F0RM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20552
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 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
O-19445
SHELBY COUNTY BANCORP
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Indiana 35-1832715
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(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
29 East Washington Street
Shelbyville, Indiana 46176
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(Address of principal executive (Zip Code)
office)
Registrant's telephone number, including area code:
(317) 398-9721
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 Exchange Act of 1934
during the preceding 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_____. No_____.
As of May 5, 1996, there were 175,950 shares of the Registrant's Common Stock
issued and outstanding.
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Statements
of Financial Condition as of
March 31, 1996 (Unaudited)
and September 30, 1995. 3
Consolidated Statements
of Earnings for the three
months ended March 31, 1996
and 1995 (Unaudited) 4
Consolidated Statements
of Earnings for the six
months ended March 31, 1996
and 1995 (Unaudited) 5
Consolidated Statements
of Cash Flows for the six months
ended March 31, 1996
and 1995 (Unaudited) 6
Notes to Consolidated
Financial Statements (Unaudited) 7
Item 2. Management's Discussion
and Analysis of
Financial Condition
and Results of Operations 8-11
PART II. OTHER INFORMATION 12
SIGNATURE PAGE 13
SHELBY COUNTY BANCORP AND SUBSIDIARY
CONSOLIDATED (UNAUDITED) STATEMENTS OF FINANCIAL CONDITION
March 31, September 30,
1996 1995
------------- --------------
ASSETS
Cash $710,922 813,706
Interest-Bearing Deposits 6,377,044 6,427,976
Investment Securities Available
for Sale 8,507,855 4,449,865
Investment Securities Held to
Maturity (market value: $1,360,350
and $2,874,268) 1,355,007 2,830,965
Loans Receivable, Net 56,763,226 50,591,445
Accrued Interest
Receivable on
Investment Securities 98,686 68,281
Stock of FHLB of Indianapolis 409,300 409,300
Premises and Equipment 1,924,771 1,965,119
Real Estate Owned -0- -0-
Prepaid Federal Income Taxes -0- 63,447
Prepaid Expenses and Other Assets 71,866 146,086
TOTAL ASSETS $76,218,677 67,766,190
LIABILITIES AND SHAREHOLDERS'
EQUITY
Liabilities:
Deposits $69,173,588 61,202,074
Accrued Interest on Deposits 176,422 145,237
Deferred Income Taxes 137,899 134,566
Accrued Expenses and Other
Liabilities 536,088 184,235
TOTAL LIABILITIES $70,023,997 61,666,112
SHAREHOLDERS' EQUITY:
Common stock, without par value:
Shares authorized of 5,000,000;
Shares issued and outstanding of
175,950 and 174,225 $1,358,123 1,340,873
Retained earnings-substantially
restricted 4,540,678 4,468,324
Unrealized Appreciation on
Investment Securities Available
for Sale 295,879 290,881
TOTAL SHAREHOLDERS' EQUITY $6,176,928 6,100,078
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $76,218,677 67,766,190
See accompanying notes to consolidated financial statements.
SHELBY COUNTY
BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Three Months Ended
March 31,
--------------------------------
1996 1995
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Interest Income:
Loans Receivable $1,196,281 1,004,974
Mortgage-Backed Securities 79,485 90,831
Interest-Bearing Deposits 81,015 36,164
Investment Securities 57,835 52,282
Dividends from FHLB 8,142 3,177
Total Interest Income 1,422,758 1,187,428
Interest Expense on FHLB Advance's -0- 47,523
Interest Expense on Deposits 834,216 526,523
Total Interest Expense 834,216 574,046
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Net Interest Income 588,542 613,382
Provision for Loan Losses 15,000 13,000
Net Interest Income After
Provision for Loan Losses 573,542 600,382
Non-Interest Income:
Service Charges and Fees 47,594 41,647
Other 55,033 47,140
Total Non-Interest Income 102,627 88,787
Non-Interest Expense:
Salaries and Employee Benefits 242,010 218,372
Premises and Equipment 68,797 37,405
Federal Deposit Insurance 40,851 34,192
Data Processing 59,631 52,263
Advertising 42,052 37,835
Bank Fees and Charges 18,420 15,358
Other 124,925 133,533
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Total Non-Interest Expense 596,686 528,958
Earnings Before Income Taxes 79,483 160,211
Income Taxes 34,799 48,360
NET EARNINGS $44,684 111,851
EARNINGS PER SHARE $.25 $.64
See accompanying notes to consolidated financial statements.
