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, 1997
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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
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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
------------------------------------ -----
(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: 2,376,961 shares of common
---------
stock on June 30, 1997.
INDEX
Page No.
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
June 30, 1997 and December 31, 1996................... 3
Condensed Consolidated Statements of Income -
Three Months Ended June 30, 1997 and 1996............. 4
Condensed Consolidated Statements of Income -
Six Months Ended June 30, 1997 and 1996............... 5
Condensed Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1997 and 1996............... 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
Item 3. Quantative and Qualitative Disclosures About
Market Risk.......................................... 13
PART II OTHER INFORMATION
Item 1. Legal Proceedings.................................... 14
Item 2. Changes in Securities................................ 14
Item 3. Defaults upon Senior Securities...................... 14
Item 4. Submission of Matters to a Vote of Security Holders.. 14
Item 5. Other Information.................................... 14
Item 6. Exhibits and Reports on Form 8-K..................... 14
SIGNATURES.................................................... 15
(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,
1997 1996
--------- -------------
ASSETS
Cash and due from banks $ 15,067 $ 10,375
Federal funds sold and interest-bearing
deposits with other financial institutions 3,000 300
Securities available for sale 51,059 43,895
Securities held to maturity 52,670 54,392
Loans receivable 356,817 348,463
Less allowance for loan losses 2,938 3,389
-------- --------
Loans receivable, net 353,879 345,074
Premises and equipment, net 7,244 7,114
Federal Home Loan Bank stock, at cost 2,435 2,279
Accrued interest receivable 3,716 3,571
Other assets 7,833 5,908
- ------------------------------------------------ -------- --------
Total Assets 496,903 472,908
================================================ ======== ========
LIABILITIES
Savings and time deposits $399,967 $385,288
Demand deposits 28,085 24,934
Borrowings 29,529 25,536
Accrued expenses and other liabilities 2,498 2,348
- ------------------------------------------------ -------- --------
Total Liabilities $460,079 $438,106
- ------------------------------------------------ -------- --------
SHAREHOLDERS' EQUITY
Preferred Stock, $1.00 par value,
3,000,000 shares authorized:
Series A - 29,999 and 30,957 shares
issued and outstanding in June 1997
and December 1996 respectively,
liquidation value $3,000 30 31
Series B - 18,652 and 19,082 shares
issued and outstanding in June 1997
and December 1996 respectively,
liquidation value $1,865 19 19
Common Stock $1.00 par value; 6,000,000 shares
authorized; 2,376,961 and 2,367,940 shares
issued and outstanding at June 30, 1997
and December 31, 1996, respectively 2,377 2,368
Additional paid-in capital 13,543 13,520
Retained earnings 21,192 19,260
Net unrealized gain(loss) on securities
available for sale 100 56
Unallocated shares of Stock Ownership Plans (437) (452)
- ------------------------------------------------ -------- --------
Total Shareholders' Equity 36,824 34,802
- ------------------------------------------------ -------- --------
Total Liabilities and Shareholders' Equity $496,903 $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
June 30,
1997 1996
--------- ---------
Interest Income:
Loans $7,542 $7,400
Securities 1,671 1,463
Other 110 123
- ------------------------------------------- ------ ------
9,323 8,986
------ ------
Interest Expense:
Deposits 3,896 3,695
Borrowings 322 416
- ------------------------------------------- ------ ------
4,218 4,111
------ ------
Net Interest Income 5,105 4,875
Provision for loan losses 372 446
- ------------------------------------------- ------ ------
Net Interest Income after Provision
for Loan Losses 4,733 4,429
- ------------------------------------------- ------ ------
Non-Interest Income:
Service charges, commissions and fees 746 656
Net gain (loss) on sales of securities
and loans 7 (1)
Other 96 36
- ------------------------------------------- ------ ------
Total Non-Interest Income 849 691
- ------------------------------------------- ------ ------
Non-Interest Expense:
Salaries and employee benefits 1,815 1,666
Occupancy and equipment expenses 424 421
Computer and product service fees 309 269
Promotion and marketing expenses 88 91
Deposit insurance 25 49
Other 830 736
- ------------------------------------------- ------ ------
Total Non-Interest Expense 3,491 3,232
- ------------------------------------------- ------ ------
Income Before Income Taxes 2,091 1,888
Income taxes 793 737
- ------------------------------------------- ------ ------
Net Income 1,298 1,151
Preferred stock dividend 111 111
- ------------------------------------------- ------ ------
Net income attributable to common stock $1,187 $1,040
=========================================== ====== ======
Net income per common share $.50 .45
