SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For Quarter Ending September 30, 1996
Commission file #33-18492
Spring Bancorp, Inc.
2600 Stevenson Drive
Springfield, Illinois 62703
IRS Employee ID Number
37-1224470
Telephone Number
(217) 529-5555
The registrant, Spring Bancorp, Inc. (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 shorter period that registrant was required to file
such reports), and (2) has been subject to filing requirements for the past 90
days.
Class Outstanding September 30, 1996
- ---------------------------- ------------------------------
common stock $1.00 par value 657,532
SPRING BANCORP, INC.
INDEX
Part I. Financial information
Consolidated Balance Sheet
September 30, 1996 and
December 31, 1995 1.
Consolidated Statement of Income
Three months ended September 30, 1996
and September 30, 1995 2.
Consolidated Statement of Income
nine months ended September 30, 1996 and
and September 30, 1995 3.
Consolidated Statement of Cash
Flows ended September 30, 1996 4.
Consolidated Statement of Cash
Flows ended June 30, 1996 5.
Notes to Consolidated Financial
Statements 6.-7.
Management's Discussion and Analysis
of Financial Condition and Results
of Operation 8.-9.
Part II. Other Information 10.
Form 10-Q
Spring Bancorp, Inc. & Subsidiary
Consolidated Statement of Condition
(unaudited)
September 30, 1996 and December 31, 1995
(In Thousands)
1996 1995
Assets
Cash & due from Banks $ 875 $ 657
Interest Bearing Deposit
Other Banks 0 98
Federal Funds Sold 0 9,000
Investment Securities
Approximate Market Value of
$6,371,000.00 and $6,178,000.00
respectively 6,375 6,121
Loans: Net of Unearned Discount 82,269 65,903
Less Reserve for Loan Loss (398) (397)
------- -------
81,871 64,696
Loans, held for sale 1,494 3,723
Bank Premises Equipment, Furniture
Fixtures and Land 3,583 3,156
Other Real Estate 741 0
Other Assets 896 1,178
------- -------
Total Assets $95,835 $88,629
======= =======
LIABILITIES
Deposits:
Demand Deposits 8,600 10,336
Interest Bearing Deposits 17,559 8,761
Savings Deposits 6,242 8,889
Time Deposits 56,272 56,823
------- -------
Total Deposits 88,673 81,809
Federal Funds Borrowed -0- -0-
Securities Sold Under
Agreement to Repurchase 250 -0-
Other Liabilities 499 1,237
Long Term Borrowing 563 613
STOCKHOLDERS EQUITY
Common Stock ($1.00 Par Value) 658 658
657,532 shares issued
657,532 outstanding
Capital Surplus 397 397
Retained earnings 4,795 3,915
------- -------
Total Stockholders' Equity $ 5,850 $ 4,970
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $95,835 $88,629
======= =======
The accompanying notes are in an integral part of this consolidated financial
statement.
-1-
Form 10-Q
Spring Bancorp, Inc. & Subsidiary
Consolidated Statement of Condition
(unaudited)
Three Months Ended September 30, 1996 &
September 30, 1995
(In Thousands, except per share data)
1996 1995
INTEREST INCOME:
Interest & fees on loans $ 1,632 $ 1,319
Interest on Investment
Securities 90 83
Interest on Funds Sold 32 57
Interest on deposits in
financial institutions 0 2
-------- --------
Total interest income 1,754 1,461
-------- --------
INTEREST EXPENSE:
Interest on deposits 1,051 811
Interest on Federal funds
purchased and securities sold
under agreement to repurchase 0 0
Interest on Long-term debt 12 14
-------- --------
Total interest expense 1,063 825
-------- --------
Net interest income 691 636
PROVISION FOR CREDIT LOSSES 2 0
-------- --------
Net interest income after
provision for credit losses 689 636
-------- --------
OTHER INCOME:
Service charges on deposit
accounts 38 30
Gain on sale of loans 76 101
Other income 401 330
-------- --------
Total other income 515 461
-------- --------
OTHER EXPENSE:
Salaries and employee benefits 383 297
Occupancy and Equipment expense 121 61
Other expenses 216 197
FDIC Exam 1 (17)
Supplies expense 25 14
-------- --------
Total other expenses 746 552
-------- --------
Income before income taxes 458 545
-------- --------
PROVISION FOR INCOME TAXES 165 233
-------- --------
NET INCOME $ 293 $ 312
-------- --------
NET INCOME PER SHARE OF COMMON
STOCK $ .45 $ .48
-------- --------
-------- --------
AVERAGE SHARES OUTSTANDING 657,532 657,532
-------- --------
-2-
FORM 10-Q
Spring Bancorp, Inc. & Subsidiary
Consolidated Statement of Operations
(unaudited)
Nine Months Ended September 30, 1996 &
September 30, 1995
(In Thousands, except per share data)
1996 1995
INTEREST INCOME:
Interest & fees on loans $ 4,573 $ 3,638
Interest on Investment
Securities 271 252
Interest on Funds Sold 229 167
Interest on deposits in
financial institutions 2 5
-------- --------
Total interest income 5,075 4,062
-------- --------
