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 SEPTEMBER 30, 2001
COMMISSION FILE NUMBER 000-24147
KILLBUCK BANCSHARES, INC.
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(Exact name of registrant as specified in its Charter)
OHIO 34-1700284
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
165 N. MAIN STREET, KILLBUCK, OH 44637
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(Address of principal executive offices and zip code)
(330) 276-2771
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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 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 November 6, 2001: 694,455
KILLBUCK BANCSHARES, INC.
INDEX
Page Number
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Consolidated Balance Sheet (unaudited) as of
September 30, 2001 and December 31, 2000 3
Consolidated Statement of Income (unaudited)
For the nine months ended September 30, 2001 and 2000 4
Consolidated Statement of Income (unaudited)
For the three months ended September 30, 2001 and 2000 5
Consolidated Statement of Changes in Shareholders'
Equity (unaudited)
For the nine months ended September 30, 2001 6
Consolidated Statement of Cash Flows (unaudited)
For the nine months ended September 30, 2001 and 2000 7
Notes to Unaudited Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis 9-16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 2. Changes in Securities 17
Item 3. Default Upon Senior Securities 17
Item 4. Submissions of Matters to a Vote of Security Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17
SIGNATURES 18
-2-
KILLBUCK BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET (UNAUDITED)
September 30, December 31,
2001 2000
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ASSETS
Cash and cash equivalents:
Cash and amounts due from depository institutions $ 11,615,064 $ 9,512,736
Federal funds sold 20,000,000 11,000,000
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Total cash and cash equivalents 31,615,064 20,512,736
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Investment securities:
Securities available for sale 45,130,568 47,477,388
Securities held to maturity (market value of $41,154,028
and $36,601,277) 39,896,886 36,129,625
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Total investment securities 85,027,454 83,607,013
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Loans (net of allowance for loan losses of $2,352,040
and $2,358,759) 149,508,353 149,061,901
Loans held for sale 338,280 520,000
Premises and equipment, net 5,143,831 4,528,169
Accrued interest receivable 2,170,564 1,885,665
Other assets 1,502,848 1,884,545
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Total assets $ 275,306,394 $ 262,000,029
============= =============
LIABILITIES
Deposits:
Noninterest bearing demand $ 31,906,060 $ 31,815,997
Interest bearing demand 29,169,590 27,833,483
Money market 16,984,557 10,249,064
Savings 31,309,944 28,493,290
Time 122,486,757 120,776,058
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Total deposits 231,856,908 219,167,892
Federal Home Loan Bank advances 5,515,402 6,197,930
Short-term borrowings 4,039,933 4,315,768
Accrued interest and other liabilities 605,024 577,274
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Total liabilities 242,017,267 230,258,864
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SHAREHOLDERS' EQUITY
Common stock - No par value: 1,000,000 shares authorized,
718,431 issued 8,846,670 8,846,670
Retained earnings 25,226,641 23,614,590
Accumulated other comprehensive income 801,332 168,141
Treasury stock, at cost (23,369 and 15,883 shares) (1,585,516) (888,236)
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Total shareholders' equity 33,289,127 31,741,165
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Total liabilities and shareholders' equity $ 275,306,394 $ 262,000,029
============= =============
See accompanying notes to the unaudited consolidated financial statements.
-3-
KILLBUCK BANCSHARES, INC.
