FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 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. 33-84132
COMMUNITY INVESTORS BANCORP, INC.
(Exact name of registrant as specified in its charter)
Ohio 34-1779309
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
119 South Sandusky Avenue
Bucyrus, Ohio 44820
(Address of principal (Zip Code)
executive office)
Issuers' telephone number, including area code: (419) 562-7055
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports) and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
As of February 12, 1999, the latest practicable date, 1,218,144 shares of the
registrant's common stock, $.01 par value, were issued and outstanding.
Page 1 of 17 pages
<PAGE>
INDEX
Page
PART I - FINANCIAL INFORMATION
Consolidated Statements of Financial Condition 3
Consolidated Statements of Earnings 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 7
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 10
PART II - OTHER INFORMATION 16
SIGNATURES 17
2
<PAGE>
<TABLE>
Community Investors Bancorp, Inc.
<CAPTION>
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In thousands, except share data)
December 31, June 30,
ASSETS 1998 1998
<S> <C> <C>
Cash and due from banks $ 2,260 $ 1,279
Federal funds sold 565 572
Interest-bearing deposits in other financial institutions 1,852 942
-------- -------
Cash and cash equivalents 4,677 2,793
Investment securities available for sale - at market 3,408 5,485
Investment securities - at amortized cost, approximate market value of
$2,953 and $7,317 as of December 31, 1998 and June 30, 1998 3,128 7,285
Mortgage-backed securities available for sale - at market 13,875 -
Mortgage-backed securities - at amortized cost, approximate market value
of $1,050 and $1,214 as of December 31, 1998 and June 30, 1998 1,111 1,269
Loans receivable - net 86,068 83,574
Property acquired in settlement of loans 27 58
Office premises and equipment - at depreciated cost 719 600
Federal Home Loan Bank stock - at cost 1,317 825
Accrued interest receivable on loans 103 114
Accrued interest receivable on mortgage-backed securities 78 7
Accrued interest receivable on investments and interest-bearing deposits 60 233
Prepaid expenses and other assets 58 150
Prepaid federal income taxes 94 -
Deferred federal income taxes 153 142
-------- -------
Total assets $114,876 $102,535
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 78,827 $ 75,955
Advances from the Federal Home Loan Bank 25,393 15,558
Advances by borrowers for taxes and insurance 13 5
Accrued interest payable 378 342
Other liabilities 217 226
Accrued federal income taxes - 106
------- -------
Total liabilities 104,828 92,192
Stockholders' equity
Preferred stock, 1,000,000 shares authorized, no par value; no shares issued - -
Common stock, 4,000,000 shares authorized, $.01 par value; 1,660,850 shares issued 17 17
Additional paid-in capital 5,926 6,908
Retained earnings, restricted 9,093 7,742
Shares acquired by stock benefit plans (681) (759)
Less 442,706 and 394,530 shares of treasury stock - at cost (4,194) (3,551)
Unrealized losses on securities designated as available for sale, net of
related tax effects (113) (14)
------- -------
Total stockholders' equity 10,048 10,343
------- -------
Total liabilities and stockholders' equity $114,876 $102,535
======= =======
</TABLE>
3
<PAGE>
<TABLE>
Community Investors Bancorp, Inc.
