1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period ended March 31, 1997
Commission File Number 1-12141
---------
DELPHOS CITIZENS BANCORP, INC.
------------------------------
(Exact name of registrant as specified in its charter)
Delaware 34-1840187
- -------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
114 East 3rd Street, Delphos, Ohio 45833
-----------------------------------------
(Address of principal executive offices)
(419) 692-2010
--------------
(Registrant's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past 12 months (or for
such shorter period that the issuer was required to file such reports) and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
------ ------
State the number of shares outstanding of each of the registrant's classes of
common equity, as of the latest practicable date.
Class: Outstanding at April 30, 1997
Common stock, $0.01 par value 2,038,719 common shares
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1.
2
DELPHOS CITIZENS BANCORP, INC.
FORM 10-Q
Quarter ended March 31, 1997
Part I - Financial Information
Page
----
ITEM 1 - FINANCIAL STATEMENTS
Consolidated Statements of Financial Condition as of March 31, 1997
and September 30, 1996 ............................................. 3
Consolidated Statements of Income for the three and six months ended
March 31, 1997 and 1996.............................................. 4
Condensed Consolidated Statements of Cash Flows for the three and six
months ended March 31, 1997 and 1996................................. 6
Notes to Consolidated Financial Statements .......................... 7
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS ......................... 14
Part II - Other Information
OTHER INFORMATION ....................................................... 17
SIGNATURES ............................................................. 18
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2.
3
PART I. FINANCIAL INFORMATION
DELPHOS CITIZENS BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
- -------------------------------------------------------------------------------------------
March 31, September 30,
1997 1996
---- ----
ASSETS
Cash and due from banks $ 1,770,694 $ 1,585,654
Interest-bearing deposits in other banks 8,683,064 3,109,623
------------ -----------
Cash and cash equivalents 10,453,758 4,695,277
Investment securities held to maturity 4,988,456 500,000
Mortgage-backed securities available for sale 745,328 777,174
Mortgage-backed securities held to maturity 12,485,496 13,437,301
Loans receivable, net 76,393,536 70,786,851
Federal Home Loan Bank stock 805,200 777,700
Premises and equipment 673,273 684,754
Accrued interest receivable 401,754 293,046
Other assets 124,793 283,194
------------ -----------
Total assets $107,071,594 $92,235,297
============ ===========
LIABILITIES
Deposits $ 76,003,516 $79,830,835
Escrow accounts 214,509 206,180
Accrued interest payable 39,125 31,295
Accrued expenses and other liabilities 463,721 741,541
------------ -----------
Total liabilities 76,720,871 80,809,851
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SHAREHOLDERS' EQUITY
Preferred stock, authorized 1,000,000 shares, no shares
issued and outstanding
Common stock, $.01 par value, 4,000,000 shares
authorized, 2,038,719 shares issued and outstanding 20,387
Additional paid-in capital 19,725,124
Retained earnings 12,137,926 11,443,182
Obligation under employee stock ownership plan (1,511,046)
Unrealized loss on available for sale securities, net (21,668) (17,736)
------------ -----------
Total shareholders' equity 30,350,723 11,425,446
------------ -----------
Total liabilities and shareholders' equity $107,071,594 $92,235,297
============ ===========
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See accompanying notes to financial statements.
3.
