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, 1998
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 4, 1998:
5,030,300 common shares, no par value
INDUSTRIAL BANCORP, INC.
Form 10-Q
For the Quarter ended March 31, 1998
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 Flow........................ 7
Notes to Consolidated Financial Statements............................ 8
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................. 9
Part II - Other Information..................................................... 11
Signatures...................................................................... 12
2.
INDUSTRIAL BANCORP, INC.
Consolidated Balance Sheets
(Unaudited, $ in thousands except per share data)
03/31/98 12/31/97
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ASSETS
Cash and noninterest-bearing deposits $ 1,444 $ 1,273
Interest-bearing demand deposits 2,655 3,499
Overnight deposits 9,000 6,000
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Cash and cash equivalents 13,099 10,772
Investment securities available for sale, at fair value 20,329 21,030
Investment securities held to maturity (fair value:
1998--$397; 1997--$474) 368 437
Federal Home Loan Bank stock 2,990 2,938
Loans receivable, net 329,955 321,669
Office properties and equipment, net 5,030 4,972
Accrued interest receivable and other assets 2,264 2,206
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Total assets $ 374,035 $ 364,023
=======================
LIABILITIES
Deposits $ 272,009 $ 270,957
Federal Home Loan Bank advances 37,000 29,000
Dividend payable
Accrued interest payable and other liabilities 3,395 3,204
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Total liabilities 312,404 303,161
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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 1,984 1,879
Retained earnings 35,263 34,569
Treasury stock, at cost: 476,700 shares at 3/31/98, 451,700
shares at 12/31/97 (6,760) (6,306)
Unearned employee stock ownership plan shares (3,422) (3,529)
Unearned compensation (1,622) (1,753)
Unrealized gain on securities available for sale 1,519 1,333
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Total shareholders' equity 61,631 60,862
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Total liabilities and shareholders' equity 374,035 364,023
=======================
Book value per share $ 12.14 $ 11.93
3.
INDUSTRIAL BANCORP, INC.
Consolidated Statements of Net Income
(Unaudited, $ in thousands except per share data)
Three months ended
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03/31/98 03/31/97
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Interest income
Interest and fees on loans $ 6,946 $ 6,122
Interest and dividends on investment securities 343 386
Interest on deposits 118 73
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Total interest income 7,407 6,581
Interest expense
Interest on deposits 3,291 3,093
Interest on FHLB advances 514 94
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Total interest expense 3,805 3,187
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Net interest income 3,602 3,394
Provision for loan losses 45 49
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Net interest income after provision for loan losses 3,557 3,345
Noninterest income
Service fees and other charges 128 101
Other 12 10
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Total noninterest income 140 111
Noninterest expense
Salaries and employee benefits 832 782
State franchise tax 120 214
Federal deposit insurance premiums 43 10
Occupancy and equipment 89 81
Data processing 110 98
Depreciation 98 65
Other 346 315
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Total noninterest expense 1,638 1,565
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Income before income tax 2,059 1,891
Provision for income tax 701 671
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Net income $ 1,358 $ 1,220
===================
Basic earnings per share $ 0.29 $ 0.24
Diluted earnings per share $ 0.28 $ 0.24
4.
INDUSTRIAL BANCORP, INC.
Consolidated Statements of Comprehensive Income
(Unaudited, $ in thousands)
Three months ended
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03/31/98 03/31/97
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Net income $ 1,358 $ 1,220
Other comprehensive income, net of tax:
Change in unrealized gain on securities 186 (159)
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Comprehensive Income $ 1,544 $ 1,061
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5.
INDUSTRIAL BANCORP, INC.
Consolidated Statements of Shareholders' Equity
(Unaudited, $ in thousands)
Total
shareholders'
equity
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Balance at January 1, 1997 $ 62,104
Net income 1,220
Cash dividends ($.12 per share) (508)
Purchase of treasury stock (94,500 shares) (1,202)
Employee Stock Ownership Plan:
Shares released 143
Management Recognition Plan:
Compensation earned 131
Change in unrealized gain on securities available for sale (159)
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Balance at March 31, 1997 $ 61,729
========
Balance at January 1, 1998 $ 60,862
Net income 1,358
Cash dividends ($.14 per share) (664)
Purchase of treasury stock (25,000 shares) (454)
Employee Stock Ownership Plan:
Shares released 212
Management Recognition Plan:
Compensation earned 131
Change in unrealized gain on securities available for sale 186
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Balance at March 31, 1998 $ 61,631
========
6.
INDUSTRIAL BANCORP, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited, $ in thousands)
Three months ended
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03/31/98 03/31/97
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Cash flows from operating activities
Net income $ 1,358 $ 1,220
Adjustments to reconcile net income to net cash from
operating activities 256 (378)
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Net cash from operating activities 1,614 842
Cash flows from investing activities
Investment securities available for sale:
Purchases (2,005) (2,997)
Proceeds from maturities 3,000 3,000
Mortgage-backed securities principal repayments 69 32
Net increase in loans (8,129) (5,737)
FHLB stock purchases -- --
Properties and equipment expenditures, net (156) (15)
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Net cash from investing activities (7,221) (5,717)
Cash flows from financing activities
Net increase in deposits 1,052 1,929
Proceeds from FHLB advances 10,000 6,000
Repayments of FHLB advances (2,000) --
Purchase of treasury stock (454) (1,202)
Cash dividends paid (664) (508)
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Net cash from financing activities 7,934 6,219
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Net change in cash and cash equivalents 2,327 1,344
Cash and cash equivalents at beginning of period 10,772 7,413
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Cash and cash equivalents at end of period $ 13,099 $ 8,757
=====================
7.
INDUSTRIAL BANCORP, INC.
