1
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 QUARTER ENDED JUNE 30, 2001
COMMISSION FILE NUMBER 000-24147
KILLBUCK BANCSHARES, INC.
(Exact name of registrant as specified in its Charter)
OHIO 34-1700284
---- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
165 N. MAIN STREET, KILLBUCK, OH 44637
--------------------------------------
(Address of principal executive offices and zip code)
(330) 276-2771
--------------
(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 Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES _X_ NO ___
State the number of shares outstanding for each of the issuer's classes of
common equity as of the latest practicable date:
Class: Common Stock, no par value
Outstanding at August 8, 2001: 697,579
2
KILLBUCK BANCSHARES, INC.
INDEX
Page Number
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Consolidated Balance Sheet as of
June 30, 2001 and December 31, 2000 3
Consolidated Statements of Income for the
six months ended June 30, 2001 and 2000 4
Consolidated Statements of Income for the
three months ended June 30, 2001 and 2000 5
Consolidated Statements of Changes In Shareholders' Equity for the
six months ended June 30, 2001 6
Consolidated Statements of Cash Flows for the
six months ended June 30, 2001 and 2000 7
Notes to Unaudited Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial Condition
And Results of Operations 9-17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 2. Changes in Securities 18
Item 3. Default Upon Senior Securities 18
Item 4. Submissions of Matters to a Vote of Security Holders 18
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 19
SIGNATURES 20
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KILLBUCK BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET (UNAUDITED)
June 30, December 31,
2001 2000
---- ----
ASSETS
Cash and cash equivalents:
Cash and amounts due from depository institutions $ 11,288,589 $ 9,512,736
Federal funds sold 12,800,000 11,000,000
------------ ------------
Total cash and cash equivalents 24,088,589 20,512,736
------------ ------------
Investment securities:
Securities available for sale 43,754,614 47,477,388
Securities held to maturity (market value of $39,881,269
and $37,859,321) 38,794,931 36,129,625
------------ ------------
Total investment securities 82,549,545 83,607,013
------------ ------------
Loans (net of allowance for loan losses of $2,292,270
and $2,358,759) 151,017,154 149,061,901
Loans held for sale 461,000 520,000
Premises and equipment, net 4,959,765 4,528,169
Accrued interest receivable 1,567,476 1,885,665
Other assets 1,805,291 1,884,545
------------ ------------
Total assets $266,448,820 $262,000,029
============ ============
LIABILITIES
Deposits:
Noninterest bearing demand $ 29,905,490 $ 31,815,997
Interest bearing demand 26,788,166 27,833,483
Money market 12,842,518 10,249,064
Savings 30,741,474 28,493,290
Time 123,884,475 120,776,058
------------ ------------
Total deposits 224,162,123 219,167,892
Federal Home Loan Bank advances 5,653,070 6,197,930
Short-term borrowings 3,589,952 4,315,768
Accrued interest and other liabilities 552,731 577,274
------------ ------------
Total liabilities 233,957,876 230,258,864
------------ ------------
SHAREHOLDERS' EQUITY
Common stock - No par value: 1,000,000 shares authorized,
718,431 issued 8,846,670 8,846,670
Retained earnings 24,515,893 23,614,590
Accumulated other comprehensive income 486,486 168,141
Treasury stock, at cost (20,852 and 15,883 shares) (1,358,105) (888,236)
------------ ------------
Total shareholders' equity 32,490,944 31,741,165
------------ ------------
Total liabilities and shareholders' equity $266,448,820 $262,000,029
============ ============
See accompanying notes to the consolidated financial statements.
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KILLBUCK BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
Six Months Ended
June 30,
2001 2000
---- ----
INTEREST INCOME
Interest and fees on loans $7,307,380 $6,840,630
Federal funds sold 413,844 248,444
Investment securities:
Taxable 1,372,540 1,376,735
Exempt from federal income tax 820,923 795,321
---------- ----------
Total interest income 9,914,687 9,261,130
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INTEREST EXPENSE
Deposits 4,715,922 4,054,097
Federal Home Loan Bank advances 200,770 231,471
Short term borrowings 47,946 78,610
---------- ----------
Total interest expense 4,964,638 4,364,178
---------- ----------
NET INTEREST INCOME 4,950,049 4,896,952
Provision for loan losses 172,500 120,000
---------- ----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN
LOSSES 4,777,549 4,776,952
---------- ----------
OTHER INCOME
Service charges on deposit accounts 275,436 240,683
Gain on sale of loans, net 22,475 4,822
Other income 47,321 69,606
---------- ----------
Total other income 345,232 315,111
---------- ----------
OTHER EXPENSE
Salaries and employee benefits 1,576,515 1,419,861
Occupancy expense 113,237 93,044
Equipment expense 323,732 307,685
Professional fees 155,361 155,833
Franchise tax 195,184 165,770
Other expenses 832,916 715,911
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Total other expense 3,196,945 2,858,104
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INCOME BEFORE INCOME TAXES 1,925,836 2,233,959
Income taxes 466,471 557,681
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NET INCOME $1,459,365 $1,676,278
========== ==========
EARNING PER COMMON SHARE $ 2.09 $ 2.38
========== ==========
AVERAGE SHARES OUTSTANDING 698,120 705,166
========== ==========
See accompanying notes to the unaudited consolidated financial statements.
