UNITED STATES
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, 2001
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
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(Commission File No.) (IRS Employer I.D. No.)
INDUSTRIAL BANCORP, INC.
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(Exact name of registrant as specified in its charter)
OHIO
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(State of jurisdiction or incorporation)
211 North Sandusky Street, Bellevue, Ohio 44811
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(Address of principal executive office) (Zip Code)
(419) 483-3375
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(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 May 9, 2001:
4,284,751 common shares, no par value
INDUSTRIAL BANCORP, INC.
Form 10-Q
For the Quarter ended March 31, 2001
Part I - Financial Information
Item 1: Financial Statements
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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 Income 4
Consolidated Statements of Comprehensive Income 5
Condensed 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
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Part II - Other Information 13
Signatures 14
INDUSTRIAL BANCORP, INC.
Consolidated Balance Sheets (Unaudited)
(Dollars in thousands, except per share data)
3/31/01 12/31/00
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ASSETS
Cash and noninterest-bearing deposits $ 1,232 $ 1,242
Interest-bearing demand deposits 6,830 5,154
Overnight deposits 18,000 16,000
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Cash and cash equivalents 26,062 22,396
Securities available for sale, at fair value 12,019 14,051
Securities held to maturity
(fair value: 3/31/01 - $117, 12/31/00 - $119) 110 118
Loans receivable 381,311 380,747
Less: Allowance for loan losses (2,195) (2,100)
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Loans receivable, net 379,116 378,647
Federal Home Loan Bank stock 3,820 3,753
Office properties and equipment, net 5,216 5,292
Accrued interest receivable 2,640 2,490
Other assets 585 550
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Total assets $429,568 $427,297
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LIABILITIES
Deposits $315,713 $314,503
Federal Home Loan Bank advances 50,000 50,000
Accrued interest payable and other liabilities 4,237 4,129
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Total liabilities 369,950 368,632
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 3,223 3,129
Retained earnings 43,350 42,691
Accumulated other comprehensive income 1,995 2,021
Unearned employee stock ownership plan shares (2,199) (2,294)
Unearned compensation (44) (175)
Treasury stock, at cost
(1,210,617 shares - 2001 and 2000) (21,376) (21,376)
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Total shareholders' equity 59,618 58,665
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Total liabilities and shareholders' equity $429,568 $427,297
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Book value per share $ 13.72 $ 13.51
See accompanying notes to financial statements
INDUSTRIAL BANCORP, INC.
Consolidated Statements of Income (Unaudited)
(Dollars in thousands, except per share data)
Three months ended
3/31/01 3/31/00
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Interest income
Interest and fees on loans $8,083 $7,139
Interest and dividends on securities 244 265
Interest on deposits 189 159
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Total interest income 8,516 7,563
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Interest expense
Interest on deposits 3,953 3,322
Interest on Federal Home Loan Bank advances 775 609
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Total interest expense 4,728 3,931
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Net interest income 3,788 3,632
Provision for loan losses 120 23
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Net interest income after provision for loan losses 3,668 3,609
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Noninterest income
Service fees and other charges 204 209
Other 119 21
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Total noninterest income 323 230
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Noninterest expense
Salaries and employee benefits 875 855
Federal deposit insurance premiums 15 15
Occupancy and equipment 113 99
Depreciation 88 112
Data processing 123 127
Advertising 26 59
Other 497 444
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Total noninterest expense 1,737 1,711
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Income before income tax 2,254 2,128
Provision for income tax 815 735
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Net income $1,439 $1,393
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Basic earnings per share $ 0.35 $ 0.34
Diluted earnings per share $ 0.34 $ 0.33
See accompanying notes to financial statements
INDUSTRIAL BANCORP, INC.
Consolidated Statements of Comprehensive Income (Unaudited)
(Dollars in thousands)
Three months ended
3/31/01 3/31/00
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Net income $1,439 $1,393
Other comprehensive income:
Unrealized gain/loss on securities, net of tax (26) (145)
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Comprehensive Income $1,413 $1,248
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See accompanying notes to financial statements
INDUSTRIAL BANCORP, INC.