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
Nine Months Ended
September 30,
2001 2000
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INTEREST INCOME
Interest and fees on loans $10,679,608 $10,507,967
Federal funds sold 577,318 443,815
Investment securities:
Taxable 2,059,515 2,118,794
Tax exempt 1,255,828 1,198,033
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Total interest income 14,572,269 14,268,609
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INTEREST EXPENSE
Deposits 6,885,450 6,375,254
Federal Home Loan Bank advances 294,490 340,766
Short term borrowings 62,609 128,342
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Total interest expense 7,242,549 6,844,362
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NET INTEREST INCOME 7,329,720 7,424,247
Provision for loan losses 262,500 180,000
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NET INTEREST INCOME AFTER PROVISION FOR LOAN
LOSSES 7,067,220 7,244,247
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OTHER INCOME
Service charges on deposit accounts 413,265 371,064
Gain on sale of loans 48,402 4,534
Other income 69,278 101,833
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Total other income 530,945 477,431
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OTHER EXPENSE
Salaries and employee benefits 2,330,096 2,064,780
Occupancy expense 670,045 614,097
Other expenses 1,755,130 1,521,333
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Total other expense 4,755,271 4,200,210
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INCOME BEFORE INCOME TAXES 2,842,894 3,521,468
Income taxes 672,781 886,470
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NET INCOME $ 2,170,113 $ 2,634,998
=========== ===========
EARNINGS PER SHARE $ 3.11 $ 3.74
=========== ===========
AVERAGE SHARES OUTSTANDING 697,484 705,014
=========== ===========
See accompanying notes to the unaudited consolidated financial statements.
-4-
KILLBUCK BANCSHARES, INC.
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
Three Months Ended
September 30,
2001 2000
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INTEREST INCOME
Interest and fees on loans $3,372,228 $3,667,050
Federal funds sold 163,474 195,371
Investment securities:
Taxable 686,976 742,059
Tax exempt 434,904 402,713
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Total interest income 4,657,582 5,007,193
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INTEREST EXPENSE
Deposits 2,169,527 2,321,157
Federal Home Loan Bank advances 93,721 109,295
Short term borrowings 14,663 49,732
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Total interest expense 2,277,911 2,480,184
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NET INTEREST INCOME 2,379,671 2,527,009
Provision for loan losses 90,000 60,000
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NET INTEREST INCOME AFTER PROVISION FOR LOAN
LOSSES 2,289,671 2,467,009
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OTHER INCOME
Service charges on deposit accounts 137,828 130,381
Gain on sale of loans 25,928 --
Other income 21,958 32,227
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Total other income 185,714 162,608
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OTHER EXPENSE
Salaries and employee benefits 753,581 644,919
Occupancy expense 233,076 213,369
Other expenses 571,669 483,820
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Total other expense 1,558,326 1,342,108
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INCOME BEFORE INCOME TAXES 917,059 1,287,509
Income taxes 206,310 328,789
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NET INCOME $ 710,749 $ 958,720
========== ==========
EARNINGS PER SHARE $ 1.02 $ 1.36
========== ==========
AVERAGE SHARES OUTSTANDING 696,213 704,715
========== ==========
See accompanying notes to the unaudited consolidated financial statements.
-5-
KILLBUCK BANCSHARES, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 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 2,170,113 2,170,113 $2,170,113
Other comprehensive income:
Net unrealized gain
on securities, net of
tax of $326,189 633,191 633,191 633,191
----------
Comprehensive income $2,803,304
==========
Purchase of Treasury Stock,
at cost (697,280) (697,280)
Cash dividends paid ($.80
per share) (558,062) (558,062)
---------- ----------- ---------- ----------- -----------
BALANCE, SEPTEMBER 30, 2001 $8,846,670 $25,226,641 $ 801,332 $(1,585,516) $33,289,127
========== =========== ========== =========== ===========
See accompanying notes to the unaudited consolidated financial statements.
