FORM 10-Q
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: September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission file number: 0-026248
Industrial Bancorp, Inc.
______________________________________________________
(Exact name of registrant as specified in its charter)
Ohio 34-1800830
_______________________________ _________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
211 North Sandusky Street, Bellevue, Ohio 44811
__________________________________________ __________
(Address of principal executive offices) (Zip Code)
(419) 483-3375
____________________________________________________
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities and Exchange Act of 1934 during the preceding twelve
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 the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Outstanding as of October 24, 1996:
Common shares, no par value 5,554,500 shares
INDUSTRIAL BANCORP, INC.
Form 10-Q
For the quarter ended September 30, 1996
Part I -- Financial Statements
Item 1: Financial Statements
------
Interim financial information required by Rule 10-01 of
Regulation S-X is included in this Form 10-Q as referenced
below:
Consolidated Balance Sheets............................. 3
Consolidated Statements of Income....................... 4
Consolidated Statements of Shareholders' Equity......... 5
Condensed Consolidated Statements of Cash Flows......... 6
Notes to Consolidated Financial Statements.............. 7
Item 2: Management's Discussion and Analysis of
------ Financial Condition and Results of Operations........ 9
Part II -- Other Information...................................... 12
Signatures.......................................................... 13
INDUSTRIAL BANCORP, INC.
Consolidated Balance Sheets
(Unaudited, $ in thousands
except per share data)
<TABLE>
9/30/96 12/31/95
<S> <C> <C>
ASSETS
Cash and noninterest-bearing deposits $ 739 $ 817
Interest-bearing demand deposits 2,723 4,894
Overnight deposits 3,000 21,000
-------- --------
Cash and cash equivalents 6,462 26,711
Investment securities available for sale 23,022 17,128
Investment securities held to maturity 2,498 9,987
(fair value: 1996 - $2,504; 1995 - $10,045)
Mortgage-backed securities held to maturity 614 767
(fair value: 1996 - $662; 1995 - $826)
Federal Home Loan Bank stock 2,600 2,401
Loans receivable, net 277,339 259,124
Office properties and equipment 5,103 4,739
Accrued interest receivable 1,740 1,765
Other assets 994 372
-------- --------
Total assets $320,372 $322,994
======== ========
LIABILITIES
Deposits $254,501 $238,282
Dividend payable 555 416
Accrued interest payable and other liabilities 4,675 3,241
-------- --------
Total liabilities 259,731 241,939
SHAREHOLDERS' EQUITY
Common stock, no par value - 10,000,000 shares 34,669 54,110
authorized; 5,554,500 shares outstanding
Surplus 1,634
Retained earnings 30,413 30,682
Shares acquired by Employee Stock Ownership Plan (4,113) (4,436)
Shares acquired by Management Recognition Plan (2,630)
Unrealized gain on securities available for sale 717 748
Minimum additional pension liability (49) (49)
-------- --------
Total shareholders' equity 60,641 81,055
-------- --------
Total liabilities and shareholders' equity $320,372 $322,994
======== ========
Book value per share $ 10.92 $ 14.59
</TABLE>
See notes to consolidated financial statements.
INDUSTRIAL BANCORP, INC.
Consolidated Statements of Income
(Unaudited, $ in thousands
except per share data)
<TABLE>
Three months ended Nine months ended
9/30/96 9/30/95 9/30/96 9/30/95
------- ------- ------- -------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 5,816 $5,276 $17,117 $15,247
Interest and dividends on investments 427 348 1,306 838
Interest on mortgage-backed securities 16 22 52 71
Interest on interest-bearing deposits 73 387 578 586
------- ------ ------- -------
Total interest income 6,332 6,033 19,053 16,742
INTEREST EXPENSE
Interest on deposits 3,011 2,713 8,730 7,879
Interest on FHLB advances 55 471
Other interest expense 86 118
------- ------ ------- -------
Total interest expense 3,011 2,854 8,730 8,468
------- ------ ------- -------
NET INTEREST INCOME 3,321 3,179 10,323 8,274
Provision for loan losses 45 45 135 135
------- ------ ------- -------
Net interest income after
provision for loan losses 3,276 3,134 10,188 8,139
NONINTEREST INCOME
Service fees and other charges 95 85 268 229
Other 9 10 31 33
------- ------ ------- -------
Total noninterest income 104 95 299 262
NONINTEREST EXPENSE
Salaries and employee benefits 2,346 578 3,814 1,642
State franchise tax 208 201 623 403
Federal deposit insurance premiums 1,651 127 1,919 396
Occupancy and equipment 80 91 246 262
Depreciation expense 75 60 198 177
Data processing 90 87 266 251
Other expenses 337 289 1,042 880
------- ------ ------- -------
Total noninterest expense 4,787 1,433 8,108 4,011
------- ------ ------- -------
Income before income tax (1,407) 1,796 2,379 4,390
Provision for income tax 55 603 1,337 1,498
------- ------ ------- -------
NET INCOME $(1,462) $1,193 $1,042 $ 2,892
======= ====== ====== =======
Earnings per share $ (.29) $ .17 $ .20 $ .17
</TABLE>
See notes to consolidated financial statements.
