Federal Home Loan Bank.
Mortgage-backed securities declined by $463,000, or 26.7%, during fiscal 1998,
as net proceeds from principal repayments were redeployed to partially fund
growth in the loan portfolio.
Loans receivable totaled $83.6 million at June 30, 1998, an increase of $7.1
million, or 9.3%, over June 30, 1997 levels. Loan disbursements during fiscal
1998 totaled $27.7 million, which were partially offset by principal repayments
of $20.4 million. Loan disbursements volume remained strong during the year, as
fiscal 1998 volume exceeded that of fiscal 1997 by approximately $900,000, or
3.3%. Growth in the loan portfolio was comprised primarily of loans secured by
one-to-four family real estate and consumer loans, which increased by $4.6
million and $3.5 million, respectively, during fiscal 1998, as compared to
fiscal 1997.
At June 30, 1998, the Corporation's allowance for loan losses totaled $563,000,
which represented .66% of total loans and 93.8% of nonperforming loans. The
allowance totaled $478,000 at June 30, 1997, which represented .61% of total
loans and 94.1% of nonperforming loans at that date. Nonperforming loans totaled
$600,000 and $508,000 at June 30, 1998 and 1997, respectively, which represented
.70% and .65% of total loans at those respective dates. Although management
believes that its allowance for loan losses at June 30, 1998 was adequate based
on 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 $76.0 million at June 30, 1998, an increase of $3.0 million, or
4.2%, over the $72.9 million total reported at June 30, 1997. Growth in deposits
resulted primarily from management's continuing efforts to sustain the
Corporation's five year growth trend through a combination of marketing and
pricing strategies. Such deposit growth consisted of $1.7 million in transaction
accounts and $1.3 million in certificates of deposit.
Advances from the Federal Home Loan Bank totaled $15.6 million at June 30, 1998,
an increase of $7.7 million, or 99.2%, over June 30, 1997 levels. Proceeds from
such advances were used primarily to fund the purchase of a $5.0 million U.S.
government agency bond, and to fund the growth in the loan portfolio.
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Discussion of Financial Condition Changes from June 30, 1997 to June 30, 1998
(continued)
Stockholders' equity totaled $10.3 million at June 30, 1998, a decrease of
$770,000, or 6.9%, from June 30, 1997 levels. The decrease resulted primarily
from repurchases of 216,730 (split-adjusted) shares of treasury stock at an
aggregate price of $1.6 million, coupled with dividend payments on common stock
totaling $271,000, which were partially offset by net earnings of $879,000.
Comparison of Results of Operations for the Fiscal Years Ended June 30, 1998 and
1997
General
The Corporation's net earnings totaled $879,000 for the fiscal year ended June
30, 1998, an increase of $290,000, or 49.2%, over the $589,000 of net earnings
reported for fiscal 1997. The increase in earnings resulted primarily from the
absence of a $304,000 one-time after tax charge recorded in fiscal 1997
reflecting the assessment to recapitalize the Savings Association Insurance Fund
(SAIF), coupled with a $139,000 increase in net interest income and a $57,000
increase in other income, which were partially offset by a $214,000 increase in
general, administrative and other expense (excluding the one-time SAIF
recapitalization pre-tax charge of $458,000) and a $136,000 increase in the
provision for federal income taxes.
Net Interest Income
Total interest income for the fiscal year ended June 30, 1998, amounted to $7.5
million, an increase of $223,000, or 3.1%, over fiscal 1997. This increase was
due primarily to a $3.8 million, or 4.1%, increase in the weighted-average
balance of interest-earning assets outstanding, which was partially offset by an
eight basis point decline in the average yield year to year, to 7.91% in fiscal
1998. Interest income on loans increased by $691,000, or 11.6%, due primarily to
a $9.9 million, or 13.8%, increase in the average balance of loans outstanding
year-to-year, partially offset by a 15 basis point decline in the average yield.
Interest income on investment and mortgage-backed securities and
interest-bearing deposits decreased by $468,000, or 34.7%, due primarily to a
$6.1 million, or 31.4%, decrease in the average portfolio balance outstanding.
Interest expense on deposits increased by $255,000, or 7.7%, due primarily to a
$4.1 million, or 5.8%, increase in the weighted-average balance of deposits
outstanding, coupled with a nine basis point increase in the cost of deposits
year to year, to 4.73% in fiscal 1998. Interest expense on borrowings decreased
by $171,000, or 22.2%, during the current period, due primarily to an $842,000
decrease in the weighted-average balance of advances from the Federal Home Loan
Bank outstanding, coupled with a 107 basis point decline in the average cost of
borrowings, to 5.61% in fiscal 1998.
As a result of the foregoing changes in interest income and interest expense,
net interest income increased by $139,000, or 4.3%, to a total of $3.4 million
for the fiscal year ended June 30, 1998. The interest rate spread amounted to
3.07% in fiscal 1998 and 3.06% in fiscal 1997, while the net interest margin
totaled approximately 3.54% in fiscal 1998, as compared to 3.53% in fiscal 1997.
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Comparison of Results of Operations for the Fiscal Years Ended June 30, 1998 and
1997 (continued)
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 $156,000 provision for losses on loans during the fiscal year ended June 30,
1998, an increase of $14,000, or 9.9%, over fiscal 1997.
Other Income
Other income increased by $57,000, or 40.7%, for the fiscal year ended June 30,
1998, compared to fiscal 1997, due primarily to an increase in service fees on
deposit accounts and transactions.
General, Administrative and Other Expense
General, administrative and other expense totaled $2.1 million for the fiscal
year ended June 30, 1998, a decrease of $244,000, or 10.5%, compared to fiscal
1997. This decrease resulted primarily from the $458,000 one-time charge
recorded in fiscal 1997 attendant to the aforementioned SAIF recapitalization
assessment.
Excluding the effects of the SAIF recapitalization assessment, general,
administrative and other expense increased by $214,000, or 11.5%, due primarily
to a $189,000, or 22.5%, increase in employee compensation and benefits, a
$22,000, or 14.2%, increase in data processing and an $46,000, or 9.4%, increase
in other operating expenses, which were partially offset by a $50,000 decrease
in federal deposit insurance premiums. 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 increase in data processing and other operating expense
generally reflects the effects of the Corporation's overall growth year to year.
The special one-time assessment to recapitalize the SAIF caused federal deposit
insurance premiums to be significantly reduced beginning January 1, 1997.
Federal Income Taxes
The provision for federal income taxes increased by $136,000, or 44.2%, for the
fiscal year ended June 30, 1998, as compared to fiscal 1997. This increase
resulted primarily from the increase in net earnings before taxes of $426,000,
or 47.5%. The effective tax rates were 33.6% and 34.3% for the fiscal years
ended June 30, 1998 and 1997, respectively.
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Comparison of Results of Operations for the Fiscal Years Ended June 30, 1997 and
1996
General
Net earnings for the fiscal year ended June 30, 1997 totaled $589,000, a
decrease of $297,000, or 33.5%, from the $886,000 in net earnings recorded in
1996. The decrease in earnings was primarily attributable to the one-time
$458,000, or $304,000 after-tax assessment imposed on the Association as part of
legislation to recapitalize the Savings Association Insurance Fund ("SAIF").
This decrease was partially offset by an increase of $75,000, or 2.4%, in net
interest income and a decrease in the provision for loan losses of $17,000. As a
result of the decrease in net earnings before taxes, total federal income tax
expense decreased by $150,000.
Absent the one-time SAIF assessment, net earnings for the fiscal year ended June
30, 1997, would have been $893,000, representing an increase in net earnings of
$7,000, or 0.8%, over the fiscal year ended June 30, 1996.
Net Interest Income
Total interest income for the year ended June 30, 1997, amounted to $7.3
million, an increase of $518,000, or 7.7%, over the $6.8 million recorded in
fiscal 1996. Interest income on loans increased by $564,000, or 10.5%, to a
total of $5.9 million in fiscal 1997. The increase resulted primarily from a
$9.7 million, or 15.6%, increase in the average balance outstanding, partially
offset by a 39 basis point decrease in yield, to 8.28% in 1997. Interest income
on investment and mortgage-backed securities and interest-bearing deposits
decreased by $46,000, or 3.3%, due primarily to a $2.8 million decrease in the
average outstanding balance, partially offset by a 65 basis point increase in
yield, to 6.92% in 1997 from 6.27% in 1996.
