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 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
O-19445
SHELBY COUNTY BANCORP
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(Exact name of registrant as specified in its charter)
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__X___. No_____.
As of August 5, 1996, there were 175,950 shares of the Registrant's Common Stock
issued and outstanding.
SHELBY COUNTY BANCORP AND SUBSIDIARY
INDEX
Page
Number
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Statements
of Financial Condition as of
June 30, 1996 (Unaudited)
and September 30, 1995. 3
Consolidated Statements
of Earnings for the three
months ended June 30, 1996
and 1995 (Unaudited) 4
Consolidated Statements
of Earnings for the nine
months ended June 30, 1996
and 1995 (Unaudited) 5
Consolidated Statements of
Cash Flows for the nine months
ended June 30, 1996
and 1995 (Unaudited) 6 Notes
to Consolidated Financial
Statements (Unaudited) 7
PART II. OTHER INFORMATION 12
SIGNATURE PAGE 13
SHELBY COUNTY BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
June 30, September 30,
1996 1995
----------- -------------
ASSETS
Cash $ 906,812 $ 813,706
Interest-Bearing Deposits 1,878,280 6,427,976
Investment Securities Available
for Sale 7,056,301 4,449,865
Investment Securities Held to
Maturity (market value: $1,287,787
and $2,874,268) 1,278,568 2,830,965
Loans Receivable, Net 62,721,091 50,591,445
Accrued Interest
Receivable on
Investment Securities 89,211 68,281
Stock of FHLB of Indianapolis 409,300 409,300
Premises and Equipment 1,897,486 1,965,119
Real Estate Owned -0- -0-
Prepaid Federal Income Taxes -0- 63,447
Prepaid Expenses and Other Assets 130,299 146,086
----------- ----------
TOTAL ASSETS $76,367,348 67,766,190
=========== ==========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Liabilities:
Deposits $65,801,460 61,202,074
FHLB Advance 3,500,000
Accrued Interest on Deposits 101,664 145,237
Deferred Income Taxes 98,392 134,566
Accrued Expenses and Other
Liabilities 678,660 184,235
----------- ----------
TOTAL LIABILITIES $70,180,176 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 4,592,430 4,468,324
Unrealized Appreciation on
Investment Securities Available
for Sale 236,619 290,881
----------- ----------
TOTAL SHAREHOLDERS' EQUITY $ 6,187,172 $ 6,100,078
----------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $76,367,348 67,766,190
=========== ==========
See accompanying notes to consolidated financial statements.
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SHELBY COUNTY BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Three Months Ended
June 30,
-------------------------------
1996 1995
---------- -----------
Interest Income:
Loans Receivable $1,204,741 1,042,129
Mortgage-Backed Securities 73,749 89,941
Interest-Bearing Deposits 61,289 57,456
Investment Securities 65,403 44,133
Dividends from FHLB 7,734 7,908
--------- ---------
Total Interest Income 1,412,916 1,241,567
Interest Expense on FHLB Advances 7,103 73,299
Interest Expense on Deposits 834,241 609,405
--------- ---------
Total Interest Expense 841,344 682,704
Net Interest Income 571,572 558,863
Provision for Loan Losses 15,000 15,000
--------- ---------
Net Interest Income After
Provision for Loan Losses 556,572 543,863
Non-Interest Income:
Service Charges and Fees 58,965 60,254
Other 40,966 91,726
--------- ---------
Total Non-Interest Income 99,931 151,980
--------- ---------
Non-Interest Expense:
Salaries and Employee Benefits 238,255 235,358
Premises and Equipment 68,488 50,683
Federal Deposit Insurance 44,383 34,193
Data Processing 58,901 53,929
Advertising 31,235 64,408
Bank Fees and Charges 17,827 15,522
Other 101,695 148,043
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Total Non-Interest Expense 560,784 602,136
--------- ---------
Earnings Before Income Taxes 95,719 93,707
Income Taxes 26,415 23,115
--------- ---------
NET EARNINGS $ 69,304 70,592
--------- ---------
EARNINGS PER SHARE $ .39 $ .41
--------- ---------
See accompanying notes to consolidated financial statements.