<CAPTION>
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except share data)
Six months ended Three months ended
December 31, December 31,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Interest income
Loans $3,436 $3,258 $1,706 $1,627
Mortgage-backed securities 228 51 198 28
Investment securities 309 343 116 181
Interest-bearing deposits and other 107 7 50 4
----- ----- ----- -----
Total interest income 4,080 3,659 2,070 1,840
Interest expense
Deposits 1,819 1,784 907 900
Borrowings 595 245 340 123
----- ----- ----- -----
Total interest expense 2,414 2,029 1,247 1,023
----- ----- ----- -----
Net interest income 1,666 1,630 823 817
Provision for losses on loans 52 56 26 54
----- ----- ----- -----
Net interest income after provision
for losses on loans 1,614 1,574 797 763
Other income
Gain on sale of investment securities 6 - 6 -
Loss on sale of repossessed assets (2) (2) (2) (4)
Other operating 125 95 68 54
----- ----- ----- -----
Total other income 129 93 72 50
General, administrative and other expense
Employee compensation and benefits 570 485 287 246
Occupancy and equipment 64 63 34 31
Federal deposit insurance premiums 23 23 12 12
Franchise taxes 79 70 38 31
Expenses of property acquired in settlement of loans 14 15 10 6
Data processing 100 80 49 37
Other operating 234 248 128 134
----- ----- ----- -----
Total general, administrative and other expense 1,084 984 558 497
----- ----- ----- -----
Earnings before income taxes 659 683 311 316
Federal income taxes
Current 227 273 131 152
Deferred (8) (38) (27) (48)
----- ----- ----- -----
Total federal income taxes 219 235 104 104
----- ----- ----- -----
NET EARNINGS $ 440 $ 448 $ 207 $ 212
===== ===== ===== =====
EARNINGS PER SHARE
Basic $.38 $.35 $.18 $.17
=== === === ===
Diluted $.37 $.35 $.18 .17
=== === === ===
</TABLE>
4
<PAGE>
<TABLE>
Community Investors Bancorp, Inc.
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended December 31,
(In thousands)
1998 1997
<S> <C> <C>
Cash flows from operating activities:
Net earnings for the period $ 440 $ 448
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 (5) (19)
Amortization of deferred loan origination fees (126) (46)
Depreciation and amortization 22 24
Provision for losses on loans 52 56
Amortization expense of stock benefit plans 156 87
Loss on sale of repossessed assets 2 2
Federal Home Loan Bank stock dividends (40) (28)
Increase (decrease) in cash due to changes in:
Accrued interest receivable on loans 11 8
Accrued interest receivable on mortgage-backed securities (71) 3
Accrued interest receivable on investments and
interest-bearing deposits 173 (7)
Prepaid expenses and other assets 92 94
Accrued interest payable 36 25
Other liabilities (10) (8)
Federal income taxes
Current (200) 106
Deferred (8) (38)
------ ------
Net cash provided by operating activities 524 707
Cash flows provided by (used in) investing activities:
Proceeds from maturity of investment securities 4,332 1,700
Proceeds from sale of investment securities 4,996 -
Purchase of investment securities designated as available for sale (3,078) -
Purchase of investment securities designated as held to maturity - (1,082)
Purchase of mortgage-backed securities designated as available
for sale (15,740) -
Principal repayments on mortgage-backed securities 1,839 129
Loan principal repayments 12,995 8,688
Loan disbursements (15,460) (13,557)
Purchase of office premises and equipment (142) (17)
Proceeds from sale of repossessed assets 146 41
Purchase of Federal Home Loan Bank stock (452) -
------ ------
Net cash used in investing activities (10,564) (4,098)
------ ------
Net cash used in operating and investing
activities (subtotal carried forward) (10,040) (3,391)
------ ------
</TABLE>
5
<PAGE>
<TABLE>
Community Investors Bancorp, Inc.