Total interest expense for the fiscal year ended June 30, 1997 amounted to $4.1
million, an increase of $443,000, or 12.2%, over the $3.6 million recorded in
fiscal 1996. Interest expense on deposits decreased by $199,000, or 5.7%, to a
total of $3.3 million in fiscal 1997. This decrease resulted primarily from a 34
basis point decrease in the average cost of funds, from 4.98% in 1996 to 4.64%
in 1997, which was partially offset by a $920,000 increase in the average
outstanding balance year-to-year. Interest expense on borrowings increased by
$642,000, or 497.7%, due primarily to a $9.4 million increase in the average
balance outstanding coupled with a 60 basis point increase in average cost of
borrowings year-to-year.
As a result of the foregoing changes in interest income and expense, net
interest income increased by $75,000, or 2.4%, to a total of $3.2 million for
the fiscal year ended June 30, 1997, as compared to $3.1 million for fiscal
1996. The interest rate spread increased by four basis points, from 3.02% in
fiscal 1996 to 3.06% in fiscal 1997, while the net interest margin declined by
20 basis points, from 3.73% in fiscal 1996 to 3.53% in fiscal 1997.
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Comparison of Results of Operations for the Fiscal Years Ended June 30, 1997 and
1996 (continued)
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
$142,000 for the fiscal year ended June 30, 1997, a decrease of $17,000, or
10.7%, from the amount recorded in fiscal 1996.
Other Income
Other income totaled $140,000 for the fiscal year ended June 30, 1997, a
$24,000, or 14.6%, decrease from the $164,000 recorded in fiscal 1996. The
decrease was due primarily to the existence of gains on sale of investment
securities designated as available for sale of $59,000 during the 1996 fiscal
period with no similar gains recorded during the 1997 period, which was
partially offset by an increase of $25,000, or 21.7%, in other operating income.
General, Administrative and Other Expense
General, administrative and other expense totaled $2.3 million for the fiscal
year ended June 30, 1997, an increase of $515,000, or 28.5%, over the $1.8
million recorded in fiscal 1996. The increase was due primarily to a $392,000
increase in federal deposit insurance premiums as a result of the one-time SAIF
assessment. Excluding the SAIF charge of $458,000, general administrative and
other expenses increased by $57,000, or 3.2%. The increase in other expenses
resulted primarily from a $112,000, or 15.4%, increase in employee compensation
and benefits, a $22,000, or 21.0%, increase in occupancy and equipment and a
$42,000, or 36.5%, increase in franchise taxes, which were partially offset by a
$63,000, or 11.4%, decrease in other operating expense. The increase in employee
compensation and benefits resulted from key employee additions and general merit
increases. The increase in occupancy and equipment resulted primarily from
increased expenses associated with additions and renovations to office space to
accommodate growth.
Federal Income Taxes
The provision for federal income taxes amounted to $308,000 for the fiscal year
ended June 30, 1997, a decrease of $150,000, or 32.8%, from the $458,000
provision recorded in fiscal 1996. The decrease resulted primarily from a
$447,000, or 33.3%, decrease in earnings before taxes. The effective tax rates
were 34.3% and 34.1% for the fiscal years ended June 30, 1997 and 1996,
respectively.
14
<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 (viii) 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,
1998 1997
Average Interest Average Interest
utstanding earned/ Yield/ outstanding earned/ Yield/
balance paid rate balance paid rate
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable $81,586 $6,631 8.13% $71,710 $5,940 8.28%
Investment securities 12,668 837 6.61 18,598 1,314 7.07
Other interest-earning assets (1) 705 43 6.10 890 34 3.82
-------- ------- -------- -------- ------- --------
Total interest-earning assets 94,959 7,511 7.91 91,198 7,288 7.99
Non-interest-earning assets 2,572 3,227
------- -------
Total assets $97,531 $94,425
====== ======
Interest-bearing liabilities:
Deposits $75,177 3,553 4.73 $71,071 3,298 4.64
FHLB advances 10,695 600 5.61 11,537 771 6.68
------ ------ -------- ------ ------ --------
Total interest-bearing liabilities 85,872 4,153 4.84 82,608 4,069 4.93
----- -------- ----- --------
Non-interest-bearing liabilities 736 517
-------- --------
Total liabilities 86,608 83,125
Stockholders' equity 10,923 11,300
------ ------
Total liabilities and
stockholders' equity $97,531 $94,425
====== ======
Net interest income/interest
rate spread $3,358 3.07% $3,219 3.06%
===== ======== ===== ========
Net interest margin (2) 3.54% 3.53%
======== ========
Ratio of interest-earning assets to
interest-bearing liabilities 110.58% 110.40%
====== ======
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
Year ended June 30,
1996
Average Interest
outstanding earned/ Yield/
balance paid rate
<S> <C> <C> <C>
Interest-earning assets:
Loans receivable $62,012 $5,376 8.67%
Investment securities 20,370 1,313 6.45
Other interest-earning assets (1) 1,871 81 4.33
------- ------- --------
Total interest-earning assets 84,253 6,770 8.04
Non-interest-earning assets 419
--------
Total assets $84,672
======
Interest-bearing liabilities:
Deposits $70,151 3,497 4.98
FHLB advances 2,123 129 6.08
------- ------ --------
Total interest-bearing liabilities 72,274 3,626 5.02
----- --------
Non-interest-bearing liabilities 495
--------
Total liabilities 72,769
Stockholders' equity 11,903
------
Total liabilities and
stockholders' equity $84,672
======
Net interest income/interest
rate spread $3,144 3.02%
===== ========
Net interest margin (2) 3.73%
========
Ratio of interest-earning assets to
interest-bearing liabilities 116.57%
========
</TABLE>
(1) Comprised principally of interest-bearing deposits. (2) Net interest income
divided by average interest-earning assets.
16
<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,
1998 vs. 1997 1997 vs. 1996
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 $(110) $801 $691 $(229) $793 $564
Investment securities (81) (396) (477) 127 (126) 1
Interest-earning deposits and other 17 (8) 9 (8) (39) (47)
----- ----- ----- ------ ---- ----
Total interest-earning assets $(174) $397 223 $(110) $628 518
==== === ==== ===
Interest-bearing liabilities:
Deposits $ 64 $191 255 $(237) $ 38 (199)
Advances from Federal Home Loan Bank (118) (53) (171) 28 614 642
---- ---- --- ----- --- ---
Total interest-bearing liabilities $ (54) $138 84 $(209) $652 443
===== === ---- ==== === ---
Increase in net interest income $139 $ 75
=== ====
</TABLE>
17
<PAGE>
ASSET AND LIABILITY MANAGEMENT
The lending activities of savings institutions have historically emphasized
long-term 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 have been difficult due to the preference of
the Corporation's customers for fixed-rate residential mortgage loans in the low
interest rate environment that has prevailed for the past five years. Despite
this preference for fixed-rate originations, as a consequence of management's
continuing efforts, $45.3 million, or 67.4%, of the Corporation's portfolio of
one-to-four family residential mortgage loans consisted of ARMs at June 30,
1998. In addition, at June 30, 1998, another $4.9 million, or 5.7%, 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.
The interest rate spread is the principal determinant of First Federal's income.
The interest rate spread, and therefore net interest income, can vary
considerably over time because asset and liability repricing do not coincide.
Moreover, the long-term and cumulative effect of interest rate changes can be
substantial. Interest rate risk is defined as the sensitivity of an
institution's earnings and net asset values to changes in interest rates. The
management and Board of Directors attempt to manage First Federal's exposure to
interest rate risk in a manner to maintain the projected four-quarter percentage
change in net interest income and the projected change in the market value of
portfolio equity within limits established by the Board of Directors, assuming a
permanent and instantaneous parallel shift in interest rates.
18
<PAGE>
ASSET AND LIABILITY MANAGEMENT (CONTINUED)
First Federal, like other financial institutions, is subject to interest rate
risk to the extent that its interest-earning assets reprice differently than its
interest-bearing liabilities. As a part of its effort to monitor its interest
rate risk, First Federal reviews the reports of the OTS which set forth the
application of the "net portfolio value" ("NPV") methodology adopted by the OTS
as part of its final rules related to revisions in the risk-based capital
regulations. Although First Federal is not currently subject to the NPV
regulation, the application of the NPV methodology may illustrate First
Federal's interest rate risk.
