SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
X
--- QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1996
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OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ____________
Commission File Number 0-18301
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IROQUOIS BANCORP, INC.
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(Exact name of Registrant as specified in its charter)
NEW YORK 16-1351101
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
115 Genesee Street, Auburn, New York 13021
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (315) 252-9521
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____________________________________________________________________
Former name, former address and former fiscal year, if changed since
last report.
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
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APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 2,348,711 shares of common
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stock on March 31, 1996.
INDEX
Page No.
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
March 31, 1996 and December 31, 1995................ 3
Condensed Consolidated Statements of Income -
Three Months Ended March 31, 1996 and 1995.......... 4
Condensed Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1996 and 1995.......... 5-6
Notes to Condensed Consolidated Financial
Statements.......................................... 7-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations....... 9-10
PART II OTHER INFORMATION................................... 11
SIGNATURES................................................... 12
Exhibit Index................................................ 13
(2)
ITEM 1. FINANCIAL INFORMATION
IROQUOIS BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
March 31, December 31,
1996 1995
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ASSETS
Cash and due from banks $ 9,217 $ 9,290
Federal funds sold and interest-
bearing deposits with other
financial institutions 3,900 3,100
Securities available for sale 39,503 39,383
Securities held to maturity 50,796 44,722
Loans receivable 332,744 329,087
Less allowance for loan losses 3,327 3,380
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Loans receivable, net 329,417 325,707
Premises and equipment, net 6,624 6,623
Federal Home Loan Bank stock, at cost 2,247 2,194
Accrued interest receivable 3,494 3,591
Other assets 5,862 3,193
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TOTAL ASSETS 451,060 437,803
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LIABILITIES
Savings and time deposits $357,856 $354,655
Demand deposits 14,749 14,446
Borrowings 43,104 35,250
Accrued expenses and other liabilities 2,912 1,606
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Total Liabilities $418,621 $405,957
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SHAREHOLDERS' EQUITY
Preferred Stock, $1.00 par value,
3,000,000 shares authorized:
Series A - 31,142 and 31,555 shares
issued and outstanding in March 1996
and December 1995 respectively,
liquidation value $3,114,000 31 31
Series B - 19,153 and 19,183 shares
issued and outstanding in March 1996
and December 1995 respectively,
liquidation value $1,915,000. 19 19
Common Stock $1.00 par value; 3,000,000 shares
authorized; 2,348,711 and 2,339,422 shares
issued and outstanding at March 31, 1996
and December 31, 1995, respectively 2,349 2,339
Additional paid-in capital 13,297 13,230
Retained earnings 17,365 16,679
Net unrealized gain(loss) on securities
available for sale (16) 170
Unallocated shares of Stock Ownership Plans (606) (622)
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Total Shareholders' Equity 32,439 31,846
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Total Liabilities and Shareholders' Equity $451,060 $437,803
======== ========
See accompanying notes to condensed consolidated financial statements.
(3)
IROQUOIS BANCORP, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Three months ended
March 31,
1996 1995
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Interest Income:
Loans $ 7,110 6,883
Securities 1,372 1,273
Other 36 43
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8,518 8,199
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Interest Expense:
Deposits 3,535 3,086
Borrowings 540 520
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4,075 3,606
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Net Interest Income 4,443 4,593
Provision for loan losses 296 242
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Net Interest Income after Provision
for Loan Losses 4,147 4,351
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Other Income:
Service charges, commissions and fees 551 527
Net gain (loss) on sales of securities
and loans 2 (54)
Other 34 44
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Total Non-Interest Income 587 517
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Other Expenses:
Salaries and employee benefits 1,583 1,601
Occupancy and equipment expenses 412 422
Computer and product service fees 221 204
Promotion and marketing expenses 82 54
Deposit insurance 50 205
Other 754 857
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Total Non-Interest Expenses 3,102 3,343
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Income before income taxes and
cumulative effect of a change in
accounting principle 1,632 1,525
Income taxes 640 619
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Net Income $ 992 906
Preferred Stock Dividend 118 107
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Net income attributable to common stock $ 874 799
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Net income $.38 .35
====== =====
Cash dividends declared $.08 .07
See accompanying notes to condensed consolidated financial statements.
