SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
0-26248 34-1800830
--------------------------------------------------------------------
(Commission File No.) (IRS Employer I.D. No.)
INDUSTRIAL BANCORP, INC.
--------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
OHIO
--------------------------------------------------------------------
(State of jurisdiction or incorporation)
211 North Sandusky Street, Bellevue, Ohio 44811
--------------------------------------------------------------------
(Address of principal executive office) (Zip Code)
(419) 483-3375
--------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities and
Exchange Act of 1934 during the preceding twelve months (or for such
shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Outstanding as of April 27, 2000:
4,333,883 common shares, no par value
INDUSTRIAL BANCORP, INC.
Form 10-Q
For the Quarter ended March 31, 2000
Part I - Financial Information
Item 1: Financial Statements
- -------
Interim financial information required by Rule 10-01 of Regulation
S-X is included in this Form 10-Q as referenced below:
Consolidated Balance Sheets 3
Consolidated Statements of Net Income 4
Consolidated Statements of Comprehensive Income 5
Consolidated Statements of Shareholders' Equity 6
Condensed Consolidated Statements of Cash Flows 7
Notes to Consolidated Financial Statements 8
Item 2: Management's Discussion and Analysis of
- ------- Financial Condition and Results of Operations 9
Item 3: Quantitative and Qualitative Disclosures about Market Risk 12
- -------
Part II - Other Information 13
Signatures 14
INDUSTRIAL BANCORP, INC.
Consolidated Balance Sheets
($ in thousands except per share data)
3/31/00 12/31/99
------- --------
ASSETS
Cash and noninterest-bearing deposits $ 1,393 $ 2,699
Interest-bearing demand deposits 4,102 3,253
Overnight deposits 10,500 4,000
---------------------
Cash and cash equivalents 15,995 9,952
Interest-bearing time deposits 5,000 10,500
Investment securities available for sale, at fair value 14,925 14,141
Investment securities held to maturity
(fair value: 2000 = $194, 1999 = $214) 183 202
Loans receivable 350,390 344,293
Less: Allowance for Loan Losses (2,043) (2,017)
Loans receivable, net 348,347 342,276
Federal Home Loan Bank stock 3,551 3,490
Office properties and equipment, net 5,616 5,709
Accrued interest receivable 2,391 2,273
Other assets 511 460
---------------------
Total assets $396,519 $389,003
=====================
LIABILITIES
Deposits $293,988 $294,250
Federal Home Loan Bank advances 44,000 37,000
Accrued interest payable and other liabilities 3,381 3,167
---------------------
Total liabilities 341,369 334,417
SHAREHOLDERS' EQUITY
Common stock, no par value, 10,000,000 shares
authorized; 5,554,500 shares issued 34,669 34,669
Additional paid-in capital 3,067 2,955
Retained earnings 40,594 40,005
Accumulated other comprehensive income 1,245 1,390
Unearned employee stock ownership plan shares (2,590) (2,688)
Unearned compensation (570) (701)
Treasury stock, at cost
(2000: 1,210,617 shares, 1999: 1,195,117 shares) (21,265) (21,044)
---------------------
Total shareholders' equity 55,150 54,586
---------------------
Total liabilities and shareholders' equity $396,519 $389,003
=====================
Book value per share $ 12.70 $ 12.52
See accompanying notes to financial statements
INDUSTRIAL BANCORP, INC.
Consolidated Statements of Net Income
($ in thousands except per share data)
Three months ended
3/31/00 3/31/99
------- -------
Interest income
Interest and fees on loans $7,139 $6,841
Interest and dividends on investment securities 265 336
Interest on deposits 159 297
------------------
Total interest income 7,563 7,474
Interest expense
Interest on deposits 3,322 3,347
Interest on FHLB advances 609 486
------------------
Total interest expense 3,931 3,833
------------------
Net interest income 3,632 3,641
Provision for loan losses 23 38
------------------
Net interest income after provision for loan losses 3,609 3,603
Noninterest income
Service fees and other charges 209 173
Other 21 62
------------------
Total noninterest income 230 235
Noninterest expense
Salaries and employee benefits 855 915
State franchise tax 100 101
Federal deposit insurance premiums 15 44
Occupancy and equipment 99 90
Depreciation 112 111
Data processing 127 111
Advertising 59 68
Other 344 298
------------------
Total noninterest expense 1,711 1,738
------------------
Income before income tax 2,128 2,100
Provision for income tax 735 729
------------------
Net income $1,393 $1,371
==================
Basic earnings per share $ 0.34 $ 0.30
Diluted earnings per share $ 0.33 $ 0.30
See accompanying notes to financial statements
INDUSTRIAL BANCORP, INC.