Generally, NPV is the discounted present value of the difference between
incoming cash flows on interest-earning and other assets and outgoing cash flows
on interest-bearing liabilities. The application of the methodology attempts to
quantify interest rate risk as the change in the NPV which would result from a
theoretical 200 basis point (1 basis point equals .01%) change in market
interest rates. Both a 200 basis point increase in market interest rates and a
200 basis point decrease in market interest rates are considered. If the NPV
would decrease more than 2% of the present value of the institution's assets
with either an increase or a decrease in market rates, the institution must
deduct 50% of the amount of the decrease in excess of such 2% in the calculation
of the institution's risk-based capital.
At June 30, 1998, 2% of the present value of First Federal's assets was
approximately $2.0 million. Because the interest rate risk of a 200 basis point
increase or decrease in market interest rates did not exceed $2.0 million at
June 30, 1998, First Federal would not have been required to reduce its capital
in determining whether First Federal met its risk-based capital requirement.
The table below shows the increase and decrease of NPV under different interest
rate scenarios at June 30, 1998.
<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 $6,131 6.28% $(380) (6)%
+300 6,806 6.86 295 5
+200 7,131 7.10 620 10
+100 6,978 6.88 467 7
- 6,511 6.38 - -
- -100 6,300 6.11 (211) (3)
- -200 6,259 6.00 (252) (4)
- -300 6,467 6.11 (44) (1)
- -400 6,778 6.30 267 4
</TABLE>
In the event that interest rates should rise from recent levels, First Federal's
net interest income could be expected to be negatively affected. Moreover,
rising interest rates could negatively affect First Federal's earnings due to
diminished loan demand.
19
<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 and its investment in U.S.
government agency bonds. As of June 30, 1998, the Association had $15.6 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,
1998, the total approved mortgage-loan commitments outstanding amounted to $1.7
million. At the same date, the Corporation had maximum exposure for loan
commitments under unfunded loans and unused lines of credit totaling $2.5
million.
During fiscal 1998, the Corporation had positive cash flows from operating
activities 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 $383,000.
During fiscal 1997, the Corporation had positive cash flows from operating
activities, and negative cash flows from investing and financing activities
which resulted in a net increase in cash and cash equivalents for the year
totaling $501,000.
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 increased during fiscal 1998
primarily due to proceeds from Federal Home Loan Bank advances, and decreased
during fiscal 1997 due to net repayments on borrowings.
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 4% 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's average monthly liquidity ratio and short-term liquid assets
ratio at June 30, 1998 was 18.1%.
20
<PAGE>
IMPACT OF INFLATION AND CHANGING PRICES
The consolidated financial statements and notes thereto included herein have
been prepared in accordance with generally accepted accounting principles, which
require the Corporation to measure financial position and results of operations
in terms of historical dollars without considering changes in the relative
purchasing power of money over time because of inflation.
In management's opinion, changes in interest rates affect the financial
condition of a financial institution to a far greater degree than changes in the
rate of inflation. While interest rates are greatly influenced by changes in the
inflation rate, they do not change at the same rate or in the same magnitude as
the inflation rate. Rather, interest rate volatility is based on changes in the
expected rate of inflation, as well as on changes in monetary and fiscal
policies.
RECENT ACCOUNTING PRONOUNCEMENTS
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 during fiscal 1998, as required, without
material effect on the Corporation's consolidated financial position or results
of operations.
21
<PAGE>
RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)
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.
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.
OTHER MATTERS
As with most 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.
22
<PAGE>
OTHER MATTERS (CONTINUED)
The Year 2000 compliance matter is progressing satisfactorily. We have an
internal committee which includes an outside director who meet regularly and
report to the board as needed or at least quarterly. All of our internal systems
have been checked and some have been updated to meet requirements. Our service
bureau has purchased a new main frame computer that is Year 2000 compliant, and
they are in the process of testing all of their customers to make sure the
system is working as planned. We continue to work with all of our suppliers to
assure that our customers will have no interruption of services on January 3,
2000.
As of the date of this Annual Report, the Association has not identified any
material 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
unlikely 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.
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.
23
<PAGE>
Report of Independent Certified Public Accountants
Board of Directors
Community Investors Bancorp, Inc.
We have audited the accompanying consolidated statements of financial condition
of Community Investors Bancorp, Inc. as of June 30, 1998 and 1997, and the
related consolidated statements of earnings, stockholders' equity, and cash
flows for each of the years ended June 30, 1998, 1997 and 1996. 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.
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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Community
Investors Bancorp, Inc. as of June 30, 1998 and 1997, and the consolidated
results of its operations and its cash flows for each of the years ended June
30, 1998, 1997 and 1996, in conformity with generally accepted accounting
principles.
GRANT THORNTON LLP
Cincinnati, Ohio
August 20, 1998
24
<PAGE>
<TABLE>
Community Investors Bancorp, Inc.
<CAPTION>
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
June 30,
(In thousands, except share data)
ASSETS 1998 1997
<S> <C> <C>
Cash and due from banks $ 1,279 $ 1,905
Federal funds sold 572 60
Interest-bearing deposits in other financial institutions 942 445
---------- --------
Cash and cash equivalents 2,793 2,410
Investment securities available for sale - at market 5,485 1,498
Investment securities - at amortized cost, approximate market value of
$7,317 and $8,216 as of June 30, 1998 and 1997 7,285 8,258
Mortgage-backed securities - at amortized cost, approximate market value
of $1,214 and $1,714 as of June 30, 1998 and 1997 1,269 1,732
Loans receivable - net 83,574 76,446
Property acquired in settlement of loans - net 58 71
Office premises and equipment - at depreciated cost 600 618
Federal Home Loan Bank stock - at cost 825 768
Accrued interest receivable on loans 114 89
Accrued interest receivable on mortgage-backed securities 7 12
Accrued interest receivable on investments and interest-bearing deposits 233 142
Prepaid expenses and other assets 150 146
Deferred federal income tax asset 142 114
---------- --------
Total assets $102,535 $92,304
======= ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 75,955 $72,911
Advances from the Federal Home Loan Bank 15,558 7,810
Advances by borrowers for taxes and insurance 5 7
Accrued interest payable 342 290
Other liabilities 226 149
Accrued federal income taxes 106 24
---------- ---------
Total liabilities 92,192 81,191
Commitments - -
Stockholders' equity
Preferred stock, 1,000,000 shares of no par value authorized,
no shares issued - -
Common stock, 4,000,000 shares authorized, $.01 par value; 1,660,850
and 1,107,171 shares issued at June 30, 1998 and 1997, respectively 17 11
Additional paid-in capital 6,908 6,827
Retained earnings, restricted 7,742 7,142
Shares acquired by stock benefit plans (759) (890)
Less 394,530 and 177,800 shares of treasury stock at June 30, 1998
and 1997, respectively - at cost (3,551) (1,971)
Unrealized losses on securities designated as available for sale,
net of related tax benefits (14) (6)
----------- ----------
Total stockholders' equity 10,343 11,113
-------- ------
Total liabilities and stockholders' equity $102,535 $92,304
======= ======
</TABLE>
The accompanying notes are an integral part of these statements.
25
<PAGE>
<TABLE>
Community Investors Bancorp, Inc.
<CAPTION>
CONSOLIDATED STATEMENTS OF EARNINGS
For the year ended June 30,
(In thousands, except share data)
1998 1997 1996
<S> <C> <C> <C>
Interest income
Loans $6,631 $5,940 $5,376
Mortgage-backed securities 98 135 181
Investment securities 739 1,179 1,132
Interest-bearing deposits and other 43 34 81
------- ------- -------
Total interest income 7,511 7,288 6,770
Interest expense
Deposits 3,553 3,298 3,497
Borrowings 600 771 129
------ ------ ------
Total interest expense 4,153 4,069 3,626
----- ----- -----
Net interest income 3,358 3,219 3,144
Provision for losses on loans 156 142 159
------ ------ ------
Net interest income after provision
for losses on loans 3,202 3,077 2,985
Other income
Gain on sale of investment securities - - 59
Loss on sale of property acquired in settlement of loans (1) - (10)
Other operating 198 140 115
------ ------ ------
Total other income 197 140 164
General, administrative and other expense
Employee compensation and benefits 1,028 839 727
Occupancy and equipment 139 127 105
Federal deposit insurance premiums 46 554 162
Franchise taxes 152 157 115
Data processing 177 155 145
Other operating 534 488 551
------ ------ ------
Total general, administrative and other expense 2,076 2,320 1,805
----- ----- -----
Earnings before income taxes 1,323 897 1,344
Federal income taxes
Current 469 299 429
Deferred (25) 9 29
------- -------- -------
Total federal income taxes 444 308 458
------ ------ ------
NET EARNINGS $ 879 $ 589 $ 886
====== ====== ======
EARNINGS PER SHARE
Basic $.70 $.44 $.59
=== === ===
Diluted $.68 $.44 $.59
=== === ===
</TABLE>
The accompanying notes are an integral part of these statements.