-6-
KILLBUCK BANCSHARES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
Nine Months Ended
September 30,
2001 2000
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OPERATING ACTIVITIES
Net income $ 2,170,113 $ 2,634,998
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for loan losses 262,500 180,000
Depreciation, amortization and accretion, net 405,516 312,883
Gain on sale of loans (48,402) (4,534)
Origination of loans held for sale (7,343,610) (2,082,920)
Proceeds from the sale of loans 7,573,732 2,443,454
Federal Home Loan Bank stock dividend (53,600) (48,700)
Net changes in:
Accrued interest and other assets (229,391) (681,018)
Accrued expenses and other liabilities 27,750 40,704
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Net cash provided by operating activities 2,764,608 2,794,867
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INVESTING ACTIVITIES
Investment securities available for sale:
Proceeds from maturities and repayments 28,344,837 3,500,000
Purchases (25,013,306) (7,055,168)
Investment securities held to maturity:
Proceeds from maturities and repayments 744,113 250,000
Purchases (4,564,883) (1,680,091)
Net increase in loans (708,952) (5,708,324)
Purchase of premises and equipment (939,400) (415,256)
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Net cash used in investing activities (2,137,591) (11,108,839)
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FINANCING ACTIVITIES
Net increase in demand,
money market and savings deposits 10,978,317 119,546
Increase in time deposits 1,710,699 12,697,248
Repayment of Federal Home Loan Bank advances (682,528) (670,598)
Net decrease/increase in short term borrowings (275,835) 295,001
Purchase of Treasury stock (697,280) (85,739)
Dividends paid (558,062) (493,356)
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Net cash provided by financing activities 10,475,311 11,862,102
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NET INCREASE IN CASH AND CASH EQUIVALENTS 11,102,328 3,548,130
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 20,512,736 16,823,806
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 31,615,064 $ 20,371,936
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION
Cash paid during the period for:
Interest on deposits and borrowings $ 7,333,099 $ 6,811,226
============ ============
Income taxes $ 518,294 $ 859,236
============ ============
See accompanying notes to the unaudited consolidated financial statements.
-7-
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 unaudited 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 June 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 September 30, 2001, the Company has
approximately $1.4 million of intangibles resulting from the purchase of another
financial institution.
-8-
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 September 30, 2001 were approximately $275,307,000 compared to
$262,000,000 at December 31, 2000, an increase of $13,300,000 or 5.1%.
Cash and cash equivalents increased by $11,102,000 or 54.1% from December 31,
2000 to September 30, 2001, with federal funds sold increasing $9,000,000. This
increase improved the Bank's liquidity position for loan demand and investment
security purchases at September 30, 2001.
Total investments increased by $1,420,000 or 1.7% from December 31, 2000 to
September 30, 2001. There was a net decrease of $2,347,000 in available for sale
U.S. Government Agency securities due to calls and maturing securities while
securities held to maturity increased by $3,767,000. The Bank had greater
purchases of investment securities during the first nine months of 2001 due to
the callable options on some of the available for sale securities.
Net loans increased by only $446,000 or .3% from December 31, 2000 to September
30, 2001 due to a decrease in overall loan demand. A decrease of $1,956,000
occurred in the consumer loan category while real estate loan balances increased
by $2,305,000 and commercial loans increased by $64,000.
Total deposits at September 30, 2001 were $231,857,000 compared to $219,168,000
at December 31, 2000, an increase of $12,689,000 or 5.8%. Money markets
increased $6,735,000. Management attributes these changes within the deposit
accounts to the general decline in interest rates and an increase in deposit
activity at the new branch.
Federal Home Loan Bank advances and short-term borrowings decreased $683,000 and
$276,000 respectively at September 30, 2001 from December 31, 2000.
-9-
Shareholders' Equity increased by $1,548,000 or 4.9%, which was mainly due to
earnings of $2,170,000 for the first nine months of 2001 accentuated by a
$633,000 increase in the unrealized gain on securities included in other
comprehensive income, and offset by the purchase of Treasury stock for $697,000
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 September 30, 2001, the total capital ratio was 19.47%, the Tier
I capital ratio was 18.22%, and the leverage ratio was 11.59%, 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.
-10-
RESULTS OF OPERATIONS
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
Total interest income of approximately $14,572,000 for the nine month period
ended September 30, 2001, compares to $14,269,000 for the same period in 2000,
an increase of $303,000 or 2.1%. The majority of the overall increase in total
interest income is attributed to an increase in interest and fees on loans of
$172,000 or 56.8% 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 $153,890,000 for the first nine months of 2001 compared to $146,659,000 for
the first nine months of 2000. The annualized yield on loans was 9.25% for the
nine month period ended September 30, 2001 and 9.54% for the comparable 2000
period. The increase in interest on Federal Funds Sold of $134,000 is due mainly
to an increase in average balances of $8,201,000 outstanding for 2001 compared
to 2000. See Average Balance Sheet for the nine month periods ended September
30, 2001 and September 30, 2000.