Notes to Consolidated Financial Statements
Summary of Significant Accounting Policies
These interim financial statements are presented in accordance with the
SEC's rules for quarterly financial information without audit 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, 1998 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 1997 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.
Comprehensive Income
Under a new accounting standard, comprehensive income is now reported for
all periods. Comprehensive income includes net income and the change in
unrealized gains and losses on securities available for sale.
Earnings Per Share
Basic earnings per common share have been computed based on 4,738,370 and
5,055,870 weighted average number of common shares outstanding during the
quarter ended March 31, 1998 and 1997, respectively. Diluted earnings per
common share have been computed based on 4,848,441 and 5,088,900 weighted
average number of common shares outstanding during the quarter ended March 31,
1998 and 1997, respectively. 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.
Commitments and Contingencies
As of March 31, 1998, commitments to originate loans and loans in process
to be funded in six months or less totaled $23.5 million.
8.
INDUSTRIAL BANCORP, INC.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Financial Condition
Total assets increased $10.0 million to $374.0 million at March 31, 1998
from $364.0 million at December 31, 1997. The increase in total assets is
primarily attributable to $8.3 million growth in net loans receivable during
the first three months of 1998. Cash and cash equivalents also increased to
$13.1 million at March 31, 1998 from $10.8 million at December 31, 1997.
Liquidity of the Association exceeded the regulatory requirement at March 31,
1998.
Asset growth was funded primarily by $8.0 million in additional advances
from the Federal Home Loan Bank of Cincinnati ("FHLB"), and to a lesser degree
by deposit growth of $1.0 million. Total deposits were $272.0 million at March
31, 1998, compared to $271.0 million at December 31, 1997. The Association has
initiated a program to sell upon origination one-to-four-family mortgage loans
with fixed rates of interest to Freddie Mac. The sales program is scheduled to
begin during the second quarter of 1998. The Association intends to continue to
fund loan demand in excess of deposit growth and loan sales with advances from
the FHLB.
Total shareholders' equity increased to $61.6 million at March 31, 1998
from $60.9 million at December 31, 1997. Net income of $1.4 million for the
first three months of 1998 was offset somewhat by $454,000 in purchases of
treasury shares. The Company repurchased 25,000 shares of its common stock
during the first three months of 1998. These repurchases represent part of the
Company's second 5% buyback plan, which is very near completion.
The Association is required by the Office of Thrift Supervision to
maintain certain minimum levels of tangible, core, and risk-based capital. The
following table presents the Association's regulatory capital position at March
31, 1998:
Minimum Required
For Capital
Actual Adequacy Purposes
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($ in thousands)
Total capital (to risk weighted assets) $39,148 19.27% $16,251 8.00%
Tier 1 (core) capital (to risk weighted assets) $37,409 18.42% $ 8,125 4.00%
Tier 1 (core) capital (to adjusted total assets) $37,409 10.06% $11,160 3.00%
Tangible capital (to adjusted total assets) $37,409 10.06% $ 5,580 1.50%
9.
INDUSTRIAL BANCORP, INC.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Results of Operations
Net income for the three months ended March 31, 1998 was $1.36 million
compared to $1.22 million for the three months ended March 31, 1997. Net
interest income was $208,000 more for the three months ended March 31, 1998
than for the comparable period in 1997.
Total interest income was $826,000 more for the three months ended March
31, 1998 than for the comparable period in 1997. The increase was primarily the
result of an increased average balance in net loans receivable, which resulted
in an increase of $824,000 in interest and fees on loans for the first quarter
of 1998.
Total interest expense was $618,000 more for the three months ended March
31, 1998 than for the same period in 1997. The cost of FHLB advances during the
first quarter of 1998 amounted to $514,000 compared to $94,000 during the first
quarter of 1997. The average balance of FHLB advances was significantly greater
in 1998 than in 1997. Somewhat higher rates of interest paid on increased
average interest-bearing deposit balances caused the interest paid on deposits
to increase by $198,000 for the quarter ended March 31, 1998 compared to the
same period in 1997.
The provision for loan losses was $45,000 and $49,000 for the three
months ended March 31, 1998 and 1997, respectively, based upon management's
assessment of reasonably foreseeable losses inherent in the loan portfolio for
each period.
Noninterest income for the three months ended March 31, 1998 was $140,000
compared to $111,000 for the same period in 1997, due primarily to higher
service fee income on an increased average balance of deposits.
Noninterest expense was $1.64 million and $1.57 million for the three
months ended March 31, 1998 and 1997, respectively. Salaries and employee
benefits expense for the first quarter of 1998 amounted to $832,000 compared to
$782,000 for the first quarter of 1997, due to a higher number of full-time
equivalent employees and normal pay increases. State franchise tax has been
reduced from $214,000 for the first quarter of 1997 to $120,000 for the first
quarter in 1998, due to an intercompany transfer of capital from Industrial
Savings to Industrial Bancorp late in 1997. Depreciation expense increased to
$98,000 during the quarter ended March 31, 1998 compared to $65,000 during the
same quarter in 1997, as a result of a substantial upgrade in technology -
teller equipment, computers, appraisal department & software - completed during
the first quarter of 1998.
10.
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
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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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On April 2, 1998, the Company's Board of Directors declared a
quarterly dividend of $0.15 per common share, an increase of $0.01
over the $0.14 per common share dividend declared in the prior
quarter.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
Not applicable.
11.
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: 5/4/98 By: /s/ Lawrence R. Rhoades
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Lawrence R. Rhoades
Chairman of the Board and
Chief Financial Officer
Date: 5/4/98 By: /s/ David M. Windau
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David M. Windau
President and
Chief Executive Officer
12.