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
For the six months ended December 31,
1998 1997
<S> <C> <C>
Net cash used in operating and investing
activities (subtotal brought forward) $(10,040) $(3,391)
Cash flows provided by (used in) financing activities:
Net increase in deposit accounts 2,872 2,336
Proceeds from Federal Home Loan Bank advances 12,000 9,300
Repayment of Federal Home Loan Bank advances (2,165) (8,193)
Advances by borrowers for taxes and insurance 8 13
Purchase of treasury stock (643) (403)
Dividends on common stock (148) (138)
------- ------
Net cash provided by financing activities 11,924 2,915
------- ------
Net decrease in cash and cash equivalents 1,884 (476)
Cash and cash equivalents at beginning of period 2,793 2,410
------- ------
Cash and cash equivalents at end of period $ 4,677 $ 1,934
======= ======
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Federal income taxes $ 378 $ 185
======= ======
Interest on deposits and borrowings $ 2,378 $ 2,004
======= ======
Supplemental disclosure of noncash investing activities:
Transfers from loans to repossessed assets $ 128 $ 13
======= ======
Unrealized losses on securities designated as available
for sale, net of related tax effects $ (99) $ (1)
======= ======
</TABLE>
6
<PAGE>
Community Investors Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the six and three months ended December 31, 1998 and 1997
1. Basis of Presentation
The accompanying unaudited consolidated financial statements were prepared
in accordance with instructions for Form 10-QSB and, therefore, do not
include information or footnotes necessary for a complete presentation of
consolidated financial position, results of operations and cash flows in
conformity with generally accepted accounting principles. Accordingly, these
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto of Community Investors Bancorp, Inc.
(the "Corporation") included in the Annual Report on Form 10-KSB for the
year ended June 30, 1998. However, in the opinion of management, all
adjustments (consisting of only normal recurring accruals) which are
necessary for a fair presentation of the financial statements have been
included. The results of operations for the three and six month periods
ended December 31, 1998 are not necessarily indicative of the results which
may be expected for an entire fiscal year.
2. Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Corporation and First Federal Savings and Loan Association of Bucyrus
(the "Association"). All significant intercompany items have been
eliminated.
3. Earnings Per Share
Basic earnings per share is computed based upon the weighted-average common
shares outstanding during the period less shares in the ESOP that are
unallocated and not committed to be released. Weighted-average common shares
deemed outstanding, which gives effect to 92,709 unallocated ESOP shares,
totaled 1,150,103 and 1,137,419 for the six and three month periods ended
December 31, 1998. Weighted-average common shares deemed outstanding, which
gives effect to 106,145 unallocated ESOP shares, totaled 1,263,125 and
1,252,075 for the six and three month period ended December 31, 1997.
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
1,193,874 and 1,181,190 for the six and three month periods ended December
31, 1998. Weighted-average common shares deemed outstanding for purposes of
computing diluted earnings per share totaled 1,292,992 and 1,281,942 for the
six and three month periods ended December 31, 1997.
Weighted-average common shares outstanding for the three month period ended
December 31, 1997, have been restated to give effect to the Corporation's
three-for-two stock split in fiscal 1998.
7
<PAGE>
Community Investors Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the six and three months ended December 31, 1998 and 1997
4. Effects of Recent Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards ("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. Management adopted SFAS No. 130 effective July 1, 1998, as
required, without material impact on the Corporation's financial statements.
Comprehensive income totaled $226,000 and $222,000 for the three month
periods ended December 31, 1998 and 1997, respectively. The components of
other comprehensive income consisted solely of unrealized losses on
securities designated as available for sale, net of related tax effects,
totaling $7,000 and $14,000 for those respective periods.
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.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which requires entities to recognize
all derivatives in their financial statements as either assets or
liabilities measured at fair value. SFAS No. 133 also specifies new methods
of accounting for hedging transactions, prescribes the items and
transactions that may be hedged, and specifies detailed criteria to be met
to qualify for hedge accounting.
8
<PAGE>
Community Investors Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the six and three months ended December 31, 1998 and 1997
4. Effects of Recent Accounting Pronouncements (continued)
The definition of a derivative financial instrument is complex, but in
general, it is an instrument with one or more underlyings, such as an
interest rate or foreign exchange rate, that is applied to a notional
amount, such as an amount of currency, to determine the settlement
amount(s). It generally requires no significant initial investment and can
be settled net or by delivery of an asset that is readily convertible to
cash. SFAS No. 133 applies to derivatives embedded in other contracts,
unless the underlying of the embedded derivative is clearly and closely
related to the host contract.