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KILLBUCK BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
Three Months Ended
June 30,
2001 2000
---- ----
INTEREST INCOME
Interest and fees on loans $3,587,516 $3,500,837
Federal funds sold 245,568 168,785
Investment securities:
Taxable 669,069 679,558
Exempt from federal income tax 420,392 400,436
---------- ----------
Total interest income 4,922,545 4,749,616
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INTEREST EXPENSE
Deposits 2,310,330 2,096,809
Federal Home Loan Bank advances 98,574 114,625
Short term borrowings 17,952 41,695
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Total interest expense 2,426,856 2,253,129
---------- ----------
NET INTEREST INCOME 2,495,689 2,496,487
Provision for loan losses 90,000 60,000
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NET INTEREST INCOME AFTER PROVISION FOR LOAN
LOSSES 2,405,689 2,436,487
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OTHER INCOME
Service charges on deposit accounts 143,238 125,078
Gain on sale of loans, net 11,637 2,745
Other income 25,025 30,155
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Total other income 179,900 157,978
---------- ----------
OTHER EXPENSE
Salaries and employee benefits 836,637 745,100
Occupancy expense 47,226 37,418
Equipment expense 154,008 147,516
Professional fees 65,541 65,202
Franchise tax 97,158 88,082
Other expenses 433,709 380,337
---------- ----------
Total other expense 1,634,279 1,463,655
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INCOME BEFORE INCOME TAXES 951,310 1,130,810
Income taxes 217,171 288,320
---------- ----------
NET INCOME $ 734,139 $ 842,490
========== ==========
EARNING PER COMMON SHARE $ 1.05 $ 1.19
========== ==========
AVERAGE SHARES OUTSTANDING 697,579 705,037
========== ==========
See accompanying notes to the unaudited consolidated financial statements.
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KILLBUCK BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2001
Accumulated
Other Total
Common Retained Comprehensive Treasury Shareholders' Comprehensive
Stock Earnings Income Stock Equity Income
----- -------- ------ ----- ------ ------
BALANCE, DECEMBER 31, 2000 $8,846,670 $23,614,590 $ 168,141 $ (888,236) $31,741,165
Net income 1,459,365 1,459,365 $1,459,365
Other comprehensive income:
Net unrealized gain on securities 318,345 318,345 318,345
----------
Comprehensive income $1,777,710
==========
Purchase of Treasury stock (469,869) (469,869)
Cash dividends paid ($.80 per share) (558,062) (558,062)
---------- ----------- ---------- ----------- -----------
BALANCE, JUNE 30, 2001 $8,846,670 $24,515,893 $ 486,486 $(1,358,105) $32,490,944
========== =========== ========== =========== ===========
See accompanying notes to the unaudited consolidated financial statements.