Consolidated Statements of Comprehensive Income
($ in thousands)
Three
months
ended
3/31/00 3/31/99
------- -------
Net income $1,393 $1,371
Other comprehensive income:
Unrealized gain/loss on securities, net of tax (145) (323)
------------------
Comprehensive Income $1,248 $1,048
==================
See accompanying notes to financial statements
INDUSTRIAL BANCORP, INC.
Consolidated Statements of Shareholders' Equity
($ in thousands except per share data)
Total
shareholders'
equity
-------------
Balance at January 1, 1999 $60,741
Net income 1,371
Cash dividends (722)
($.16 per share)
Purchase of treasury stock (2,136)
(110,120 shares)
Employee Stock Ownership Plan:
Shares released 198
Management Recognition Plan:
Compensation earned 131
Change in unrealized gain on securities available for sale (323)
-------
Balance at March 31, 1999 $59,260
=======
Balance at January 1, 2000 $54,586
Net income 1,393
Cash dividends (785)
($.18 per share)
Purchase of treasury stock (221)
(15,500 shares)
Employee Stock Ownership Plan:
Shares released 191
Management Recognition Plan:
Compensation earned 131
Change in unrealized gain on securities available for sale (145)
-------
Balance at March 31, 2000 $55,150
=======
See accompanying notes to financial statements
INDUSTRIAL BANCORP, INC.
Condensed Consolidated Statements of Cash Flows
($ in thousands)
Three months ended
3/31/00 3/31/99
------- -------
Cash flows from operating activities
Net income $ 1,393 $ 1,371
Adjustments to reconcile net income to net cash from
operating activities 489 25
--------------------
Net cash from operating activities 1,882 1,396
Cash flows from investing activities
Net decrease in interest-bearing time deposits 5,500 -
Investment securities available for sale:
Purchases (3,000) (4,000)
Proceeds from maturities 2,000 5,000
Mortgage-backed securities principal repayments 19 27
Net decrease (increase) in loans (6,071) 7,048
Properties and equipment expenditures, net (19) (445)
--------------------
Net cash from investing activities (1,571) 7,630
Cash flows from financing activities
Net (decrease) increase in deposits (262) 3,632
Proceeds from FHLB advances 18,000 -
Repayments of FHLB advances (11,000) (4,000)
Purchase of treasury stock (221) (2,136)
Cash dividends paid (785) (722)
--------------------
Net cash from financing activities 5,732 (3,226)
--------------------
Net change in cash and cash equivalents 6,043 5,800
Cash and cash equivalents at beginning of period 9,952 28,536
--------------------
Cash and cash equivalents at end of period $ 15,995 $34,336
====================
Cash paid during the period for:
Interest 3,931 3,832
Income taxes 123 93
See accompanying notes to financial statements
INDUSTRIAL BANCORP, INC.
Notes to Consolidated Financial Statements
Summary of Significant Accounting Policies
These interim financial statements are presented in accordance with
the Securities and Exchange Commission's rules for quarterly financial
information and reflect all adjustments which, in the opinion of
management, are necessary to present fairly the financial position of
Industrial Bancorp, Inc. (the "Company") and its wholly owned subsidiary,
The Industrial Savings and Loan Association (the "Association"), at March
31, 2000, and the results of operations and cash flows for the periods
presented. All such adjustments are normal and recurring in nature. All
significant intercompany accounts and transactions have been eliminated in
consolidation. The accompanying condensed financial statements do not
purport to contain all the necessary disclosures required by generally
accepted accounting principles that might otherwise be necessary in the
circumstances and should be read in conjunction with the financial
statements included in the 1999 Annual Report of Industrial Bancorp, Inc.
The results of the three months presented are not necessarily
representative of the results of operations and cash flows, which may be
expected for the entire year.