(4)
IROQUOIS BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(DOLLARS IN THOUSANDS)
Three months ended
March 31,
1996 1995
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Cash flows from operating activities:
Net income $ 992 906
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization expense,
provision for loan losses, deferred
taxes and other 329 214
Net (gain) loss on sale of securities
and loans (2) 54
Increase (decrease) in accrued interest
receivable and other assets (120) (412)
Increase (decrease) in accrued expenses
and other liabilities 1,259 65
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Net cash provided by operating activities 2,458 827
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Cash flows from investing activities:
Proceeds from sales of securities available
for sale -- 4,972
Proceeds from maturities and redemptions
of securities available for sale 2,177 1,000
Proceeds from maturities and redemptions
of securities held to maturity 2,216 2,249
Purchases of securities available for sale (3,633) (4,922)
Purchases of securities held to maturity (7,324) (3,565)
Loans made to customers net of principal
payments received (4,631) (654)
Proceeds from sales of loans 976 912
Capital expenditures (154) (117)
Purchase of FHLB stock (53) (112)
Other - net (2,435) 994
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Net cash provided (used) by investing
activities (12,861) 757
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Cash flows from financing activities:
Net increase (decrease) in savings
accounts and demand deposits 4,302 (15,396)
Net increase (decrease) in time deposits (798) 17,423
Net increase (decrease) in borrowings
and other liabilities 7,854 (3,382)
Proceeds from issuance of Common stock 101 --
Dividends paid (305) (268)
Redemption of Preferred stock (24) (10)
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Net cash provided (used) by financing
activities 11,130 (1,633)
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(5)
IROQUOIS BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
Three months ended
March 31,
1996 1995
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Net increase (decrease) in cash and
cash equivalents $ 727 (49)
Cash and cash equivalents at beginning of
period 12,390 10,429
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Cash and cash equivalents at end of period 13,117 10,380
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Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest 3,936 3,523
Income taxes 274 330
Supplemental schedule of non-cash investing
activities:
Loans to facilitate the sale of ORE 40 21
Additions to other real estate 707 187
See accompanying notes to condensed consolidated financial
statements.
(6)
IROQUOIS BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1) Financial Statements
--------------------
The interim financial statements contained herein are unaudited, but in
the opinion of management of the Company, include all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of the results of operations for these periods. The results
of operations for the interim periods are not necessarily indicative of
the results of operations for the full year.
2) Earnings Per Share
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Net income per common share for 1996 and 1995 was calculated for the
respective periods by dividing net income applicable to common shares of
$874,000 in 1996 and $799,000 in 1995 by the weighted average number of
shares outstanding of 2,314,374 in 1996 and 2,293,520 in 1995. The
exercise of outstanding stock options was not considered in the
calculation because, if exercised, they would not materially affect
earnings per share, as presented.
3) Stock Dividend
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In July 1995, the Corporation declared a two-for-one stock split,
effected by means of a stock dividend paid on August 31, 1995. All share
and per share data included in the condensed consolidated financial
statements have been retroactively adjusted to reflect the stock split.
4) Other Accounting Issues
-----------------------
On January 1, 1996, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 122, "Accounting For Mortgage Servicing Rights" on
a prospective basis. SFAS 122 requires the Company to recognize as
separate assets rights to service mortgage loans for others, however
those servicing rights are acquired, and also requires the Company to
assess its capitalized mortgage servicing rights for impairment based on
the fair value of those rights. The adoption of SFAS 122 did not have a
material impact on the Company's financial condition or results of
operations.
(7)
On January 1, 1996, the Company adopted SFAS No. 123, "Accounting for
Stock-Based Compensation" which encourages, but does not require,
companies to use a fair value based method of determining compensation
cost for grants of stock options under stock-based employee compensation
plans. As permitted by SFAS No. 123, the Company elected to continue
accounting for stock-based compensation in accordance with Accounting
Principals Board Opinion No. 25 ("APB 25"). Under APB 25, no compensation
cost is recorded as options are granted by the Company at a purchase
price not less than the fair market value of the common stock on the date
of the grant. Companies electing to continue accounting under the
provisions of APB 25 are required to present pro forma disclosures of net
income and net income per share, as if a fair value based method had been
applied for each period in which a complete set of financial statements
are presented.
(8)
IROQUOIS BANCORP, INC.
AND CONSOLIDATED SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
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Three months ended March 31, 1996 compared to March 31, 1995
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Net income for the three months ended March 31, 1996 was $992,000, or $.38 per
share, compared to net income of $906,000, or $.35 per share, for the three
months ended March 31, 1995. Net interest income was $4,443,000 for the first
quarter of 1996, compared to $4,593,000 for the same period in 1995. Net
interest rate spread was 4.03% for the three months ended March 31, 1996,
compared to 4.28% for the same period in 1995.
Total interest income increased to $8,518,000 from $8,199,000 for the same
period in 1995. The increase is primarily a result of the increase in the
average balance of earning assets as the yield increased only slightly to
8.12% in the first quarter of 1996 from 8.11% in 1995. Total interest expense
increased $469,000, or 13.02%, for the three months ended March 31, 1996, from
the same period in 1995. The increase in interest expense was a result of an
increase in the average cost of interest-bearing liabilities to 4.09% in 1996
from 3.83% in 1995. This primarily reflects the higher cost of funds due to
the migration of lower costing transactional accounts back to higher costing
time deposits during the last three quarters of 1995, and the higher level of
borrowings.
