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 June 30, 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.
----------------------
(Exact name of Registrant as specified in its charter)
NEW YORK 16-1351101
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
115 Genesee Street, Auburn, New York 13021
------------------------------------ -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (315) 252-9521
--------------
____________________________________________________________________
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
--- ---
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: 2,356,564 shares of common
---------
stock on June 30, 1996.
INDEX
Page No.
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
June 30, 1996 and December 31, 1995................... 3
Condensed Consolidated Statements of Income -
Three Months Ended June 30, 1996 and 1995............. 4
Condensed Consolidated Statements of Income -
Six Months Ended June 30, 1996 and 1995............... 5
Condensed Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1996 and 1995............... 6-7
Notes to Condensed Consolidated Financial
Statements............................................ 8-9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.........10-13
PART II OTHER INFORMATION.....................................14-15
SIGNATURES..................................................... 16
(2)
ITEM 1. FINANCIAL INFORMATION
IROQUOIS BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
June 30, December 31,
1996 1995
------------------------
ASSETS
Cash and due from banks $ 10,326 $ 9,290
Federal funds sold and interest-bearing
deposits with other financial institutions 700 3,100
Securities available for sale 40,640 39,383
Securities held to maturity 54,029 44,722
Loans receivable 347,995 329,087
Less allowance for loan losses 3,236 3,380
---------------------
Loans receivable, net 344,759 325,707
Premises and equipment, net 7,122 6,623
Federal Home Loan Bank stock, at cost 2,239 2,194
Accrued interest receivable 3,658 3,591
Other assets 7,237 3,193
- -------------------------------------------------------------------------
TOTAL ASSETS 470,710 437,803
=========================================================================
LIABILITIES
Savings and time deposits $390,805 $354,655
Demand deposits 21,708 14,446
Borrowings 22,601 35,250
Accrued expenses and other liabilities 2,312 1,606
- -------------------------------------------------------------------------
Total Liabilities $437,426 $405,957
- -------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Preferred Stock, $1.00 par value,
3,000,000 shares authorized:
Series A - 31,092 and 31,355 shares
issued and outstanding in June 1996
and December 1995 respectively,
liquidation value $3,114,000 31 31
Series B - 19,143 and 19,183 shares
issued and outstanding in June 1996
and December 1995 respectively,
liquidation value $1,915,000. 19 19
Common Stock $1.00 par value; 3,000,000 shares
authorized; 2,356,564 and 2,339,422 shares
issued and outstanding at June 30, 1996
and December 31, 1995, respectively 2,357 2,339
Additional paid-in capital 13,365 13,230
Retained earnings 18,219 16,679
Net unrealized gain(loss) on securities
available for sale (101) 170
Unallocated shares of Stock Ownership Plans (606) (622)
- -------------------------------------------------------------------------
Total Shareholders' Equity 33,284 31,846
- -------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $470,710 $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
June 30,
1996 1995
--------------------
Interest Income:
Loans $ 7,400 7,004
Securities 1,551 1,327
Other 35 43
- -----------------------------------------------------------------
8,986 8,374
- -----------------------------------------------------------------
Interest Expense:
Deposits 3,695 3,478
Borrowings 416 428
- -----------------------------------------------------------------
4,111 3,906
- -----------------------------------------------------------------
Net Interest Income 4,875 4,468
Provision for loan losses 446 224
- -----------------------------------------------------------------
Net Interest Income after Provision
for Loan Losses 4,429 4,244
- -----------------------------------------------------------------
Other Income:
Service charges, commissions and fees 656 579
Net gain (loss) on sales of securities
and loans (1) 36
Other 36 57
- -----------------------------------------------------------------
Total Non-Interest Income 691 672
- -----------------------------------------------------------------
Other Expenses:
Salaries and employee benefits 1,666 1,493
Occupancy and equipment expenses 421 417
Computer and product service fees 269 244
Promotion and marketing expenses 91 62
Deposit insurance 49 205
Other 736 616
- -----------------------------------------------------------------
Total Non-Interest Expenses 3,232 3,037
- -----------------------------------------------------------------
Income before income taxes and
cumulative effect of a change in
accounting principle 1,888 1,879
Income taxes 737 741
- -----------------------------------------------------------------
Net Income $1,151 1,138
Preferred Stock Dividend 111 122
- -----------------------------------------------------------------
Net income attributable to common stock $1,040 1,016
=================================================================
Net income $ .45 .44
=================================================================
Cash dividends declared $ .08 .07
See accompanying notes to condensed consolidated financial statements.