Earnings Per Share
Earnings per common share have been computed based on the applicable
weighted average number of common shares outstanding during the period as
indicated below:
For the quarter ended
3/31/00 3/31/99
------- -------
Basic earnings per share 4,116,004 4,505,423
Diluted earnings per share 4,168,546 4,613,487
The calculation of diluted earnings per share considers the dilutive
effect of the assumed exercise of options outstanding during the period.
Employee Stock Ownership Plan shares that have not been allocated to
participants are not considered outstanding for purposes of computing
earnings per share; however, unallocated shares in the Management
Recognition Plan are considered for purposes of computing earnings per
share.
Commitments and Contingencies
As of March 31, 2000, commitments to originate loans and loans in
process to be funded totaled $17.4 million. All of the commitments to
originate loans expire within twelve months.
As of March 31, 2000, the Association had outstanding $11.0 million
in letters of credit from the Federal Home Loan Bank as security pledged
against public deposits.
INDUSTRIAL BANCORP, INC.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Financial Condition
Total assets increased to $396.5 million at March 31, 2000 from
$389.0 million at December 31, 1999. The increase in total assets is
primarily attributable to a $6.1 million increase in net loans receivable
during the first quarter of 2000. Cash and cash equivalents increased $6.0
million while interest bearing time deposits declined $5.5 million during
the first three months of 2000. Liquidity of the association exceeded the
regulatory requirement at March 31, 2000.
Total liabilities increased as FHLB advances increased $7.0 million
to $44.0 million at March 31, 2000, and were used to fund the growth in the
loan portfolio. Deposits declined slightly during the quarter. Total
deposits were $294.0 million at March 31, 2000 compared to $294.3 million
at year end 1999.
Total shareholder's equity increased to $55.2 million at March 31,
2000, from $54.6 million at December 31, 1999. Net income for the quarter
was $1.4 million and dividends paid to shareholders amounted to $.8
million.
The Association is required by the Office of Thrift Supervision to
maintain certain minimum levels of tangible, core, and risk-based capital.
The following table presents the Association's regulatory capital position
at March 31, 2000:
Minimum Required
For Capital
Actual Adequacy Purposes
------------------ -----------------
($ in thousands)
Total capital (to risk weighted assets) $38,056 16.26% $19,496 8.00%
Tier 1 (core) capital (to risk weighted assets) $36,811 15.10% $ 9,748 4.00%
Tier 1 (core) capital (to adjusted total assets) $36,811 9.30% $15,826 4.00%
Tangible capital (to adjusted total assets) $36,811 9.30% $ 5,953 1.50%
Results of Operations
Net income for the quarter ended March 31, 2000 was $1.39 million,
slightly higher than the $1.37 million for the quarter ended March 31,
1999. Net interest income was slightly less for the three months ended
March 31, 2000 than for the comparable period in 1999.
Total interest income was $89,000 more for the three months ended
March 31, 2000 than for the comparable period in 1999. The increase was
primarily the result of a larger average balance in net loans receivable.
Interest and fees on loans for the first quarter of 2000 amounted to $7.1
million compared to $6.8 million for the same period in 1999. Interest on
deposits declined from $297,000 in the quarter ending March 31, 1999 to
$159,000 in the same quarter in 2000. The decline is a result of smaller
average balances in overnight deposits and interest bearing time deposits
during the first quarter of 2000 compared to the first quarter of 1999.
Total interest expense was $98,000 more for the three months ended
March 31, 2000 than for the comparable period in 1999. The cost of FHLB
advances during the first quarter of 2000 amounted to $609,000 compared to
$486,000 during the first quarter of 1999. The average balance of FHLB
advances, as well as the rate paid, was higher in 2000 than in 1999.
Interest paid on deposits declined by $25,000 for the quarter ended March
31, 2000 compared to the same period in 1999. This was a result of slight
increases in average interest-bearing deposit balances offset by lower
average rates of interest paid (4.63% in 2000 compared to 4.69% in 1999).
The provision for loan losses was $23,000 for the quarter ended March
31, 2000 and $38,000 for the same quarter in 1999. The provision is based
upon management's assessment of probable losses inherent in the loan
portfolio for each period and, among other factors, the size of the loan
portfolio and activity in sales of mortgage loans relative to each period.
Noninterest income for the quarter ended March 31, 2000 was $230,000
compared to $235,000 for the same period in 1999. The slight decrease is
due primarily to lower income from servicing rights and gains on the sale
of loans to Freddie Mac.