SFAS No. 133 is effective for fiscal years beginning after June 15, 1999. On
adoption, entities are permitted to transfer held-to-maturity debt
securities to the available-for-sale or trading category without calling
into question their intent to hold other debt securities to maturity in the
future. SFAS No. 133 is not expected to have a material impact on the
Corporation's financial statements.
9
<PAGE>
Community Investors Bancorp, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Forward-Looking Statements
In addition to historical information contained herein, the following discussion
contains forward-looking statements that involve risks and uncertainties.
Economic circumstances, the Corporation's operations and the Corporation's
actual results could differ significantly from those discussed in the
forward-looking statements. Some of the factors that could cause or contribute
to such differences are discussed herein but also include changes in the economy
and interest rates in the nation and the Corporation's market area generally.
Some of the forward-looking statements included herein are the statements
regarding management's determination of the amount and adequacy of the allowance
for losses on loans, the effect of the year 2000 on certain information
technology systems and the effect of certain recent accounting pronouncements.
Discussion of Financial Condition Changes from June 30, 1998 to December 31,
1998
At December 31, 1998, the Corporation's assets totaled $114.9 million, an
increase of $12.3 million, or 12.0%, over the level reported at June 30, 1998.
The increase in assets was funded primarily through growth in the deposit
portfolio of $2.9 million, combined with an increase in advances from the
Federal Home Loan Bank of $9.8 million.
Liquid assets (i.e. cash, interest-bearing deposits and investment securities)
decreased by $4.4 million during the six month period, to a total of $11.2
million at December 31, 1998, as maturities and sales of investment securities
totaling $4.3 million and $5.0 million, respectively, were partially offset by
purchases of investment securities totaling $3.1 million and a $1.9 million
increase in cash and cash equivalents. Mortgage-backed securities totaled $15.0
million at December 31, 1998, an increase of $13.7 million over June 30, 1998
levels. Purchases of mortgage-backed and investment securities totaled $15.7
million and $3.1 million, respectively, during the six month period. The
instruments are backed by FNMA, FHLB and GNMA and bear a weighted average
interest at a rate of 6.361%. The purchases were financed via a 5.00% fixed-rate
advance from the Federal Home Loan Bank, coupled with previously mentioned
maturities of investment securities. Regulatory liquidity amounted to 11.79% at
December 31, 1998.
Loans receivable increased by $2.5 million, or 3.0%, during the six month
period, to a total of $86.1 million at December 31, 1998. Loan disbursements
amounted to $15.5 million and were partially offset by principal repayments of
$13.0 million. The volume of loan disbursements during the six months ended
December 31, 1998, remained consistent with the increased volume achieved during
the six months ended December 31, 1997. The allowance for loan losses totaled
$586,000 at December 31, 1998, as compared to $563,000 at June 30, 1998.
Nonperforming loans totaled $762,000 at December 31, 1998, as compared to
$600,000 at June 30, 1998. The allowance for loan losses represented 76.9% of
nonperforming loans as of December 31, 1998 and 93.8% at June 30, 1998. Although
management believes that its allowance for loan losses at December 31, 1998, is
adequate based upon the available facts and circumstances, there can be no
assurance that additions to such allowance will not be necessary in future
periods, which could adversely affect the Corporation's results of operations.
10
<PAGE>
Community Investors Bancorp, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Discussion of Financial Condition Changes from June 30, 1998 to December 31,
1998 (continued)
Deposits totaled $78.8 million at December 31, 1998, an increase of $2.9
million, or 3.8%, over June 30, 1998 levels. Management continued its efforts to
achieve a moderate rate of growth through marketing and pricing strategies.
Advances from the Federal Home Loan Bank totaled $25.4 million at December 31,
1998, an increase of $9.8 million, or 63.2%, over June 30, 1998 levels. The
increase resulted primarily from a $11.0 million advance used to fund the
purchase of mortgage-backed securities, as previously discussed.
