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, 1997
----------------
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
-------
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: 2,373,438 shares of common
---------
stock on March 31, 1997.
INDEX
Page No.
--------
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
March 31, 1997 and December 31, 1996.................. 3
Condensed Consolidated Statements of Income -
Three Months Ended March 31, 1997 and 1996............ 4
Condensed Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1997 and 1996............ 5-6
Notes to Condensed Consolidated Financial
Statements............................................ 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations........ 8-10
PART II OTHER INFORMATION.................................... 11
SIGNATURES.................................................... 12
(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,
1997 1996
---------- -------------
ASSETS
Cash and due from banks $ 12,216 $ 10,375
Federal funds sold and interest-bearing
deposits with other financial institutions 2,000 300
Securities available for sale 48,050 43,895
Securities held to maturity 54,065 54,392
Loans receivable 348,735 348,463
Less allowance for loan losses 3,589 3,389
-------- --------
Loans receivable, net 345,146 345,074
Premises and equipment, net 7,121 7,114
Federal Home Loan Bank stock, at cost 2,434 2,279
Accrued interest receivable 3,705 3,571
Other assets 6,468 5,908
- ------------------------------------------------ -------- --------
Total Assets 481,205 472,908
================================================ ======== ========
LIABILITIES
Savings and time deposits $398,242 $385,288
Demand deposits 24,590 24,934
Borrowings 20,333 25,536
Accrued expenses and other liabilities 2,546 2,348
- ------------------------------------------------ -------- --------
Total Liabilities $445,711 $438,106
- ------------------------------------------------ -------- --------
SHAREHOLDERS' EQUITY
Preferred Stock, $1.00 par value,
3,000,000 shares authorized:
Series A - 30,059 and 30,957 shares
issued and outstanding in March 1997
and December 1996 respectively,
liquidation value $3,006 30 31
Series B - 18,652 and 19,082 shares
issued and outstanding in March 1997
and December 1996 respectively,
liquidation value $1,865 19 19
Common Stock $1.00 par value; 6,000,000 shares
authorized; 2,373,438 and 2,367,440 shares
issued and outstanding at March 31, 1997
and December 31, 1996, respectively 2,373 2,368
Additional paid-in capital 13,482 13,520
Retained earnings 20,193 19,260
Net unrealized gain(loss) on securities
available for sale (166) 56
Unallocated shares of Stock Ownership Plans (437) (452)
- ------------------------------------------------ -------- --------
Total Shareholders' Equity 35,494 34,802
- ------------------------------------------------ -------- --------
Total Liabilities and Shareholders' Equity $481,205 $472,908
================================================ ======== ========
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,
1997 1996
---------- -------
Interest Income:
Loans $7,447 7,110
Securities 1,628 1,372
Other 37 36
- ------------------------------------------ ------ -----
9,112 8,518
------ -----
Interest Expense:
Deposits 3,701 3,535
Borrowings 345 540
- ------------------------------------------ ------ -----
4,046 4,075
------ -----
Net Interest Income 5,066 4,443
Provision for loan losses 373 296
- ------------------------------------------ ------ -----
Net Interest Income after Provision
for Loan Losses 4,693 4,147
- ------------------------------------------ ------ -----
Non-Interest Income:
Service charges, commissions and fees 616 551
Net gain on sales of securities
and loans 30 2
Other 78 34
- ------------------------------------------ ------ -----
Total Non-Interest Income 724 587
- ------------------------------------------ ------ -----
Non-Interest Expense:
Salaries and employee benefits 1,813 1,583
Occupancy and equipment expenses 444 412
Computer and product service fees 317 221
Promotion and marketing expenses 74 82
Deposit insurance 24 50
Other 757 754
- ------------------------------------------ ------ -----
Total Non-Interest Expenses 3,429 3,102
- ------------------------------------------ ------ -----
Income Before Income Taxes 1,988 1,632
Income taxes 759 640
- ------------------------------------------ ------ -----
Net Income $1,229 992
Preferred stock dividend 108 118
- ------------------------------------------ ------ -----
Net income attributable to common stock $1,121 874
========================================== ====== =====
Net income per common share $.48 .38
========================================== ====== =====
Cash dividends declared $.08 .08
See accompanying notes to condensed consolidated financial statements.