=========================================== ====== ======
Cash dividends declared $.08 .08
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,
1997 1996
--------- -------
Interest Income:
Loans $14,989 $14,510
Securities 3,280 2,783
Other 166 211
- -------------------------------------------- ------- -------
18,435 17,504
------- -------
Interest Expense:
Deposits 7,597 7,230
Borrowings 667 956
- -------------------------------------------- ------- -------
8,264 8,186
------- -------
Net Interest Income 10,171 9,318
Provision for loan losses 745 742
- -------------------------------------------- ------- -------
Net Interest Income after Provision
for Loan Losses 9,426 8,576
- -------------------------------------------- ------- -------
Non-Interest Income:
Service charges, commissions and fees 1,362 1,207
Net gain (loss) on sales of securities
and loans 37 1
Other 174 70
- -------------------------------------------- ------- -------
Total Non-Interest Income 1,573 1,278
- -------------------------------------------- ------- -------
Non-Interest Expense:
Salaries and employee benefits 3,628 3,249
Occupancy and equipment expenses 868 833
Computer and product service fees 626 490
Promotion and marketing expenses 162 173
Deposit insurance 49 99
Other 1,587 1,490
- -------------------------------------------- ------- -------
Total Non-Interest Expense 6,920 6,334
- -------------------------------------------- ------- -------
Income Before Income Taxes 4,079 3,520
Income taxes 1,552 1,377
- -------------------------------------------- ------- -------
Net Income 2,527 2,143
Preferred stock dividend 219 229
- -------------------------------------------- ------- -------
Net income attributable to common stock $ 2,308 $ 1,914
============================================ ======= =======
Net income per common share $.98 .83
============================================ ======= =======
Cash dividends declared $.16 $.16
See accompanying notes to condensed consolidated financial statements.
(5)
IROQUOIS BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
Six months ended
June 30,
1997 1996
--------- --------
Cash flows from operating activities:
Net income $ 2,527 2,143
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization expense,
provision for loan losses, deferred
taxes and other 1,248 905
Net (gain) loss on sale of securities
and loans (37) (1)
(Decrease) in accrued interest receivable
and other assets (608) (225)
Increase (decrease) in accrued expenses
and other liabilities 56 710
- ----------------------------------------------- -------- -------
Net cash provided by operating activities 3,186 3,532
- ----------------------------------------------- -------- -------
Cash flows from investing activities:
Proceeds from sales of securities available
for sale 1,381 1,502
Proceeds from maturities and redemptions
of securities available for sale 1,768 2,870
Proceeds from maturities and redemptions
of securities held to maturity 7,670 5,601
Purchases of securities available for sale (9,370) (5,322)
Purchases of securities held to maturity (6,817) (15,791)
Loans made to customers net of principal
payments received (9,271) (10,375)
Loans of acquired branches -- (10,270)
Proceeds from sales of loans 918 1,738
Capital expenditures (437) (645)
Purchase of FHLB stock (156) (45)
Premium paid for deposits -- (3,032)
Other - net (2,730) (1,440)
- ----------------------------------------------- -------- -------
Net cash provided (used) by investing
activities (17,044) (35,209)
- ----------------------------------------------- -------- -------
Cash flows from financing activities:
Net increase (decrease) in savings
accounts and demand deposits 674 (507)
Net increase in time deposits 17,156 (2,733)
Deposits of acquired branches -- 46,652
Net increase (decrease) in borrowings
and other liabilities 3,993 (12,650)
Proceeds from issuance of common stock 161 183
Dividends paid (595) (602)
Redemption of preferred stock (139) (30)
- ----------------------------------------------- -------- -------
Net cash provided (used) by financing
activities 21,250 30,313
- ----------------------------------------------- -------- -------
(6)
IROQUOIS BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
Six months ended
June 30,
1997 1996
-------- -------
Net increase (decrease) in cash and
cash equivalents $ 7,392 (1,364)
Cash and cash equivalents at beginning of
period 10,675 12,390
- ----------------------------------------------- ------- ------
Cash and cash equivalents at end of period 18,067 11,026
- ----------------------------------------------- ------- ------
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest 8,279 8,120
Income taxes 711 1,329
Supplemental schedule of non-cash investing
activities:
Loans to facilitate the sale of ORE 46 99
Additions to other real estate 467 1,150
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 1997 and 1996 was calculated for the
respective periods by dividing net income applicable to common shares of
$2,308,000 in 1997 and $1,914,000 in 1996 by the weighted average number
of shares outstanding of 2,348,362 in 1997 and 2,318,518 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. 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.
