F0RM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(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
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, 1997, there were 175,950 shares of the Registrant's Common Stock
issued and outstanding.
SHELBY COUNTY BANCORP AND SUBSIDIARY
Page
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Statements of Financial
Condition as of June 30, 1997
(Unaudited) and September 30, 1996. 3
Consolidated Statements of Earnings for
the three months ended June 30, 1997 and
1996 (Unaudited) 4
Consolidated Statements of Earnings for
the nine months ended June 30, 1997 and
1996 (Unaudited) 5
Consolidated Statements of Cash Flows
for the nine months ended June 31, 1997
and 1996 (Unaudited) 6
Notes to Consolidated Financial
Statements (Unaudited) 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8-10
PART II. OTHER INFORMATION 11
SIGNATURE PAGE 12
SHELBY COUNTY BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
June 30, September 30,
1997 1996
----------- -------------
(Unaudited)
ASSETS
Cash $ 860,772 1,043,977
Interest-Bearing Deposits 1,383,805 3,879,299
Investment Securities
Available for Sale 7,568,324 7,243,756
Investment Securities Held to
Maturity (market value:
$1,052,472 and $1,275,713) 1,051,297 1,267,448
Loans Receivable, Net 75,005,235 66,522,476
Accrued Interest Receivable on
Investment Securities 95,392 104,504
Stock of FHLB of Indianapolis 850,000 620,100
Real Estate Owned 36,727 --
Premises and Equipment 1,799,920 1,874,702
Prepaid Expenses and Other Assets 124,211 119,353
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TOTAL ASSETS $88,775,683 82,675,615
----------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits $64,001,250 65,286,137
FHLB Advances and Other Borrowings 17,061,071 10,071,360
Accrued Interest on Deposits 110,951 133,492
Income Taxes Payable 249,528 225,237
Deferred Income Taxes 182,270 4,954
Accrued Expenses and Other Liabilities 143,806 521,557
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TOTAL LIABILITIES $81,748,876 76,242,737
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SHAREHOLDERS' EQUITY:
Common stock, without par value:
Shares authorized of 5,000,000;
Shares issued and outstanding of 175,950 $ 1,358,123 1,358,123
Retained earnings-substantially
restricted 5,072,479 4,744,525
Unrealized Appreciation on
Investment Securities Available
for Sale 596,205 330,230
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TOTAL SHAREHOLDERS' EQUITY $ 7,026,807 6,432,878
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $88,775,683 82,675,615
----------- ----------
See accompanying notes to consolidated financial statements.
SHELBY COUNTY BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Three Months Ended
June 30,
------------------------------
1997 1996
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Interest Income:
Loans Receivable $1,543,321 1,204,741
Mortgage-Backed Securities 58,782 73,749
Interest-Bearing Deposits 29,030 61,289
Investment Securities 43,709 65,403
Dividends from FHLB 14,673 7,734
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Total Interest Income 1,689,515 1,412,916
Interest Expense on FHLB Advances 251,333 7,103
Interest Expense on Deposits 732,286 834,241
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Total Interest Expense 983,619 841,344
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Net Interest Income 705,896 571,572
Provision for Loan Losses 27,000 15,000
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Net Interest Income After
Provision for Loan Losses 678,896 556,572
Non-Interest Income:
Service Charges and Fees 62,286 58,965
Other 20,216 40,966
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Total Non-Interest Income 82,502 99,931
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Non-Interest Expense:
Salaries and Employee Benefits 235,386 238,255
Premises and Equipment 68,867 68,488
Federal Deposit Insurance 17,184 44,383
Data Processing 59,709 58,901
Advertising 43,540 31,235
Bank Fees and Charges 25,074 17,827
Other 105,398 101,695
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Total Non-Interest Expense 555,158 560,784
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Earnings Before Income Taxes 206,240 95,719
Income Taxes 74,472 26,415
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NET EARNINGS $ 131,768 69,304
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EARNINGS PER SHARE $ .75 $ .39
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See accompanying notes to consolidated financial statements.
SHELBY COUNTY BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Nine Months Ended
June 30,
--------------------------
1997 1996
---------- ----------
Interest Income:
Loans Receivable $4,466,230 3,528,178
Mortgage-Backed Securities 194,280 237,569
Interest-Bearing Deposits 96,786 208,115
Investment Securities 161,521 155,213
Dividends from FHLB 40,942 24,129
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Total Interest Income 4,959,759 4,153,204
Interest Expense on FHLB Advances 640,026 7,103
Interest Expense on Deposits 2,257,142 2,443,003
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Total Interest Expense 2,897,168 2,450,106
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Net Interest Income 2,062,591 1,703,098
Provision for Loan Losses 77,000 45,000
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Net Interest Income After
Provision for Loan Losses 1,985,591 1,658,098
Non-Interest Income:
Service Charges and Fees 181,627 176,170
Other 68,584 152,725
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Total Non-Interest Income 250,211 328,895
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Non-Interest Expense:
Salaries and Employee Benefits 723,515 751,365
Premises and Equipment 199,042 196,783
Federal Deposit Insurance 52,398 126,476
Data Processing 181,670 175,382
Advertising 104,404 95,004
Bank Fees and Charges 70,867 49,594
Other 295,861 299,524
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Total Non-Interest Expense 1,627,757 1,694,128
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Earnings Before Income Taxes 608,045 292,865
Income Taxes 227,317 116,034
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NET EARNINGS $ 380,728 176,831
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EARNINGS PER SHARE $ 2.16 $ 1.01
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See accompanying notes to consolidated financial statements.