(4)
IROQUOIS BANCORP, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Six months ended
June 30,
1996 1995
-------------------
Interest Income:
Loans $14,510 13,887
Securities 2,923 2,600
Other 71 86
- ---------------------------------------------------------------
17,504 16,573
- ---------------------------------------------------------------
Interest Expense:
Deposits 7,230 6,564
Borrowings 956 948
- ---------------------------------------------------------------
8,186 7,512
- ---------------------------------------------------------------
Net Interest Income 9,318 9,061
Provision for loan losses 742 466
- ---------------------------------------------------------------
Net Interest Income after Provision
for Loan Losses 8,576 8,595
- ---------------------------------------------------------------
Other Income:
Service charges, commissions and fees 1,207 1,106
Net gain (loss) on sales of securities
and loans 1 (18)
Other 70 101
- ---------------------------------------------------------------
Total Non-Interest Income 1,278 1,189
- ---------------------------------------------------------------
Other Expenses:
Salaries and employee benefits 3,249 3,094
Occupancy and equipment expenses 833 839
Computer and product service fees 490 421
Promotion and marketing expenses 173 116
Deposit insurance 99 410
Other 1,490 1,500
- ---------------------------------------------------------------
Total Non-Interest Expenses 6,334 6,380
- ---------------------------------------------------------------
Income before income taxes and
cumulative effect of a change in
accounting principle 3,520 3,404
Income taxes 1,377 1,360
- ---------------------------------------------------------------
Net Income $ 2,143 2,044
Preferred Stock Dividend 229 229
- ---------------------------------------------------------------
Net income attributable to common stock $ 1,914 1,815
===============================================================
Net income $ .83 .79
===============================================================
Cash dividends declared $ .16 .14
See accompanying notes to condensed consolidated financial statements.
(5)
IROQUOIS BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(DOLLARS IN THOUSANDS)
Six months ended
June 30,
1996 1995
-------------------
Cash flows from operating activities:
Net income $ 2,143 2,044
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization expense,
provision for loan losses, deferred
taxes and other 833 664
Net (gain) loss on sale of securities
and loans (1) 18
(Decrease) in accrued interest receivable
and other assets (225) (441)
Increase (decrease) in accrued expenses
and other liabilities 710 801
- -------------------------------------------------------------------
Net cash provided by operating activities 3,460 3,086
- -------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from sales of securities available
for sale 1,502 4,972
Proceeds from sales of securities held to
maturity -- 3,042
Proceeds from maturities and redemptions
of securities available for sale 2,870 1,500
Proceeds from maturities and redemptions
of securities held to maturity 5,601 7,678
Purchases of securities available for sale (5,322) (6,982)
Purchases of securities held to maturity (15,791) (6,908)
Loans made to customers net of principal
payments received (20,645) (4,210)
Proceeds from sales of loans 1,738 1,745
Capital expenditures (645) (243)
Purchase of FHLB stock (45) (112)
Other - net (4,400) 775
- -------------------------------------------------------------------
Net cash provided (used) by investing
activities (35,137) 1,257
- -------------------------------------------------------------------
Cash flows from financing activities:
Net increase (decrease) in savings
accounts and demand deposits 33,585 (16,054)
Net increase in time deposits 9,827 27,776
Net (decrease) in borrowings and other
liabilities (12,650) (8,271)
Proceeds from issuance of Common stock 183 14
Dividends paid (602) (550)
Redemption of Preferred stock (30) (54)
- -------------------------------------------------------------------
Net cash provided (used) by financing
activities 30,313 2,861
- -------------------------------------------------------------------
(6)
IROQUOIS BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
Six months ended
June 30,
1996 1995
-----------------
Net increase (decrease) in cash and
cash equivalents $(1,364) 7,204
Cash and cash equivalents at beginning of
period 12,390 10,429
- ------------------------------------------------------------------
Cash and cash equivalents at end of period 11,026 17,633
- ------------------------------------------------------------------
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest 8,120 7,430
Income taxes 1,329 1,244
Supplemental schedule of non-cash investing
activities:
Loans to facilitate the sale of ORE 99 --
Additions to other real estate 1,150 254
See accompanying notes to condensed consolidated financial
statements.
(7)
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
------------------
Net income per common share for 1996 and 1995 was calculated for the
respective periods by dividing net income applicable to common shares of
$1,914,000 in 1996 and $1,815,000 in 1995 by the weighted average number
of shares outstanding of 2,318,518 in 1996 and 2,294,906 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
--------------
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.
(8)
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.
