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: June 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 July 26, 1996:
Common stock, no par value 5,554,500 common shares
<PAGE> 1
INDUSTRIAL BANCORP, INC.
Form 10-Q
For the quarter ended June 30, 1996
Part I -- Financial Information
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.......................................... 11
Signatures............................................................ 12
<PAGE> 2
INDUSTRIAL BANCORP, INC.
Consolidated Balance Sheets
(Unaudited, $ in thousands
except per share data)
<TABLE>
<CAPTION>
6/30/96 12/31/95
-------- --------
<S> <C> <C>
ASSETS
Cash and noninterest-bearing deposits $ 766 $ 817
Interest-bearing demand deposits 4,606 4,894
Overnight deposits 3,000 21,000
---------------------
Cash and cash equivalents 8,372 26,711
Investment securities available for sale 20,848 17,128
Investment securities held to maturity
(fair value: 1996 - $5,014; 1995 - $10,045) 4,997 9,987
Mortgage-backed securities
(fair value: 1996 - $712; 1995 - $826) 662 767
Federal Home Loan Bank stock 2,555 2,401
Loans receivable, net 268,417 259,124
Office properties and equipment 5,089 4,739
Accrued interest receivable 1,918 1,765
Other assets 705 372
---------------------
Total assets $313,563 $322,994
=====================
LIABILITIES
Deposits $249,387 $238,282
Dividend payable 417 416
Accrued interest payable and other liabilities 2,960 3,241
---------------------
Total liabilities 252,764 241,939
SHAREHOLDERS' EQUITY
Common stock, no par value - 10,000,000 shares
authorized; 5,554,500 shares outstanding 34,669 54,110
Surplus 87
Retained earnings 32,385 30,682
Stock acquired by Employee Stock Ownership Plan (4,273) (4,436)
Stock acquired by Management Recognition Plan (2,630)
Unrealized gain on securities available for sale 610 748
Minimum additional pension liability (49) (49)
---------------------
Total shareholders' equity 60,799 81,055
---------------------
Total liabilities and shareholders' equity $313,563 $322,994
=====================
Book value per share $ 10.95 $ 14.59
</TABLE>
See notes to consolidated financial statements.
<PAGE> 3
INDUSTRIAL BANCORP, INC.
Consolidated Statements of Income
(Unaudited, $ in thousands
except per share data)
<TABLE>
<CAPTION>
Three months ended Six months ended
6/30/96 6/30/95 6/30/96 6/30/95
----------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 5,717 $ 5,055 $11,301 $ 9,971
Interest and dividends on investments 445 256 879 489
Interest on mortgage-backed securities 18 24 36 48
Interest on interest-bearing deposits 197 124 505 199
----------------------------------------------
Total interest income 6,377 5,459 12,721 10,707
INTEREST EXPENSE
Interest on deposits 2,887 2,695 5,719 5,197
Interest on FHLB advances 236 415
----------------------------------------------
Total interest expense 2,887 2,931 5,719 5,612
----------------------------------------------
NET INTEREST INCOME 3,490 2,528 7,002 5,095
Provision for loan losses 45 45 90 90
----------------------------------------------
Net interest income after
provision for loan losses 3,445 2,483 6,912 5,005
NONINTEREST INCOME
Service fees and other charges 88 75 173 144
Other 11 12 22 23
----------------------------------------------
Total noninterest income 99 87 195 167
NONINTEREST EXPENSE
Salaries and employee benefits 708 542 1,469 1,064
State franchise tax 209 101 415 203
Federal deposit insurance premiums 137 135 268 269
Occupancy and equipment 85 89 166 171
Depreciation expense 63 60 123 117
Data processing 86 82 176 164
Other expenses 370 309 705 591
----------------------------------------------
Total noninterest expense 1,658 1,318 3,322 2,579
----------------------------------------------
Income before income tax 1,886 1,252 3,785 2,593
Provision for income tax 637 438 1,282 895
----------------------------------------------
NET INCOME $ 1,249 $ 814 $ 2,503 $ 1,698
==============================================
Earnings per share $ .24 n/a $ .49 n/a
</TABLE>
See notes to consolidated financial statements.