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KILLBUCK BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
Six Months Ended
June 30,
2001 2000
---- ----
OPERATING ACTIVITIES
Net income $ 1,459,365 $ 1,676,278
Adjustments to reconcile net income to net cash provided by
Operating activities:
Provision for loan losses 172,500 120,000
Gain on sale of loans (22,475) (4,822)
Provision for depreciation and amortization 262,750 200,030
Origination of loans held for sale (3,760,510) (1,354,120)
Proceeds from the sale of loans 3,841,985 1,714,942
Federal Home Loan Bank stock dividend (35,600) (31,700)
Net Change in:
Accrued interest and other assets 233,447 (299,477)
Accrued expenses and other liabilities (24,543) (19,816)
------------ -----------
Net cash provided by operating activities 2,126,919 2,001,315
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INVESTING ACTIVITIES
Investment securities available for sale:
Proceeds from maturities and repayments 23,240,705 3,100,000
Purchases (19,013,306) (3,091,600)
Investment securities held to maturity:
Proceeds from maturities and repayments 505,621 100,000
Purchases (3,210,751) (634,666)
Net increase in loans (2,127,753) (3,480,409)
Purchase of premises and equipment (641,206) (356,021)
------------ -----------
Net cash used in investing activities (1,246,690) (4,362,696)
------------ -----------
FINANCING ACTIVITIES
Net increase in demand, money market and savings deposits 1,885,814 (1,797,731)
Net increase in time deposits 3,108,417 7,379,943
Repayment of Federal Home Loan Bank advances (544,860) (544,707)
Net decrease in short term borrowings (725,816) (605,000)
Purchase of Treasury stock (469,869) (52,414)
Dividends paid (558,062) (493,356)
------------ -----------
Net cash provided by (used in) financing activities 2,695,624 3,886,735
------------ -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,575,853 1,525,354
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 20,512,736 16,823,806
------------ -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 24,088,589 $18,349,160
============ ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION
Cash Paid During the Period For:
Interest on deposits and borrowings $ 5,002,585 $ 4,332,598
============ ===========
Income taxes $ 324,000 $ 500,000
============ ===========
See accompanying notes to the unaudited consolidated financial statements.
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KILLBUCK BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Killbuck
Bancshares, Inc. (the "Company") and its wholly-owned subsidiary Killbuck
Savings Bank Company (the "Bank"). All significant intercompany balances and
transactions have been eliminated in the consolidation.
The accompanying reviewed consolidated financial statements have been prepared
in accordance with the instructions to Form 10-Q and, therefore, do not
necessarily include all information that would be included in audited financial
statements. The information furnished reflects all adjustments, which are, in
the opinion of management, necessary for a fair statement of the results of
operations. All such adjustments are of a normal recurring nature. The results
of operations for the interim periods are not necessarily indicative of the
results to be expected for the full year.
These statements should be read in conjunction with the consolidated statements
of and for the year ended December 31, 2000 and related notes which are included
on the Form 10-K (file no. 000-24147)
NOTE 2 - EARNINGS PER SHARE
The Company currently maintains a simple capital structure; therefore, there are
no dilutive effects on earnings per share. As such, earnings per share are
calculated using the weighted number of shares for the period.
NOTE 3 - RECENT ACCOUNTING PRONOUNCEMENTS
In July 2001, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 141, Business Combinations, effective for
all business combinations initiated after Jun 30, 2001, as well as all business
combinations accounted for by the purchase method that are completed after June
30, 2001. The new statement requires that the purchase method of accounting be
used for all business combinations and prohibits the use of the
pooling-of-interests method. The adoption of Statement No. 141 is not expected
to have a material effect on the Company's financial position or results of
operations.
In July 2001, the FASB issued Statement of Financial Accounting Standards No.
142, Goodwill and Other Intangible Assets, effective for fiscal years beginning
after December 15, 2001. The new statement changes the accounting for goodwill
from an amortization method to an impairment-only approach. Thus, amortization
of goodwill, including goodwill recorded in past business combinations, will
cease upon adoption of this Statement. At June 30, 2001, the Company has
approximately $1.4 million of intangibles resulting from the purchase of another
financial institution.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Private Securities Litigation Reform Act of 1995 contains safe harbor
provisions regarding forward-looking statements. When used in this discussion,
the words "believes", "anticipates", "contemplates", "expects", and similar
expressions are intended to identify forward-looking statements. Such statements
are subject to certain risks and uncertainties, which could cause actual results
to differ materially from those projected. Those risks and uncertainties include
changes in interest rates, risks associated with the ability to control costs
and expenses, and general economic conditions. Killbuck Bancshares, Inc.
undertakes no obligation to publicly release the results of any revisions to
those forward-looking statements, which may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
The Company conducts no significant business or operations of its own other than
holding all of the outstanding stock of the Killbuck Savings Bank Company. As a
result, references to the Company generally refer to the Bank unless the context
indicates otherwise.
FINANCIAL CONDITION
Total assets at June 30, 2001 were approximately $266,449,000 compared to
$262,000,000 at December 31, 2000, an increase of $4,449,000 or 1.7%.
Cash and cash equivalents increased by $3,576,000 or 1.7% from December 31, 2000
to June 30, 2001, with federal funds sold increasing $1,800,000. This increase
improved the Bank's liquidity position for loan demand and investment security
purchases at June 30, 2001.