Condensed Consolidated Statements of Shareholders' Equity (Unaudited)
(Dollars in thousands, except per share data)
Total
Shareholders'
Equity
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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)
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Balance at March 31, 2000 $55,150
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Balance at January 1, 2001 $58,665
Net income 1,439
Cash dividends (780)
($.19 per share)
Employee Stock Ownership Plan:
Shares released 189
Management Recognition Plan:
Compensation earned 131
Change in unrealized gain on securities available for sale (26)
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Balance at March 31, 2001 $59,618
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See accompanying notes to financial statements
INDUSTRIAL BANCORP, INC.
Condensed Consolidated Statements of Cash Flows
(Dollars in thousands)
Three months ended
3/31/01 3/31/00
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Cash flows from operating activities
Net income $ 1,439 $ 1,393
Adjustments to reconcile net income to net cash from
operating activities 393 489
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Net cash from operating activities 1,832 1,882
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Cash flows from investing activities
Net decrease in interest-bearing time deposits - 5,500
Securities available for sale:
Purchases - (3,000)
Proceeds from maturities 2,000 2,000
Principal repayments of securities held to maturity 8 19
Net decrease (increase) in loans (592) (6,071)
Properties and equipment expenditures, net (12) (19)
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Net cash from investing activities 1,404 (1,571)
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Cash flows from financing activities
Net (decrease) increase in deposits 1,210 (262)
Proceeds from FHLB advances 23,000 18,000
Repayments of FHLB advances (23,000) (11,000)
Purchase of treasury stock - (221)
Cash dividends paid (780) (785)
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Net cash from financing activities 430 5,732
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Net change in cash and cash equivalents 3,666 6,043
Cash and cash equivalents at beginning of period 22,396 9,952
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Cash and cash equivalents at end of period $ 26,062 $ 15,995
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Cash paid during the period for:
Interest $ 4,590 $ 3,931
Income taxes 178 123
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, 2001, and the results of operations and cash flows for the periods
presented. All such adjustments are normal and recurring in nature. All
significant inter-company 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 and management's discussion and analysis included in the
December 31, 2000 Form 10-K 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
3/31/01 3/31/00
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Basic earnings per share 4,134,806 4,116,004
Diluted earnings per share 4,244,597 4,168,546
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, 2001, commitments to originate loans and loans in
process to be funded totaled $15.6 million. All of the commitments to
originate loans expire within twelve months.
As of March 31, 2001, the Association had outstanding $19.1 million
in letters of credit from the Federal Home Loan Bank as security pledged
against public deposits.
Acquisitions
On December 9, 2000, a merger agreement was signed between United
Community Financial Corp. (and its wholly-owned subsidiary The Home Savings
and Loan Company of Youngstown, Ohio) and Industrial Bancorp, Inc. (and its
wholly-owned subsidiary The Industrial Savings and Loan Association.) The
agreement was amended on January 30, 2001. At the effective time of the
merger, each share of Industrial Bancorp, Inc. will be exchanged for
$20.375 all in cash. The agreement provides for Industrial Bancorp, Inc. to
be merged into an acquiring subsidiary and then merged into The Home
Savings and Loan Company of Youngstown, Ohio. The shareholders of
Industrial Bancorp, Inc. ratified the agreement at a shareholders' meeting
held on April 17, 2001. The acquisition is expected to be consummated in
the second quarter of 2001 and is subject to approvals by various
regulatory authorities and shareholders.
INDUSTRIAL BANCORP, INC.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
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 related 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.
Financial Condition
Total assets increased to $429.6 million at March 31, 2001 from
$427.3 million at December 31, 2000. The increase in total assets is
primarily attributable to a $1.7 million increase in interest-bearing
demand deposits and a $.5 million increase in net loans receivable during
the first quarter of 2001. Cash and cash equivalents increased $3.7 million
while securities available for sale decreased $2.0 million during the first
three months of 2001.
FHLB advances remained constant at $50.0 million at March 31, 2001 as
compared to December 31, 2000. Deposits increased $1.2 million during the
quarter to $315.7 million at March 31, 2001.
Total shareholders' equity increased to $59.6 million at March 31,
2001, from $58.7 million at December 31, 2000. Net income for the quarter
was $1.4 million and dividends paid to shareholders amounted to $.8
million.
The Association is required by the Office of Thrift Supervision to
maintain certain minimum levels of tangible, core and risk-based capital.