Total interest expense of $7,243,000 for the nine month period ending September
30, 2001, represents an increase of $399,000 from the $6,844,000 reported for
the same nine month period in 2000. The increase in interest expense resulted
primarily from an increase in the average volume of the underlyng principal
balances of interest bearing liabilities. See Average Balance Sheet for the nine
month periods ended September 30, 2001 and September 30, 2000.
Net interest income of $7,330,000 for the nine months ended September 30, 2001,
compares to $7,424,000 for the same nine month period in 2000, a decrease of
$94,000 or 1.3%.
Total other income for the nine month period ended September 30, 2001, of
$531,000 compares to $477,000 for the same nine month period in 2000, an
increase of $54,000 or 11.3%. The increase of $42,000 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 $44,000 due to
increased activity caused by declining fixed loan rates. Other income decreased
$33,000 due to a decrease of $36,000 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
began in July 2001.
Total other expense of $4,755,000 for the nine months ended September 30, 2001,
compares to $4,200,000 for the same nine month period in 2000. This represents
an increase of $555,000 or 13.2%. Salary and employee benefits increased
approximately $265,000 due to additional staff, approximately fifteen, being
hired as a result of opening the branches in Sugarcreek and Howard, Ohio and
normal increases in salaries, staff additions and employee benefits. Other
expenses increased approximately $240,000. More specifically, there was an
increase of approximately $78,000 in advertising, public relations, and internet
expense and a $56,000 increase in telephone expense. The remainder of 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 nine month period ended September 30, 2001, was $2,170,000, a
decrease of $465,000 or 17.6% from the $2,635,000 reported at September 30,
2000.
-11-
RESULTS OF OPERATIONS (CONTINUED)
COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
Total interest income of approximately $4,658,000 for the three-month period
ended September 30, 2001, compares to $5,007,000 for the same period in 2000, a
decrease of $349,000 or 7.0%. The majority of the overall decrease in total
interest income is attributed to a decrease in interest and fees on loans of
$295,000 or 84.5% of the overall decrease. The decrease in interest and fees on
loans is due mainly to a decrease in the yield. The yield was 8.70% compared to
9.83% for this three-month period of 2001 and 2000 respectively. The decrease in
interest on Federal funds sold of $32,000 was due mainly to a decrease in the
yield. The yield was 3.32% compared to 6.57% for this three-month period of 2001
and 2000 respectively. See Average Balance Sheet for the three-month periods
ended September 30, 2001 and 2000.
Total interest expense of $2,278,000 for the three-month period ending September
30, 2001, represents a decrease of $202,000 from the $2,480,000 reported for the
same three-month period in 2000. The decrease in interest expense of $152,000 is
due mainly to a decrease in the cost of interest bearing liabilities. The cost
of interest bearing liabilities was 4.36% compared to 5.02% for this three-month
period of 2001 and 2000 respectively. See Average Balance Sheet for the
three-month periods ended September 30, 2001 and 2000.
Net interest income of $2,380,000 for the three months ended September 30, 2001,
compares to $2,527,000 for the same three-month period in 2000, a decrease of
$147,000 or 5.8%.
Total other income for the three month period ended September 30, 2001, of
$186,000 compares to $163,000 for the same three month period in 2000, an
increase of $23,000 or 14.1%. The service fee income on deposits increased
$7,000 due to an increase in the accounts being serviced. Gains on sale of loans
increased $26,000 due to the Bank's increased activity caused by declining fixed
loan rates.
Total other expense of $1,558,000 for the three months ended September 30, 2001,
compares to $1,342,000 for the same three-month period in 2000. This represents
an increase of $216,000 or 16.1%. Salary and employee benefits increased
$109,000 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 $88,000 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 September 30, 2001, was $711,000, a
decrease of $248,000 or 25.9% from the $959,000 reported at September 30, 2000.
-12-
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
$31,615,000 at September 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, $45,131,000 as available for sale and has
an available unused line of credit of $15,189,000 with the Federal Home Loan
Bank of Cincinnati to provide additional sources of liquidity at September 30,
2001. As of September 30, 2001, the Company had commitments to fund loans of
approximately $1,248,000 and $22,223,000 in unused lines and letters of credit.