Total investments decreased by $1,057,000 or 1.3% from December 31, 2000 to June
30, 2001. There was a net decrease of $3,723,000 in available for sale U.S.
Government Agency securities due to called and maturing securities while
securities held to maturity increased by $2,665,000. The Bank had greater
purchases of investment securities during the first six months of 2001 due to
the callable options on some of the available for sale Securities.
Net loans increased by $1,955,000 or 1.3% from December 31, 2000 to June 30,
2001. A decrease of $1,487,000 occurred in the consumer loan category while real
estate loan balances increased by $1,001,000 and commercial loans increased by
$2,441,000.
Total deposits at June 30, 2001 were $224,162,000 compared to $219,168,000 at
December 31, 2000, an increase of $4,994,000 or 2.3%. Time deposits increased
$3,108,000, demand accounts decreased $2,956,000 and money market and savings
accounts increased $4,842,000. Management attributes these changes to normal
transfers of funds within the deposit accounts and the general decline in
interest rates.
Federal Home Loan Bank advances and short-term borrowings decreased $545,000 and
$726,000 respectively at June 30, 2001 from December 31, 2000.
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Shareholders' Equity increased by $750,000 or 2.36%, which was mainly due to
earnings of $1,459,000 for the first six months of 2001 accentuated by a
$319,000 increase in the unrealized gain on securities included in other
comprehensive income, and offset by the purchase of Treasury stock for $470,000
and dividends paid totaling $558,000. Management monitors risk-based capital and
leveraged capital ratios in order to assess compliance of the regulatory
guidelines. At June 30, 2001, the total capital ratio was 19.31%; the Tier I
capital ratio was 18.06%, and the leverage ratio was 11.63%, compared to
regulatory capital requirements of 8.00%, 4.00% and 4.00% respectively. These
ratios are well in excess of regulatory capital requirements.
The Company opened and began operating its new branch in Howard, Ohio, (Apple
Valley), in July, 2001.
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RESULTS OF OPERATIONS
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000
Total interest income of approximately $9,915,000 for the six-month period ended
June 30, 2001, compares to $9,261,000 for the same period in 2000, an increase
of $654,000 or 7.06%. The majority of the overall increase in total interest
income is attributed to an increase in interest and fees on loans of $466,000 or
71.3% of the overall increase. The increase in interest and fees on loans is due
to increased volume in the loan portfolio and an increase in the yield on loans.
Average loan balances were $153,955,000 for the first six months of 2001
compared to $145,950,000 for the first six months of 2000 and the yield on loans
increased to 9.49% for the first six months of 2001 compared to 9.37% for the
first six months of 2000. Investment income increased $22,000 or 1.0% for the
six-month period ended June 30, 2001 compared to the same period for 2000. The
increase in investment income is also due to an increase in volume. Average
investment balances were $77,465,000 compared to $76,813,000 and the yields were
5.66% compared to 5.66% for the first six months of 2001 and 2000 respectively.
See Average Balance Sheet for the six month periods ended June 30, 2001 and
2000.
Total interest expense of $4,965,000 for the six-month period ending June 30,
2001 represents an increase of $601,000 from the $4,364,000 reported for the
same six-month period in 2000. The increase in interest expense on deposits of
$662,000 is due mainly to the increases in the volume of deposit accounts.
Average interest bearing deposits were $192,739,000 for the first six months of
2001 compared to $177,317,000 for the first six months of 2000. The cost on
interest bearing deposits was 4.89%, compared to 4.57% for the six-month periods
of 2001 and 2000 respectively. See Average Balance Sheet for the six month
periods ended June 30, 2001 and 2000.
Net interest income of $4,950,000 for the six months ended June 30, 2001,
compares to $4,897,000 for the same six-month period in 2000, an increase of
$53,000 or 1.1%.
Total other income for the six month period ended June 30, 2001, of $345,000
compares to $315,000 for the same six month period in 2000, a increase of
$30,000 or 9.5%. The increase of $35,000 in service charges on deposit accounts
was attributable to normal activity within the deposit accounts due to an
increase in accounts. Gains on sale of loans increased $18,000 due to increased
activity caused by declining fixed loan rates. Other income decreased $23,000
due to a decrease of $26,000 in alternative investment income. The decrease in
alternative investment income is attributable to the absence of permanent
personnel in this area. However, a new broker/dealer relationship has been
secured and permanent personnel are now in place.
