SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 1997 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ________
0-26248 31-1800830
- ------------------------------------- ---------------------------------------
(Commission File No.) (IRS Employer I.D. No.)
INDUSTRIAL BANCORP, INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
OHIO
- -------------------------------------------------------------------------------
(State of jurisdiction or incorporation)
211 North Sandusky Street, Bellevue, Ohio 44811
- -------------------------------------------------------------------------------
(Address of principal executive office) (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 31, 1997:
5,276,775 common shares, no par value
INDUSTRIAL BANCORP, INC.
Form 10-Q
For the Quarter ended June 30, 1997
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 Flow.................... 6
Notes to Consolidated Financial Statements........................ 7
Item 2: Management's Discussion and Analysis of Financial Condition and
- ------- Results of Operations............................................. 8
Part II - Other Information................................................. 11
Signatures.................................................................. 12
<PAGE> 2.
INDUSTRIAL BANCORP, INC.
Consolidated Balance Sheets
(Unaudited, $ in thousands except per share data)
<TABLE>
<CAPTION>
6/30/97 12/31/96
--------- ---------
<S> <C> <C>
ASSETS
Cash and noninterest-bearing deposits $ 875 $ 1,312
Interest-bearing demand deposits 4,597 2,101
Overnight deposits 6,000 4,000
-----------------------
Cash and cash equivalents 11,472 7,413
Investment securities available for sale, at fair value 23,582 23,236
Investment securities held to maturity (fair value:
1997--$534; 1996--$608) 495 561
Federal Home Loan Bank stock 2,833 2,645
Loans receivable, net 300,996 285,803
Office properties and equipment, net 4,959 5,029
Accrued interest receivable 2,023 1,784
Other assets 236 142
-----------------------
Total assets $ 346,596 $ 326,613
=======================
LIABILITIES
Deposits $ 264,791 $ 259,074
Federal Home Loan Bank advances 18,000 2,000
Accrued interest payable and other liabilities 2,453 3,435
-----------------------
Total liabilities 285,244 264,509
-----------------------
SHAREHOLDERS'EQUITY
Common stock, no par value, 10,000,000 shares authorized;
5,554,500 shares issued 34,669 34,669
Additional paid-in capital 1,732 1,669
Retained earnings 33,211 31,803
Treasury stock, at cost: 277,725 shares at 6/30/97,
50,000 shares at 12/31/96 (3,545) (634)
Unearned employee stock ownership plan shares (3,751) (3,974)
Unearned compensation (2,017) (2,279)
Unrealized gain on securities available for sale 1,053 850
-----------------------
Total shareholders' equity 61,352 62,104
-----------------------
Total liabilities and shareholders' equity $ 346,596 $ 326,613
=======================
Book value per share $ 11.63 $ 11.28
</TABLE>
<PAGE> 3.
INDUSTRIAL BANCORP, INC.
Consolidated Statements of Income
(Unaudited, $ in thousands except per share data)
<TABLE>
<CAPTION>
Three months ended Six months ended
------------------ --------------------
6/30/97 6/30/96 6/30/97 6/30/96
------- ------- -------- --------
<S> <C> <C> <C> <C>
Interest income
Interest and fees on loans $ 6,325 $ 5,717 $ 12,447 $ 11,301
Interest and dividends on investment securities 414 463 801 915
Interest on deposits 107 197 180 505
-------------------------------------------
Total interest income 6,846 6,377 13,428 12,721
Interest expense
Interest on deposits 3,194 2,887 6,287 5,719
Interest on FHLB advances 229 -- 323 --
-------------------------------------------
Total interest expense 3,423 2,887 6,610 5,719
-------------------------------------------
Net interest income 3,423 3,490 6,818 7,002
Provision for loan losses 47 45 96 90
-------------------------------------------
Net interest income after provision for loan losses 3,376 3,445 6,722 6,912
Noninterest income
Service fees and other charges 101 88 203 173
Other 10 11 20 22
-------------------------------------------
Total noninterest income 111 99 223 195
Noninterest expense
Salaries and employee benefits 717 708 1,500 1,469
State franchise tax 164 209 378 415
Federal deposit insurance premiums 42 137 52 268
Occupancy and equipment 86 85 166 166
Data processing 85 86 184 176
Depreciation 70 63 135 123
Other 366 370 681 705
-------------------------------------------
Total noninterest expense 1,530 1,658 3,096 3,322
-------------------------------------------
Income before income tax 1,957 1,886 3,849 3,785
Provision for income tax 674 637 1,346 1,282
-------------------------------------------
Net income $ 1,283 $ 1,249 $ 2,503 $ 2,503
===========================================
Earnings per share $ 0.26 $ 0.24 $ 0.50 $ 0.49
</TABLE>
<PAGE> 4.
INDUSTRIAL BANCORP, INC.