4
DELPHOS CITIZENS BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
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Three Months Ended Six months ended
March 31, March 31,
--------- ---------
1997 1996 1997 1996
---- ---- ---- ----
INTEREST INCOME
First mortgage loans $ 1,420,744 $ 1,255,268 $ 2,793,429 $ 2,491,990
Consumer and other loans 26,687 23,582 51,078 51,406
Mortgage-backed and
investment securities 300,184 299,483 563,214 623,099
FHLB stock dividends 13,923 13,029 27,607 25,831
Interest bearing deposits 172,570 70,984 251,808 123,290
----------- ----------- ----------- -----------
Total interest income 1,934,108 1,662,346 3,687,136 3,315,616
----------- ----------- ----------- -----------
INTEREST EXPENSE
Deposits 893,990 1,009,092 1,887,663 2,009,269
----------- ----------- ----------- -----------
NET INTEREST INCOME 1,040,118 653,254 1,799,473 1,306,347
Provision for loan losses 3,000 6,000
----------- ----------- ----------- -----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,037,118 653,254 1,793,473 1,306,347
----------- ----------- ----------- -----------
NON-INTEREST INCOME
Service charges and fees 41,037 66,969 75,481 97,256
Gain on mortgage-backed
securities available for sale 8,259
Other non-interest income 11,139 7,339 23,718 11,099
----------- ----------- ----------- -----------
Total non-interest income 52,176 74,308 99,199 116,614
----------- ----------- ----------- -----------
NON-INTEREST EXPENSE
Compensation and benefits 175,166 128,368 460,513 331,677
Occupancy and equipment 23,711 23,588 42,040 45,062
Deposit insurance 2,880 43,757 48,368 87,450
Franchise taxes 45,100 42,270 88,782 80,839
Other non-interest expense 151,560 111,380 286,149 218,201
----------- ----------- ----------- -----------
Total non-interest expense 398,417 349,363 925,852 763,229
----------- ----------- ----------- -----------
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(Continued)
4.
5
DELPHOS CITIZENS BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME (CONTINUED)
(Unaudited)
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Three Months Ended Six months ended
March 31, March 31,
--------- ---------
1997 1996 1997 1996
---- ---- ---- ----
INCOME BEFORE INCOME TAX $ 690,877 $ 378,199 $ 966,820 $ 659,732
Income tax expense 193,625 100,200 272,075 196,154
--------- ----------- --------- ----------
NET INCOME $ 497,252 $ 277,999 $ 694,745 $ 463,578
========= =========== ========= ==========
Earnings per share subsequent
to conversion $ .27 N/A $ .31 $ N/A
========= =========== ========= ==========
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See accompanying notes to financial statements.
5.
6
DELPHOS CITIZENS BANCORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASHFLOWS
(Unaudited)
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Six Months Ended
March 31,
---------
1997 1996
---- ----
NET CASH (USED) PROVIDED FROM OPERATING ACTIVITIES $ 627,764 $ 542,674
CASH FLOWS USED IN INVESTING ACTIVITIES
Mortgage-backed securities available for sale
Proceeds from sales 763,370
Proceeds from principal payments on mortgage-
backed securities 26,358 24,190
Investment and mortgage-backed securities held to
maturity
Proceeds from calls, maturities and paydowns 1,461,881 1,293,180
Purchase of securities held to maturity (4,985,938)
Loan originations net of principal payment on loans (5,625,845) (4,639,126)
Purchases of premises and equipment (13,316) (8,942)
------------ -----------
Net cash used in investing activities (9,136,860) (2,567,328)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposits (3,827,319) 3,131,354
Net increase in mortgage escrow funds 8,329 (24,237)
Net proceeds from sale of stock 18,086,567
------------ -----------
Net cash from financing activities 14,267,577 3,107,117
------------ -----------
Net change in cash and cash equivalents 5,758,481 1,082,463
Cash and cash equivalents at beginning of period 4,695,277 4,257,072
------------ -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 10,453,758 $ 5,339,535
============ ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
CASH PAID DURING THE PERIOD FOR:
Interest $ 1,879,833 $ 2,013,605
Taxes 20,000 120,000
NONCASH TRANSACTIONS:
Transfer of mortgage-backed securities to
available for sale $ 1,607,975
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See accompanying notes to financial statements.
6.