Total other expense of $3,197,000 for the six months ended June 30, 2001,
compares to $2,858,000 for the same six-month period in 2000. This represents an
increase of $339,000 or 11.9%. Salary and employee benefits increased
approximately $157,000 due to additional staff being hired as a result of
opening the branches in Sugarcreek and Howard, Ohio and normal increases in
salaries, staff additions and employee benefits. The increases in the remaining
expense accounts were attributable to the opening of the branches in Sugarcreek
and Howard, Ohio and increases in items that are normal and recurring in nature.
Net income for the six-month period ended June 30, 2001, was $1,459,000, a
decrease of $217,000 or 12.9% from the $1,676,000 reported at June 30, 2000.
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RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 2001 AND 2000
Total interest income of approximately $4,923,000 for the three-month period
ended June 30, 2001, compares to $4,750,000 for the same period in 2000, an
increase of $173,000 or 3.6%. The majority of the overall increase in total
interest income is attributed to an increase in interest and fees on loans of
$87,000 or 50.3% of the overall increase. The increase in interest and fees on
loans is due to increased volume in the loan portfolio. Average loan balances
were $154,289,000 compared to $147,107,000 and the yield was 9.30% compared to
9.52% for this three-month period of 2001 and 2000 respectively. The increase in
interest on investment securities of $9,000 was due to an increase in the
average balances outstanding of $76,301,000 for 2001 compared to $76,113,000 for
2000 and the yield was 5.71% compared to 5.68% for this three-month period of
2001 and 2000 respectively. See Average Balance Sheet for the three month
periods ended June 30, 2001 and 2000.
Total interest expense of $2,427,000 for the three-month period ending June 30,
2001, represents an increase of $174,000 from the $2,253,000 reported for the
same three-month period in 2000. The increase in interest expense on deposits of
$214,000 is due mainly to increases in volume. Average interest bearing deposits
were $194,365,000 for this three-month period of 2001 compared to $179,691,000
for the same three months of 2000. The cost of interest bearing deposits was
4.75% compared to 4.67% for this three-month period of 2001 and 2000
respectively. See Average Balance Sheet for the three month periods ended June
30, 2001 and 2000.
Net interest income of $2,496,000 for the three months ended June 30, 2001,
compares to $2,497,000 for the same three-month period in 2000, a decrease of
$1,000 or .04%.
Total other income for the three month period ended June 30, 2001, of $180,000
compares to $158,000 for the same three month period in 2000, an increase of
$22,000 or 13.9%. The service fee income on deposits increased $18,000 due to an
increase in the accounts being serviced. Gains on sale of loans increased $9,000
due to the Bank's increased activity caused by declining fixed loan rates.
Total other expense of $1,634,000 for the three months ended June 30, 2001,
compares to $1,464,000 for the same three-month period in 2000. This represents
an increase of $170,000 or 11.6%. Salary and employee benefits increased $92,000
in part to new employees due to the opening of the branch in Howard, Ohio and
normal recurring employee cost increases for salary, staff additions and
employee benefits. The increase in other expenses of $54,000 was due in part to
the opening of the branch in Howard, Ohio and increases in other expenses that
are generally thought to be normal and recurring in nature.
Net income for the three-month period ended June 30, 2001, was $734,000, a
decrease of $108,000 or 12.8% from the $842,000 reported at June 30, 2000.
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LIQUIDITY
Management monitors projected liquidity needs and determines the level desirable
based in part on the Company's commitments to make loans and management's
assessment of the Company's ability to generate funds.
The primary sources of funds are deposits, repayment of loans, maturities of
investments, funds provided from operations and advances from the FHLB of
Cincinnati. While scheduled repayments of loans and maturities of investment
securities are predictable sources of funds, deposit flows and loan repayments
are greatly influenced by the general level of interest rates, economic
conditions and competition. The Company uses its sources of funds to fund
existing and future loan commitments, to fund maturing time deposits and demand
deposit withdrawals, to invest in other interest-earning assets, to maintain
liquidity, and to meet operating expenses.
Cash and amounts due from depository institutions and federal funds sold totaled
$24,089,000 at June 30, 2001. These assets provide the primary source of
liquidity for the Company. In addition, management has designated a substantial
portion of the investment portfolio, $43,755,000 as available for sale and has
an available unused line of credit of $14,700,000 with the Federal Home Loan
Bank of Cincinnati to provide additional sources of liquidity at June 30, 2001.
As of June 30, 2001, the Company had commitments to fund loans of approximately
$828,000 and $21,910,000 in unused lines and letters of credit.