INDUSTRIAL BANCORP, INC.
Consolidated Statements of Shareholders' Equity
(Unaudited, $ in thousands)
<TABLE>
Total
shareholders'
equity
-------------
<S> <C>
Balance as of December 31, 1994 $ 27,616
Net income 2,892
Sale of 5,554,500 common shares, 54,110
net of conversion costs
Shares purchased under Employee Stock (4,436)
Ownership Plan
Change in unrealized gain on securities
available for sale 152
--------
Balance as of September 30, 1995 $ 80,334
========
Balance as of December 31, 1995 $ 81,055
Net income 1,042
Capital distribution declared (19,441)
($3.50 per share)
Cash dividends declared (1,278)
($.25 per share)
Employee stock ownership plan:
Accounting for capital distribution on 1,553
unallocated shares
Shares released 371
Management Recognition Plan shares purchased (2,630)
Change in unrealized gain on securities
available for sale (31)
--------
Balance as of September 30, 1996 $ 60,641
========
</TABLE>
See notes to consolidated financial statements.
INDUSTRIAL BANCORP, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited, $ in thousands)
<TABLE>
Nine months ended
9/30/96 9/30/95
------- -------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 1,042 $ 2,892
Adjustments to reconcile net income to net cash
from operating activities 2,447 (237)
-------- --------
Net cash from operating activities 3,489 2,655
-------- --------
INVESTING ACTIVITIES
Net change in interest-bearing time deposits 2,500
Purchases of investment securities:
Available for sale (5,910)
Held to maturity (17,944)
Proceeds from maturities of investment securities
held to maturity 7,500 3,500
Mortgage-backed securities principal repayments 152 126
Net increase in loans (17,854) (16,289)
FHLB stock purchases (69) (352)
Properties and equipment expenditures, net (555) (247)
-------- --------
Net cash from investing activities (16,736) (28,706)
-------- --------
FINANCING ACTIVITIES
Capital distribution to shareholders (19,441)
Purchase of Management Recognition Plan shares (2,630)
Proceeds from issuance and sale of common shares,
net of conversion expenses 54,110
Cash provided to Employee Stock Ownership Plan (4,436)
Net change in deposits 16,219 (5,726)
Proceeds from FHLB advances 11,000
FHLB advances principal repayments (17,000)
Cash dividends paid (1,150)
-------- --------
Net cash from financing activities (7,002) 37,948
-------- --------
Net change in cash and cash equivalents (20,249) 11,897
Cash and cash equivalents at beginning of period 26,711 5,466
-------- --------
Cash and cash equivalents at end of period $ 6,462 $ 17,363
======== ========
Noncash transactions:
Change in unrealized gain on securities
available for sale, net of tax effect $ (30)
</TABLE>
See notes to consolidated financial statements.
INDUSTRIAL BANCORP, INC.
Notes to Consolidated Financial Statements
(Unaudited)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These interim financial statements are presented in accordance
with the SEC's rules for quarterly financial information without
audit and reflect all adjustments which, in the opinion of
management, are necessary to present fairly the financial position
of Industrial Bancorp, Inc. (the "Company") and its wholly owned
subsidiary, The Industrial Savings and Loan Association (the
"Association"), at September 30, 1996 and the results of operations
and cash flows for the periods presented. All such adjustments are
normal and recurring in nature. All significant intercompany
accounts and transactions have been eliminated in consolidation.
The accompanying condensed financial statements do not purport to
contain all the necessary disclosures required by generally
accepted accounting principles that might otherwise be necessary in
the circumstances and should be read in conjunction with the
financial statements included in the 1995 Annual Report of
Industrial Bancorp, Inc. The results of the nine months presented
are not necessarily representative of the results of operations and
cash flows which may be expected for the entire year.
In accordance with the AICPA's Statement of Position 93-6,
"Employers' Accounting for Employee Stock Ownership Plans," the
Company recorded ESOP expense of $1.5 million with regard to the
Company's $3.50 return of capital. The expense was offset,
however, by a corresponding increase to shareholders' equity.