(8)
In June 1997, the FASB issued SFAS No. 129, Disclosure of Information
about Capital Structure. SFAS 129 establishes standards for disclosing
information about an entity's capital structure and is effective for the
Company in 1988. Adoption of SFAS 129 is not expected to have an impact
on the financial condition or results of operations of the Company.
In June 1997, the FASB issued SFAS NO. 130, Reporting Comprehensive
Income. SFAS No. 123 establishes standards for the reporting and display
of comprehensive income and its components in a full set of general
purpose financial statements. Comprehensive income is defined as the
change in equity of a business enterprise during a period from
transactions and other events and circumstances from nonowner sources.
The impact of adopting SFAS No. 130, which is effective for the Company in
1998, has not been determined.
In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments of
an Enterprise and Related Information. SFAS No. 131 requires publicly-
held companies to report financial and other information about key
revenue-producing segments of the entity for which such information is
available and is utilized by the chief operation decision maker. Specific
information to be reported for individual segments includes profit or
loss, certain revenue and expense items and total assets. A
reconciliation of segment financial information to amounts reported in the
financial statements would be provided. SFAS No. 131 is effective for the
Company in 1998 and the impact of adoption has not been determined.
(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, 1997 COMPARED TO JUNE 30, 1996
----------------------------------------------------------
Net income for the three months ended June 30, 1997 was $1,298,000 or $.50 per
share, compared to net income of $1,151,000, or $.45 per share for the three
months ended June 30, 1996.
Net interest income was $5,105,000 for the second quarter of 1997, compared to
$4,875,000 for the second quarter of 1996. The increase in net interest
income was volume driven as the yield on assets fell to 8.13% for the current
quarter from 8.17% for the year earlier quarter.
Interest income was $9,323,000 for the quarter ended June 30, 1997, compared
to $8,986,000 for the quarter ended June 30, 1996. Average earning assets
increased from $440.2 million at the end of June 1996 to $458.5 million at the
end of June 1997; average loans increased from $338.3 million to $348.4
million.
Interest expense on deposits and borrowings was $4,218,000 for the quarter
ended June 30, 1997 compared to $4,111,000 for the quarter ended June 30,
1996. Average costing liabilities increased from $410.7 million at the end of
June 1996 to $421.5 million at the end of June 1997. Average deposits
including non-interest bearing demand deposits increased from $402.2 million
to $426.0 million while average borrowings were reduced from $29.5 million to
$21.4 million. The cost of funds remained constant at 4.00% for each quarter.
The loan loss provision decreased from $446,000 for the second quarter of 1996
to $372,000 for the second quarter of 1997. The decreased provision reflects
the changing composition of the loan portfolio. The average balance of retail
loans increased. The average balance of commercial loans decreased the prior
year. The decrease in commercial loans includes the sale of $4.6 million of
classified commercial real estate mortgages during the third quarter of 1996.
Total non-interest income increased from $691,000 for the second quarter of
1996 to $849,000 for the second quarter of 1997, reflecting increased loan and
deposit service fees.
(10)
Total non-interest expense increased from $3.2 million for the second quarter
of 1996 to $3.5 million for the second quarter of 1997. The increase was
primarily additional salary and benefit expense, legal fees and consulting
fees. Other real estate expenses also increased and were associated with the
foreclosure and disposition of non-performing loans.
The provision for income taxes for the three months ended June 30, 1997, was
$793,000, compared to $737,000 for the same period in 1996.
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO JUNE 30, 1996
--------------------------------------------------------
Net income for the six months ended June 30, 1997 was $2,527,000 or $.98 per
share, compared to net income of $2,143,000, or $.83 per share, for the six
months ended June 30, 1996.
Net interest income was $10,171,000 for the first six months of 1997, compared
to $9,318,000 for the first six months of 1996. The increase was both rate
and volume related as the net interest spread increased from 4.08% for the
first half of 1996 to 4.20% for the first half of 1997. The improvement was
attributable to the cost of liabilities which was 4.08% for the six months
ended June 30, 1996 compared to 3.94% for the six months ended June 30, 1997.
Average liability costs were lower in 1997 as a result of the lower costing
deposits acquired in the May 1996 branch acquisition and the replacement of
higher costing borrowings with lower costing public deposits since January
1997.
The increase in interest income from $17,504,000 for the first six months of
1996 to $18,435,000 for the first six months of 1997 was volume related as the
yield on assets decreased during the period from 8.16% to 8.14%. The average
balance of earning assets increased from $429.0 million to $453.0 million;
average loans increased from $333.2 million to $346.1 million.
The loan loss provision for the six months ending June 30, 1997 was $745,000,
compared to $742,000 for the six months ending June 30, 1996. The ratio of
non-performing loans to total loans increased from 1.20% at June 30, 1996, to
1.40% at June 30, 1997.