7
DELPHOS CITIZENS BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation: These interim financial statements are prepared
- ---------------------
without audit and reflect all adjustments which, in the opinion of
management, are necessary to present fairly the financial position of Delphos
Citizens Bancorp, Inc. (Company) and its sole subsidiary, Citizens Bank of
Delphos (Bank) at March 31, 1997, and its results of operations and cash flows
for the periods presented. All such adjustments are normal and recurring in
nature. The accompanying financial statements do not purport to contain all the
necessary financial disclosures required by generally accepted accounting
principles that might otherwise be necessary in the circumstances. The annual
report for the Bank for the year ended September 30, 1996, contains financial
statements and related notes which should be read in conjunction with the
accompanying unaudited consolidated financial statements.
Effective November 20, 1996, Citizens Federal Savings & Loan Association,
(Association) converted from a federally chartered mutual savings and loan
association to a federally chartered stock savings bank (Citizens Bank of
Delphos) with the concurrent formation of a holding company (Delphos Citizens
Bancorp, Inc.). The conversion was accomplished through an amendment of the
Association's articles of incorporation and the sale of the Company's common
stock in an amount equal to the pro forma market value of the Association after
giving effect to the conversion.
Consolidation Policy: The consolidated financial statements include the
- --------------------
accounts of the Company and the Bank. All significant intercompany transactions
and balances have been eliminated.
Industry Segment Information: The Company is engaged in the business of banking
- ----------------------------
with operations conducted through its office located in Delphos, Ohio. The
Company originates and holds primarily residential and consumer loans to
customers throughout the Allen and Van Wert County area in Northwest Ohio. The
Company's primary deposit products are interest-bearing checking and
certificates of deposit. There are no branch operations.
Use of Estimates in Preparation of Financial Statements: In preparing financial
- -------------------------------------------------------
statements, management must make estimates and assumptions. These estimates and
assumptions affect the amounts reported for assets, liabilities, revenues and
expenses as well as affecting the disclosures provided. Future results could
differ from current estimates.
Areas involving the use of management's estimates and assumptions primarily
include the allowance for loan losses, the realization of deferred tax assets,
fair value of certain securities and the determination and carrying value of
impaired loans.
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Continued
7.
8
DELPHOS CITIZENS BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
- --------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Securities: The Company classifies securities as held to maturity, trading or
- ----------
available for sale. Securities classified as held to maturity are those that
management has the positive intent and ability to hold to maturity. Securities
held to maturity are stated at cost, adjusted for amortization of premiums and
accretion of discounts.
Securities classified as available for sale are those that management intends to
sell or that could be sold for liquidity, investment management, or similar
reasons, even if there is not a present intention for such a sale. Securities
available for sale are carried at fair value with unrealized gains and losses
included as a separate component of shareholders' equity, net of tax. Gains or
losses on dispositions are based on net proceeds and the adjusted carrying
amount of securities sold, using the specific identification method.
Loans Receivable: Loans receivable are stated at unpaid principal balances,
- ----------------
less the allowance for loan losses, and net deferred loan origination fees. The
allowance for loan losses is increased by charges to income and decreased by
charge-offs (net of recoveries). Management's periodic evaluation of the
adequacy of the allowance is based on the Company's past loan loss experience,
known and inherent risks in the portfolio, adverse situations that may affect
the collateral and current economic conditions.
Uncollectible interest on loans that are contractually past due is charged off,
or an allowance is established based on management's periodic evaluation. The
allowance is established by a charge to interest income equal to all interest
previously accrued and unpaid, and income is subsequently recognized only to the
extent that cash payments are received until, in management's judgment, the
borrower demonstrates the ability to make periodic interest payments in which
case the loan is returned to accrual status.
On October 1, 1995, the Company adopted SFAS No. 114, "Accounting by Creditors
for Impairment of a Loan," and SFAS No. 118, "Accounting by Creditors for
Impairment of a Loan - Income Recognition and Disclosures." Under these
standards, loans considered to be impaired, as identified according to internal
loan review standards, are reduced to the present value of expected future cash
flows or to the fair value of collateral by allocating a portion of the
allowance for loan losses to such loans. If these allocations cause the
allowance for loan losses to require an increase, such an increase will be
reported as a provision for loan losses charged to operations. The effect of
adopting these standards did not materially affect the allowance for loan losses
at October 1, 1995 or for the periods presented.