Cash was provided during the nine month period ended September 30, 2001, mainly
from operating activities of $2.8 million, a net increase in deposits of $12.0
million, and the maturities and repayments of investment securities of $29.1
million. Cash was used during the nine month period ended September 30, 2001,
mainly to fund a net increase in loans of $.7 million, and for the purchase of
investment securities of $29.6 million. In addition $1.0 million was also used
to reduce Federal Home Loan Bank advances and short-term borrowings during the
first nine months of 2001, $.7 million was used to purchase Treasury Stock and
$.6 million was used to pay dividends. Cash and cash equivalents totaled $31.6
million at September 30, 2001, an increase of $11.1 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.
-13-
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 September 30, 2001, and December 31,
2000. A loan is classified as nonaccrual when, in the opinion of management,
there are doubts about collectability 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 in which the terms have been
renegotiated to provide a reduction or deferral of principal or interest as a
result of the deterioration of the borrower.
September 30, December 31,
2001 2000
------------- ------------
(dollars in thousands)
Loans on nonaccrual basis $140 $298
Loans past due 90 days or more 53 340
Renegotiated loans -- --
---- ----
Total nonperforming loans 193 638
Other real estate -- --
Repossessed assets -- --
---- ----
Total nonperforming assets $193 $638
==== ====
Nonperforming loans as a percent of total loans 0.13% 0.42%
Nonperforming loans as a percent of total assets 0.07% 0.24%
Nonperforming assets as a percent of total assets 0.07% 0.24%
Management monitors impaired loans on a continual basis. As of September 30,
2001, impaired loans had no material effect on the company's financial position
or results from operations.
The allowance for loan losses at September 30, 2001, totaled $2,352,000 or 1.55%
of total loans as compared to $2,359,000 or 1.55% at December 31, 2000.
Provisions for loan losses were $262,500 and $180,000 for the nine months ended
September 30, 2001 and 2000 respectively.
The level of funding for the provision is a reflection of the overall increase
in loans and is not an indication of any decline in the quality of the loan
portfolio. Nonperforming loans consist of approximately $41,000 in one to four
family residential mortgages, $81,000 in commercial loans and $71,000 in
consumer loans. The collateral requirements on such loans reduce the risk of
potential losses to an acceptable level in management's opinion.
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 the 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.
-14-
AVERAGE BALANCE SHEET FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 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) $153,889,826 $10,679,608 9.25% $146,659,087 $10,507,967 9.54%
Securities-taxable (4) 41,436,030 1,954,175 6.28% 43,347,953 2,062,602 6.34%
Securities-nontaxable 35,986,272 1,297,263 4.80% 33,276,833 1,196,474 4.79%
Securities-equity (4)(5) 1,353,967 63,905 6.29% 1,259,360 57,751 6.11%
Federal funds sold 17,775,208 577,318 4.33% 9,573,920 443,815 6.17%
------------ ----------- ------------ -----------
Total interest earnings assets 250,441,303 14,572,269 7.75% 234,117,153 14,268,609 8.12%
------------ ----------- ------------ -----------
Noninterest earning assets:
Cash and due from other institutions 8,052,432 7,629,733
Premises and equipment, net 4,884,173 4,002,918
Accrued interest 1,450,781 1,468,162
Other assets 2,408,255 2,387,890
Less allowance for loan losses (2,264,189) (1,981,802)
------------ ------------
Total noninterest earnings assets 14,531,452 13,506,901
------------ ------------
Total Assets $264,972,755 $247,624,054
============ ============
Liabilities and Shareholders' Equity
- ------------------------------------
Interest bearing liabilities:
Interest bearing demand $28,181,363 451,299 2.13% $28,801,736 555,538 2.57%
Money market accounts 12,550,885 347,993 3.69% 11,280,396 309,958 3.66%
Savings deposits 29,920,726 617,707 2.75% 27,802,115 644,577 3.09%
Time deposits 123,829,696 5,468,451 5.88% 111,941,556 4,865,181 5.79%
Short term borrowings 3,801,721 62,609 2.19% 4,390,292 128,342 3.89%
Federal Home Loan Advances 5,794,569 294,490 6.77% 6,723,530 340,766 6.75%
------------ ----------- ------------ -----------
Total interest bearing liabilities 204,078,960 7,242,549 4.73% 190,939,625 6,844,362 4.78%
------------ ----------- ------------ -----------
Noninterest bearing liabilities:
Demand deposits 27,739,889 26,616,805
Accrued expenses and other liabilities 1,214,643 559,424
------------ ------------
Total noninterest bearing liabilities 28,954,532 27,176,229
Shareholders' equity 31,939,263 29,508,200
------------ ------------
Total Liabilities and Shareholders' Equity $264,972,755 $247,624,054
============ ============
Net interest income $ 7,329,720 $ 7,424,247
=========== ===========
Interest rate spread (6) 3.02% 3.34%
==== ====
Net yield on interest earning assets (7) 3.90% 4.23%
==== ====
(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 $237,318 and $220,627 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.