Noninterest expense for the quarter ended March 31, 2000 was $1.71
million compared to $1.74 million for the same quarter in 1999. Salaries
and employee benefits expense for the first quarter of 2000 amounted to
$855,000 compared to $915,000 for the first quarter of 1999, due to tight
control of the number of full-time equivalent employees. Federal deposit
insurance premiums has been reduced to $15,000 for the first quarter of
2000 from $44,000 for the first quarter in 1999, based on a reduction in
the premium rate.
Occupancy and equipment expense increased from $90,000 in the first
quarter of 1999 to $99,000 during the same period in 2000. This was due to
the operation of the two new offices opened in the second and third
quarters of 1999. Data processing expense increased to $127,000 during the
three months ending March 31, 2000 compared to $111,000 during the same
period in 1999. This increase is a result of an increased number of
deposit and loan accounts. Advertising expense declined from $68,000 in
1999 to $59,000 in the same quarter of 2000 primarily due to the additional
advertising expense associated with the opening of the new offices in 1999.
Other non-interest expense increased from $298,000 in the period ending
March 31, 1999 to $344,000 in the same period of 2000. This increase was
due to expanded services and several small expenses associated with the
operation of the two new offices.
Year 2000 Issues
The Company's diligent effort to be Y2K compliant was successful with
virtually no problems in the first quarter of 2000. The year 2000
committee will continue to monitor all computer dependent systems
throughout the year 2000.
Forward Looking Statements
Certain statements contained in this report that are not historical
facts are forward looking statements that are subject to certain risks and
uncertainties. When used herein, the terms "anticipates," "plans,"
"expects," "believes," and similar expressions as they relate to the
Company or its management are intended to identify such forward looking
statements. The Company's actual results, performance or achievements may
materially differ from those expressed or implied in the forward looking
statements. Risks and uncertainties that could cause or contribute to such
material differences include, but are not limited to, general economic
conditions, interest rate environment, competitive conditions in the
financial services industry, changes in law, governmental policies and
regulations, and rapidly changing technology affecting financial services.
INDUSTRIAL BANCORP, INC.
Quantitative and Qualitative Disclosures about Market Risk
Asset and Liability Management
The Company is subject to interest rate risk to the extent that its
interest-earning assets reprice differently than its interest-bearing
liabilities. Exposure to interest rate risk is measured with the use of
interest rate sensitivity analysis to estimate the change in the Company's
"net portfolio value" ("NPV") in the event of hypothetical changes in
interest rates.
As part of its efforts to monitor and manage interest rate risk, the
Company's asset and liability committee reviews with the Board of
Directors, on a quarterly basis, reports provided by the Office of Thrift
Supervision ("OTS") and considers methods of maintaining acceptable levels
of changes in NPV. The Company's assets and liability management is
designed to minimize the impact of sudden and sustained changes in interest
rates on NPV. If estimated changes to NPV are not within the limits
established by the Board, the Board may direct management to adjust the
asset and liability mix to bring interest rate risk within board-approved
limits.
It is the intent of the Board not to exceed a moderate risk level.
The Association has increased the percentage of adjustable rate loans
granted in the first quarter of 2000 to 28.3% from 16.7% in the first
quarter of 1999. The percentage of adjustable rate loan in the portfolio
also increased slightly from 21.2% in 1999 to 21.3% in 2000. Based on
internal analysis, management believes Industrial's interest rate risk
sensitivity did not materially change between December 31, 1999 and March
31, 2000. However, the increase in interest rates continues to increase
the Association's overall interest rate sensitivity.
INDUSTRIAL BANCORP, INC.
Form 10-Q
Other Information
Part II
Item 1. Legal Proceedings
-----------------
Not applicable.
Item 2. Changes in Securities
---------------------
Not applicable.
Item 3. Defaults upon Senior Securities
-------------------------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Not applicable.
Item 5. Other Information
-----------------
Not applicable
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
Not applicable.
INDUSTRIAL BANCORP, INC.
Form 10-Q
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Date: 04/28/00 By: /s/ Lawrence R. Rhoades
----------- --------------------------------
Lawrence R. Rhoades
Chairman of the Board and
Chief Financial Officer
Date: 04/28/00 By: /s/ David M. Windau
----------- --------------------------------
David M. Windau
President and
Chief Executive Officer