(4)
IROQUOIS BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
Three months ended
March 31,
1997 1996
--------- ---------
Cash flows from operating activities:
Net income $ 1,229 992
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization expense,
provision for loan losses, deferred
taxes and other 475 329
Net (gain) loss on sale of securities
and loans (30) (2)
(Decrease) in accrued interest receivable
and other assets (489) (120)
Increase (decrease) in accrued expenses
and other liabilities 169 1,259
- --------------------------------------------- ------- -------
Net cash provided by operating activities 1,354 2,458
- --------------------------------------------- ------- -------
Cash flows from investing activities:
Proceeds from sales of securities available
for sale 891 --
Proceeds from maturities and redemptions
of securities available for sale 914 2,177
Proceeds from maturities and redemptions
of securities held to maturity 4,567 2,216
Purchases of securities available for sale (5,450) (3,633)
Purchases of securities held to maturity (5,106) (7,324)
Loans made to customers net of principal
payments received (649) (4,631)
Proceeds from sales of loans 375 976
Capital expenditures (156) (154)
Purchase of FHLB stock (156) (53)
Other - net (119) (2,435)
- --------------------------------------------- ------- -------
Net cash provided (used) by investing
activities (4,889) (12,861)
- --------------------------------------------- ------- -------
Cash flows from financing activities:
Net increase (decrease) in savings
accounts and demand deposits 9,452 (4,302)
Net increase in time deposits 3,159 (798)
Net (decrease) in borrowings and other
liabilities (5,203) 7,854
Proceeds from issuance of Common stock 89 101
Dividends paid (296) (305)
Redemption of Preferred stock (123) (24)
- --------------------------------------------- ------- -------
Net cash provided (used) by financing
activities 7,076 11,130
- --------------------------------------------- ------- -------
(5)
IROQUOIS BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
Three months ended
March 31,
1997 1996
--------- -------
Net increase (decrease) in cash and
cash equivalents $ 3,541 727
Cash and cash equivalents at beginning of
period 10,675 12,390
- --------------------------------------------- ------- ------
Cash and cash equivalents at end of period 14,216 13,117
- --------------------------------------------- ------- ------
Supplemental disclosures of cash flow
=============================================
information:
Cash paid during the period for:
Interest 4,076 3,936
Income taxes 343 274
Supplemental schedule of non-cash investing
activities:
Loans to facilitate the sale of ORE 29 40
Additions to other real estate 94 707
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
------------------
Net income per common share for 1997 and 1996 was calculated for the
respective periods by dividing net income applicable to common shares of
$1,121,000 in 1997 and $874,000 in 1996 by the weighted average number of
shares outstanding of 2,346,096 in 1997 and 2,314,374 in 1996. 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) Other Accounting Issues
-----------------------
In June 1996 the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards (SFAS) No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities." SFAS 125 provides accounting and reporting standards for
transfers and servicing of financial assets and extinguishment of
liabilities occurring after December 31, 1996, and is based on consistent
application of a "financial components approach" that focuses on control.
The Statement provides consistent standards for distinguishing transfer of
financial assets that are sales from transfers that are secured borrowings.
In December 1996, FASB deferred for one year the effective date of SFAS 125
as it relates to transfers of financial assets and secured borrowings and
collateral. Effective January 1, 1997, the Company adopted SFAS 125 and
the adoption did not have a material impact on its financial condition or
results of operations.
In February 1997 the FASB issued SFAS No. 128, "Earnings per Share." SFAS
128 establishes standards for computing and presenting earnings per share
(EPS) and applies to entities with publicly held common stock or potential
common stock. SFAS 128 is effective for financial statements issued for
periods ending after December 15, 1997, including interim periods. Upon
adoption, prior period EPS will be restated to conform with the provisions
of SFAS 128. Management does not believe the adoption of SFAS 128 will
have a material impact on its financial condition or results of operation.
(7)
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 MARCH 31, 1997 COMPARED TO MARCH 31, 1996
- ------------------------------------------------------------
Net income for the three months ended March 31, 1997 was $1,229,000, or $.48 per
share, compared to net income of $992,000, or $.38 per share, for the three
months ended March 31, 1996.
Net interest income was $5,066,000 for the first quarter of 1997 compared to
$4,443,000 for the first quarter of 1996. Net interest spread improved to 4.36%
for the current quarter compared to 4.02% for the same quarter the year earlier.
The improvement in net interest spread reflected a decline in the Company's cost
of funds from 4.09% for the quarter ended March 31, 1996 to 3.76% for the
quarter ended March 31, 1997. The overall increase in net interest income
compared to the prior year quarter primarily reflects the Company's growth from
its May 1996 branch acquisition.
Interest income from investments and loans increased to $9.1 million for the
quarter ended March 31, 1997 compared to $8.5 million for the quarter ended
March 31, 1996. Average earning assets increased from $421.2 million for the
first quarter of 1996 to $450.8 million for the first quarter of 1997. Interest
expense remained relatively constant at approximately $4.1 million while average
costing liabilities increased from $403.6 million in 1996 to $435.0 million in
1997.
The loan loss provision increased from $296,000 for the first quarter of 1996 to
$373,000 for the first quarter of 1997. The increased provision reflects
additions to the allowance for loan losses consistent with the continued loan
growth and current levels of non-performing loans. The ratio of non-performing
loans to total loans decreased from 1.87% at March 31, 1996 to 1.13% at March
31, 1997. The ratio of non-performing assets to total assets also decreased
from 1.59% at the end of March 1996 to .91% at the end of March 1997.