Cash was provided during the six month period ended June 30, 2001, mainly from
operating activities of $2.1 million, a net increase in deposits of $4.9
million, and the maturities and repayments of investment securities of $23.7
million. Cash was used during the six month period ended June 30, 2001, mainly
to fund a net increase in loans of $2.1 million, and for the purchase of
investment securities of $22.2 million. In addition $1.3 million was also used
to reduce Federal Home Loan Bank advances and short-term borrowings during the
first six months of 2001 and $.5 million was used to purchase Treasury Stock.
Cash and cash equivalents totaled $24.1 million at June 30, 2001, an increase of
$3.6 million from $20.5 million at December 31, 2000.
Management is not aware of any conditions, including any regulatory
recommendations or requirements, which would adversely affect its liquidity or
ability to meet its funding needs in the normal course of business.
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RISK ELEMENTS
The table below presents information concerning nonperforming assets including
nonaccrual loans, renegotiated loans, loans 90 days or more past due, other real
estate loans and repossessed assets at June 30, 2001, and December 31, 2000. A
loan is classified as nonaccrual when, in the opinion of management, there are
doubts about collectibility of interest and principal. At the time the accrual
of interest is discontinued, future income is recognized only when cash is
received. Renegotiated loans are those loans which terms have been renegotiated
to provide a reduction or deferral of principal or interest as of result of the
deterioration of the borrower.
June 31, December 31,
2001 2000
---- ----
(dollars in thousands)
Loans on nonaccrual basis $ 77 $298
Loans past due 90 days or more 179 340
Renegotiated loans -- --
---- ----
Total nonperforming loans 256 638
Other real estate -- --
Repossessed assets -- --
---- ----
Total nonperforming assets $256 $638
==== ====
Nonperforming loans as a percent of total loans 0.17% 0.42%
Nonperforming loans as a percent of total assets 0.10% 0.24%
Nonperforming assets as a percent of total assets 0.10% 0.24%
Management monitors impaired loans on a continual basis. As of June 2001,
impaired loans had no material effect on the Company's financial position or
results from operations.
The allowance for loan losses at June 30, 2001, totaled approximately $2,292,000
or 1.49% of total loans as compared to $2,359,000 or 1.55% at December 31, 2000.
Provisions for loan losses were $173,000 for the six months ended June 30, 2001
and $120,000 for the six months ended June 30, 2000.
The level of funding for the provision is a reflection of the overall loan
portfolio. Nonperforming loans consist of approximately $52,000 in one to four
family residential mortgages, $125,000 in commercial loans and $79,000 in
consumer loans. The collateral requirements on such loans reduce the risk of
potential losses to an acceptable level in management's opinion.
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15
Management performs a quarterly evaluation of the allowance for loan losses. The
evaluation incorporates internal loan review, actual historical losses, as well
as any negative economic trends in the local market. The evaluation is presented
to and approved by the Board of Directors. Although the Company maintains its
allowance for loan losses at a level that it considers to be adequate to provide
for the inherent risk of loss in its portfolio, there can be no assurance that
future losses will not exceed estimated amounts or that additional provisions
for loan losses will not be required in future periods.
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16
AVERAGE BALANCE SHEET FOR THE SIX-MONTH PERIOD ENDED JUNE 30
The following table sets forth certain information relating to the Company's
average balance sheet and reflects the average yield on assets and average cost
of liabilities for the periods indicated and the average yields earned and rates
paid. Such yields and costs are derived by dividing income or expense by the
average balance of assets or liabilities, respectively, for the periods
presented. Average balances are derived from month-end balances. Management does
not believe that the use of month-end balances instead of daily average balances
has caused any material differences in the information presented.