(9)
IROQUOIS BANCORP, INC.
AND CONSOLIDATED SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
---------------------
THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO JUNE 30, 1995
----------------------------------------------------------
Net income for the three months ended June 30, 1996 was $1.2 million, or $.45
per share, compared to net income of $1.1 million, or $.44 per share, for the
three months ended June 30, 1995. Net interest income was $4.9 million the
second quarter of 1996 compared to $4.5 million for the second quarter of
1995. The net interest spread improved to 4.28% for the quarter ending June
30, 1996 compared to 4.26% for the year earlier quarter. The yield on assets
for the second quarter of 1996 declined nine basis points to 8.11% while the
cost of liabilities declined 11 basis points to 3.82%, compared to the same
period in 1995.
The increase in net interest income was attributable primarily to the increase
in average earning assets, both loans and securities, from $408.7 million for
the quarter ended June 30, 1995 to $443.2 million for the quarter ended June
30, 1996. Interest income increased from $8.4 million in 1995 to $9.0 million
in 1996. Interest-bearing liabilities also increased from $393.2 million in
the second quarter of 1995 to $429.2 million for the second quarter of 1996.
Interest expense increased from $3.9 million in 1995 to $4.1 million in 1996.
The increase in liabilities reflects the acquisition of $46.7 million of
deposits in the purchase of three branches from OnBank and Trust Company
during the second quarter of 1996.
The loan loss provision increased from $224,000 for the second quarter of 1995
to $446,000 for the second quarter of 1996. The ratio of non-performing loans
to total loans decreased from 1.21% at June 30, 1995 to 1.20% at June 30,
1996. The ratio of non-performing assets to total assets increased from .98%
at June 30, 1995 to 1.17% at June 30, 1996.
Total non-interest income increased $56,000 for the second quarter compared to
the same period in 1995. The increase was primarily due to additional fees
from brokerage and trust services as well as deposit service charges on the
additional deposits acquired in the branch acquisition.
Total non-interest expense increased $195,000 for the second quarter 1996
compared to the same period in 1995. The increase was primarily a result of
the amortization of the core deposit premium and additional operating costs
related to the OnBank and Trust Company branches acquired.
(10)
Results of Operations
Page Two
The provision for income taxes was $737,000 for the three months ending June
30, 1996 compared to $741,000 for the three months ending June 30, 1995.
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO JUNE 30, 1995
--------------------------------------------------------
Net income for the six months ending June 30, 1996 was $2.1 million or $.83
per share, compared to $2.0 million or $.79 per share for the first six months
of 1995. Net interest income was $9.3 million compared to $9.1 million for
the first six months of the prior year. The yield on assets declined four
basis points to 8.11% while the cost of liabilities increased 12 basis points
to 3.95% at June 30, 1996. The net interest rate spread contracted to 4.16%
in 1996 from 4.32% in 1995.
The increase of $931,000 in interest income was attributable primarily to a
$25.0 million increase in average earning assets in 1996 compared to 1995.
Interest expense increased $674,000 primarily as a result of an increase of
$23.4 million in average deposits as well as an increase in the average cost
of deposits from 3.63% in 1995 to 3.78% in 1996. Both the average balances
and rates paid on time deposits increased in 1996 compared to 1995.
The loan loss provision was $742,000 for the first six months of 1996,
compared to $466,000 for the first six months of 1995. The increase in the
provision in 1996 reflects an increased level of net charge-offs, growth in
the loan portfolio, and recognition of softness in the central New York
commercial real estate market.
Total non-interest income increased $70,000, or 5.8% for the first six months
of 1996, compared to the same period in 1995. The increase was primarily due
to additional fees for brokerage and trust services as well as fees from a new
accounts receivable financing service for small business customers.
Total non-interest expense decreased $46,000, or .7% for the first six months
of 1996, compared to the same period in 1995. Increased expenses relating to
the branches acquired from OnBank and Trust Company in May 1996 were offset
with the reduction in FDIC insurance premiums compared to the prior year.
(11)
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
----------------------------------------------------
Consolidated assets were $470.7 million at June 30, 1996, compared to $437.8
million at December 31, 1995. Net loans receivable were $344.8 million at
June 30, 1996, compared to $325.7 million at year end 1995. Of the $19.1
million increase in loans, $10.3 million was acquired from OnBank and Trust
Company as part of the purchase of the three branches in May 1996.
Residential mortgage balances increased $12.3 million during the six month
period, consumer loans increased $5.1 million, commercial mortgages decreased
by $783,000, and other commercial loans increased by $2.6 million.