The Association is required to meet minimum capital standards promulgated by the
Office of Thrift Supervision (OTS). At December 31, 1998, the Association's
capital was well in excess of such minimum capital requirements.
Comparison of Operating Results for the Six Month Periods Ended December 31,
1998 and 1997
General
The Corporation's net earnings totaled $440,000 for the six months ended
December 31, 1998, a decrease of $8,000, or 1.8%, from the $448,000 of net
earnings reported for the same period in 1997. The decrease in earnings resulted
primarily from a $100,000 increase in general, administrative and other expense,
which was partially offset by a $36,000 increase in net interest income, a
$36,000 increase in other income and a $16,000 decrease in the provision for
federal income taxes.
Net Interest Income
Net interest income increased by $36,000, or 2.2%, for the six months ended
December 31, 1998, compared to the 1997 period. Interest income on loans
increased by $178,000, or 5.5%, due primarily to a $5.8 million increase in the
average net portfolio balance of loans outstanding year-to-year, partially
offset by a decline in the average yield. Interest income on investment and
mortgage-backed securities and interest-bearing deposits increased by $243,000,
or 60.6%, due primarily to a increase in the average portfolio balance
outstanding.
Interest expense on deposits increased by $35,000, or 2.0%, due primarily to a
$3.7 million increase in the average balance of deposits outstanding, which was
partially offset by a decline in the cost of deposits year-to-year. Interest
expense on borrowings increased by $350,000, due primarily to a $13.8 million
increase in the weighted-average balance of advances from the Federal Home Loan
Bank outstanding.
11
<PAGE>
Community Investors Bancorp, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Comparison of Operating Results for the Six Month Periods Ended December 31,
1998 and 1997 (continued)
Net Interest Income (continued)
As a result of the foregoing changes in interest income and interest expense,
net interest income increased by $36,000, or 2.2%, to a total of $1,666,000 for
the six months ended December 31, 1998. The interest rate spread amounted to
approximately 2.73% in the 1998 six month period, as compared to 3.02% during
the 1997 period, while the net interest margin totaled approximately 3.08% in
1998, as compared to 3.53% in 1997.
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 $52,000 provision for losses on loans during the six month period ended
December 31, 1998, a decrease of $4,000 over the comparable 1997 period. There
can be no assurance that the loan loss allowance of the Association will be
adequate to cover losses on nonperforming assets in the future.
Other Income
Other income increased by $36,000, or 38.7%, for the six months ended December
31, 1998, compared to the same period in 1997, due primarily to an increase in
service fees on deposit accounts and transactions.
General, Administrative and Other Expense
General, administrative and other expense increased by $100,000, or 10.2%,
during the six months ended December 31, 1998, compared to the same period in
1997. This increase resulted primarily from an $85,000, or 17.5%, increase in
employee compensation and benefits, which was partially offset by a $14,000, or
5.6%, decrease in other operating expenses. The increase in employee
compensation and benefits resulted primarily from increased staffing levels year
to year, coupled with increased costs attendant to stock benefit plans and
normal merit increases.
Federal Income Taxes
The provision for federal income taxes decreased by $16,000, or 6.8%, for the
six months ended December 31, 1998, as compared to the same period in 1997. This
decrease resulted primarily from the decrease in net earnings before taxes of
$24,000, or 3.5%. The effective tax rates were 33.2% and 34.4% for the six
months ended December 31, 1998 and 1997, respectively.
12
<PAGE>
Community Investors Bancorp, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Comparison of Operating Results for the Three Month Periods Ended December 31,
1998 and 1997
General
The Corporation's net earnings totaled $207,000 for the three months ended
December 31, 1998, a decrease of $5,000, or 2.4%, from the $212,000 of net
earnings reported for the same period in 1997. The decrease in earnings resulted
primarily from a $61,000 increase in general, administrative and other expense,
which was partially offset by a $6,000 increase in net interest income and a
$22,000 increase in other income.
