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, 1998
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 34-1800830
(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, 1998:
5,014,936 common shares, no par value
<PAGE> 1
INDUSTRIAL BANCORP, INC.
Form 10-Q
For the Quarter ended June 30, 1998
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 Net Income 4
Consolidated Statements of Comprehensive Income 5
Consolidated Statements of Shareholders' Equity 6
Condensed Consolidated Statements of Cash Flows 7
Notes to Consolidated Financial Statements 8
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
Part II - Other Information 12
Signatures 14
<PAGE> 2
INDUSTRIAL BANCORP, INC.
Consolidated Balance Sheets
(Unaudited, $ in thousands except per share data)
<TABLE>
<CAPTION>
06/30/98 12/31/97
-------- --------
<S> <C> <C>
ASSETS
Cash and noninterest-bearing deposits $ 1,602 $ 1,273
Interest-bearing demand deposits 1,847 3,499
Overnight deposits 12,000 6,000
----------------------
Cash and cash equivalents 15,449 10,772
Investment securities available for sale,
at fair value 20,332 21,030
Investment securities held to maturity
(fair value: 1998 -- $356; 1997 -- $474) 333 437
Federal Home Loan Bank stock 3,141 2,938
Loans receivable, net 335,528 321,669
Office properties and equipment, net 5,461 4,972
Accrued interest receivable and other assets 2,597 2,205
----------------------
Total assets $382,841 $364,023
======================
LIABILITIES
Deposits $281,844 $270,957
Federal Home Loan Bank advances 37,000 29,000
Dividend payable
Accrued interest payable and other liabilities 2,841 3,204
----------------------
Total liabilities 321,685 303,161
----------------------
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 2,058 1,879
Retained earnings 35,952 34,569
Treasury stock, at cost: 539,564 shares at
6/30/98, 451,700 shares at 12/31/97 (8,226) (6,306)
Unearned employee stock ownership plan shares (3,315) (3,529)
Unearned compensation (1,490) (1,753)
Unrealized gain on securities available for sale 1,508 1,333
----------------------
Total shareholders' equity 61,156 60,862
----------------------
Total liabilities and shareholders' equity 382,841 364,023
======================
Book value per share $ 12.19 $ 11.93
</TABLE>
<PAGE> 3
INDUSTRIAL BANCORP, INC.
Consolidated Statements of Net Income
(Unaudited, $ in thousands except per share data)
<TABLE>
<CAPTION>
Three months ended Six months ended
---------------------- ----------------------
06/30/98 06/30/97 06/30/98 06/30/97
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest income
Interest and fees on loans $7,115 $6,325 $14,061 $12,447
Interest and dividends on investment
securities 353 414 696 801
Interest on deposits 153 107 271 180
-------------------------------------------------
Total interest income 7,621 6,846 15,028 13,428
Interest expense
Interest on deposits 3,373 3,194 6,664 6,287
Interest on FHLB advances 565 229 1,079 323
-------------------------------------------------
Total interest expense 3,938 3,423 7,743 6,610
-------------------------------------------------
Net interest income 3,683 3,423 7,285 6,818
Provision for loan losses 55 47 100 96
-------------------------------------------------
Net interest income after provision
for loan losses 3,628 3,376 7,185 6,722
Noninterest income
Service fees and other charges 154 101 282 203
Other 19 10 31 20
-------------------------------------------------
Total noninterest income 173 111 313 223
Noninterest expense
Salaries and employee benefits 862 717 1,694 1,500
State franchise tax 120 164 240 378
Federal deposit insurance premiums 42 42 85 52
Occupancy and equipment 80 86 169 166
Data processing 108 85 218 184
Depreciation 98 70 196 135
Other 375 366 721 681
-------------------------------------------------
Total noninterest expense 1,685 1,530 3,323 3,096
-------------------------------------------------
Income before income tax 2,116 1,957 4,175 3,849
Provision for income tax 722 674 1,423 1,346
-------------------------------------------------
Net income $1,394 $1,283 $ 2,752 $ 2,503
=================================================
Basic earnings per share $ 0.30 $ 0.26 $ 0.58 $ 0.50
Diluted earnings per share $ 0.29 $ 0.26 $ 0.57 $ 0.50
</TABLE>
<PAGE> 4
INDUSTRIAL BANCORP, INC.