SHELBY COUNTY BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
June 30,
-----------------------------
1997 1996
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Cash Flows From Operating Activities:
Net Earnings $ 380,728 $ 176,831
Adjustments To Reconcile
Net Earnings To Net Cash
Provided By Operating Activities:
Depreciation and Amortization 125,837 72,277
Net Deferred Loan Origination Fees 9,788 (9,675)
Provision For Loan Losses 77,000 45,000
Gain on Sale of Securities AFS 4,751 (28,445)
Increase (Decrease) in Accrued Int. Rec 9,112 (20,930)
(Increase) Decrease in Other Assets (4,858) 79,234
Increase (Decrease) in Other Liabilities (386,290) 433,257
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Net Cash Provided by Oper. Act 216,068 747,549
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Cash Flows From Investing Activities:
Loans Funded Net of Collections (8,606,274) (12,164,971)
Principal Collected on Investment Sec. 208,100 139,450
Principal Collected on AFS Securities 407,482 670,183
Purchase of Premises and Equipment (41,431) (29,094)
Purchase of Investment Securities 0 1,405,545
Proceeds From Sale of Securities AFS 2,352,427 5,951,754
Purchase of Available for Sale Securities 0 (9,258,512)
Investment in FHLB Stock (229,900) 0
Net Investment in Mtg.-Backed Sec. & Inv (2,668,664) 0
Disposals of Premises & Equipment 21,154 0
Net Cash Provided by (Used) in Invest. Act (8,557,106) (13,285,645)
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Cash Flows from Financing Activities:
FHLB Advances 7,000,000 3,500,000
Dividends Paid (52,774) (35,130)
Net Decrease in Deposits (1,284,887) 4,599,386
Proceeds of Issuance of Common Stock 0 17,250
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Net Cash Provided by Financing Activities 5,662,339 8,081,506
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Net Increase (Decrease) in Cash
and Cash Equivalents (2,678,699) (4,456,590)
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Cash and Cash Equivalents at Beginning of
Period $ 4,923,276 7,241,682
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Cash and Cash Equivalents at End of Period $ 2,244,577 2,785,092
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Supplemental Cash Flow Information:
Interest Paid $ 2,324,538 $ 2,409,480
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Income Taxes Paid $ 200,000 $ 70,568
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Transfer From Investment Security Portfolio
to Available for Sale Portfolio $ 0 $ 1,521,991
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See accompanying notes to consolidated financial statements.
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,
1996 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, 1997 and for the three
months and nine months ended June 30, 1997 and 1996 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, 1997 and 1996 by the 175,950 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 pursuant to those options as of
June 30, 1997. Options for 1,725 shares at an option price of $18 per share have
also been granted under the plan. Options for 3,450 shares at an option price of
$20 per share have also been granted under the plan.
Note 4 Dividends
On June 21, 1997, the Board of Directors declared a quarterly cash dividend of
$.10 per share. The dividend was paid July 15, 1997 to shareholders of record as
of June 30, 1997.
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, 1997, were $88,776,000, an increase of $6,100,000
from total assets of $82,676,000 at September 30, 1996. The most significant
increases in assets was in net loans receivable. Total net loans receivable
increased from $66,522,000 at September 30, 1996 to $75,005,000 at June 30,
1997. Mortgage loans increased from $53,878,000 at September 30, 1996 to
$60,598,000 at June 30, 1997. Consumer loans increased from $12,687,000 at
September 30, 1996 to $14,333,000 at June 30, 1997. The increase in mortgage
loans is attributed to a very strong local economy and loan demand. The two
branches that were opened in 1995 have contributed over $5,224,000 in mortgage
and consumer lending. Interest bearing deposits decreased from $3,879,000 at
September 30, 1996 to $1,384,000 at June 30, 1997.
Total deposits at September 30, 1996 of $65,286,000 decreased to
$64,001,000 at June 30, 1997. This decrease in deposits is due to an increase in
loan demand.
Non-performing assets increased from $247,000 at September 30, 1996 to
$752,000 at June 30, 1997. 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, 1997.