Total other income increased $14,200, or 2.5%, in the first quarter of 1996,
compared to the same period in 1995. The increase is primarily due to the
increase in trust services and fees associated with the Bank's brokerage
services.
Total other expenses decreased $241,400 or 7.2%, in the first quarter of 1996,
compared to the same period in 1995. The decline in other expense reflects
the results of cost control initiatives, implemented in 1995 as well as a
reduction in FDIC insurance premiums for Cayuga Savings Bank during the third
quarter of 1995.
The provision for income taxes for the three months ended March 31, 1996 was
$640,000, compared to $619,300 for the same period in 1995.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
----------------------------------------------------
Consolidated assets were $451.1 million at March 31, 1996, compared to $437.8
million at December 31, 1995. Net loans receivable were
(9)
$329.4 million at March 31, 1996, compared to $325.7 million at year end 1995.
The growth in lending was primarily in residential mortgage loans and
commercial loans. Residential mortgage loans increased $1.6 million or 1.0%
while commercial loans increased $1.2 million or 3.2%. Securities increased
$6.2 million or 7.4% from $89.4 million at December 31, 1995 to $96.4 million
at March 31, 1996.
The allowance for loan losses at March 31, 1996, was $3,327,000, or 1.00% of
total loans, compared to $3,380,000, or 1.03%, at December 31, 1995. Non-
performing assets were 1.37% of total assets at March 31, 1996, compared to
1.21% of total assets at December 31, 1995. The increase in non-performing
assets is primarily due to increases in Other Real Estate (ORE) acquired by
foreclosure and an increase in commercial mortgage loans currently under the
process of workout and on a non-accrual status. Approximately $1.6 million of
the non-performing loans at March 31, 1996 were subsequently paid in full or
brought current.
Total deposits increased $3.5 million, from $369.1 million at December 31,
1995, to $372.6 million at March 31, 1996. Growth during the quarter was in
savings and money market accounts which increased a combined $5.0 million
while demand deposit accounts decreased by a combined $3.8 million. Time
deposit balances remained constant at $177.4 million at March 31, 1996,
compared to $178.2 million at December 31, 1995. During the first quarter of
1996, $39 million of time deposits matured with the banks retaining over 95%
of those maturities. Borrowings increased $7.9 million, from $35.2 million at
December 31, 1995 to $43.1 million at March 31, 1996. Term advances at the
Federal Home Loan Bank increased $6.0 million while draws against overnight
lines of credit increased $1.9 million. Additional borrowings were primarily
utilized to fund additions to the securities portfolio in anticipation of
funds to be received from Cayuga's acquisition of three OnBank & Trust Co.
branches during the second quarter.
At March 31, 1996, the Company had total shareholders' equity of $32.4
million, with an average equity to average assets ratio of 7.26%. The
subsidiaries of Iroquois Bancorp, Inc. are each required to meet the capital
requirements established by their respective federal regulatory agency.
Cayuga Savings Bank, insured under the FDIC's Bank Insurance Fund (BIF) and
subject to FDIC capital regulations, had a core capital ratio of 7.67% and a
risk-based capital ratio of 12.43%. The Homestead Savings (FA), which is
insured under the FDIC's Savings Association Insurance Fund (SAIF), and
subject to the Office of Thrift Supervision (OTS) capital regulations, had
tangible and core capital ratios of 5.60% and a risk-based capital ratio of
10.25%. The capital ratios of these subsidiaries all exceed the current
minimum regulatory requirements.
At March 31, 1996, the Company held short-term liquid assets including
investments held as available for sale of $44.7 million, or 9.9% of total
assets. The Company considers its current liquidity and additional sources of
funds sufficient and within an acceptable range.
(10)
IROQUOIS BANCORP, INC.
AND CONSOLIDATED SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - None
Item 3. Defaults upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information
During the quarter, Cayuga Savings Bank received approval from state
and federal regulatory agencies to acquire three OnBank & Trust
Company branches with deposits in excess of $46 million. The
acquisition will be completed during the second quarter.
Item 6. Exhibits and Reports on Form 8-K
Exhibit 10.8 - Stock Purchase Incentive Program, as Amended.
Exhibit 10.10.1 - Amendment to Chairman's Supplemental Retirement
Plan and Trust Agreement.
(11)
IROQUOIS BANCORP, INC.
AND CONSOLIDATED SUBSIDIARIES
SIGNATURE
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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.
Iroquois Bancorp, Inc.
(Registrant)
Date: May 10, 1996 /s/ Richard D. Callahan
-----------------------------
Richard D. Callahan
President & CEO
Date: May 10, 1996 /s/ Marianne R. O'Connor
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Marianne R. O'Connor
Treasurer & CFO
(12)
EXHIBIT INDEX
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Exhibit 10.8 Stock Purchase Incentive Program, as Amended.
Exhibit 10.10.1 Amendment to Chairman's Supplemental Retirement Plan and
Trust Agreement.
(13)