SHELBY COUNTY BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Six Months Ended
March 31,
------------------------------
1996 1995
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Interest Income:
Loans Receivable $2,323,437 1,939,966
Mortgage-Backed
Securities 163,820 171,500
Interest-Bearing Deposits 146,826 65,067
Investment Securities 89,810 100,800
Dividends from FHLB 16,395 10,399
Total Interest Income 2,740,288 2,287,732
Interest Expense on FHLB
Advance's -0- 47,523
Interest Expense on Deposits
1,608,865 1,022,776
Total Interest Expense 1,608,865 1,070,299
Net Interest Income 1,131,423 1,217,433
Provision for Loan Losses 30,000 25,000
Net Interest Income After
Provision for Loan Losses 1,101,423 1,192,433
Non-Interest Income:
Service Charges and Fees 117,205 80,213
Other 111,759 77,526
Total Non-Interest Income 228,964 157,739
Non-Interest Expense:
Salaries and Employees Benefits 513,110 470,818
Premises and Equipment 128,295 77,627
Federal Deposit Insurance 82,093 69,617
Data Processing 116,481 99,261
Advertising 63,769 66,273
Bank Fees and Charges 31,767 30,752
Other 197,829 203,762
Total Non-Interest Expense 1,133,344 1,018,110
Earnings Before Income Taxes 197,043 332,062
Income Taxes 89,619 118,643
NET EARNINGS $107,424 213,419
EARNINGS PER SHARE $.61 $1.22
See accompanying notes to consolidated
financial statements.
SHELBY COUNTY BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
March 31,
-----------------------
1996 1995
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Cash Flows From Operating Activities:
Net Earnings $107,424 $213,419
Adjustments To Reconcile Net Earnings
To Net Cash Provided By Operating
Activities:
Depreciation and Amortization 44,339 43,483
Net Deferred Loan Origination Fees (8,892) 220,146
Provision For Loan Losses 30,000 25,000
Gain on sale of
Securities AFS (28,445) -0-
Increase (Decrease) in Accrued
Int. Rec (30,405) -0-
(Increase) Decrease in Other Assets 137,667 (51,633)
Increase (Decrease) in Other Liabilities 365,503 (53,996)
Net Cash Provided by Oper. Act 617,191 396,419
Cash Flows From Investing Activities:
Loans Funded Net of Collections (6,192,889) (3,490,704)
Principal Collected on Investment Sec 65,478 358,716
Principal Collected on
AFS Securities 420,431 -0-
Purchase of Premises and Equipment (24,094) (613,710)
Purchase of Investment Securities 1,405,545 -0-
Proceeds From Sale of Securities AFS 4,584,648 -0-
Purchase of Available for
Sale Securities (9,001,724) (500,000)
Net Cash Provided by (Used) in Invest. Act (8,742,136) (4,245,698)
Cash Flows from Financing Activities:
FHLB Advances -0- 4,000,000
Dividends Paid (17,535) (15,245)
Net Increase (Decrease)
in Deposits 7,971,514 (289,188)
Proceeds of Issuance of Common Stock 17,250 -0-
Net Cash Provided by
(Used) by Financing
Activities 7,971,229 3,695,567
Net Increase (Decrease) in Cash and Cash
Equivalents (153,716) (153,712)
Cash and Cash Equivalents at Beginning of
Period $7,241,682 3,555,918
Cash and Cash Equivalents at End of Period $7,087,966 3,402,206
Supplemental Cash Flow Information:
Interest Paid $1,608,865 $1,022,776
Income Taxes Paid $72,276 $95,071
Transfer From Investment
Security Portfolio
to Available For Sale Portfolio $1,521,991 -0-
See accompanying notes to consolidated financial statements.
SHELBY COUNTY BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 Basis of Presentation
The consolidated financial statements include the accounts of Shelby County
Bancorp (the "Corporation") and its subsidiary Shelby County Savings Bank, FSB
(the "Bank"). A summary of significant accounting policies is set forth in Note
1 of Notes to Consolidated Financial Statements included in the September 30,
1995 Annual Report to Shareholders.
The consolidated interim financial statements have been prepared in accordance
with instructions to Form 10-Q, and therefore do not include all information and
footnotes necessary for a fair presentation of financial position, results of
operations and cash flows in conformity with generally accepted accounting
principles.
The consolidated interim financial statements at March 31, 1996 and for the
three months and six months ended March 31, 1996 and 1995 have not been audited
by independent accountants, but reflect, in the opinion of management, all
adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial position, results of operations and cash flows for
such periods.
Note 2 Earnings per Share
Earnings per share are computed by dividing net earnings for the periods ended
March 31, 1996 and 1995 by the 175,950 and 174,225 shares of weighted average
common stock outstanding, respectively, during the period. The effects of
outstanding stock options are dilutive by less than 3%.