<PAGE> 4
INDUSTRIAL BANCORP, INC.
Consolidated Statements of Shareholders' Equity
(Unaudited, $ in thousands)
<TABLE>
<CAPTION>
Total
shareholders'
equity
------------
<S> <C>
Balance as of December 31, 1994 $27,616
Net income 1,698
Change in unrealized gain on securities
available for sale 149
-------
Balance as of June 30, 1995 $29,463
=======
Balance as of December 31, 1995 $81,055
Net income 2,503
Capital distribution declared (19,441)
($3.50 per share)
Cash dividend declared (767)
($0.15 per share)
Employee stock ownership plan shares released 217
Management Recognition Plan shares purchased (2,630)
Change in unrealized gain on securities
available for sale (138)
-------
Balance as of June 30, 1996 $60,799
=======
</TABLE>
See notes to consolidated financial statements.
<PAGE> 5
INDUSTRIAL BANCORP, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited, $ in thousands)
<TABLE>
<CAPTION>
Six months ended
6/30/96 6/30/95
--------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 2,503 $ 1,698
Adjustments to reconcile net income to net cash
from operating activities (784) (908)
----------------------
Net cash from operating activities 1,719 790
----------------------
INVESTING ACTIVITIES
Net change in interest-bearing time deposits 1,500
Purchases of investment securities:
Available for sale (3,910)
Held to maturity (2,000)
Proceeds from maturities of investment securities
held to maturity 5,000 1,000
Mortgage-backed securities principal repayments 105 74
Net increase in loans (8,986) (9,825)
FHLB stock purchases (69) (312)
Properties and equipment expenditures, net (466) (198)
----------------------
Net cash from investing activities (8,326) (9,761)
----------------------
FINANCING ACTIVITIES
Capital distribution to shareholders (19,441)
Purchase of Management Recognition Plan shares (2,630)
Stock purchase funds 29,060
Net change in deposits 11,105 2,199
Proceeds from FHLB advances 9,000
FHLB advances principal repayments (4,000)
Cash dividends paid (766)
----------------------
Net cash from financing activities (11,732) 36,259
----------------------
Net change in cash and cash equivalents (18,339) 27,288
Cash and cash equivalents at beginning of period 26,711 5,466
----------------------
Cash and cash equivalents at end of period $ 8,372 $32,754
======================
Noncash transactions:
Change in unrealized gain on securities
available for sale, net of tax effect $ (138)
</TABLE>
See notes to consolidated financial statements.
<PAGE> 6
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 June 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 six months presented are not necessarily representative of the results of
operations and cash flows which may be expected for the entire year.
EARNINGS PER SHARE
Earnings per common share have been computed based on weighted average
number of common shares outstanding during the quarter. 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 $13.3 million as of June 30,
1996.
Congress has proposed a plan to recapitalize the Savings Association
Insurance Fund (SAIF). Pursuant to the plan, each institution holding
SAIF-insured deposits would be required to pay a one-time assessment of
approximately $0.85 per $100 in deposits held by such institution at a date yet
to be determined. If the one-time assessment is enacted into law, the
Association, based upon $249.4 million in deposits at June 30, 1996, will pay an
assessment of approximately $2.1 million, which would be a direct charge to
operations. No assurance can be given that the proposal will be enacted into
law.
<PAGE> 7
INDUSTRIAL BANCORP, INC.
Notes to Consolidated Financial Statements
(Unaudited)
MANAGEMENT RECOGNITION PLAN
The Association's Management Recognition Plan (the "MRP"), approved by the
Company's shareholders at the Annual Meeting held on April 16, 1996, is intended
to compensate directors and key employees of the Association in a manner which
will provide an additional incentive to put forth maximum efforts for the
success of the Association and the Company.