EARNINGS PER SHARE
Earnings per common share have been computed based on 5,138,568
and 5,127,345 weighted average number of common shares outstanding
during the quarter and nine months ended September 30, 1996,
respectively, and 5,110,890 weighted average number of common
shares outstanding during the period from the conversion to stock
form on August 1, 1995 to September 30, 1995. Employee Stock
Ownership Plan shares that have been released, or committed to be
released, to participants are considered outstanding for earnings
per share purposes.
COMMITMENTS AND CONTINGENCIES
Outstanding commitments to originate loans were $5.9 million as
of September 30, 1996.
During the third quarter of 1996, the Company announced its
intent to repurchase 277,725, or 5%, of its outstanding common
shares over a period of twelve months. On October 28, 1996, the
Company received approval of its buyback plan from the Office of
Thrift Supervision.
SAIF RECAPITALIZATION
During the third quarter of 1996, Congress enacted legislation
to recapitalize the Savings Association Insurance Fund (SAIF).
Accordingly, each institution with SAIF-insured deposits must
pay a special FDIC assessment of 65.7 basis points of SAIF-insured
deposits held at March 31, 1995. As a result of the special
assessment, a pre-tax expense of $1.5 million was recorded by the
Company on September 30, 1996 and is payable November 27, 1996.
In connection with the recapitalization, it is anticipated that
the FDIC will refund a portion of the fourth quarter premium equal
to five basis points of SAIF-insured deposits. The refund for the
Association's fourth quarter premium assessment is estimated to be
$31,000. The legislation also provides for reduced premium rates
beginning in 1997. The Association paid $552,000 of regular SAIF
assessments during 1996, based upon an assessment rate of 23 basis
points per $100 of SAIF-insured deposits. It is anticipated that
the Association will pay $165,000 in regular SAIF assessments in
1997, based upon a estimated assessment rate of 6.4 basis points
per $100 of SAIF-insured deposits.
INDUSTRIAL BANCORP, INC.
Management's Discussion and Analysis
(Unaudited)
Financial Condition
- -------------------
Total assets decreased $2.6 million to $320.4 million at
September 30, 1996 from $323.0 million at December 31, 1995. Cash
and cash equivalents decreased from $26.7 million at December 31,
1995 to $6.5 million at September 30, 1996, primarily as a result
of the $19.4 million return of capital distribution. Liquidity,
6.7% at September 30, 1996, was in excess of the regulatory
requirement.
Growth in net loans receivable during the first nine months of
1996 amounted to $18.2 million. In addition, the undisbursed
portion of construction loans totalled $9.8 million at September
30, 1996. Loan growth was funded primarily by deposits, which
increased $16.2 million, from $238.3 million at yearend 1995 to
$254.5 million at September 30, 1996. The Company intends,
however, to fund any continued loan demand in excess of deposit
growth with advances from the Federal Home Loan Bank.
Total shareholders' equity decreased to $60.6 million at
September 30, 1996 from $81.1 million at December 31, 1995, as a
result of several factors. A return of capital distribution of
$3.50 per share reduced shareholders' equity by $19.4 million.
Shareholders' equity was also reduced by $2.6 million as a result
of the purchase of shares by the Company's Management Recognition
Plan. These reductions were partially offset by $1.0 million of
net income for the first nine months of 1996 and the third quarter
increase to surplus of $1.5 million related to the impact of the
return of capital upon unallocated ESOP shares.
The Association is required by the Office of Thrift Supervision
to maintain certain minimum levels of tangible, core and risk-based
capital. The following table presents the Association's regulatory
capital position at September 30, 1996:
<TABLE>
Tangible Core Risk-Based
Capital Capital Capital
---------------- ---------------- -----------------
($ in thousands) Amount % Amount % Amount %
------- ----- ------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Capital level $53,843 16.84 $53,843 16.84 $ 55,320 32.51
Current requirement 4,796 1.50 9,591 3.00 13,613 8.00
------- ----- ------- ----- -------- -----
Excess $49,047 15.34 $44,252 13.84 $ 41,707 24.51
======= ===== ======= ===== ======== =====
Applicable asset base $319,704 $319,704 $170,161
======== ======== ========
</TABLE>
Results of Operations
- ---------------------
Accounting for two significant events during the third quarter
caused the Company to record a net loss of $1.5 million for the
three months ended September 30, 1996 compared to net income of
$1.2 million for the same period in 1995. The SAIF special
assessment amounted to a pre-tax $1.5 million expense for the
Association during the third quarter of 1996. Also during the
third quarter of 1996, the Association recorded $1.5 million of
expense, in accordance with accounting guidance, relative to the
$3.50 per share return of capital on unallocated ESOP shares. As
this expense was offset by an increase in shareholders' equity,
there was no net tax effect associated with this transaction.
Net income for the nine months ended September 30, 1996 was
$1.0 million compared to $2.9 million for the same period in 1995.