(b) Results of Operations:
During the three month period ended June 30, 1997, net earnings increased
to $132,000 ($.75 per share) compared to net earnings of $69,000 ($.39 per
share) during the three month period ended June 30, 1996. The increase in
earnings is primarily the result of an increase in interest income on loans
receivable in excess of the increase in interest expense.
Net interest income after provision for loan losses was $557,000, for the
three months ended June 30, 1996, compared to $679,000 for the three months
ended June 30, 1997. The interest rate margin for the three months ended June
30, 1997 was 3.34%, compared to 3.16% for the same period one year ago.
Interest income increased from $1,413,000 for the three months ended June
30, 1996 to $1,690,000 for the three months endedJune 30, 1997. Interest expense
for the three month period ended June 30, 1997 was $984,000 compared to $841,000
SHELBY COUNTY BANCORP AND SUBSIDIARY
Management's Discussion and Analysis of Financial Condition and
Results of Operation
for the three months ended June 30, 1996. This increase is attributed to the
increase in interest expense on FHLB borrowings.
Total non-interest income was $83,000 for the three months ended June
30, 1997, compared to $100,000 for the same period in 1996. The decrease was
primarily due to the closure of The Shelby Group, a wholly owned subsidiary of
the Bank in November of 1996.
Non-interest expense totaled $555,000 for the quarter ended June 30, 1997
compared to $561,000 for the same period in the prior year. The primary decrease
in non-interest expense relate to the reduction in the Federal Deposit Insurance
Corporation insurance premiums.
During the nine month period ended June 30, 1997, net earnings increased to
$381,000 ($2.16 per share) compared to net earnings of $177,000 ($1.01 per
share) during the nine month period ended June 30, 1996. The increase in
earnings is primarily the result of an increase in interest income in excess of
the increase in total interest expense.
Net interest income after provision for loan losses was $1,986,000 for the
nine months ended June 30, 1997 compared to $1,658,000 for the nine months ended
June 30, 1996. The interest rate margin for the nine months ended June 30, 1997
was 3.25%, compared to 3.01% for the same period one year ago. The increase in
the margin is primarily due to the decrease in rates being paid on deposit
accounts.
Interest income increased from $4,153,000 for the nine months ended June
30, 1996 to $4,960,000 for the nine months ended June 30, 1997. Interest expense
for the nine month period ended June 30, 1997 was $2,897,000 compared to
$2,450,000 for the nine months ended June 30, 1996. This increase is attributed
to the increase in interest expense on FHLB borrowings.
Total non-interest income was $250,000 for the nine months ended June 30,
1997 compared to $329,000 for the same period in 1996. The decrease was
primarily due to the closure of The Shelby Group, Inc. by the Bank in November
of 1996.
Non-interest expense totaled $1,628,000 for the nine months ended June 30,
1997 compared to $1,694,000 for the same period in the prior year. The decrease
in non-interest expense is due to cost cutting measures related to salaries and
employee benefits and the reduction ofthe Federal Deposit Insurance Corporation
insurance premiums.
(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
SHELBY COUNTY BANCORP AND SUBSIDIARY
Management's Discussion and Analysis of Financial Condition
and Results of Operation
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,
1997, the Bank satisfied its capital requirements.
The following is a summary of the Bank's regulatory capital and capital
requirements at June 30, 1997 based on capital regulations currently in effect
for savings institutions.
Tangible Core Risk-based
Capital Capital Capital
---------- ---------- ----------
Regulatory Capital $5,454,000 $5,454,000 $5,820,000
Minimum Capital Requirement 1,307,000 2,614,000 4,900,000
--------- --------- ---------
Excess Capital $4,147,000 $2,840,000 $ 920,000
Regulatory Capital Ratio 6.18% 6.18% 9.50%
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 $1,788,000 in loan
commitments as of June 30, 1997. The Bank maintains liquidity of at least 5% of
net withdrawable assets. At June 30, 1997, its regulatory liquidity ratio was
8.03%.
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 of Form 8-K
(a) The following exhibits are filed herewith or incorporated
herein by reference:
3(1) The Articles of Incorporation of the Registrant are incorporated herein
by reference to Exhibit 3(1) to the Registration Statement on Form S-1
(Registration No. 33-40540)
3(2) The Code of By-Laws of the Registrant are incorporated herein by
reference to Exhibit 3(2) to the Registration Statement of Form S-1
(Registration No. 33-40540)
4 The Rights Agreement, dated as of April 17, 1995, between Registrant
and Bank One, Indianapolis, NA, as Rights Agent, is incorporated herein
by reference to Exhibit 2 to the Registration Statement on Form 8-A
(Registration No. 19445)
27 Financial Date Schedule
(b) Reports on Form 8-K -- There were no reports on Form 8-K filed
during the three months ended June 30, 1997.
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, 1997 By /s/ Rodney L. Meyerholtz
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Rodney L. Meyerholtz
President
Date: August 5, 1997 By /s/ Robert E. Thomas
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Robert E. Thomas
Treasurer