26
<PAGE>
<TABLE>
Community Investors Bancorp, Inc.
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS'EQUITY
For the years ended June 30, 1998, 1997 and 1996
(In thousands, except share data)
Unrealized
gains
(losses) on
Shares securities
acquired designated
Additional by stock as
Common paid-in Retained benef Treasury available
stock capital earnings plans shares for sale Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at July 1, 1995 $ 7 $6,785 $6,028 $(561) $ - $ 37 $12,296
Purchase of shares for stock benefit plans - - - (464) - - (464)
Purchase of treasury shares, at cost - - - - (1,117) - (1,117)
Amortization of stock benefit plan expense - 15 - 30 - - 45
Net earnings for the year ended June 30, 1996 - - 886 - - - 886
Cash dividends of $.072 per share - - (118) - - - (118)
Unrealized losses on securities designated as
available for sale, net of related tax benefits - - - - - (42) (42)
-- ----- ----- --- ------ ---- ------
Balance at June 30, 1996 7 6,800 6,796 (995) (1,117) (5) 11,486
Purchase of treasury shares, at cost - - - - (854) - (854)
Amortization of stock benefit plan expense - 27 - 105 - - 132
Net earnings for the year ended June 30, 1997 - - 589 - - - 589
Cash dividends of $.18 per share - - (238) - - - (238)
Effect of 3-for-2 stock split, including cash in lieu
of fractional shares 4 - (5) - - - (1)
Unrealized losses on securities designated as
available for sale, net of related tax benefits - - - - - (1) (1)
-- ----- ----- --- ------ ----- ------
Balance at June 30, 1997 11 6,827 7,142 (890) (1,971) (6) 11,113
Purchase of treasury shares, at cost - - - - (1,580) - (1,580)
Amortization of stock benefit plan expense - 81 - 131 - - 212
Net earnings for the year ended June 30, 1998 - - 879 - - - 879
Cash dividends of $.32 per share - - (271) - - - (271)
Effect of 3-for-2 stock split, including cash in lieu
of fractional shares 6 - (8) - - - (2)
Unrealized losses on securities designated as
available for sale, net of related tax benefits - - - - - (8) (8)
-- ----- ----- --- ------ ----- ------
Balance at June 30, 1998 $ 17 $6,908 $7,742 $(759) $(3,551) $ (14) $10,343
==== ===== ===== ==== ====== ==== ======
</TABLE>
The accompanying notes are an integral part of these statements.
27
<PAGE>
<TABLE>
Community Investors Bancorp, Inc.
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the year ended June 30,
(In thousands)
1998 1997 1996
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings for the year $ 879 $ 589 $ 886
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 (53) (10) (49)
Amortization of deferred loan origination fees (90) (38) (54)
Depreciation and amortization 53 52 39
Provision for losses on loans 156 142 159
Amortization of stock benefit plan expense 212 132 45
Loss on sale of property acquired in settlement of loans 1 - 10
Federal Home Loan Bank stock dividends (57) (49) (38)
Increase (decrease) in cash due to changes in:
Accrued interest receivable on loans (25) (23) 13
Accrued interest receivable on mortgage-backed securities 5 7 8
Accrued interest receivable on investments and
interest-bearing deposits (91) 109 61
Prepaid expenses and other assets (9) (37) (6)
Accrued interest payable 52 - (26)
Other liabilities 77 (7) 24
Federal income taxes
Current 82 (30) 48
Deferred (25) 9 29
--------- ---------- ---------
Net cash provided by operating activities 1,167 846 1,149
Cash flows provided by (used in) investing activities:
Proceeds from maturity of investment securities 5,646 10,338 9,257
Proceeds from sale of securities designated as available-for-sale - - 224
Purchase of investment securities designated as available for sale (4,992) (999) (5,000)
Purchase of investment securities designated as held to maturity (3,621) - (5,100)
Principal repayments on mortgage-backed securities 463 1,056 1,009
Purchase of loans (60) (250) (672)
Loan principal repayments 20,421 16,529 10,701
Loan disbursements (27,732) (26,839) (16,906)
Purchase of office premises and equipment (35) (145) (232)
Proceeds from sale of property acquired in settlement of loans 189 275 291
Purchase of Federal Home Loan Bank stock - (144) -
------- -------- ------
Net cash used in investing activities (9,721) (179) (6,428)
------- -------- -------
Net cash provided by (used in) operating and investing
activities (subtotal carried forward) (8,554) 667 (5,279)
------- -------- -------
</TABLE>
28
<PAGE>
<TABLE>
Community Investors Bancorp, Inc.
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
For the year ended June 30,
(In thousands)
1998 1997 1996
<S> <C> <C> <C>
Net cash provided by (used in) operating and investing
activities (subtotal brought forward) $(8,554) $ 667 $(5,279)
Cash flows provided by financing activities:
Net increase (decrease) in deposit accounts 3,044 3,000 (553)
Proceeds from Federal Home Loan Bank advances 25,950 23,050 8,950
Repayment of Federal Home Loan Bank advances (18,202) (25,124) (581)
Advances by borrowers for taxes and insurance (2) 1 (6)
Purchase of shares for stock benefit plans - - (464)
Purchase of treasury stock (1,580) (854) (1,117)
Dividends on common stock (273) (239) (118)
------- -------- -------
Net cash provided by (used in) financing activities 8,937 (166) 6,111
------ -------- ------
Net increase in cash and cash equivalents 383 501 832
Cash and cash equivalents at beginning of year 2,410 1,909 1,077
------ ------- ------
Cash and cash equivalents at end of year $ 2,793 $ 2,410 $ 1,909
====== ======= ======
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Federal income taxes $ 404 $ 275 $ 400
======= ======== =======
Interest on deposits and borrowings $ 4,101 $ 4,069 $ 3,652
====== ======= ======
Supplemental disclosure of noncash investing activities:
Transfers from loans to property acquired in settlement of loans $ 177 $ 265 $ 275
======= ======== =======
Unrealized losses on securities designated as available
for sale, net of related tax benefits $ (8) $ (1) $ (42)
======= ======== =======
</TABLE>
The accompanying notes are an integral part of these statements.
29
<PAGE>
Community Investors Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998, 1997 and 1996
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Community Investors Bancorp, Inc. (the "Corporation") is a savings and loan
holding company whose activities are primarily limited to holding the stock
of First Federal Savings and Loan Association of Bucyrus (the
"Association"). The Association conducts a general banking business in
northern 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 its subsidiary, the Association. All significant
intercompany balances and transactions have been eliminated.
2. Investment Securities and Mortgage-Backed Securities
The Corporation accounts for investment and mortgage-backed securities in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 115
"Accounting for Certain Investments in Debt and Equity Securities." SFAS No.
115 requires that investments be categorized as held-to-maturity, trading,
or available for sale. Securities classified as held-to-maturity are carried
at cost only if the Corporation has the positive intent and ability to hold
these securities to maturity. Trading securities and securities available
for sale are carried at fair value with resulting unrealized gains or losses
recorded to operations or stockholders' equity, respectively.
30
<PAGE>
Community Investors Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
June 30, 1998, 1997 and 1996
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2. Investment Securities and Mortgage-Backed Securities (continued)
At June 30, 1998 and 1997, the Corporation's stockholders' equity reflected
net unrealized losses on securities designated as available for sale of
$14,000 and $6,000, 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.
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.