Management analyzes loans on an individual basis and classifies a loan as
impaired when an analysis of the borrower's operating results and financial
condition indicates that underlying cash flows are not adequate to meet its debt
service requirements. Often this is associated with a delay or shortfall in
payments of 30 days or more. Smaller balance homogeneous loans are
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Continued
8.
9
DELPHOS CITIZENS BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
- --------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
evaluated for impairment in total. Such loans include residential first mortgage
loans secured by one to four family residences, residential construction loans,
home equity, and other consumer loans, with balances less than $200,000. Loans
are generally moved to non-accrual status when 90 days or more past due. These
loans may also be considered impaired.
Impaired loans, or portions thereof, are charged off when deemed uncollectible.
The nature of the disclosures for impaired loans is considered generally
comparable to prior nonaccrual loans and non-performing and past due asset
disclosures. The adoption of SFAS No. 114 had no impact on the comparability of
the March 31, 1997 or September 30, 1996 allowance for loan losses to prior
periods.
Loan Fees and Costs: Loan fees and costs are deferred, and are recognized as an
- -------------------
adjustment to interest income using the interest method over the contractual
life of the loans, adjusted for estimated prepayments based on the Company's
historical prepayment experience.
Other Real Estate: Other real estate owned is recorded at the lower of cost or
- -----------------
fair value, less estimated costs to sell. Any reduction in fair value is
reflected in a valuation allowance account established by a charge to income.
Costs incurred to carry the real estate are charged to expense.
Premises and Equipment: Land is carried at cost. Buildings, furniture and
- ----------------------
fixtures, and equipment are carried at cost, less accumulated depreciation.
Buildings, furniture and fixtures, and equipment are depreciated using
straight-line and accelerated methods over the estimated useful lives of the
respective assets, which range from five to forty years.
Income Taxes: The Company follows the liability method in accounting for
- ------------
income taxes. The liability method provides that deferred tax assets and
liabilities are recorded based on the difference between the tax basis of
assets and liabilities and their carrying amounts for financial reporting
purposes, referred to as "temporary differences."
Statement of Cash Flows: For purposes of this statement, cash and cash
- -----------------------
equivalents are defined to include the Company's cash on hand, due from banks
and interest-bearing deposits in other banks. The Company reports net cash
flows for customer loan transactions, deposit transactions and interest-bearing
deposits made with other financial institutions.
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Continued
9.
10
DELPHOS CITIZENS BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
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NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Earnings Per Share: Earnings per common share for the three and six months
- ------------------
ended March 31, 1997 was computed based on earnings for the period November
20, 1996 (conversion date), to March 31, 1997, divided by the weighted average
number of common shares outstanding for the period. Pro rata earnings based on
number of days was $497,252 and weighted average shares outstanding was
1,886,042 for the three months ended March 31, 1997. Pro rata earnings based on
number of days was $575,505 and weighted average shares outstanding was
1,880,856 for the six months ended March 31, 1997. Earnings per share
information for the three and six months ended March 31, 1996 is not meaningful
since the mutual to stock conversion was not consummated until November 20,
1996.
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Continued
10.