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SHELBY COUNTY BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Nine Months Ended
June 30,
-------------------------------
1996 1995
---------- -----------
1995
Interest Income:
Loans Receivable $3,528,178 2,982,095
Mortgage-Backed
Securities 237,569 261,441
Interest-Bearing Deposits 208,115 122,523
Investment Securities 155,213 144,933
Dividends from FHLB 24,129 18,307
---------- -------
Total Interest Income 4,153,204 3,529,299
Interest Expense on FHLB
Advances 7,103 120,822
Interest Expense on Deposits 2,443,003 1,632,181
---------- -------
Total Interest Expense 2,450,106 1,753,003
Net Interest Income 1,703,098 1,776,296
Provision for Loan Losses 45,000 40,000
---------- -------
Net Interest Income After
Provision for Loan Losses 1,658,098 1,736,296
Non-Interest Income:
Service Charges and Fees 176,170 140,467
Other 152,725 169,252
---------- -------
Total Non-Interest Income 328,895 309,719
---------- -------
Non-Interest Expense:
Salaries and Employee Benefits 751,365 706,176
Premises and Equipment 196,783 128,310
Federal Deposit Insurance 126,476 103,810
Data Processing 175,382 153,190
Advertising 95,004 130,681
Bank Fees and Charges 49,594 46,274
Other 299,524 375,377
---------- -------
Total Non-Interest Expense 1,694,128 1,643,818
---------- -------
Earnings Before Income Taxes 292,865 402,197
Income Taxes 116,034 118,186
NET EARNINGS $ 176,831 284,011
---------- -------
EARNINGS PER SHARE $ 1.01 $ 1.63
---------- -------
See accompanying notes to consolidated
financial statements.
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SHELBY COUNTY BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
June 30,
-------------------------------
1996 1995
---------- -----------
Cash Flows From Operating Activities:
Net Earnings $ 176,831 $ 284,011
Adjustments To Reconcile Net Earnings
To Net Cash Provided By Operating
Activities:
Depreciation and Amortization 72,277 64,558
Net Deferred Loan Origination Fees (9,675) (14,814)
Provision For Loan Losses 45,000 40,000
Gain on sale of
Securities AFS (28,445) -0-
Loss on Sale of Assets -0- 25,000
Increase (Decrease) in
Accrued Int. Rec (20,930) -0-
(Increase) Decrease in Other Assets 79,234 (27,973)
Increase in Other Liabilities 433,257 79,542
------------ ------------
Net Cash Provided by Oper. Act 747,549 450,324
------------ ------------
Cash Flows From Investing Activities:
Loans Funded Net of Collections (12,164,971) (5,562,100)
Principal Collected on Investment Sec 139,450 375,807
Principal Collected on
AFS Securities 670,183 -0-
Purchase of Premises and Equipment (29,094) (809,367)
Purchase of Investment Securities 1,405,545 (425,532)
Proceeds From Sale of Securities AFS 5,951,754 3,610,291
Purchase of Available for
Sale Securities (9,258,512) (2,501,061)
------------ ------------
Net Cash Provided by (Used)
in Invest. Act (13,285,645) (5,311,962)
------------ ------------
Cash Flows from Financing Activities:
FHLB Advances 3,500,000 4,000,000
Dividends Paid (35,130) (45,735)
Net Increase in
Deposits 4,599,386 11,098,873
Proceeds of Issuance of Common Stock 17,250 -0-
------------ ------------
Net Cash Provided by
Financing
Activities 8,081,506 15,053,138
Net Decrease in Cash and Cash
Equivalents (4,456,590) (10,191,500)
Cash and Cash Equivalents at Beginning of
Period $ 7,241,682 3,555,918
------------ ------------
Cash and Cash Equivalents at End of Period $ 2,785,092 13,747,418
------------ ------------
Supplemental Cash Flow Information:
Interest Paid $ 2,409,480 $ 1,632,180
------------ ------------
Income Taxes Paid
Transfer From Investment
Security Portfolio $ 70,568 $ 175,000
------------ ------------
to Avaialable for Sale Portfolio $ 1,521,991 -0-
------------ ------------
See accompanying notes to consolidated financial statements.
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SHELBY COUNTY BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 June 30, 1996 and for the
three months and nine months ended June 30, 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
June 30, 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 June 30, 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 June 17, 1996, the Board of Directors declared a quarterly cash dividend of
$.10 per share. The dividend was paid July 13, 1996 to shareholders of record
as of June 28, 1996.
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SHELBY COUNTY BANCORP AND SUBSIDIARY
Management's Discussion and Analysis of Financial Condition and
Results of Operations
(a) Financial Condition:
Total assets at June 30, 1996, were $76,367,000, an increase of
$8,601,000 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 $62,721,000 at June 30, 1996. Investment
securities available for sale increased from $4,450,000 at September 30, 1995 to
$7,056,000 at June 30, 1996. Mortgage loans increased from $42,721,000 at
September 30, 1995 to $51,868,000 at June 30, 1996. Consumer loans increased
from $8,129,000 at September 30, 1995 to $11,148,000 at June 30, 1996. These
increases are attributed to a very strong local economy and loan demand. The two
branches that were opened in 1995 have contributed over $2,985,000 in mortgage
and consumer lending. Interest bearing deposits decreased from $6,428,000 at
September 30, 1995 to $1,878,000 at June 30, 1996.
Total deposits at September 30, 1995 of $61,202,000 increased to
$65,801,000 at June 30, 1996. This increase in 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 June 30, 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 June 30, 1996.