31
<PAGE>
Community Investors Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
June 30, 1998, 1997 and 1996
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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 specific 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 its primary
lending areas. 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 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).
The Association accounts for impaired loans in accordance with SFAS No. 114,
"Accounting by Creditors for Impairment of a Loan" which 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.
A loan is defined as impaired under SFAS No. 114 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 multi-family and nonresidential loans, and its
evaluation of impairment thereof, such loans are collateral dependent and as
a result are carried as a practical expedient at the lower of cost or fair
value.
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, 1998 and 1997, the Association had no loans that would be
defined as impaired under SFAS No. 114.
32
<PAGE>
Community Investors Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
June 30, 1998, 1997 and 1996
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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 the fair value of collateral less
estimated selling expenses at the date of acquisition. Loss provisions are
recorded if the property's 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". 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 consolidated 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 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.
33
<PAGE>
Community Investors Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
June 30, 1998, 1997 and 1996
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
8. Federal Income Taxes (continued)
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. Benefit Plans
The Corporation has an Employee Stock Ownership Plan ("ESOP") which provides
retirement benefits for substantially all full-time employees who have
completed one year of service and have attained the age of 21. The
Corporation accounts for the ESOP in accordance with Statement of Position
("SOP") 93-6, "Employers Accounting for Employee Stock Ownership Plans." SOP
93-6 requires that compensation expense recorded by employers equal the fair
value of ESOP shares allocated to participants during a given fiscal year.
Expense recognized related to the ESOP totaled approximately $150,000,
$102,000 and $86,000 for the fiscal years ended June 30, 1998, 1997 and
1996, respectively.
The Corporation also has a Management Recognition Plan ("MRP"). During
fiscal 1996, the MRP purchased 66,430 shares of the Corporation's common
stock in the open market. As of June 30, 1998, the Corporation had awarded
63,800 shares under the MRP, leaving 2,630 shares available for allocation
at June 30, 1998. Common stock granted under the MRP vests ratably over a
five year period, commencing with the date of grant. A provision of
$143,000, $63,000 and $27,000 related to the MRP was charged to expense for
the fiscal years ended June 30, 1998, 1997 and 1996, respectively. All share
total references herein have been adjusted for the 3-for-2 stock splits in
fiscal 1998 and 1997.
10. Earnings Per Share
Basic earnings per share is computed based upon the weighted-average 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 a reduction for 99,427, 112,861 and
126,224 weighted-average unallocated shares held by the ESOP, totaled
1,248,309, 1,342,619 and 1,510,689 for the fiscal years ended June 30, 1998,
1997 and 1996, respectively.
Diluted earnings per share is computed taking into consideration common
shares outstanding and dilutive potential common shares to be issued under
the Corporation's stock option plan. Weighted-average common shares deemed
outstanding for purposes of computing diluted earnings per share totaled
1,287,095, 1,350,245 and 1,511,163 for the fiscal years ended
34
<PAGE>
Community Investors Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
June 30, 1998, 1997 and 1996
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
10. Earnings Per Share (continued)
June 30, 1998, 1997 and 1996, respectively. Options to purchase 10,792 and
33,210 shares of common stock with a weighted average exercise price of
$7.89 and $7.33 were outstanding at June 30, 1997 and 1996, respectively,
but were excluded from the computation of diluted earnings per share because
their exercise prices were greater than the average market price of the
common shares.
Effective during the fiscal year ended June 30, 1998, the Corporation began
presenting earnings per share pursuant to the provisions of SFAS No. 128,
"Earnings per Share." Accordingly, the fiscal 1997 and 1996 earnings per
share presentation has been revised to conform to SFAS No. 128.
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, 1998
and 1997:
Cash and cash equivalents: The carrying amounts presented in
the consolidated statements of financial condition for cash
and cash equivalents are deemed to approximate fair value.
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.
35
<PAGE>
Community Investors Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
June 30, 1998, 1997 and 1996
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
11. Fair Value of Financial Instruments (continued)
Federal Home Loan Bank stock: The carrying amount presented in
the consolidated statements of financial condition is deemed to
approximate fair value.
Deposits: The fair value of NOW accounts, passbook accounts and
advances by borrowers are deemed to approximate the amounts
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 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, 1998 and 1997 was not
material.
Based on the foregoing methods and assumptions, the carrying value and fair
value of the Corporation's financial instruments at June 30 are as follows:
<TABLE>
<CAPTION>
1998 1997
Carrying Fair Carrying Fair
value value value value
(In thousands)
<S> <C> <C> <C> <C>
Financial assets
Cash and cash equivalents $ 2,793 $ 2,793 $ 2,410 $ 2,410
Investment securities 12,770 12,802 9,756 9,714
Mortgage-backed securities 1,269 1,214 1,732 1,714
Loans receivable 83,574 83,371 76,446 78,142
Federal Home Loan Bank stock 825 825 768 768
---------- ---------- -------- --------
$101,231 $101,005 $91,112 $92,748
======= ======= ====== ======
Financial liabilities
Deposits $ 75,955 $ 76,157 $72,911 $73,071
Advances from the Federal Home Loan Bank 15,558 15,553 7,810 7,803
Advances by borrowers for taxes and insurance 5 5 7 7
------------ ---------- ---------- ----------
$ 91,518 $ 91,715 $80,728 $80,881
======== ======== ====== ======
</TABLE>
36
<PAGE>
Community Investors Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
June 30, 1998, 1997 and 1996
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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 1998
consolidated financial statement presentation.
NOTE B - INVESTMENTS AND MORTGAGE-BACKED SECURITIES
Carrying values and estimated fair values of investment securities held to
maturity at June 30 are summarized as follows:
<TABLE>
<CAPTION>
1998 1997
Estimated Estimated
Carrying fair Carrying fair
value value value value
(In thousands)
<S> <C> <C> <C> <C>
U. S. Government and
agency obligations $6,705 $6,737 $8,008 $7,966
Municipal obligations 580 580 250 250
------ ------ ------ ------
$7,285 $7,317 $8,258 $8,216
===== ===== ===== =====
</TABLE>
At June 30, 1998, the market value of the Corporation's investment
securities exceeded the cost carrying value by $32,000, comprised of $48,000
in gross unrealized gains and $16,000 in gross unrealized losses. At June
30, 1997, the market value decline of the Corporation's investment
securities below cost carrying value totaled $42,000, consisting of $50,000
in gross unrealized gains and $92,000 in gross unrealized losses.