11
DELPHOS CITIZENS BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
- --------------------------------------------------------------------------------
NOTE 2 - INVESTMENT AND MORTGAGE-BACKED SECURITIES
Securities are summarized as follows:
March 31, 1997
-------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
AVAILABLE FOR SALE:
Mortgage-backed
securities $ 778,158 $ (32,830) $ 745,328
HELD TO MATURITY:
U.S. Treasury securities 4,988,456 (12,656) 4,975,800
Mortgage-backed
securities 12,485,496 $ 358,901 (139,118) 12,705,279
----------- ---------- ----------- -----------
$18,252,110 $ 358,901 $ (184,604) $18,426,407
=========== ========== =========== ===========
September 30, 1996
-------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
AVAILABLE FOR SALE:
Mortgage-backed
securities $ 804,047 $ (26,873) $ 777,174
HELD TO MATURITY:
FHLB debt security 500,000 500,000
Mortgage-backed
securities 13,437,301 $ 347,278 (111,858) 13,672,721
----------- ---------- ------------ -----------
$14,741,348 $ 347,278 $ (138,731) $14,949,895
=========== ========== =========== ===========
During the year ended September 30, 1996, the Company reclassified
mortgage-backed securities with an amortized cost of $1,607,975 from held to
maturity to available for sale. The securities were transferred on November 21,
1995, as allowed by the Statement of Financial Accounting Standards No. 115
implementation guide issued by the Financial Accounting Standards Board, with
the related unrealized gain of $6,818 recorded net of tax as an increase in
retained earnings.
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Continued
11.
12
DELPHOS CITIZENS BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
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NOTE 2 - INVESTMENT AND MORTGAGE-BACKED SECURITIES (Continued)
There were no sales of mortgage-backed securities during the three and six
months ended March_31, 1997. Proceeds from the sale of mortgage-backed
securities available for sale during the three and six months ended March 31,
1996 were $763,370. Gross gains of $8,259 were realized on these sales.
NOTE 3 - LOANS RECEIVABLE
Loans receivable are summarized as follows: March 31, September 30,
1997 1996
---- ----
Real estate loans
One- to four-family $ 67,363,953 $ 62,282,192
Multi-family 1,333,572 1,505,896
Commercial real estate 5,562,807 4,969,530
Construction and land 2,829,169 4,871,181
------------ ------------
77,089,501 73,628,799
Less:
Mortgage loans in process (2,804,369) (4,709,495)
Net deferred loan origination fees (66,476) (53,316)
------------ ------------
74,218,656 68,865,988
------------ ------------
Consumer and other loans
Manufactured homes 98,023 63,331
Home equity loans 1,105,973 1,038,780
Unsecured loans 255,487 241,314
Other consumer loans 818,373 680,254
------------ ------------
2,277,856 2,023,679
Less: Non-mortgage loans in process (2,616) (8,456)
------------ ------------
2,275,240 2,015,223
------------ ------------
Less: Allowance for loan losses (100,360) (94,360)
------------ ------------
$ 76,393,536 $ 70,786,851
============ ============
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Continued
12.
13
DELPHOS CITIZENS BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
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NOTE 3 - LOANS RECEIVABLE (Continued)
Activity in the allowance for loan losses is summarized as follows:
Six months ended
March 31,
1997 1996
---- ----
Balance at beginning of period $ 94,360 $ 92,360
Provision charged to income 6,000 -
Charge-offs - -
--------- --------
Balance at end of period $ 100,360 $ 92,360
========= ========
As of and for the periods ended March 31, 1997 and September 30, 1996, there
were no impaired loans.
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13.
14
DELPHOS CITIZENS BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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The following discussion compares the financial condition of Delphos Citizens
Bancorp, Inc. (Company) and its sole subsidiary Citizens Savings Bank (Bank) at
March 31, 1997 to September 30, 1996 and the results of operations for the three
and six months ended March 31, 1997 and 1996. This discussion should be read in
conjunction with the interim financial statements and footnotes included herein.
FINANCIAL CONDITION
Total assets grew $14.8 million, or 16.1% from $92,235,000 at September 30, 1996
to $107,072,000 at March 31, 1997. The growth is primarily attributable to
increases in interest-bearing deposits in other banks, investment securities
held to maturity and loans receivable, partially offset by the paydowns of
mortgage backed securities as well as a reduction in deposits. The increase was
funded by the net proceeds from the sale of stock due to the conversion from a
mutual savings and loan association to a stock savings bank owned by a stock
thrift holding company.