(b) Results of Operations:
During the three month period ended June 30, 1996, net earnings
decreased to $69,000 ($.39 per share) compared to net earnings of $71,000 ($.41
per share) during the three month period ended June 30, 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 $557,000, after provision for loan losses, for
the three months ended June 30, 1996, compared to $544,000 for the three months
ended June 30, 1995. The interest rate margin for the three months ended June
30, 1996 was 2.93%, compared to 3.89% 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 $1,242,000 for the three months ended
June 30, 1995 to $1,413,000 for the three months ended June 30, 1996. Interest
expense for the three month period ended June 30, 1996 was $841,000 compared to
$683,000 for the three months ended June 30, 1995. This increase is primarily
attributed to theincrease in deposits.
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SHELBY COUNTY BANCORP AND SUBSIDIARY
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Total non-interest income was $100,000 for the three months ended June 30,
1996, compared to $152,000 for the same period in 1995. The decrease was
primarily due to the decrease in sales of insurance products sold by The Shelby
Group, a wholly-owned subsidiary of The Bank.
Non-interest expense totaled $561,000 for the quarter ended June 30, 1996
compared to $602,000 for the same period in the prior year. The primary
decreases in non-interest expense relate to decreases in advertising and other
operating expense due to cost cutting.
During the nine month period ended June 30, 1996, net earnings
decreased to $177,000 ($1.01 per share) compared to net earnings of $284,000
($1.63 per share) during the nine month period ended June 30, 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 $1,658,000 for the nine months ended June 30,
1996 compared to $1,736,000 for the nine months ended June 30, 1995. The
interest rate margin for the nine months ended June 30, 1996 was 3.01%, compared
to 3.67% 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 $3,529,000 for the nine months ended
June 30, 1995 to $4,153,000 for the nine months ended June 30, 1996. Interest
expense for the nine month period ended June 30, 1996 was $2,450,000 compared to
$1,753,000 for the nine months ended June 30, 1995. This increase is primarily
attributed to the increase in deposits.
Total non-interest income was $329,000 for the nine months ended June
30, 1996 compared to $310,000 for the same period in 1995. The increase was
primarily due to the increase in fees charged on checking and savings accounts.
Non-interest expense totaled $1,694,000 for the nine months ended June
30, 1996 compared to $1,644,000 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.
(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
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SHELBY COUNTY BANCORP AND SUBSIDIARY
Management's Discussion and Analysis of Financial Condition and
Results of Operations
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 June
30, 1996, the Bank satisfied its capital requirements.
The following is a summary of the Bank's regulatory capital and capital
requirements at June 30, 1996 based on capital regulations currently in effect
for savings institutions.
Tangible Core Risk-based
Capital Capital Capital
----------- ---------- -----------
Regulatory Capital $5,307,000 $5,307,000 $5,344,000
Minimum Capital Requirement 1,145,000 2,290,000 4,112,000
--------- --------- ---------
Excess Capital $4,162,000 $3,017,000 $1,232,000
Regulatory Capital Ratio 6.92% 6.92% 10.40%
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 June 30, 1996. The Bank maintains liquidity of at least 5% of
net withdrawable assets. At June 30, 1996, its regulatory liquidity ratio was
12.96%.
(d) Proposed Legislation
Congress is 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 associations and for deposits of
savings associations that have been acquired by banks. The House Banking
Committee recently proposed provisions which would (1) require banks and thrifts
to pay approximately $320 million and $450 million, respectively, a year through
1999 to pay interest due on Financing Corp. bonds, (2) require banks and thrifts
to pay off the Financing Corp. bonds on a pro rata basis commencing in 2000, (3)
require thrifts to pay a one-time fee to raise approximately $5 billion to
capitalize the SAIF, and (4) to use the Federal Reserve's surplus to lower the
above amount due from banks by about $100 million per year.
Prior provisions propsed by the House Banking Committee 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.
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SHELBY COUNTY BANCORP AND SUBSIDIARY
Management's Discussion and Analysis of Financial Condition
The House Banking Committee also made a proposal which 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.
In addition, under some of the proposals being considered by Congress, the
FDIC's authority to build reserves beyond 1.25% would be limited.
Given the numerous differing legislative proposals made by the House and
Senate Banking Committees, 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.
-11-
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.
Item 6. Exhibits and Reports on Form 8-K
a) Not applicable
b) Reports on 8-K--There were no reports on Form 8-K
filed during the three months ended June 30, 1996.
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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.
SHELBY COUNTY BANCORP
Date: August 5, 1996 By /s/ Rodney L. Meyerholtz
-------------------------------
Rodney L. Meyerholtz
President
Date: August 5, 1996 By /s/ Robert E. Thomas
-------------------------------
Robert E. Thomas
Treasurer
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