The following table presents the Association's regulatory capital position
at March 31, 2001:
Minimum Required
For Capital
Actual Adequacy Purposes
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($ in thousands)
Total capital (to risk weighted assets) $41,823 15.54% $21,526 8.00%
Tier 1 (core) capital (to risk weighted assets) $38,481 14.30% $ 8,072 3.00%
Tier 1 (core) capital (to adjusted total assets) $38,481 9.02% $12,799 3.00%
Tangible capital (to adjusted total assets) $38,481 9.02% $ 6,400 1.50%
Results of Operations
Net income for the quarter ended March 31, 2001 was $1.44 million,
slightly higher than the $1.39 million for the quarter ended March 31,
2000. Net interest income was slightly higher for the three months ended
March 31, 2001 than for the comparable period in 2000.
Total interest income was $953,000 higher for the three months ended
March 31, 2001 than for the comparable period in 2000. 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 2001 amounted to $8.0
million compared to $7.1 million for the same period in 2000. Interest on
deposits increased from $159,000 in the quarter ending March 31, 2000 to
$189,000 in the same quarter in 2001. The increase is a result of larger
average balances in overnight deposits and interest-bearing demand deposits
during the first quarter of 2001 compared to the first quarter of 2000.
Total interest expense was $797,000 higher for the three months ended
March 31, 2001 than for the comparable period in 2000. The cost of FHLB
advances during the first quarter of 2001 amounted to $775,000 compared to
$609,000 during the first quarter of 2000. The average balance of FHLB
advances, as well as the rate paid, was higher in 2001 than in 2000.
Interest paid on deposits increased by $631,000 for the quarter ended March
31, 2001 compared to the same period in 2000. This was a result of an
increase in average interest-bearing deposit balances and higher average
rates of interest paid on those deposits.
The provision for loan losses was $120,000 for the quarter ended
March 31, 2001 and $23,000 for the same quarter in 2000. 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, 2001 was $323,000
compared to $230,000 for the same period in 2000. The increase is due
primarily to income from servicing rights and gains on the sale of loans to
Freddie Mac.
Noninterest expense for the quarter ended March 31, 2001 was $1.73
million compared to $1.71 million for the same quarter in 2000. Salaries
and employee benefits expense for the first quarter of 2001 amounted to
$875,000 compared to $855,000 for the first quarter of 2000, due to tight
control of the number of full-time equivalent employees.
Occupancy and equipment expense increased from $99,000 in the first
quarter of 2000 to $113,000 during the same period in 2001. This was due to
increased maintenance and utilities costs. Data processing expense
decreased to $123,000 during the three months ending March 31, 2001
compared to $127,000 during the same period in 2000. Advertising expense
declined from $59,000 in 2000 to $26,000 in the same quarter of 2001
primarily due to the elimination of additional advertising expense
associated with the opening of the new offices in 1999. Other non-interest
expense increased from $444,000 in the period ending March 31, 2000 to
$497,000 in the same period of 2001. This increase was due to the
prepayments of the mortgage loans serviced by the Association accelerating
the amortization of loan servicing rights and legal and consulting
expenses.
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 decreased the percentage of adjustable rate loans
granted in the first quarter of 2001 to 8.9% from 28.3% in the first
quarter of 2000. The percentage of adjustable rate loan in the portfolio
also decreased from 21.3% in 2000 to 20.2% in 2001. Based on internal
analysis, management believes Industrial's interest rate risk sensitivity
did not materially change between December 31, 2000 and March 31, 2001.
INDUSTRIAL BANCORP, INC.
Form 10-Q
Other Information
Part II
Item 1. Legal Proceedings
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Not applicable.
Item 2. Changes in Securities and Use of Proceeds
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Not applicable.
Item 3. Defaults upon Senior Securities
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Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
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Not applicable.
Item 5. Other Information
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The 2001 Annual Meeting of Shareholders will be delayed
indefinitely in anticipation of the closing of the acquisition
of the Company and the Association by United Community
Financial Corp. and The Home Savings and Loan Company of
Youngstown, Ohio.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) None.
(b) None.
INDUSTRIAL BANCORP, INC.
Form 10-Q
Signatures
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.
Industrial Bancorp,Inc.
Date: 05/14/01 By: /s/ Lawrence R. Rhoades
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Lawrence R. Rhoades
Chairman of the Board and
Chief Financial Officer
Date: 05/14/01 By: /s/ David M. Windau
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David M. Windau
President and
Chief Executive Officer