Net Interest Income
Net interest income increased by $6,000, or .7%, for the three months ended
December 31, 1998, compared to the 1997 period. Interest income on loans
increased by $79,000, or 4.9%, due primarily to a $4.8 million increase in the
average net portfolio balance of loans outstanding year-to-year, partially
offset by a decline in the average yield. Interest income on investment and
mortgage-backed securities and interest-bearing deposits increased by $151,000,
or 70.9%, due primarily to a increase in the average portfolio balance
outstanding.
Interest expense on deposits increased by $7,000, or.8%, due primarily to a $3.8
million increase in the average balance of deposits outstanding, which was
partially offset by a decline in the cost of deposits year-to-year. Interest
expense on borrowings increased by $217,000, due primarily to a $16.7 million
increase in the weighted-average balance of advances from the Federal Home Loan
Bank outstanding.
As a result of the foregoing changes in interest income and interest expense,
net interest income increased by $6,000, or .7%, to a total of $823,000 for the
three months ended December 31, 1998. The interest rate spread amounted to
approximately 2.6% in the 1998 three month period, as compared to 3.0% during
the 1997 period, while the net interest margin totaled approximately 2.9% in
1998, as compared to 3.5% in 1997.
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 $26,000 provision for losses on loans during the three month period ended
December 31, 1998, a decrease of $28,000 from the comparable 1997 period. There
can be no assurance that the loan loss allowance of the Association will be
adequate to cover losses on nonperforming assets in the future.
13
<PAGE>
Community Investors Bancorp, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Comparison of Operating Results for the Three Month Periods Ended December 31,
1998 and 1997 (continued)
Other Income
Other income increased by $22,000, or 44.0%, for the three months ended December
31, 1998, compared to the same period in 1997, due primarily to an increase in
service fees on deposit accounts and transactions.
General, Administrative and Other Expense
General, administrative and other expense increased by $61,000, or 12.3%, during
the three months ended December 31, 1998, compared to the same period in 1997.
This increase resulted primarily from a $41,000, or 16.7%, increase in employee
compensation and benefits, which was partially offset by a $6,000, or 4.5%,
decrease in other operating expenses. The increase in employee compensation and
benefits resulted primarily from increased staffing levels year to year, coupled
with increased costs attendant to stock benefit plans and normal merit
increases.
Federal Income Taxes
The provision for federal income taxes remained unchanged at $104,000, for the
three months ended December 31, 1998, as compared to the same period in 1997.
Net earnings before income taxes declined slightly to $311,000, compared to
$316,000 for the three months ended December 31, 1997. The effective tax rates
were 33.4% and 32.9% for the three months ended December 31, 1998 and 1997,
respectively.
Year 2000 Compliance Matters
As with all providers of financial services, the Association's operations are
heavily dependent on information technology systems. The Association is
addressing the potential problems associated with the possibility that the
computers that control or operate the 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.
As part of the awareness and assessment phases of its action plan related to the
Year 2000 problem, the Association identified the operating systems that it
considers critical to the on-going operations of the Asssociation. The
Association is working with companies that supply or service its information
technology systems to remedy any year 2000 problems.
Of the systems that the Association identified as mission-critical, the most
significant is the on-line core account processing system that is performed by a
third party service provider, Intrieve, Inc. The service provider is converting
its hardware to a new Year 2000 compliant system. The Association's conversion
to this new system will be completed during the fourth calendar quarter of 1998.
The service provider successfully performed Year 2000 proxy testing with several
of its larger users during early October 1998. Year 2000 compliance has become
an intregal part of the Association's 1999 planning. With the completion of the
proxy testing of the mission critical systems the Association is now focusing on
the less critical portions of the year 2000 program.