The amortized cost, gross unrealized gains, gross unrealized losses, and
estimated fair values of investment securities designated as available for
sale at June 30, are summarized as follows:
<TABLE>
<CAPTION>
1998
Gross Gross Estimated
Amortized unrealized unrealized fair
cost gains losses value
(In thousands)
<S> <C> <C> <C> <C>
U.S. Government and
agency obligations $5,018 $ - $ 8 $5,010
Mutual funds 488 - 13 475
------ --- -- ------
$5,506 $ - $21 $5,485
===== === == =====
</TABLE>
37
<PAGE>
Community Investors Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
June 30, 1998, 1997 and 1996
NOTE B - INVESTMENTS AND MORTGAGE-BACKED SECURITIES (continued)
<TABLE>
<CAPTION>
1997
Gross Gross Estimated
Amortized unrealized unrealized fair
cost gains losses value
(In thousands)
<S> <C> <C> <C> <C>
U.S. Government and
agency obligations $1,020 $ 1 $ - $1,021
Mutual funds 488 - 11 477
------ -- ---- ------
$1,508 $ 1 $ 11 $1,498
===== ===== ==== =====
</TABLE>
The amortized cost and estimated fair 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:
<TABLE>
<CAPTION>
1998 1997
Estimated Estimated
Amortized fair Amortized fair
cost value cost value
(In thousands)
<S> <C> <C> <C> <C>
Due in three years or less $3,397 $3,404 $3,090 $3,056
Due after three years through
five years 2,023 2,044 1,332 1,342
Due after five years 1,865 1,869 3,836 3,818
----- ----- ----- -----
$7,285 $7,317 $8,258 $8,216
===== ===== ===== =====
</TABLE>
The amortized cost and estimated fair value of U.S. Government and agency
securities, designated as available for sale at June 30, by contractual
terms to maturity, are shown below:
<TABLE>
<CAPTION>
1998 1997
Estimated Estimated
Amortized fair Amortized fair
cost value cost value
(In thousands)
<S> <C> <C> <C> <C>
Due in three years or less $4,993 $4,985 $ - $ -
Due in three through five years 25 25 1,020 1,021
------- ------- ----- -----
$5,018 $5,010 $1,020 $1,021
===== ===== ===== =====
</TABLE>
38
<PAGE>
Community Investors Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
June 30, 1998, 1997 and 1996
NOTE B - INVESTMENTS AND MORTGAGE-BACKED SECURITIES (continued)
The amortized cost, gross unrealized gains, gross unrealized losses and
estimated fair values of mortgage-backed securities at June 30, 1998 and
1997 are summarized as follows:
<TABLE>
<CAPTION>
1998
Gross Gross Estimated
Amortized unrealized unrealized fair
cost gains losses value
(In thousands)
<S> <C> <C> <C> <C>
Held to maturity:
Federal Home Loan
Mortgage Corporation
participation certificates $ 175 $ 6 $- $ 181
Government National
Mortgage Association
participation certificates 385 7 - 392
Federal National
Mortgage Association
participation certificates 709 - 68 641
------ -- ---- ------
Total mortgage-backed
securities $1,269 $ 13 $ 68 $1,214
===== ==== ==== =====
</TABLE>
<TABLE>
<CAPTION>
1997
Gross Gross Estimated
Amortized unrealized unrealized fair
cost gains losses value
(In thousands)
<S> <C> <C> <C> <C>
Held to maturity:
Federal Home Loan
Mortgage Corporation
participation certificates $ 275 $ 5 $- $ 280
Government National
Mortgage Association
participation certificates 511 13 - 524
Federal National
Mortgage Association
participation certificates 946 9 45 910
------ --- ---- ------
Total mortgage-backed
securities $1,732 $27 $ 45 $1,714
===== == ==== =====
</TABLE>
39
<PAGE>
Community Investors Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
June 30, 1998, 1997 and 1996
NOTE B - INVESTMENTS AND MORTGAGE-BACKED SECURITIES (continued)
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.
<TABLE>
<CAPTION>
June 30,
1998 1997
(In thousands)
<S> <C> <C>
Due within three years $ 36 $ 85
Due in three to five years 5 74
Due in five to ten years 105 231
Due in ten to twenty years 45 740
Due after twenty years 1,078 602
----- ------
$1,269 $1,732
===== =====
</TABLE>
NOTE C - LOANS RECEIVABLE
The composition of the loan portfolio at June 30 is as follows:
<TABLE>
<CAPTION>
1998 1997
(In thousands)
<S> <C> <C>
Residential real estate
One-to-four family $67,205 $62,584
Multi-family 500 1,093
Construction 1,026 1,284
Nonresidential real estate and land 4,744 4,039
Mobile home loans 1,988 3,003
Consumer and other 9,912 6,398
------- -------
85,375 78,401
Less:
Undisbursed portion of loans in process 930 1,137
Deferred loan origination fees 308 340
Allowance for loan losses 563 478
-------- --------
$83,574 $76,446
====== ======
</TABLE>
The Association's lending efforts have historically focused on one-to-four
family and multi-family residential real estate loans, which comprise
approximately $67.8 million, or 81%, of the total loan portfolio at June 30,
1998 and $63.8 million, or 83%, of the total loan portfolio at June 30,
1997. 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 northern 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.
40
<PAGE>
Community Investors Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
June 30, 1998, 1997 and 1996
NOTE C - LOANS RECEIVABLE (continued)
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.
Loans to directors and officers totaled approximately $997,000 and $989,000
at June 30, 1998 and 1997, respectively. During the year ended June 30,
1998, there were $436,000 in loans disbursed to directors and officers,
while principal repayments of $428,000 were received.
NOTE D - ALLOWANCE FOR LOAN LOSSES
The activity in the allowance for loan losses is summarized as follows for
the years ended June 30:
<TABLE>
<CAPTION>
1998 1997 1996
(In thousands)
<S> <C> <C> <C>
Balance at beginning of year $478 $459 $399
Provision for loan losses 156 142 159
Charge-offs of loans (87) (131) (102)
Recoveries 16 8 3
---- ----- -----
Balance at end of year $563 $478 $459
=== === ===
</TABLE>
As of June 30, 1998, the Association's allowance for loan losses was
comprised of a general loss allowance of $466,000, which is includible as a
component of regulatory risk-based capital and a specific loss allowance of
$97,000.
Nonperforming and nonaccrual loans totaled approximately $600,000, $508,000
and $636,000 at June 30, 1998, 1997 and 1996, respectively.
During the years ended June 30, 1998, 1997 and 1996, interest income of
approximately $29,000, $16,000 and $22,000, respectively, would have been
recognized had nonperforming loans been performing in accordance with their
contractual terms.
NOTE E - OFFICE PREMISES AND EQUIPMENT
Office premises and equipment at June 30 are comprised of the following:
<TABLE>
<CAPTION>
1998 1997
(In thousands)
<S> <C> <C>
Land and improvements $ 93 $ 90
Office buildings and improvements 539 537
Furniture, fixtures and equipment 242 549
--- ------
874 1,176
Less accumulated depreciation and
amortization 274 558
--- ------
$600 $ 618
=== ======
</TABLE>
41
<PAGE>
Community Investors Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
June 30, 1998, 1997 and 1996
NOTE F - DEPOSITS
Deposits consist of the following major classifications at June 30:
<TABLE>
<CAPTION>
Deposit type and weighted-
average interest rate 1998 1997
(In thousands)
<S> <C> <C>
NOW accounts
1998 - 2.39% $ 8,757
1997 - 2.52% $ 7,710
Passbook
1998 - 3.25% 16,139
1997 - 3.24% 15,454
Total demand, transaction and
passbook deposits 24,896 23,164
Certificates of deposit
Original maturities of:
Less than 12 months
1998 - 5.07% 7,360
1997 - 4.97% 7,347
12 months to 24 months
1998 - 5.64% 23,752
1997 - 5.53% 22,980
30 months to 36 months
1998 - 5.75% 3,892
1997 - 6.01% 3,786
More than 36 months
1998 - 6.23% 3,356
1997 - 6.21% 2,571
Individual retirement accounts
1998 - 5.65% 12,699
1997 - 5.65% 13,063
------ ------
Total certificates of deposit 51,059 49,747
------ ------
Total deposit accounts $75,955 $72,911
====== ======
</TABLE>
At June 30, 1998 and 1997, the Association had certificates of deposit accounts
with balances in excess of $100,000 totaling $2.8 million and $5.2 million,
respectively.