-15-
AVERAGE BALANCE SHEET FOR THE THREE-MONTH PERIOD ENDED SEPTEMBER 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) $153,760,381 $3,372,228 8.70% $148,076,863 $3,667,050 9.83%
Securities-taxable (4) 42,595,546 654,262 6.09% 45,082,988 725,026 6.38%
Securities-nontaxable 37,430,536 447,405 4.74% 33,643,705 402,713 4.75%
Securities-equity (4)(5) 1,371,942 20,213 5.85% 1,300,813 17,033 5.20%
Federal funds sold 19,523,907 163,474 3.32% 11,797,133 195,371 6.57%
------------ ---------- ------------ ----------
Total interest earnings assets 254,682,312 4,657,582 7.26% 239,901,502 5,007,193 8.28%
------------ ---------- ------------ ----------
Noninterest earning assets:
Cash and due from other institutions 8,667,606 7,923,949
Premises and equipment, net 5,143,315 4,021,419
Accrued interest 1,316,742 1,468,538
Other assets 2,412,246 2,372,544
Less allowance for loan losses (2,335,879) (2,057,880)
------------ ------------
Total noninterest earnings assets 15,204,030 13,728,570
------------ ------------
Total Assets $269,886,342 $253,630,072
============ ============
Liabilities and Shareholders' Equity
- ------------------------------------
Interest bearing liabilities:
Interest bearing demand 28,668,853 142,561 1.97% 27,734,346 180,272 2.58%
Money market accounts 15,702,508 148,960 3.76% 12,596,074 122,990 3.87%
Savings deposits 30,973,921 199,533 2.56% 28,050,344 219,465 3.10%
Time deposits 122,624,234 1,678,473 5.43% 116,462,273 1,798,430 6.13%
Short term borrowings 4,003,891 14,663 1.45% 4,734,885 49,732 4.17%
Federal Home Loan Advances 5,559,221 93,721 6.69% 6,484,686 109,295 6.69%
------------ ---------- ------------ ----------
Total interest bearing liabilities 207,532,628 2,277,911 4.36% 196,062,608 2,480,184 5.02%
------------ ---------- ------------ ----------
Noninterest bearing liabilities:
Demand deposits 28,963,726 26,540,897
Accrued expenses and other liabilities 1,341,400 704,913
------------ ------------
Total noninterest bearing liabilities 30,305,126 27,245,810
Shareholders' equity 32,048,588 30,321,654
------------ ------------
Total Liabilities and Shareholders' Equity $269,886,342 $253,630,072
============ ============
Net interest income $2,379,671 $2,527,009
========== ==========
Interest rate spread (6) 2.90% 3.26%
==== ====
Net yield on interest earning assets (7) 3.74% 4.21%
===== ====
(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 $93,920 and
$74,551 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.
-16-
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
None
Item 5 - Other Information
None
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.
-17-
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: November 8, 2001 By: /s/Luther E. Proper
---------------------------
Luther E. Proper
President and
Chief Executive Officer
Date: November 8, 2001 By: /s/Diane Knowles
---------------------------
Diane Knowles
Chief Financial Officer
-18-