Note 3 Stock Option Plan
The Corporation has adopted a stock option plan whereby 17,250 shares of
authorized but unissued common stock were reserved for future issuance upon the
exercise of stock options granted to key employees and directors at an option
price of $10 per share. Options for 12,075 shares at an option price of $10 per
share have been granted under the plan. Three thousand four hundred and fifty
shares of stock have been issued under the plan as of March 31, 1996. Options
for 1,725 shares at an option price of $18 per share have also been granted
under the plan.
Note 4 Dividends
On March 18, 1996, the Board of Directors declared a quarterly cash dividend of
$.10 per share. The dividend was paid April 13, 1996 to shareholders of record
as of March 29, 1996.
SHELBY COUNTY BANCORP AND SUBSIDIARY
Results of Operations
(a) Financial Condition:
Total assets at March 31, 1996, were $76,219,000, an increase of $8,453,000 from
total assets of $67,766,000 at September 30, 1995. The most significant
increases in assets was in net loans receivable and investment securities
available for sale. Total net loans receivable increased from $50,591,000 at
September 30, 1995 to $56,763,000 at March 31, 1996. Investment securities
available for sale increased from $4,450,000 at September 30, 1995 to $8,508,000
at March 31, 1996. Mortgage loans increased from $42,721,000 at September 30,
1995 to $46,439,000 at March 31, 1996. Consumer loans increased from $8,129,000
at September 30, 1995 to $10,609,000 at March 31, 1996. These increases are
attributed to a very strong local economy and loan demand. Interest bearing
deposits decreased from $6,428,000 at September 30, 1995 to $6,377,000 at March
31, 1996.
Total deposits at September 30, 1995 of $61,202,000 increased to
$69,174,000 at March 31, 1996. This increase of deposits is primarily due to the
opening of branches in May and September of 1995.
Non-performing assets increased from $374,000 at September 30, 1995 to
$489,000 at March 31, 1996. It is management's opinion that the bank's allowance
for possible loan losses is adequate to absorb any anticipated future losses
from loans at March 31, 1996.
(b) Results of Operations:
During the three month period ended March 31, 1996, net earnings decreased
to $45,000 ($.25 per share) compared to net earnings of $112,000 ($.64 per
share) during the three month period ended March 31, 1995. The decrease in
earnings is primarily the result of an increase in interest expense on deposits
in excess of the increase in interestincome.
Net interest income was $574,000, after provision for loan losses, for the three
months ended March 31, 1996, compared to $600,000 for the three months ended
March 31, 1995. The interest rate margin for the three months ended March 31,
1996 was 3.17%, compared to 4.11% for the same period one year ago. The
reduction in the margin is primarily dueto the decrease in rates being charged
on loan products.
Interest income increased from $1,187,000 for the three months ended March
31, 1995 to $1,423,000 for the three months ended March 31, 1996. Interest
expense for the three month period ended March 31, 1996 was $834,000 compared to
$574,000 for the three months ended March 31, 1995. This increase is primarily
attributed to the increase in deposits and higher interest rates.
Total non-interest income was $103,000 for the three months ended March
31, 1996, compared to $89,000 for the same period in 1995. The increase was
primarily due to the increase on the gain of the sale of securities for sale.
Non-interest expense totaled $609,000 for the quarter ended March 31, 1996
compared to $529,000 for the same period in the prior year. The primary
increases in non-interest expense relate to increases in salaries and employee
benefits and premises and equipment in relation to the opening of branch offices
in May and September of 1995.
During the six month period ended March 31, 1996, net earnings decreased to
$107,000 ($.61 per share) compared to net earnings of $213,000 ($1.22 per share)
during the six month period ended March 31, 1995. The decrease in earnings is
primarily the result of an increase in total interest expense in excess of the
increase in interest income.
Net interest income was $1,101,000 for the six months ended March 31, 1996
compared to $1,192,000 for the six months ended March 31, 1996. The interest
rate margin for the six months ended March 31, 1996 was 3.05%, compared to 4.19%
for the same period one year ago. The reduction in the margin is primarily due
to the decrease in rates being
charged on loan products.
Interest income increased from $2,288,000 for the six months ended March
31, 1995 to $2,740,000 for the six months ended March 31, 1996. Interest expense
for the six month period ended March 31, 1996 was $1,609,000 compared to
$1,070,000 for the six months ended March 31, 1995. This increase is primarily
attributed to the increase in deposits and the higher interest rates associated
with these deposits.