Total non-interest income was $1,573,000 for the first half of 1997, compared
to $1,278,000 for the first half of 1996. The increase was primarily related
to service fees on loans and deposits. Gains on the sale of loans and
securities were $37,000 for the current period, compared to $1,000 for the
same period the year earlier.
(11)
Total non-interest expense was $6,920,000 for the first six months of 1997
compared to $6,334,000 in 1996. The increase in salary and benefits reflects
the additional expenses related to the branches acquired in 1996. Computer
and product service fees increased reflecting increased data processing fees
and service fees relating to the "Business Manager" accounts receivable
product. The increase in other expenses were primarily related to deposit
premium amortization and consulting fees.
The provision for income taxes through June 30, 1997 was $1,552,000, compared
to $1,377,000 at June 30, 1996.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
----------------------------------------------------
Consolidated assets were $496.9 million at June 30, 1997, compared to $472.9
million at December 31, 1996.
Net loans receivable were $353.9 million at the end of June 1997, or $8.8
million higher than the $345.1 million balance at the end of December 1996.
Within the loan portfolio, residential mortgage loans increased $10.9 million,
to $199.1 million, while commercial mortgage loans decreased $4.4 million, to
$41.6 million. Other consumer lending was stagnant during the period,
increasing only $369,000, to $74.6 million. Other commercial loans also
displayed slow growth, increasing $1.5 million to $41.5 million.
The allowance for loan losses ended June 30, 1997 at $2.9 million, down from
$3.4 million at the end of December 1996. The allowance for loan losses as a
percentage of total loans was .82% at June 30, 1997, compared to .97% at
December 30, 1996. The allowance as a percentage of non-performing loans was
91.0% at December 30, 1996 and 58.9% at June 30, 1997. The decrease in the
allowance primarily reflects the charge-off of certain impaired loans during
the period.
Total securities increased from $98.3 million at December 31, 1996 to $103.7
million at June 30, 1997. The increase of $7.2 million was solely in
securities available for sale, which stood at $51.1 million at end of the
period. Securities held to maturity decreased by $1.7 million to end the
period at $52.7 million. The increase in securities available for sale were
primarily in U.S. Government and U.S. Agency securities, while the decrease in
securities held to maturity was primarily in fixed rate mortgage backed
securities.
Total deposits increased from $410.2 million to $428.1 million during the
first six months of 1997. The increase was in public deposits, which
accounted for $26.7 million of deposits at the end of June 1997. The largest
increase was in short-term certificates of deposit, which totaled $17.3
million at June 30, 1997.
(12)
Borrowings from the Federal Home Loan Bank of New York ("FHLBNY") increased
during the period. Total borrowings were $25.5 million at December 31, 1996,
compared to $29.5 million at June 30, 1997. The increase was all in term
advances as draws against overnight lines of credit remained the same.
At June 30, 1997, Iroquois Bancorp, Inc. had total shareholders' equity of
$36.8 million, compared to $34.8 million at December 31, 1996. The average
equity to assets ratio increased from 7.12% at the end of December 1996 to
7.31% at the end of June 1997. Tier 1 capital to average assets for the
period ending June 30, 1997 was 6.67%.
As of June 30, 1997, the capital ratio of Iroquois Bancorp, Inc. and both of
its banking subsidiaries exceeded the capital ratio requirements of the "well
capitalized" category under applicable regulatory provisions.
At June 30, 1997, Iroquois Bancorp, Inc. held as available for sale short-term
liquid assets including securities and loans of $54.1 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.
Item 3. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable
(13)
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
(a) The Annual Meeting of Shareholders of the Company was held on
May 8, 1997.
(b) At the Annual Meeting, three directors were elected:
Brian D. Baird, John Bisgrove, Jr.,
Richard D. Callahan.
(c) On the proposal for the election of the three
directors, the following votes were cast:
For Withheld
--------- --------
Brian D. Baird 1,846,083 11,934
John Bisgrove, Jr. 1,842,498 15,517
Richard D. Callahan 1,852,587 5,429
On the proposal to approve the selection of KPMG Peat Marwick
LLP as independent auditors, the following votes were cast:
For Against Abstain
--- ------- -------
1,846,337 7,907 3,770
There were no broker non-votes as there was no non-
discretionary matter on the agenda for which brokers may not
vote without instruction.
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K - None
(14)
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: August 8, 1997 /s/Richard D. Callahan
-----------------------------
Richard D. Callahan
President & CEO
Date: August 8, 1997 /s/Marianne R. O'Connor
----------------------------
Marianne R. O'Connor
Treasurer & CFO
(15)