The Association contributed $2.6 million to the MRP during the second
quarter of 1996 for the purchase of 222,180 common shares of the Company in the
open market. The number of shares purchased is approximately 4% of the common
shares outstanding. As of June 30, 1996, all 222,180 shares have been awarded
under the MRP.
One-fifth of awarded shares will be earned and become non- forfeitable on
each of the first five anniversaries of the date of the award. Until shares
awarded are earned by the participant, such shares will be forfeited in the
event that the participant ceases to be either a director or an employee of the
Association. In the event of the death or disability of a participant, however,
the participant's shares will be deemed to be earned and non- forfeitable.
The MRP is administered by a committee composed of three directors of the
Association who are not also employees of the Association.
<PAGE> 8
INDUSTRIAL BANCORP, INC.
Management's Discussion and Analysis
(Unaudited)
Financial Condition
- - -------------------
Total assets decreased $9.4 million to $313.6 million at June 30, 1996 from
$323.0 million at December 31, 1995. Cash and cash equivalents decreased from
$26.7 million at December 31, 1995 to $8.4 million at June 30, 1996, primarily
as a result of the $19.4 million return of capital distribution. Although the
liquidity ratio of 7.9% at June 30, 1996 is in excess of the regulatory
requirement, the Company may need to fund anticipated loan demand with advances
from the Federal Home Loan Bank.
Growth in net loans receivable during the first six months of 1996 amounted
to $9.3 million. In addition, the undisbursed portion of construction loans
totalled $9.1 million at June 30, 1996. Office properties and equipment
increased $350,000, to $5.1 million at June 30, 1996 from $4.7 million at
December 31, 1995, with the completed relocation of the Ashland branch to a
newly constructed office facility. Deposits increased $11.1 million from $238.3
million at yearend 1995 to $249.4 million at June 30, 1996.
Total shareholders' equity decreased to $60.8 million at June 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 with the purchase
of shares by the MRP. Net income for the first six months of 1996, which
amounted to $2.5 million, partially offset these reductions.
The Association is required by the Office of Thrift Supervision to maintain
certain minimum levels of tangible, core and risk-based capital. The following
table presents the Association's regulatory capital position at June 30, 1996:
<TABLE>
<CAPTION>
Tangible Core Risk-Based
Capital Capital Capital
--------------- --------------- ---------------
($ in thousands) Amount % Amount % Amount %
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Capital level $53,589 17.12 $53,589 17.12 $55,021 33.35
Current requirement 4,695 1.50 9,390 3.00 13,200 8.00
-----------------------------------------------------
Excess $48,894 15.62 $44,199 14.12 $41,821 25.35
=====================================================
Applicable asset base $313,004 $313,004 $164,997
======== ======== ========
</TABLE>
<PAGE> 9
INDUSTRIAL BANCORP, INC.
Management's Discussion and Analysis
(Unaudited)
Results of Operations
- - ---------------------
Net income for the three and six months ended June 30, 1996 was $1.2
million and $2.5 million, respectively, compared to $814,000 and $1.7 million
for the same periods in 1995. Net interest income increased $962,000 and $1.9
million between comparable periods for the second quarter and for the first six
months, respectively, as a result of larger loan and investment securities
portfolios and the elimination of interest on Federal Home Loan Bank advances.
Total interest income was $918,000 and $2.0 million more for the quarter
and six months ended June 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 in increased weighted average yield as a
result of rising interest rates.
Total interest expense was $44,000 less and $107,000 more for the quarter
and six months ended June 30, 1996, respectively, than for the same periods in
1995. Increases due to 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 $90,000 for the three and six
month periods ended June 30, 1996 and 1995, respectively, based upon
management's assessment of reasonably foreseeable losses inherent in the
portfolio for each period.
Noninterest expense was $340,000 and $743,000 more for the quarter and six
months ended June 30, 1996, respectively, than for the same periods in 1995.