14
<PAGE>
Community Investors Bancorp, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Year 2000 Compliance Matters (continued)
The Association has developed a contingency plan in case the mission-critical
systems are not successfully renovated in a timely manner or if they actually
fail at Year 2000 critical dates. The contingency plan states that the
Association deems the likelihood of failure of the service provider's efforts to
renovate Year 2000 changes to the on-line core account processing system to be
remote; however, a more likely scenario is that the service provider's system
will be down for several days or weeks upon arrival of Year 2000. The plan,
therefore, primarily addresses action to deal with the latter possibility rather
than with a catastrophic event. The Association does not consider contingency
planning to be a static process; therefore, the plan will be amended to address
a catastrophic event if testing results indicate greater concern.
Management of the Association has developed an estimate of expenses that are
reasonably likely to be incurred by the Association in connection with this
issue; however, the Association does not expect to incur significant expense to
implement the necessary corrective measures. No assurance can be given, however,
that significant expense will not be incurred in future periods. In the event
that the Association is ultimately required to purchase replacement computer
systems, programs and equipment, or incur substantial expense to make the
Association's current systems, programs and equipment Year 2000 compliant, the
Association's net earnings and financial condition could be adversely affected.
In addition to possible expense related to its own systems, the Association
could incur losses if loan payments are delayed due to Year 2000 problems
affecting any major borrowers in the Association's primary market area. Because
the Association's loan portfolio is highly diversified with regard to individual
borrowers and types of businesses and the Association's primary market area is
not significantly dependent upon one employer or industry, the Association does
not expect any significant or prolonged difficulties that will affect net
earnings or cash flow.
15
<PAGE>
Community Investors Bancorp, Inc.
PART II
ITEM 1. Legal Proceedings
Not applicable
ITEM 2. Changes in Securities and Use of Proceeds
Not applicable
ITEM 3. Defaults Upon Senior Securities
Not applicable
ITEM 4. Submission of Matters to a Vote of Security Holders
None
ITEM 5. Other Information
None
ITEM 6. Exhibits and Reports on Form 8-K
Reports on Form 8-K: None.
Exhibits 27: Financial Data Schedule for the six
months ended December 31, 1998.
16
<PAGE>
Community Investors Bancorp, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: February 12, 1999 By: /s/John W. Kennedy
----------------------------- -----------------------------
John W. Kennedy
President and Chief
Executive Officer
Date: February 12, 1999 By: /s/Robert W. Siegel
----------------------------- -----------------------------
Robert W. Siegel
Assistant Vice President
and Controller
17
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 2,260
<INT-BEARING-DEPOSITS> 1,852
<FED-FUNDS-SOLD> 565
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 17,283
<INVESTMENTS-CARRYING> 4,239
<INVESTMENTS-MARKET> 4,003
<LOANS> 86,068
<ALLOWANCE> 586
<TOTAL-ASSETS> 114,876
<DEPOSITS> 78,827
<SHORT-TERM> 0
<LIABILITIES-OTHER> 608
<LONG-TERM> 25,393
0
0
<COMMON> 17
<OTHER-SE> 10,031
<TOTAL-LIABILITIES-AND-EQUITY> 114,876
<INTEREST-LOAN> 3,436
<INTEREST-INVEST> 537
<INTEREST-OTHER> 107
<INTEREST-TOTAL> 4,080
<INTEREST-DEPOSIT> 1,819
<INTEREST-EXPENSE> 2,414
<INTEREST-INCOME-NET> 1,666
<LOAN-LOSSES> 52
<SECURITIES-GAINS> 6
<EXPENSE-OTHER> 1,084
<INCOME-PRETAX> 659
<INCOME-PRE-EXTRAORDINARY> 440
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 440
<EPS-PRIMARY> .38
<EPS-DILUTED> .37
<YIELD-ACTUAL> 3.08
<LOANS-NON> 762
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 563
<CHARGE-OFFS> 42
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 586
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 586
</TABLE>