Total non-interest income was $229,000 for the six months ended March 31,
1996 compared to $158,000 for the same period in 1995. The increase was
primarily due to the increase of insurance commissions earned by The Shelby
Group, Inc.
Non-interest expense totaled $1,168,000 for the six months ended March 31,
1996 compared to $1,042,000 for the same period in the prior year. The increase
in non-interest expense is due to increased costs in salaries and employee
benefits and premises and equipment in relation to the opening of branch offices
in May and September of 1995.
SHELBY COUNTY BANCORP AND SUBSIDIARY
Management's Discussion and Analysis of Financial Condition
and Results of Operations
(c) Capital Resources and Liquidity
The Corporation is subject to regulation as a savings and loan holding
company by the Office of Thrift Supervision ("OTS"). The Bank, as a subsidiary
of a savings and loan holding company, is subject to certain restrictions in its
dealings with the Corporation. The Bank is subject to the regulatory
requirements applicable to a federal savings bank.
Current capital regulations require savings institutions to have minimum
tangible capital equal to 1.5% to total assets and a core capital ratio equal to
3% of total assets. Additionally, savings institutions are required to meet a
risk-based capital ratio equal to 8.0% for risk-weighted assets. At March 31,
1996, the Bank satisfied its capital requirements.
The following is a summary of the Bank's regulatory capital and capital
requirements at March 31, 1996 based on capital regulations currently in effect
for savings institutions.
Tangible Core Risk-based
Capital Capital Capital
---------- ---------- ----------
Regulatory Capital $5,299,000 $5,299,000 $5,269,000
Minimum Capital Requirement 1,125,000 2,250,000 3,759,000
Excess Capital $4,174,000 $3,049,000 $1,510,000
Regulatory Capital Ratio 7.01% 7.01% 11.21%
Required Capital Ratio 1.50% 3.00% 8.00%
Liquidity measures the bank's ability to meet its savings withdrawals and
lending commitments. Management believes that the Bank's liquidity is adequate
to meet current requirements, such as the funding of $3,181,000 in loan
commitments as of March 31, 1996. The Bank maintains liquidity of at least 5% of
net withdrawable assets. At March 31, 1996, its regulatory liquidity ratio was
12.96%.
(d) Proposed Legislation
Congress i currently considering a number of alternatives to address the
problems arising from the fact that FDIC deposit insurance premiums for banks
are currently lower than those for savings association and for deposits of
savings association that have been acquired by banks. Congress is considering
provisions proposed by the House Banking Committee which would (1) impose a
one-time assessment on thrift deposits of 70 to 85 basis points to build up
SAIF's reserves, (2) merge BIF and SAIF at some time in the future, and (3)
require banks to pay the bulk of the interest due on Financing Corp. bonds.
These same provisions have been proposed by the Senate Banking Committee,
although its proposed legislation would provide for a lower one-time assessment
for banks which had acquired SAIF deposits.
SHELBY COUNTY BANCORP AND SUBSIDIARY
Management's Discussion and Analysis of Financial Condition
and Results of Operations
In addition, the House Banking Committee proposal would eliminate the 8% bad
debt reserve deduction now permitted for savings associations, but would not
require savings associations to pay taxes on accumulated bad debt reserves.
Moreover, all thrift holding companies would be required to become bank holding
companies by January 1, 1998. The OTS would be abolished. Powers of unitary
savings and loan holding companies would be grandfathered (to the extent they
exist under existing law) until the holding company or savings association is
sold. Such unitary holding companies would be subject to the qualified thrift
lender test and limits on commercial lending. Savings association would either
by required to convert to a state bank or national bank charter by January 1,
1998. Except with respect to unitary savings and loan companies, activities of
those new banks not permitted to commercial banks would have to terminate within
four years.
Under some of the proposals being considered by Congress, the FDIC's authority
to build reserves beyond 1.25% would be limited. It is difficult at this time to
assess whether or how Congress will address the SAIF/BIF premium differential
and, if so, what impact its legislative solution to the problem will have on the
Corporation and
its subsidiaries.
II. OTHER INFORMATION
Item 1. Legal Proceedings
The Bank is not engaged in any legal proceedings of a material nature at the
present time. From time to time, the Bank is a party to legal proceedings
wherein it enforces its security interest in mortgage loans made by it.
a) Not applicable
b) Reports on 8-K--There were no reports on Form 8-K filed during the
three months ended March 31, 1996.
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.
SHELBY COUNTY BANCORP
Date: May 5, 1996 By /s/ Rodney L. Meyerholtz
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Rodney L. Meyerholtz
President
Date: May 5, 1996 By /s/ Robert E. Thomas
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Robert E. Thomas
Treasurer