42
<PAGE>
Community Investors Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
June 30, 1998, 1997 and 1996
NOTE F - DEPOSITS (continued)
Interest expense on deposits for the year ended June 30 is summarized as
follows:
<TABLE>
<CAPTION>
1998 1997 1996
(In thousands)
<S> <C> <C> <C>
Passbook $ 503 $ 502 $ 544
NOW accounts 226 153 180
Certificates of deposit 2,824 2,643 2,773
----- ----- -----
$3,553 $3,298 $3,497
===== ===== =====
</TABLE>
Maturities of outstanding certificates of deposit at June 30 are summarized
as follows:
<TABLE>
<CAPTION>
1998 1997
(In thousands)
<S> <C> <C>
Less than one year $40,446 $35,484
One to three years 9,426 13,475
Over three years 1,187 788
------- --------
$51,059 $49,747
====== ======
</TABLE>
NOTE G - ADVANCES FROM THE FEDERAL HOME LOAN BANK
Advances from the Federal Home Loan Bank, collateralized at June 30, 1998 by
pledges of certain residential mortgage loans totaling $23.3 million, and
the Association's investment in Federal Home Loan Bank stock, are summarized
as follows:
<TABLE>
<CAPTION>
Maturing year
Interest rate ending June 30, 1998 1997
(In thousands)
<S> <C> <C> <C>
5.60 - 6.65% 1998 $ - $6,550
6.45% 1999 1,000 -
5.78% 2003 6,000 -
5.15 - 7.05% 2008 8,558 1,260
------- -----
$15,558 $7,810
====== =====
Weighted-average interest rate 5.58% 6.46%
==== ====
</TABLE>
43
<PAGE>
Community Investors Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
June 30, 1998, 1997 and 1996
NOTE H - FEDERAL INCOME TAXES
Federal income taxes differ from the amounts computed at the statutory
corporate tax rate as follows for the years ended June 30:
<TABLE>
<CAPTION>
1998 1997 1996
(In thousands)
<S> <C> <C> <C>
Federal income taxes computed at
statutory rate $450 $305 $457
Increase (decrease) in taxes resulting from:
Other (primarily tax-exempt interest in 1998) (6) 3 1
----- ----- -----
Federal income tax provision per consolidated
statements of earnings $444 $308 $458
=== === ===
</TABLE>
The composition of the Corporation's net deferred tax asset at June 30 is
as follows:
<TABLE>
<CAPTION>
1998 1997
(In thousands)
<S> <C> <C>
Taxes (payable) refundable on temporary
differences at estimated corporate tax rate:
Deferred tax assets:
General loan loss allowance $158 $152
Deferred loan origination fees 105 57
Unrealized loss on securities designated as
available for sale 7 4
Other 50 22
---- ----
Total deferred tax assets 320 235
Deferred tax liabilities:
Percentage of earnings bad debt deduction (9) (9)
Federal Home Loan Bank stock dividends (132) (112)
Book/tax depreciation (37) -
---- -
Total deferred tax liabilities (178) (121)
--- ---
Net deferred tax asset $142 $114
=== ===
</TABLE>
44
<PAGE>
Community Investors Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
June 30, 1998, 1997 and 1996
NOTE H - FEDERAL INCOME TAXES (continued)
The Association was allowed a special bad debt deduction, generally limited
to 8% of otherwise taxable income, 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,
1998, includes approximately $1.2 million for which federal income taxes
have not been provided. The amount of unrecognized deferred tax liability
relating to the cumulative bad debt deduction at June 30, 1998 is
approximately $400,000. See Note M for additional information regarding the
Association's future percentage of earnings bad debt deductions.
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 its
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, 1998, the Association had outstanding commitments of
approximately $1.7 million to originate loans. Additionally, the Association
was obligated under unused lines of credit totaling $1.6 million. In the
opinion of management, all loan commitments equaled or exceeded prevalent
market interest rates as of June 30, 1998, and will be funded from normal
cash flow from operations.
NOTE J - REGULATORY CAPITAL
The Association is subject to the regulatory capital requirements of the
Office of Thrift Supervision (the "OTS"). Failure to meet minimum capital
requirements can initiate certain mandatory - and possibly additional
discretionary - actions by regulators that, if undertaken, could have a
direct material effect on the Association's financial statements. Under
capital adequacy guidelines and the regulatory framework for prompt
corrective action, the Association must meet specific capital guidelines
that involve quantitative measures of the Association's assets, liabilities,
and certain off-balance-sheet items as calculated under regulatory
accounting practices. The Association's capital amounts and classification
are also subject to qualitative judgments by the regulators about
components, risk weightings, and other factors.
45
<PAGE>
Community Investors Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
June 30, 1998, 1997 and 1996
NOTE J - REGULATORY CAPITAL (continued)
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) 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%.
During the 1998 fiscal year, the Association was notified from its regulator
that it was categorized as "well-capitalized" under the regulatory framework
for prompt corrective action. To be categorized as "well-capitalized" the
Association must maintain minimum capital ratios as set forth in the
following table.
As of June 30, 1998 and 1997, management believes that the Association met
all capital adequacy requirements to which it is subject.
<TABLE>
<CAPTION>
1998
To be "well-
capitalized" under
For capital prompt corrective
Actual adequacy purposes action provisions
Amount Ratio Amount Ratio Amount Ratio
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Risk-based capital $7,113 12.4% =>$4,604 =>8.0% =>$5,755 =>10.0%
Core capital $6,647 6.5% =>$3,075 =>3.0% =>$6,150 => 6.0%
Tangible capital $6,647 6.5% =>$1,538 =>1.5% =>$5,125 => 5.0%
</TABLE>
46
<PAGE>
Community Investors Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
June 30, 1998, 1997 and 1996
NOTE J - REGULATORY CAPITAL (continued)
<TABLE>
<CAPTION>
1997
To be "well-
capitalized" under
For capital prompt corrective
Actual adequacy purposes action provisions
Amount Ratio Amount Ratio Amount Ratio
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Risk-based capital $10,856 21.9% =>$3,971 =>8.0% =>$4,964 =>10.0%
Core capital $10,408 11.3% =>$2,765 =>3.0% =>$5,531 => 6.0%
Tangible capital $10,408 11.3% =>$1,383 =>1.5% =>$4,609 => 5.0%
</TABLE>
The Corporation's management believes that, under the current regulatory
capital regulations, the Association will continue to meet its minimum
capital requirements in the foreseeable future. However, events beyond the
control of the management, such as increased interest rates or a downturn in
the economy in the Association's market areas, could adversely affect future
earnings and, consequently, the ability to meet future minimum regulatory
capital requirements.
47
<PAGE>
Community Investors Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
June 30, 1998, 1997 and 1996
NOTE K - 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, 1998 and 1997,
and the results of its operations and its cash flows for the years ended
June 30, 1998, 1997 and 1996.
<TABLE>
Community Investors Bancorp, Inc.
<CAPTION>
STATEMENTS OF FINANCIAL CONDITION
June 30,
(In thousands)
ASSETS 1998 1997
<S> <C> <C>
Interest-bearing deposits in First Federal Savings and
Loan Association of Bucyrus $ 3,256 $ 103
Interest-bearing deposits in other financial institutions 21 116
Loan receivable from ESOP 454 472
Investment in First Federal Savings and Loan Association of Bucyrus 6,633 10,430
Prepaid expenses and other 76 25
--------- ---------
Total assets $10,440 $11,146
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Other liabilities $ 97 $ 33
Stockholders' equity
Common stock and additional paid-in capital 6,925 6,838
Retained earnings 7,742 7,142
Shares acquired by stock benefit plans (759) (890)
Treasury shares - at cost (3,551) (1,971)
Unrealized losses on securities designated as available for sale,
net of related tax benefits (14) (6)
--------- ----------
Total stockholders' equity 10,343 11,113
------ ------
Total liabilities and stockholders' equity $10,440 $11,146
====== ======
</TABLE>
<TABLE>
Community Investors Bancorp, Inc.
<CAPTION>
STATEMENTS OF EARNINGS
Year ended June 30,
(In thousands)
1998 1997 1996
<S> <C> <C> <C>
Revenue
Interest income $ 56 $ 66 $ 200
Equity in earnings of First Federal Savings and Loan
Association of Bucyrus 976 640 855
------ -------- --------
Total revenue 1,032 706 1,055
General, administrative and other expenses 204 134 151
------ -------- --------
Earnings before income taxes (credits) 828 572 904
Federal income taxes (credits) (51) (17) 18
------- --------- ---------
NET EARNINGS $ 879 $ 589 $ 886
====== ======== ========
</TABLE>
48
<PAGE>
Community Investors Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
June 30, 1998, 1997 and 1996
NOTE K - CONDENSED FINANCIAL STATEMENTS OF COMMUNITY INVESTORS BANCORP, INC.
(continued)
<TABLE>
Community Investors Bancorp, Inc.
<CAPTION>
STATEMENTS OF CASH FLOWS
Year ended June 30,
(In thousands)
1998 1997 1996
<S> <C> <C> <C>
Cash flows provided by (used in) operating activities:
Net earnings for the year $ 879 $ 589 $ 886
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
(Undistributed earnings of) excess distributions from
consolidated subsidiary 3,913 (640) (855)
Amortization of stock benefit plan expense 104 73 45
Increases (decreases) in cash due to changes in:
Prepaid expenses and other assets (51) 22 23
Other liabilities 64 4 (11)
Other (18) (38) (24)
------- ------- -------
Cash provided by operating activities 4,891 10 64
Cash flows provided by investing activities:
Maturities of investment securities - 709 1,917
Repayments on ESOP loan 18 60 24
------- ------- -------
Net cash provided by investment activities 18 769 1,941
Cash flows provided by (used in) financing activities:
Dividends on common stock (271) (239) (118)
Purchase of shares for management recognition plans - - (464)
Purchase of treasury stock (1,580) (854) (1,117)
----- ------- -----
Net cash used in financing activities (1,851) (1,093) (1,699)
----- ----- -----
Net increase (decrease) in cash and cash equivalents 3,058 (314) 306
Cash and cash equivalents at beginning of year 219 533 227
------ ------- ------
Cash and cash equivalents at end of year $3,277 $ 219 $ 533
===== ====== ======
</TABLE>
49
<PAGE>
Community Investors Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
June 30, 1998, 1997 and 1996
NOTE K - CONDENSED FINANCIAL STATEMENTS OF COMMUNITY INVESTORS BANCORP, INC.