Period Ended
------------------------------------------------------------------------------
2001 2000
------------------------------------ -------------------------------------
Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate
------- -------- ---- ------- -------- ----
Assets
- ------
Interest Earnings Assets:
Loans (1)(2)(3) $153,954,549 $7,307,380 9.49% $145,950,199 $6,840,630 9.37%
Securities-taxable (4) 40,856,272 1,347,015 6.59% 42,480,436 1,337,576 6.30%
Securities-nontaxable 35,264,140 820,923 4.66% 33,093,397 793,762 4.80%
Securities-equity (4)(5) 1,344,979 25,525 3.80% 1,238,633 40,718 6.57%
Federal funds sold 16,900,858 413,844 4.90% 8,462,314 248,444 5.87%
------------ ---------- ---- ------------ ---------- ----
Total interest earnings assets 248,320,798 9,914,687 7.99% 231,224,979 9,261,130 8.01%
------------ ---------- ---- ------------ ---------- ----
Noninterest earning assets:
Cash and due from other institutions 7,744,845 7,482,624
Premises and equipment, net 4,754,602 3,993,668
Accrued interest 1,517,801 1,467,974
Other assets 2,411,532 2,395,563
Less allowance for loan losses (2,228,344) (1,943,763)
------------ ------------
Total noninterest earnings assets 14,200,436 13,396,066
------------ ------------
Total Assets $262,521,234 $244,621,045
============ ============
Liabilities and Shareholders' Equity
- ------------------------------------
Interest bearing liabilities:
Interest bearing demand $ 27,937,619 308,735 2.21% $ 29,335,430 375,266 2.56%
Money market accounts 10,975,074 199,036 3.63% 10,622,890 186,968 3.52%
Savings deposits 29,394,129 418,174 2.85% 27,678,001 425,112 3.07%
Time deposits 124,432,426 3,789,977 6.09% 109,681,198 3,066,751 5.59%
Short term borrowings 3,700,636 47,946 2.59% 4,217,996 78,610 3.73%
Federal Home Loan Advances 5,912,242 200,770 6.79% 6,842,953 231,471 6.77%
------------ ---------- ---- ------------ ---------- ----
Total interest bearing liabilities 202,352,126 4,964,638 4.91% 188,378,468 4,364,178 4.63%
------------ ---------- ---- ------------ ---------- ----
Noninterest bearing liabilities:
Demand deposits 27,133,243 26,654,425
Accrued expenses and other liabilities 1,151,265 486,680
------------ ------------
Total noninterest bearing liabilities 28,284,508 27,141,105
------------ ------------
Shareholders' equity 31,884,600 29,101,472
------------ ------------
Total Liabilities and Shareholders' Equity $262,521,234 $244,621,045
============ ============
Net interest income $4,950,049 $4,896,952
========== ==========
Interest rate spread (6) 3.08% 3.38%
==== ====
Net yield on interest earning assets (7) 3.99% 4.24%
==== ====
(1) For purposes of these computations, the average loan amounts
outstanding are net of deferred loan fees.
(2) Included in loan interest income are loan related fees of $143,398 and
$146,087 in 2001 and 2000, respectively.
(3) Nonaccrual loans are include in loan totals and do not have a material
impact on the information presented.
(4) Average balance is computed using the carrying value of securities. The
average yield has been computed using the historical amortized cost
average balance for available for sale securities.
(5) Equity securities are comprised of common stock of the Federal Home
Loan Bank, Federal Reserve Bank and Great Lakes Bankers Bank.
(6) Interest rate spread represents the difference between the average
yield on interest earning assets and the average cost of interest
bearing liabilities.
(7) Net yield on interest earning assets represents net interest income as
a percentage of average interest earning assets.
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17
AVERAGE BALANCE SHEET FOR THE THREE-MONTH PERIOD ENDED JUNE 30
The following table sets forth certain information relating to the Company's
average balance sheet and reflects the average yield on assets and average cost
of liabilities for the periods indicated and the average yields earned and rates
paid. Such yields and costs are derived by dividing income or expense by the
average balance of assets or liabilities, respectively, for the periods
presented. Average balances are derived from month-end balances. Management does
not believe that the use of month-end balances instead of daily average balances
has caused any material differences in the information presented.