Consolidated Statements of Comprehensive Income
(Unaudited, $ in thousands)
<TABLE>
<CAPTION>
Three months ended Six months ended
---------------------- ----------------------
06/30/98 06/30/97 06/30/98 06/30/97
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income $1,394 $1,283 $2,752 $2,503
Other comprehensive income, net of tax:
Change in unrealized gain on securities (11) 362 175 203
------------------------------------------------
Comprehensive Income $1,383 $1,645 $2,927 $2,706
================================================
</TABLE>
<PAGE> 5
INDUSTRIAL BANCORP, INC.
Consolidated Statements of Shareholders' Equity
(Unaudited, $ in thousands)
<TABLE>
<CAPTION>
Total
shareholders'
equity
-------------
<S> <C>
Balance at January 1, 1997 $62,104
Net income 2,503
Cash dividends (1,096)
($.22 per share)
Purchase of treasury stock (2,911)
(227,725 shares)
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
=======
Balance at January 1, 1998 $60,862
Net income 2,752
Cash dividends (1,369)
($.29 per share)
Purchase of treasury stock (2,061)
(93,864 shares)
Exercise of stock options 92
Employee Stock Ownership Plan:
Shares released 442
Management Recognition Plan:
Compensation earned 263
Change in unrealized gain on securities available
for sale 175
-------
Balance at June 30, 1998 $61,156
=======
</TABLE>
<PAGE> 6
INDUSTRIAL BANCORP, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited, $ in thousands)
<TABLE>
<CAPTION>
Six months ended
----------------------
06/30/98 06/30/97
-------- --------
<S> <C> <C>
Cash flows from operating activities
Net income $ 2,752 $ 2,503
Adjustments to reconcile net income to net cash
from operating activities (452) (1,083)
----------------------
Net cash from operating activities 2,300 1,420
Cash flows from investing activities
Investment securities available for sale:
Purchases (5,020) (6,004)
Proceeds from maturities 6,000 6,000
Mortgage-backed securities principal repayments 104 66
Net increase in loans (13,476) (14,976)
FHLB stock purchases (95) (92)
Properties and equipment expenditures, net (685) (65)
----------------------
Net cash from investing activities (13,172) (15,071)
Cash flows from financing activities
Net increase in deposits 10,887 5,717
Proceeds from FHLB advances 10,000 18,000
Repayments of FHLB advances (2,000) (2,000)
Exercise of stock options 92 -
Purchase of treasury stock (2,061) (2,911)
Cash dividends paid (1,369) (1,096)
----------------------
Net cash from financing activities 15,549 17,710
----------------------
Net change in cash and cash equivalents 4,677 4,059
Cash and cash equivalents at beginning of period 10,772 7,413
----------------------
Cash and cash equivalents at end of period $15,449 $11,472
======================
</TABLE>
<PAGE> 7
INDUSTRIAL BANCORP, INC.
Notes to Consolidated Financial Statements
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, 1998 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 1997 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 the applicable
weighted average number of common shares outstanding during the period as
indicated below:
<TABLE>
<CAPTION>
For the quarter ended For the six months ended
------------------------ ------------------------
6/30/98 6/30/97 6/30/98 6/30/97
------- ------- ------- -------
<S> <C> <C> <C> <C>
Basic earnings per share 4,695,479 4,916,645 4,716,806 4,985,873
Diluted earnings per share 4,818,446 4,951,519 4,833,632 5,021,025
</TABLE>
The calculation of diluted earnings per share considers the dilutive
effect of the assumed exercise of options outstanding during the period.
Employee Stock Ownership Plan shares that have not been allocated to
participants are not considered outstanding for purposes of computing
earnings per share.
Commitments and Contingencies
As of June 30, 1998, commitments to originate loans and loans in
process to be funded in six months or less totaled $18.0 million and
commitments to sell loans amounted to $362,000.
During the second quarter, the Association entered into an agreement
to obtain letters of credit from the Federal Home Loan Bank to be used, when
necessary, as security pledged against public deposits. As of June 30,
1998, these letters of credit amounted to $7.6 million.
<PAGE> 8
INDUSTRIAL BANCORP, INC.
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Financial Condition
Total assets increased $18.8 million to $382.8 million at June 30,
1998 from $364.0 million at December 31, 1997. The increase in total assets
is primarily attributable to $13.8 million growth in net loans receivable
during the first six months of 1998. Cash and cash equivalents also
increased to $15.5 million at June 30, 1998 from $10.8 million at December
31, 1997. Liquidity of the Association exceeded the regulatory requirement
at June 30, 1998.