The allowance for loan losses at June 30, 1996 was $3.2 million, compared to
$3.4 million at December 31, 1995. The allowance was .92% of total loans at
June 30, 1996, compared to 1.03% at December 1995. Non-performing assets were
1.17% of total assets at the end of June 1996 compared to 1.21% of assets at
the end of 1995.
The ending balance of securities increased from $89.4 million at year end 1995
to $97.6 million at June 30, 1996. The increase was primarily in mortgage-
backed securities which increased by $6.1 million.
Other assets increased $4.6 million to $18.0 million at June 30, 1996 compared
to $13.4 million at December 31, 1995. Intangible assets of $3.0 million were
added as a result of the branch acquisition and will be amortized over a seven
year period.
Total deposits increased from $369.1 million as of December 31, 1995 to $412.5
million as of June 30, 1996 primarily as a result of the branch acquisition.
The three branches acquired in May 1996 had total deposits of $46.7 million
representing savings, money market, and time deposits, as well as interest-
and non-interest bearing checking accounts.
Total borrowings declined from $35.3 million at year end 1995 to $22.6 million
at June 30, 1996. Term advances from the FHLB decreased by $10.1 million
while draws against overnight lines of credit decreased by $2.6 million. A
portion of the proceeds from the branch acquisition were used to reduce
borrowings.
As of June 30, 1996, the Company had total shareholders' equity of $33.3
million which increased $1.4 million from the year ending December 31, 1995.
The average equity to average assets ratio increased from 6.89% at December
31, 1995 to 7.11% at June 30, 1996. The tangible equity ratio was 6.48% for
the period ending June 30, 1996.
(12)
Financial Condition, Liquidity and Capital Resources
Page Two
The subsidiaries of Iroquois Bancorp, Inc. each exceed the minimum regulatory
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 7.39%, a
tangible capital ratio of 6.57% and a risk based capital ratio of 11.14%. 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 core and tangible capital ratios of 5.54% and a risk
based capital ratio of 10.34%.
At June 30, 1996, the Company held short term liquid assets, including
investments held as available for sale of $46.2 million, compared to $40.7
million at December 31, 1995. The Company considers its current level of
liquidity and additional sources of funds as both sufficient and within
acceptable ranges.
(13)
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
(a) The Annual Meeting of Shareholders of the Company was held on
May 9, 1996.
(b) At the Annual Meeting, three directors were elected: William
J. Humes, Arthur A. Karpinski, Henry D. Morehouse. The
following directors continue to serve: Brian D. Baird, John
Bisgrove, Jr., Richard D. Callahan, Peter J. Emerson, Joseph P.
Ganey, Russel C. Fielding, Lewis E. Springer, II.
(c) On the proposal for the election of the three directors, the
following votes were cast:
For Withheld
--------- --------
William J. Humes 1,751,633 67,605
Arthur A. Karpinski 1,751,723 67,515
Henry D. Morehouse 1,751,773 67,465
On the proposal to amend the Company's Restated Certificate of
Incorporation to increase the Company's authorized shares of
common stock from 3,000,000 to 6,000,000, the following votes
were cast:
For Against Abstain
--- ------- -------
1,476,503 110,018 17,582
On the proposal to approve the Company's 1996 Stock
Option Plan, the following votes were cast:
For Against Abstain
--- ------- -------
1,729,864 81,763 7,607
On the proposal to approve selection of KPMG Peat
Marwick LLP as independent auditors, the following
votes were cast:
For Against Abstain
--- ------- -------
1,806,798 8,271 4,169
Item 5. Other Information - None
(14)
Part II Other Information
Page Two
Item 6. Exhibits and Reports on Form 8-K
A Current Report on Form 8-K was filed on May 18, 1996 to
report at Item 2 thereof an acquisition by Registrant's wholly-owned
subsidiary, Cayuga Savings Bank, of the assets of three branch
operations from OnBank & Trust Co. No financial statements or pro
forma financial information pursuant to Item 7 were included at that
time as it was impracticable to provide the required financial
information until all post-closing adjustments for the transaction
had been completed. The financial statements and pro forma
financial information are to be filed by amendment.
(15)
IROQUOIS BANCORP, INC.
AND CONSOLIDATED SUBSIDIARIES
SIGNATURE
---------
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: August 7, 1996 /s/Richard D. Callahan
-----------------------------
Richard D. Callahan
President & CEO
Date: August 7, 1996 /s/Marianne R. O'Connor
----------------------------
Marianne R. O'Connor
Treasurer & CFO
(16)