Cash and cash equivalents increased $5.8 million to $10.5 million at March 31,
1997 compared to $4.7 million at September 30, 1996. Interest-bearing deposits
in other banks increased $5.6 million from $3.1 million at September 30, 1996 to
$8.7 million at March 31, 1997. The increase was primarily due to the portion of
the funds received from the conversion which were invested in short term funds.
Ultimately, it is management's intention to utilize a significant portion of the
conversion proceeds to fund new loan originations.
During the quarter ended March 31, 1997, a portion of the conversion proceeds
were utilized to purchase a held to maturity security. At March 31, 1997, the
Company's mortgage-backed securities portfolio was comprised of FHLMC and GNMA
fixed and adjustable rate securities. The net unrealized gain on these
securities totaled $220,000 at March 31, 1997. A small portion of this portfolio
was classified as available for sale. The remainder of the portfolio was
classified as held to maturity as the Company does not anticipate the need to
sell these securities in the near future due to the Company's strong liquidity
position. Management's strategy emphasizes investment in mortgage-backed
securities guaranteed by U.S. government agencies in order to minimize credit
risk.
Loans receivable increased $5.6 million, or 7.9%, from $70.8 million at
September 30, 1996 to $76.4 million at March 31, 1997. The increase was
primarily due to the increase in one- to four-family real estate loans which
grew $5.1 million, or 8.2% during the period.
Deposits decreased $3.8 million, or 4.8%, from $79.8 million at September 30,
1996 to $76.0 million at March 31, 1997. Due to the significant amount of funds
obtained in the conversion, management allowed some higher cost time deposits to
mature by choosing not to match the higher rates offered by certain competitors
in the Company's market area.
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(Continued)
14.
15
DELPHOS CITIZENS BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS
Net income increased $219,000 from $278,000 for the quarter ended March 31, 1996
to $497,000 for the same period in 1997. Net income increased $231,000 from
$464,000 for the year to date period ended March 31, 1996 to $695,000 for the
same period in 1997. The 1997 increase was primarily due to the increase in net
interest income, partially offset by increases in compensation and benefits and
other noninterest expense.
Net interest income increased $387,000, or 59.2%, during the quarter ended March
31, 1997 and $493,000 or 37.8% during the six months ended March 31, 1997
compared to the same periods in 1996. The increases were primarily due to the
increases in average loans during the 1997 periods as compared to the 1996
periods, as well as the Company's ability to increase interest earning assets
without increasing interest bearing liabilities due to the funds received from
the sale of stock. The increase in loan income was partially offset by a
reduction in income from mortgage-backed securities due to the decrease in the
average balance during the 1997 period as compared to the 1996 period.
Management has used paydowns on mortgage-backed securities to fund higher
yielding loans. Interest expense decreased in the three and six months ended
March 31, 1997 compared to the same period in 1996, due to a decline in deposits
outstanding during the periods.
A provision for loan losses of $3,000 and $6,000 was recorded for the three and
six months ended March 31, 1997, respectively, based on management's assessment
of risk factors affecting the allowance for loan losses. The allowance for loan
losses was approximately .13% of loans, net of deferred and unearned income, as
of March 31, 1997 and September 30, 1996. Management believes the allowance for
loan loss is adequate to absorb potential losses; however, future additions to
the allowance may be necessary based on changes in economic conditions.
Non-interest income decreased $22,000, or 29.8%, from $74,000 for the quarter
ended March 31, 1996 to $52,000 for the same period in 1997. Non-interest income
decreased $17,000, or 14.9%, from $117,000 for the six months ended March 31,
1996 to $99,000 for the same period in 1997.