Total non-interest income increased 23% to $724,000 for the quarter ended March
31, 1997 compared to the same period of 1996. Increases in loan and deposit
service fees, brokerage fees, and a $30,000 gain on the sale of securities
contributed to the growth in non-interest income.
(8)
Total non-interest expense increased 23% to $3.4 million for the quarter ended
March 31, 1997 from $3.1 million for the quarter ending March 31, 1996. The
increase is primarily attributed to the additional expenses including salaries
and benefits and deposit premium amortization relating to the three branches
acquired in May 1996.
The provision for income taxes was $759,000 for the first quarter of 1997
compared to $640,000 for the first quarter of 1996, reflecting the increase in
income before taxes in 1997.
(9)
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
- ----------------------------------------------------
Consolidated assets were $481.2 million at March 31, 1997, compared to $472.9
million at December 31, 1996.
Loans receivable at March 31, 1997 compared to December 31, 1996 remained
relatively constant at $345.1 million. Within the loan portfolio, residential
mortgage loans increased $820,000, commercial mortgage loans decreased $2.2
million, consumer loans increased $478,000, and commercial loans increased $1.2
million.
The allowance for loan losses increased from $3.4 million at December 31, 1996
to $3.6 million at March 31, 1997. The allowance for loan losses as a
percentage of total loans was .97% at December 31, 1996 and 1.03% at March 31,
1997. The allowance as a percentage of non-performing loans was 93.3% at
December 31, 1996 and 91.0% at March 31, 1997.
Securities held as available for sale increased from $43.9 million at December
31, 1996 to $48.1 million at March 31, 1997 while Federal Funds sold increased
from $300,000 to $2.0 million for the same time periods. The increase in
securities held as available for sale were primarily in U.S. Agencies which were
$3.8 million higher at the end of the first quarter of 1997 compared to year-end
1996.
Total deposits increased from $410.2 million to $422.8 million during the first
quarter of 1997. The increase was primarily in municipal deposits which
accounted for $20.8 million of deposits at the end of the quarter. As part of
its charter change effective January 1, 1997, Cayuga was able to begin accepting
municipal deposits. With the increase in deposits, total borrowings declined
from $25.3 million at year-end 1996 to $20.3 million at March 31, 1997. The
outstanding balance of term advances from the Federal Home Loan Bank of New York
("FHLBNY") increased $3.1 million while overnight draws against lines of credit
from FHLBNY decreased $8.3 million.
At March 31, 1997, Iroquois Bancorp, Inc. had total shareholders' equity of
$35.5 million compared to $34.8 million at December 31, 1996. The average
equity to assets ratio increased from 7.19% at December 31, 1996 to 7.34% at
March 31, 1997. The tangible equity to assets ratio ended the period March 31,
1997 at 6.79%.
As of March 31, 1997, the capital ratios of the Company and both of its banking
subsidiaries exceeded the capital ratio requirements of the "well capitalized"
category under the regulatory framework for prompt corrective actions.
At March 31, 1997, the Company held as available for sale short term liquid
assets including securities and loans of $50.1 million compared to $44.2 million
at December 31, 1996. The Company considers its current level of liquidity and
additional sources of funds as both sufficient and within acceptable ranges.
(10)
IROQUOIS BANCORP, INC.
AND 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 - None
Item 6. Exhibits and Reports on Form 8-K
Exhibit 10(A) Employment Agreement with Richard D. Callahan
Exhibit 10(B) Employment Agreement with Richard J.
Notebaert, Jr.
Exhibit 10(C) Employment Agreement with Marianne R. O'Connor
Exhibit 10(D) Employment Agreement with W. Anthony Shay, Jr.
Exhibit 10(E) Employment Agreement with Henry M. O'Reilly
Exhibit 10(F) Separation Agreement with James H. Paul
(11)
IROQUOIS BANCORP, INC.
AND 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: May 13, 1997 /s/Richard D. Callahan
-----------------------------
Richard D. Callahan
President & CEO
Date: May 13, 1997 /s/Marianne R. O'Connor
----------------------------
Marianne R. O'Connor
Treasurer & CFO
(12)
EXHIBITS INDEX
Exhibit 10(A) Employment Agreement with Richard D. Callahan
Exhibit 10(B) Employment Agreement with Richard J. Notebaert, Jr.
Exhibit 10(C) Employment Agreement with Marianne R. O'Connor
Exhibit 10(D) Employment Agreement with W. Anthony Shay, Jr.
Exhibit 10(E) Employment Agreement with Henry M. O'Reilly
Exhibit 10(F) Separation Agreement with James H. Paul