Asset growth was funded primarily by deposit growth of $10.8 million,
and $8.0 million in advances from the Federal Home Loan Bank of Cincinnati
("FHLB"). Total deposits were $281.8 million at June 30, 1998, compared to
$271.0 million at December 31, 1997. During the first quarter, the
Association initiated a program to sell upon origination one-to-four-family
mortgage loans with fixed rates of interest to Freddie Mac. Loan sales,
which began early in June, amounted to $748,000 during the second quarter of
1998. Although unnecessary during the second quarter, the Association
intends to continue to fund loan demand in excess of deposit growth and loan
sales with additional advances from the FHLB.
Total shareholders' equity increased to $61.2 million at June 30, 1998
from $60.9 million at December 31, 1997. Net income of $3.9 million for the
first six months of 1998 was offset somewhat by $2.1 million in purchases of
treasury shares. The Company repurchased 93,864 shares of its common stock
during the first six months of 1998. These repurchases represent part of
the Company's second 5% buyback plan, which was completed during the second
quarter. A third 5% buyback plan, in which another 250,646 treasury shares
are to be purchased, was announced during the second quarter and was
initiated August 1, 1998.
The Association is required by the Office of Thrift Supervision to
maintain certain minimum levels of tangible, core, and risk-based capital.
The following table presents the Association's regulatory capital position
at June 30, 1998:
<TABLE>
<CAPTION>
Minimum Required
For Capital
Actual Adequacy Purposes
------------------- ------------------
($ in thousands)
<S> <C> <C> <C> <C>
Total capital (to risk weighted assets) $40,955 19.63% $16,694 8.00%
Tier 1 (core) capital (to risk weighted assets) $39,161 18.77% $ 8,347 4.00%
Tier 1 (core) capital (to adjusted total assets) $39,161 10.28% $15,241 4.00%
Tangible capital (to adjusted total assets) $39,161 10.28% $ 5,715 1.50%
</TABLE>
<PAGE> 9
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, 1998 was $1.4
million and $2.8 million, respectively, compared to $1.3 million and $2.5
million, respectively, for the three and six months ended June 30, 1997.
Net interest income was $260,000 and $467,000 more for the three and six
months ended June 30, 1998, respectively, than for the comparable periods in
1997.
Total interest income was $775,000 and $1.6 million more for the three
and six months ended June 30, 1998, respectively, than for the comparable
periods in 1997. The increases were primarily the result of an increased
average balance in net loans receivable, which resulted in an increase of
$790,000 and $1.6 million in interest and fees on loans for the second
quarter and first six months of 1998, respectively.
Total interest expense was $515,000 and $1.1 million more for the three and
six months ended June 30, 1998, respectively, than for the comparable
periods in 1997. The cost of FHLB advances during the second quarter and
first six months of 1998 amounted to $565,000 and $1.1 million,
respectively, compared to $229,000 and $323,000 during the second quarter
and first six months of 1997, respectively. The average balance of FHLB
advances was significantly greater in 1998 than in 1997. Slightly higher
rates of interest paid on increased average interest-bearing deposit
balances caused the interest paid on deposits to increase by $179,000 and
$377,000 for the three and six months ended June 30, 1998, respectively,
compared to the same periods in 1997.
The provision for loan losses was $55,000 and $100,000 for the three
and six months ended June 30, 1998 and 1997, respectively, based upon
management's assessment of reasonably foreseeable losses inherent in the
loan portfolio for each period.
Noninterest income for the three and six months ended June 30, 1998
was $174,000 and $314,000, respectively, compared to $111,000 and $223,000,
respectively, for the same periods in 1997. The increases are due primarily
to higher service fee income on an increased average balance of deposits.
Noninterest expense for the three and six months ended June 30, 1998
was $1.7 million and $3.3 million, respectively, compared to $1.5 million
and $3.1 million for the three and six months ended June 30, 1997,
respectively. Salaries and employee benefits expense for the second quarter
and first six months of 1998 amounted to $862,000 and $1.7 million,
<PAGE> 10
INDUSTRIAL BANCORP, INC.