Non-interest expense increased $49,000, or 14.0%, for the quarter ended March
31, 1997 and $163,000 or 21.3% for the six months ended March 31, 1997 compared
to the similar periods in 1996. The increases were primarily due to increases in
compensation and benefits expense and other non-interest expense. Compensation
and benefits increased $47,000 or 36.5% for the three months ended March 31,
1997, and increased $129,000 or 38.8% for the six months ended March 31, 1997,
compared to the same periods in 1996 primarily due to ESOP expense. An expense
was recorded in fiscal 1997 for the ESOP shares released to participants. No
such expense was recorded during the similar periods in 1996 as the ESOP was not
approved until the fourth quarter of 1996. The increase in other non-interest
expense was primarily attributable to an increase in office supplies related to
the change in the name of the subsidiary Bank.
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(Continued)
15.
16
DELPHOS CITIZENS BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
LIQUIDITY
Federally insured banks are required to maintain minimum levels of liquid
assets. The Bank is currently required to maintain an average daily balance of
liquid assets of at least 5% of the sum of its average daily balance of net
withdrawable deposit accounts and borrowings payable in one year or less. At
March 31, 1997, the Bank was in compliance with this requirement with a
liquidity ratio of 14.7%. Management considers this liquidity position adequate
to meet its expected needs for the foreseeable future.
CAPITAL RESOURCES
Savings institutions insured by the Federal Deposit Insurance Corporation are
required by federal law to meet three regulatory capital requirements. If a
requirement is not met, regulatory authorities may take legal or administrative
actions, including restrictions on growth or operations or, in extreme cases,
placing the institution in receivership or conservatorship.
The following table presents the Bank's compliance with its capital requirements
at March 31, 1997:
(Dollars in thousands)
Tangible Capital Core Capital Risk Based Capital
------------------ ------------ ------------------
Amount % Amount % Amount %
------ -- ------ -- ------ --
Actual $ 20,429 20.0% $ 20,429 20.0% $ 20,529 43.7%
Required 1,530 1.5 3,061 3.0 3,759 8.0
---------- ------ ----------- ------ ---------- ------
Excess $ 18,899 18.5% $ 17,368 17.0% $ 16,770 35.7%
========== ====== =========== ====== ========== ======
The Bank's tangible capital consists solely of shareholders' equity. Core
capital consists of tangible capital plus certain intangible assets, of which
the Bank has none. Risk based capital consists of core capital plus general loan
loss allowances less certain assets required to be deducted.
At March 31, 1997 the Bank was considered well capitalized under Prompt
Corrective Action Regulations.
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16.
17
DELPHOS CITIZENS BANCORP, INC.
FORM 10-Q
Quarter ended March 31, 1997
PART II - OTHER INFORMATION
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Items 1- 5 are not applicable.
Item 6 - Exhibits and Reports on Form 8-K:
(a) Exhibits
Exhibit
Number Description
------ -----------
3.1 Certificate of Incorporation of Delphos Citizens Bancorp,
Inc. (1)
3.2 Bylaws of Delphos Citizens Bancorp, Inc. (1)
4.0 Stock Certificate of Delphos Citizens Bancorp, Inc. (1)
27 Financial Data Schedule (2)
(b) No current reports on Form 8-K were filed by the Company during
the quarter ended March 31, 1997.
(1) Incorporated herein by reference from the Exhibits to the
Registration Statement on Form S-1, as amended, filed on
August 22, 1996, Registration No. 333-10639.
(2) Filed only in electronic format pursuant to Item 601(b)(27)
of Regulation S-K.
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17.
18
DELPHOS CITIZENS BANCORP, INC.
SIGNATURES
Pursuant to the requirement 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.
DELPHOS CITIZENS BANCORP, INC.
------------------------------
(Registrant)
Date: May 12, 1997 /s/Joseph R. Reinemeyer
------------------------------- ------------------------------
Joseph R. Reinemeyer
President and Chief Executive Officer
(Principal Executive Officer)
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18.