Period Ended
------------------------------------------------------------------------------
2001 2000
------------------------------------ -------------------------------------
Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate
------- -------- ---- ------- -------- ----
Assets
- ------
Interest Earnings Assets:
Loans (1)(2)(3) $154,288,612 $3,587,516 9.30% $147,106,553 $3,500,837 9.52%
Securities-taxable (4) 38,855,430 643,598 6.63% 41,629,790 655,100 6.29%
Securities-nontaxable 36,092,270 420,338 4.66% 33,199,077 398,877 4.81%
Securities-equity (4)(5) 1,353,511 25,525 7.54% 1,284,032 26,017 8.10%
Federal funds sold 19,562,276 245,568 5.02% 11,237,419 168,785 6.01%
------------ ---------- ---- ------------- ----------- ----
Total interest earnings assets 250,152,099 4,922,545 7.87% 234,456,871 4,749,616 8.10%
------------ ---------- ---- ------------- ----------- ----
Noninterest earning assets:
Cash and due from other institutions 8,060,391 7,558,834
Premises and equipment, net 4,831,315 4,011,404
Accrued interest 1,535,367 1,563,520
Other assets 2,472,285 2,445,587
Less allowance for loan losses (2,268,099) (1,964,864)
------------ ------------
Total noninterest earnings assets 14,631,259 13,614,481
------------ ------------
Total Assets $264,783,358 $248,071,352
============ ============
Liabilities and Shareholders' Equity
- ------------------------------------
Interest bearing liabilities:
Interest bearing demand $ 28,134,830 142,861 2.03% $ 28,688,965 184,641 2.57%
Money market accounts 10,998,206 99,216 3.61% 11,334,431 102,986 3.63%
Savings deposits 30,256,779 197,470 2.61% 27,453,870 210,545 3.07%
Time deposits 124,975,043 1,870,783 5.99% 112,214,019 1,598,637 5.70%
Short term borrowings 3,721,148 17,952 1.93% 4,387,005 41,695 3.80%
Federal Home Loan Advances 5,799,605 98,574 6.80% 6,738,848 114,625 6.80%
------------ ----------- ---- ------------ ----------- ----
Total interest bearing liabilities 203,885,611 2,426,856 4.76% 190,817,138 2,253,129 4.72%
------------ ----------- ---- ------------ ----------- ----
Noninterest bearing liabilities:
Demand deposits 27,641,911 27,345,910
Accrued expenses and other liabilities 1,231,549 539,907
------------ ------------
Total noninterest bearing liabilities 28,873,460 27,885,817
------------ ------------
Shareholders' equity 32,024,287 29,368,397
------------ ------------
Total Liabilities and Shareholders' Equity $264,783,358 $248,071,352
============ ============
Net interest income $2,495,689 $2,496,487
========== ==========
Interest rate spread (6) 3.11% 3.38%
==== ====
Net yield on interest earning assets (7) 3.99% 4.26%
==== ====
(1) For purposes of these computations, the average loan amounts
outstanding are net of deferred loan fees.
(2) Included in loan interest income are loan related fees of $77,142 and
$71,330 in 2001 and 2000, respectively.
(3) Nonaccrual loans are include in loan totals and do not have a material
impact on the information presented.
(4) Average balance is computed using the carrying value of securities. The
average yield has been computed using the historical amortized cost
average balance for available for sale securities.
(5) Equity securities are comprised of common stock of the Federal Home
Loan Bank, Federal Reserve Bank and Great Lakes Bankers Bank.
(6) Interest rate spread represents the difference between the average
yield on interest earning assets and the average cost of interest
bearing liabilities.
(7) Net yield on interest earning assets represents net interest income as
a percentage of average interest earning assets.
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18
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
None
Item 2 - Changes in the rights of the Company's security holders
None
Item 3 - Defaults by the Company on its senior securities
None
Item 4 - Results of votes of security holders
The following represents the results of matters submitted to a vote
of the shareholders at the annual meeting held on April 23, 2001:
Affixing the number of directors at ten for 2001:
For 535,655
Abstain 0
Absent 161,924
Election of Directors:
The following directors were elected with terms to expire April 2004:
For Abstain Absent
--- ------- ------
Ted Bratton 533,845 1,810 161,924
Thomas D. Gindlesberger 533,845 1,810 161,924
Dean J. Mullet 533,845 1,810 161,924
Michael S. Yoder 533,845 1,810 161,924
Item 5 - Other Information
None
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19
Item 6 - Exhibits and Reports on Form 8-K
a) The following exhibits are included in this report or
incorporated herein by reference:
3(i) Articles of Incorporation of Killbuck Bancshares, Inc.*
3(ii) Code of Regulations of Killbuck Bancshares, Inc.*
10 Agreement and Plan of Reorganization with Commercial and
Savings Bank Co.*
21 Subsidiaries of Registrant*
99 Independent Accountant's Report
b) No reports on Form 8-K were filed during the quarter of the
period covered by this report.
*Incorporated by reference to an identically numbered exhibit to
the Form 10 (file No. 0-24147) filed with SEC on April 30, 1998
and subsequently amended on July 8, 1998 and July 31, 1998.
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20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused the report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Killbuck Bancshares, Inc.
Date: August 14, 2001 By:/s/Luther E. Proper
------------------------
Luther E. Proper
President and
Chief Executive Officer
Date: August 14, 2001 By:/s/Diane Knowles
------------------------
Diane Knowles
Chief Financial Officer
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