Net interest income increased $142,000 and $2.0 million for the
third quarter and for the first nine months of 1996, respectively,
compared to the same periods in 1995, as a result of larger loan
and investment securities portfolios and the absence of interest on
Federal Home Loan Bank advances utilized earlier in 1995.
Total interest income was $299,000 and $2.3 million more for
the quarter and nine months ended September 30, 1996, respectively,
than for the same periods in 1995. These increases were primarily
a result of the increased average balances in loans and investment
securities and an increased weighted average yield as a result of
higher interest rates.
Total interest expense was $157,000 and $262,000 more for the
quarter and nine months ended September 30, 1996, respectively,
than for the same periods in 1995. Increases due to marginally
higher deposit rates paid on increased average interest-bearing
deposit balances were offset by the absence in 1996 of FHLB
advances, which had been used to fund excess loan demand during the
first half of 1995.
The provision for loan losses was $45,000 and $135,000 for
the three and nine month periods ended September 30, 1996 and 1995,
respectively, based upon management's assessment of reasonably
foreseeable losses inherent in the portfolio for each period.
Noninterest expense was $3.4 million and $4.1 million more for
the quarter and nine months ended September 30, 1996, respectively,
than for same periods in 1995, primarily as a result of the $3.0
million related to the FDIC special assessment and additional ESOP
expense which resulted from the payment of the capital distribution
on unallocated ESOP shares. Salaries and employee benefits expense
was significantly greater in 1996 than during comparable periods in
1995 due to the $1.5 million of additional ESOP expense related to
the capital distribution. Also included in salaries and employee
benefits expense during the first nine months of 1996 was $201,000
related to the termination of the Association's defined benefit
pension plan. Federal deposit insurance premiums were also
significantly greater in 1996 than in 1995 due to the $1.5 million
special assessment.
INDUSTRIAL BANCORP, INC.
Form 10-Q
Other Information
Part II
Item 1. Legal Proceedings
-----------------
Not applicable
Item 2. Changes in Securities
---------------------
Not applicable
Item 3. Defaults upon Senior Securities
-------------------------------
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Not applicable
Item 5. Other Information
-----------------
A plan to repurchase up to 5% of the outstanding common
shares of the Company was introduced during the quarter.
Under the terms of the plan, approved by the Office of
Thrift Supervision on October 28, 1996, the Company can
purchase, on the open market, up to 277,725 shares of its
common stock, during the twelve month period beginning on
the date of the first purchase.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
Filing dated September 25, 1996: reported announcement
of retirement as Chief Executive Officer of Lawrence R.
Rhoades and ascension to Chief Executive Officer by David
M. Windau, President of the Company.
Filing dated October 22, 1996: reported increase in
regular quarterly cash dividend from $.075 to $.10 per
common share and the announcement of plan to repurchase 5%
of outstanding common shares over a twelve month period.
INDUSTRIAL BANCORP, INC.
Form 10-Q
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.
10/31/96 /s/ Lawrence R. Rhoades
Date: __________ By: _____________________________
Lawrence R. Rhoades
Chairman of the Board and
Chief Financial Officer
10/31/96 /s/ David M. Windau
Date: __________ By: _____________________________
David M. Windau
President and
Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 739
<INT-BEARING-DEPOSITS> 4,723
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 23,022
<INVESTMENTS-CARRYING> 3,112
<INVESTMENTS-MARKET> 3,166
<LOANS> 278,851
<ALLOWANCE> 1,512
<TOTAL-ASSETS> 320,372
<DEPOSITS> 254,501
<SHORT-TERM> 0
<LIABILITIES-OTHER> 5,230
<LONG-TERM> 0
0
0
<COMMON> 34,669
<OTHER-SE> 25,972
<TOTAL-LIABILITIES-AND-EQUITY> 320,372
<INTEREST-LOAN> 17,117
<INTEREST-INVEST> 1,358
<INTEREST-OTHER> 578
<INTEREST-TOTAL> 19,053
<INTEREST-DEPOSIT> 8,730
<INTEREST-EXPENSE> 8,730
<INTEREST-INCOME-NET> 10,323
<LOAN-LOSSES> 135
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 8,108
<INCOME-PRETAX> 2,379
<INCOME-PRE-EXTRAORDINARY> 1,042
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,042
<EPS-PRIMARY> 0.20
<EPS-DILUTED> 0.20
<YIELD-ACTUAL> 4.29
<LOANS-NON> 546
<LOANS-PAST> 925
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,376
<CHARGE-OFFS> 0
<RECOVERIES> 1
<ALLOWANCE-CLOSE> 1,512
<ALLOWANCE-DOMESTIC> 1,512
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