Salaries and employee benefits expense was $166,000 and $405,000 more than
comparable periods for the quarter and six months ended June 30, 1996 and 1995,
respectively, in part due to a higher number of full time equivalent employees
and normal pay increases. Also included in salaries and employee benefits
expense during the first six months of 1996 was $201,000 related to the
termination of the Association's defined benefit pension plan and $251,000
related to the ESOP. The Association's defined benefit pension plan was
terminated upon its anniversary in February 1996 and the ESOP was established at
the time of the conversion to stock form in August 1995.
State franchise taxes were $108,000 and $212,000 more in 1996 than the
comparable three and six month periods in 1995, respectively, due to the
increase in shareholders' equity that resulted from the capital raised through
the stock conversion.
<PAGE> 10
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
---------------------------------------------------
At the Annual Meeting of Shareholders held April 16, 1996, Messrs.
Lawrence R. Rhoades, Fredric C. Spurck, and Roger O. Wilkinson were
elected to two year terms as directors of the Company. Shareholders
also voted to ratify the selection of Crowe, Chizek and Company as
auditors of the Company for the current fiscal year and to approve
both the the Company's 1996 Stock Option and Incentive Plan (the
"Option Plan") and the MRP.
At the Annual Meeting of Shareholders, there were:
(a) 5,554,500 votes eligible to be cast,
(b) 4,635,522 votes cast for and 36,810 votes withheld from the
election of Mr. Rhoades,
(c) 4,629,802 votes cast for and 38,485 votes withheld from the
election of Mr. Spurck,
(d) 4,630,702 votes cast for and 42,085 votes withheld from the
election of Mr. Wilkinson,
(e) 4,337,640 votes cast for, 45,306 votes cast against, 41,547
abstentions and 94,689 broker non-votes related to the
ratification of the selection of Crowe, Chizek and Company as the
Company's auditors,
(f) 2,939,189 votes cast for, 197,964 votes cast against, 37,364
abstentions and 1,479,258 broker non-votes related to the
approval of the Option Plan, and
(g) 2,970,237 votes cast for, 227,228 votes cast against, 44,249
abstentions and 1,384,287 broker non-votes related to the
approval of the MRP.
Item 5. Other Information
-----------------
Not applicable
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
Not applicable
<PAGE> 11
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.
07/31/96 /s/ Lawrence R. Rhoades
Date: __________ By: _____________________________
Lawrence R. Rhoades
CEO and Chairman of the Board
07/31/96 /s/ David M. Windau
Date: __________ By: _____________________________
David M. Windau
President
07/31/96 /s/ Carol Comyns
Date: __________ By: _____________________________
Carol Comyns
Controller
<PAGE> 12
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 766
<INT-BEARING-DEPOSITS> 7,606
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 20,848
<INVESTMENTS-CARRYING> 5,659
<INVESTMENTS-MARKET> 5,726
<LOANS> 269,884
<ALLOWANCE> 1,467
<TOTAL-ASSETS> 313,563
<DEPOSITS> 249,387
<SHORT-TERM> 0
<LIABILITIES-OTHER> 3,377
<LONG-TERM> 0
0
0
<COMMON> 34,669
<OTHER-SE> 26,130
<TOTAL-LIABILITIES-AND-EQUITY> 313,563
<INTEREST-LOAN> 11,301
<INTEREST-INVEST> 915
<INTEREST-OTHER> 505
<INTEREST-TOTAL> 12,721
<INTEREST-DEPOSIT> 5,719
<INTEREST-EXPENSE> 5,719
<INTEREST-INCOME-NET> 7,002
<LOAN-LOSSES> 90
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3,322
<INCOME-PRETAX> 3,785
<INCOME-PRE-EXTRAORDINARY> 2,503
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,503
<EPS-PRIMARY> 0.49
<EPS-DILUTED> 0.49
<YIELD-ACTUAL> 4.45
<LOANS-NON> 354
<LOANS-PAST> 1,116
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,376
<CHARGE-OFFS> 0
<RECOVERIES> 1
<ALLOWANCE-CLOSE> 1,467
<ALLOWANCE-DOMESTIC> 1,467
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