(continued)
As a condition to regulatory approval of the stock conversion and
reorganization to the holding company form of ownership, the Association
agreed to limit the amount of dividends payable to the Corporation.
Regulations of the Office of Thrift Supervision (OTS) impose limitations on
the payment of dividends and other capital distributions by savings
associations. Under such regulations, a savings association that,
immediately prior to, and on a pro forma basis after giving effect to, a
proposed capital distribution, has total capital (as defined by OTS
regulation) that is equal to or greater than the amount of its fully
phased-in capital requirement is generally permitted without OTS approval
(but subsequent to 30 days prior notice to the OTS of the planned dividend)
to make capital distributions during a calendar year in the amount of up to
the greater of (i) 100% of its net earnings to date during the year plus an
amount equal to one-half of the amount by which its total capital-to-assets
ratio exceeded its fully phased-in capital-to-assets ratio at the beginning
of the year or (ii) 75% of its net earnings for the most recent four
quarters. Pursuant to such OTS dividend regulations, the Association had the
ability to pay dividends of approximately $700,000 to the Corporation at
June 30, 1998.
NOTE L - STOCK OPTION PLAN
During fiscal 1996, the Board of Directors adopted a Stock Option Plan that
provided for the issuance of 110,722 shares of authorized, but unissued
shares of common stock at the fair value at the date of grant. During fiscal
1998, 1997 and 1996, the Corporation granted options to purchase 21,321,
10,793 and 85,860 shares, respectively, to members of the Board of Directors
and certain employees at an exercise price equal to fair value at the date
of grant.
In fiscal 1997, the Corporation adopted SFAS No. 123, "Accounting for
Stock-Based Compensation," which contains a fair value-based method for
valuing stock-based compensation at the grant date. Compensation is then
recognized over the service period, which is usually the vesting period.
Alternatively, SFAS No. 123 permits entities to continue to account for
stock options and similar equity instruments under Accounting Principles
Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees."
Entities that continue to account for stock options using APB Opinion No. 25
are required to make pro forma disclosures of net earnings and earnings per
share, as if the fair value-based method of accounting defined in SFAS No.
123 had been applied.
The Corporation applies Accounting Principles Board Opinion No. 25 and
related Interpretations in accounting for its stock option plan.
Accordingly, no compensation cost has been recognized for the plan. Had
compensation cost for the Corporation's stock option plan been determined
based on the fair value at the grant dates for awards under the plan
consistent with the accounting method utilized in SFAS No. 123, the
Corporation's net earnings and earnings per share would have been reduced to
the pro forma amounts indicated below:
50
<PAGE>
Community Investors Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
June 30, 1998, 1997 and 1996
NOTE L - STOCK OPTION PLAN (continued)
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C> <C>
Net earnings (In thousands) As reported $879 $589 $886
=== === ===
Pro-forma $863 $579 $881
=== === ===
Earnings per share
Basic As reported $.70 $.44 $.59
=== === ===
Pro-forma $.69 $.43 $.58
=== === ===
Diluted As reported $.68 $.44 $.59
=== === ===
Pro-forma $.67 $.43 $.58
=== === ===
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the modified Black-Scholes options-pricing model with the following
weighted-average assumptions used for grants in 1998, 1997 and 1996,
respectively; dividend yield of 7.0% and expected volatility of 20.0% for
all years; risk-free interest rates of 6.5%, 6.5% and 6.0% and expected
lives of ten years.
A summary of the status of the Corporation's stock option plan as of June
30, 1998, 1997 and 1996, and changes during the periods ending on those
dates is presented below:
<TABLE>
<CAPTION>
1998 1997 1996
Weighted- Weighted- Weighted-
average average average
exercise exercise exercise
Shares price Shares price Shares price
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 96,653 $ 7.00 85,860 $6.89 - $ -
Granted 21,321 10.73 10,793 7.87 85,860 6.89
Exercised 180 9.92 - - - -
Forfeited 720 - - - - -
---------- --------- ------- ------- ------- -----
Outstanding at end of year 117,074 $ 7.67 96,653 $7.00 85,860 $6.89
======= ====== ====== ==== ====== ====
Options exercisable at year-end 36,322 $ 6.95 17,172 $6.89 - $ -
======== ====== ====== ==== ======= ===
Weighted-average fair value of
options granted during the year $ 1.20 $1.33 $1.16
====== ==== ====
</TABLE>
51
<PAGE>
Community Investors Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
June 30, 1998, 1997 and 1996
NOTE L - STOCK OPTION PLAN (continued)
The following information applies to options outstanding at June 30, 1998:
Number outstanding 117,074
Range of exercise prices $6.61 - $10.83
Weighted-average exercise price $7.67
Weighted-average remaining contractual life 7.0 years
NOTE M - LEGISLATIVE MATTERS
The deposit accounts of the Association and of other savings associations
are insured by the FDIC through the Savings Association Insurance Fund
("SAIF"). The reserves of the SAIF were below the level required by law,
because a significant portion of the assessments paid into the fund were
used to pay the cost of prior thrift failures. The deposit accounts of
commercial banks are insured by the FDIC through 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
fiscal 1996 and 1997, no BIF assessments were required for healthy
commercial banks except for a $2,000 minimum fee.
Legislation was enacted to recapitalize the SAIF that provided for a special
assessment totaled $.657 per $100 of SAIF deposits held at March 31, 1995,
in order to increase SAIF reserves to the level required by law. The
Association held $70.2 million in deposits at March 31, 1995, resulting in
an assessment of approximately $458,000, or $304,000 after-tax, which was
charged to operations in fiscal 1997.
A component of the recapitalization plan provided for the merger of the SAIF
and BIF on January 1, 1999. 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. In the opinion of management, such
activity limit restrictions would not have a material effect on the
Corporation's financial position or results of operations.
Under separate legislation related to the recapitalization plan, the
Association is required to recapture as taxable income approximately $26,000
of its tax 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 bad debt deduction 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 in taxable income over six years.
52
<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
President and General Manager - Major Market Makers
Brokensword Broadcasting Co. The Ohio Company
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
Phillip W. Gerber
Vice President
Assistant Vice Presidents
Jane A. Cremeans
Timothy G. Heydinger
Kimberly B. Roe
Robert W. Siegel
53
<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
Automated Teller Machine
1661 Marion Road
Bucyrus, Ohio 44820
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
54
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<CASH> 1,279
<INT-BEARING-DEPOSITS> 942
<FED-FUNDS-SOLD> 572
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 5,485
<INVESTMENTS-CARRYING> 8,554
<INVESTMENTS-MARKET> 8,531
<LOANS> 83,574
<ALLOWANCE> 563
<TOTAL-ASSETS> 102,535
<DEPOSITS> 75,955
<SHORT-TERM> 0
<LIABILITIES-OTHER> 679
<LONG-TERM> 15,558
0
0
<COMMON> 17
<OTHER-SE> 10,326
<TOTAL-LIABILITIES-AND-EQUITY> 102,535
<INTEREST-LOAN> 6,631
<INTEREST-INVEST> 837
<INTEREST-OTHER> 43
<INTEREST-TOTAL> 7,511
<INTEREST-DEPOSIT> 3,553
<INTEREST-EXPENSE> 4,153
<INTEREST-INCOME-NET> 3,358
<LOAN-LOSSES> 156
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,076
<INCOME-PRETAX> 1,323
<INCOME-PRE-EXTRAORDINARY> 879
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 879
<EPS-PRIMARY> .70
<EPS-DILUTED> .68
<YIELD-ACTUAL> 3.54
<LOANS-NON> 600
<LOANS-PAST> 0
<LOANS-TROUBLED> 34
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 478
<CHARGE-OFFS> 87
<RECOVERIES> 16
<ALLOWANCE-CLOSE> 563
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 563
</TABLE>