Management's Discussion and Analysis of Financial Condition
and Results of Operations
respectively, compared to $717,000 and $1.5 million for the second quarter
and first six months of 1997, respectively, due to a higher number of full-
time equivalent employees and normal pay increases. State franchise tax has
been reduced from $164,000 and $378,000 for the second quarter and first six
months of 1997, respectively, to $120,000 and $240,000 for the second
quarter and first six months in 1998, respectively, due to an intercompany
transfer of capital from Industrial Savings to Industrial Bancorp late in
1997. Depreciation expense increased to $98,000 and $196,000 during the
three and six months ended June 30, 1998, respectively, compared to $70,000
and $135,000 during the same periods in 1997, respectively, as a result of a
substantial upgrade in technology - teller equipment, computers, appraisal
department & software - completed during the first quarter of 1998.
<PAGE> 11
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 21, 1998,
Messrs. Lawrence R. Rhoades, Fredric C. Spurck, and Roger O.
Wilkinson were elected to two-year terms as directors of the
Company and shareholders voted to ratify the selection of Crowe,
Chizek & Company as auditors of the Company for the current
fiscal year.
At the Annual Meeting of Shareholders, there were:
(a) 5,077,800 votes eligible to be cast,
(b) 4,136,262 votes cast for and 40,263 votes withheld from the
election of Mr. Rhoades,
(c) 4,147,637 votes cast for and 28,888 votes withheld from the
election of Mr. Spurck,
(d) 4,153,913 votes cast for and 22,612 votes withheld from the
election of Mr. Wilkinson, and
(e) 4,146,049 votes cast for, 7,225 votes cast against, and
23,251 abstentions related to the ratification of the
selection of Crowe, Chizek & Company as the Company's
auditors.
Item 5. Other Information
On June 17, 1998 the Company announced its intent to repurchase
5% of its outstanding common shares. The repurchase, on the open
market, of up to 250,646 of its common shares will take place
during the twelve month period beginning August 1, 1998.
<PAGE> 12
Item 5. Other Information (continued)
Any proposals of shareholders intended to be included in the
Company's proxy statement and proxy card for the 1999 Annual
Meeting of Shareholders should be sent to the Company by certified
mail and must be received by the Company not later than December
18, 1998. If a shareholder intends to present a proposal at the
1999 Annual Meeting without including the proposal in the proxy
materials related to that meeting, and if the proposal is not
received by the Company by February 1, 1999, then the proxies
designated by the Board of Directors of the Company for the 1999
Annual Meeting of Shareholders of the Company may vote in their
discretion on any such proposal any shares for which they have
been appointed proxies without mention of such matter in the
proxy statement or on the proxy card for such meeting.
Item 6. Exhibits and Reports on Form 8-K
Not applicable.
<PAGE> 13
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.
7/31/98 /s/ Lawrence R. Rhoades
Date: _______ By: _______________________
Lawrence R. Rhoades
Chairman of the Board and
Chief Financial Officer
7/31/98 /s/ David M. Windau
Date: _______ By: _______________________
David M. Windau
President and
Chief Executive Officer
<PAGE> 14
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,602
<INT-BEARING-DEPOSITS> 13,847
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 20,332
<INVESTMENTS-CARRYING> 333
<INVESTMENTS-MARKET> 356
<LOANS> 337,359
<ALLOWANCE> 1,831
<TOTAL-ASSETS> 382,841
<DEPOSITS> 281,844
<SHORT-TERM> 0
<LIABILITIES-OTHER> 2,841
<LONG-TERM> 37,000
0
0
<COMMON> 34,669
<OTHER-SE> 26,487
<TOTAL-LIABILITIES-AND-EQUITY> 384,841
<INTEREST-LOAN> 7,115
<INTEREST-INVEST> 353
<INTEREST-OTHER> 153
<INTEREST-TOTAL> 7,621
<INTEREST-DEPOSIT> 3,373
<INTEREST-EXPENSE> 3,938
<INTEREST-INCOME-NET> 3,683
<LOAN-LOSSES> 55
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,685
<INCOME-PRETAX> 2,116
<INCOME-PRE-EXTRAORDINARY> 1,394
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,394
<EPS-PRIMARY> 0.30
<EPS-DILUTED> 0.29
<YIELD-ACTUAL> 3.97
<LOANS-NON> 891
<LOANS-PAST> 249
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,777
<CHARGE-OFFS> 2
<RECOVERIES> 1
<ALLOWANCE-CLOSE> 1,831
<ALLOWANCE-DOMESTIC> 1,831
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