Consolidated Statements of Shareholders'Equity
(Unaudited, $ in thousands)
<TABLE>
<CAPTION>
Total
shareholders'
equity
-------------
<S> <C>
Balance at January 1, 1996 $ 81,055
Net income 2,503
Capital distribution declared (19,441)
($3.50 per share)
Cash dividends declared (767)
($.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 at June 30, 1996 $ 60,799
========
Balance at January 1, 1997 $ 62,104
Net income 2,503
Purchase of treasury stock (2,911)
(227,725 shares)
Cash dividends declared (1,096)
($.22 per share)
Employee Stock Ownership Plan:
Shares released 286
Management Recognition Plan:
Compensation earned 263
Change in unrealized gain on securities available for sale 203
--------
Balance at June 30, 1997 $ 61,352
========
</TABLE>
<PAGE> 5.
INDUSTRIAL BANCORP, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited, $ in thousands)
<TABLE>
<CAPTION>
Six months ended
------------------------
6/30/97 6/30/96
--------- ---------
<S> <C> <C>
Cash flows from operating activities
Net income $ 2,503 $ 2,503
Adjustments to reconcile net income to net cash
from operating activities (1,083) (784)
-----------------------
Net cash from operating activities 1,420 1,719
Cash flows from investing activities
Investment securities available for sale:
Purchases (6,004) (3,910)
Proceeds from maturities 6,000 5,000
Mortgage-backed securities principal repayments 66 105
Net increase in loans (14,976) (8,986)
FHLB stock purchases (92) (69)
Properties and equipment expenditures, net (65) (466)
-----------------------
Net cash from investing activities (15,071) (8,326)
Cash flows from financing activities
Capital distribution to shareholders -- (19,441)
Purchase of Management Recognition Plan shares -- (2,630)
Net increase in deposits 5,717 11,105
Proceeds from FHLB advances 18,000 --
Repayments of FHLB advances (2,000) --
Purchase of treasury stock (2,911) --
Cash dividends paid (1,096) (766)
-----------------------
Net cash from financing activities 17,710 (11,732)
-----------------------
Net change in cash and cash equivalents 4,059 (18,339)
Cash and cash equivalents at beginning of period 7,413 26,711
-----------------------
Cash and cash equivalents at end of period $ 11,472 $ 8,372
=======================
</TABLE>
<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, 1997 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 1996 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 for 1997 have been computed based on 4,953,418
and 5,021,980 weighted average number of common shares outstanding during the
quarter and six months ended June 30, 1997, respectively. 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
As of June 30, 1997, commitments to originate loans and loans in process
to be funded in six months or less totaled $15.6 million.
<PAGE> 7.
INDUSTRIAL BANCORP, INC.
Management's Discussion and Analysis of Financial Condition and Results
of Operations
Financial Condition
Total assets increased $20.0 million to $346.6 million at June 30, 1997
from $326.6 million at December 31, 1996. The increase in total assets is
primarily attributable to $15.2 million growth in net loans receivable during
the first six months of 1997. Cash and cash equivalents also increased to $11.5
million at June 30, 1997 from $7.4 million at December 31, 1996. Liquidity,
which amounted to 5.9% at June 30, 1997, exceeded the regulatory requirement.
Asset growth was funded by deposit growth of $5.7 million and $16.0
million in additional advances from the Federal Home Loan Bank of Cincinnati
("FHLB"). Total deposits were $264.8 million at June 30, 1997, compared to
$259.1 million at December 31, 1996. The Company intends to continue to fund
loan demand in excess of deposit growth with advances from the FHLB. At June
30, 1997, the undisbursed portion of construction loans totaled $10.7 million.
Despite net income of $2.5 million for the first six months of 1997,
total shareholders' equity decreased slightly to $61.4 million at June 30, 1997
from $62.1 million at December 31, 1996, primarily as a result of treasury
share purchases. The Company completed its 5% repurchase program initiated late
in 1996 by repurchasing 227,725 shares during the six months ended June 30,
1997 at an aggregate cost of $2.9 million.
The Association is required by the Office of Thrift Supervision to
maintain certain minimum levels of tangible, core, and risk-based capital. The
following table presents the Association's regulatory capital position at June
30, 1997:
($ in thousands)
<TABLE>
<CAPTION>
Minimum Required For
Actual Capital Adequacy Purposes
---------------- -------------------------
<S> <C> <C> <C> <C>
Total capital
(to risk weighted assets) $57,504 31.50% $14,619 8.00%
Core capital
(to adjusted total assets) $55,884 16.18% $10,359 3.00%
Tangible capital
(to adjusted total assets) $55,884 16.18% $ 5,180 1.50%
</TABLE>
<PAGE> 8.
INDUSTRIAL BANCORP, INC.
Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Net income for the three and six months ended June 30, 1997 was $1.28
million and $2.50 million, respectively, compared to $1.25 million and $2.50
million for the same periods in 1996. Net interest income was $67,000 and
$184,000 less for the three and six months ended June 30, 1997, respectively,
than for the comparable periods in 1996. Interest earned on short-term deposits
preceding the $19.4 million return of capital in May of 1996 and interest paid
on an increasing amount of FHLB advances during the first half of 1997 are the
primary reasons for the decline in net interest income.
Total interest income was $469,000 and $707,000 more for the three and
six months ended June 30, 1997, respectively, than for the comparable periods
in 1996. These increases were primarily the result of an increased average
balance in net loans receivable, which resulted in increases of $608,000 and
$1.15 million in interest and fees on loans for the three and six months ended
June 30, 1997, respectively. Interest on deposits with other financial
institutions amounted to $505,000 for the six months ended June 30, 1996
compared to $180,000 for the comparable period in 1997, as a result of the
investment in short-term funds preceding the $19.4 million special return of
capital distribution in May of 1996.
Total interest expense was $536,000 and $891,000 more for the three and
six months ended June 30, 1997, respectively, than for the same periods in
1996. Higher rates of interest paid on increased average interest-bearing
deposit balances have driven the interest paid on deposits higher by $307,000
and $568,000 for the three and six months ended June 30, 1997, respectively,
than for the comparable periods in 1996. The cost of FHLB advances, which were
absent during the first half of 1996, amounted to $229,000 and $323,000 for the
three and six months ended June 30, 1997, respectively.
The provision for loan losses was $47,000 and $96,000 for the three and
six months ended June 30, 1997, respectively, based upon management's
assessment of reasonably foreseeable losses inherent in the portfolio for each
period.
Noninterest income for the three and six months ended June 30, 1997 was
$111,000 and $223,000, respectively, compared to $99,000 and $195,000 recorded
for the same periods in 1996, due primarily to higher service fee income on an
increased average balance of deposits.
<PAGE> 9.
INDUSTRIAL BANCORP, INC.
Management's Discussion and Analysis of Financial Condition and Results
of Operations
Noninterest expense was $128,000 and $226,000 less for the three and six
months ended June 30, 1997, respectively, than for the comparable periods in
1996. The primary reason for the decline is the reduced level of federal
deposit insurance premiums being paid as a result of the 1996 recapitalization
of the Savings Association Insurance Fund. Federal deposit insurance premiums
amounted to $42,000 and $52,000 for the three and six months ended June 30,
1997, respectively, compared to $137,000 and $268,000 for the comparable
periods in 1996.
Salaries and employee benefits expense was $717,000 and $1.50 million for
the first three and six months of 1997, respectively, compared to $708,000 and
$1.47 million for the comparable periods in 1996, a result of a higher number
of full-time equivalent employees and normal pay increases.
<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
---------------------------------------------------
Not applicable.
Item 5. Other Information
-----------------
On June 18, 1997, the Company announced its intention to repurchase 5%
of its outstanding common shares. The Office of Thrift Supervision has
approved the repurchase, on the open market, of up to 263,839 of its
common shares during the twelve month period beginning August 1, 1997.
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.
Date: 7/31/97 By: /s/ Lawrence R. Rhoades
----------------- ------------------------------
Lawrence R. Rhoades
Chairman of the Board and Chief Financial
Officer
Date: 7/31/97 By: /s/ David M. Windau
----------------- ------------------------------
David M. Windau
President and Chief Executive Officer
12.
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 875
<INT-BEARING-DEPOSITS> 10,597
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 23,582
<INVESTMENTS-CARRYING> 495
<INVESTMENTS-MARKET> 534
<LOANS> 302,649
<ALLOWANCE> 1,653
<TOTAL-ASSETS> 346,596
<DEPOSITS> 264,791
<SHORT-TERM> 0
<LIABILITIES-OTHER> 2,453
<LONG-TERM> 18,000
0
0
<COMMON> 34,669
<OTHER-SE> 26,683
<TOTAL-LIABILITIES-AND-EQUITY> 346,596
<INTEREST-LOAN> 12,447
<INTEREST-INVEST> 801
<INTEREST-OTHER> 180
<INTEREST-TOTAL> 13,428
<INTEREST-DEPOSIT> 6,287
<INTEREST-EXPENSE> 6,610
<INTEREST-INCOME-NET> 6,818
<LOAN-LOSSES> 96
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3,096
<INCOME-PRETAX> 3,849
<INCOME-PRE-EXTRAORDINARY> 2,503
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,503
<EPS-PRIMARY> 0.50
<EPS-DILUTED> 0.50
<YIELD-ACTUAL> 4.14
<LOANS-NON> 760
<LOANS-PAST> 277
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,557
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 1,653
<ALLOWANCE-DOMESTIC> 1,653
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