INTEREST EXPENSE:
Interest on deposits 3,032 2,190
Interest on Federal funds
purchased and securities sold
under agreement to repurchase 0 3
Interest on Long-term debt 37 43
-------- --------
Total interest expense 3,069 2,236
-------- --------
Net interest income 2,006 1,826
PROVISION FOR CREDIT LOSSES 14 7
-------- --------
Net interest income after
provision for credit losses 1,992 1,819
-------- --------
OTHER INCOME:
Service charges on deposit
accounts 111 92
Gain on sale of loans 305 172
Other income 1,105 992
-------- --------
Total other income 1,521 1,256
-------- --------
OTHER EXPENSE:
Salaries and employee benefits 1,113 870
Occupancy and Equipment expense 348 178
Other expenses 623 530
FDIC Exam 3 9
Supplies expense 95 42
-------- --------
Total other expenses 2,182 1,629
-------- --------
Income before income taxes 1,331 1,446
-------- --------
PROVISION FOR INCOME TAXES 437 539
-------- --------
NET INCOME $ 894 $ 907
-------- --------
NET INCOME PER SHARE OF COMMON
STOCK $ 1.36 $ 1.38
======== ========
AVERAGE SHARES OUTSTANDING 657,532 657,532
-------- --------
-3-
Form 10 Q
SPRING BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Period Ended September 30, 1996
(In Thousands)
1996
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 893,848
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 174,616
Accretion and Amortization of investment securities 14,882
Provision for credit losses 14,000
Gain on sale of loans (305,026)
Changes in operating assets and liabilities:
Increase (decrease) in accrued income and other assets 282,000
Increase (decrease) in accrued expenses and other
liabilities 742,000
------------
Net cash provided by operating activities 1,816,320
------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of investment securities $ 1,210,046
Purchases of investment securities (1,691,300)
Net increase (decrease) in interest bearing deposits in
financial institutions 98,000
Net increase (decrease) in federal funds sold 9,000,000
Net increase in loans (18,249,417)
Decrease in loans held for sale 2,229,000
Purchase of bank premises and equipment (427,000)
------------
Net cash used in investing activities (7,830,671)
------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in customers deposits $ 6,864,135
Net increase in federal funds purchased 250,000
Long term note (51,000)
Dividends paid (89,900)
------------
Net cash provided by financing activities $ 6,973,235
------------
Net increase in cash and cash equivalents 958,884
------------
Cash and cash equivalents at beginning of year $ 657,218
Cash and cash equivalents at end of year $ 1,616,102
Disclosure of accounting policy:
For purposes of reporting cash flows, cash and cash equivalents include cash
on hand, amounts due from banks.
- -------------
See accompanying notes to consolidated financial statements.
-4-
Form 10 Q
SPRING BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Period Ended September 30, 1995
(In Thousands)
1995
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 906,944
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 69,048
Accretion and Amortization of investment
securities 11,043
Provision for credit losses 7,000
Gain on sale of loans (171,981)
Changes in operating assets and liabilities:
(Increase) decrease in accrued income and
other assets (340,000)
Increase (decrease) in accrued expenses and
other liabilities (264,000)
Deferred Income Taxes (35,510)
-------------
Net cash provided by operating activities 182,544
-------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities of investment
securities $ (190,185)
Proceeds from sale of loans 2,026,235
Net (increase) decrease in interest bearing
deposits in financial institutions (98,000)
Net increase (decrease) in federal funds sold (4,700,000)
Net increase in loans (9,786,008)
Purchases of bank premises and equipment (752,897)
-------------
Net cash used in investing activities (13,500,855)
-------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in customers deposits $ 14,511,000
Net decrease in federal funds purchased -0-
Long term note (51,000)
Dividends paid (95,940)
-------------
Net cash provided by financing activities $ 14,364,060
-------------
Net increase in cash and cash equivalents 1,045,749
-------------
Cash and cash equivalents at beginning of year $ 2,031,267
Cash and cash equivalents at end of year $ 3,077,016
Disclosure of accounting policy:
For purpose of reporting cash flows, cash and cash
equivalents include cash on hand, amounts due
from bank.
- -----------
See accompanying notes to consolidated financial statements.
-5-
SPRING BANCORP, AND SUBSIDIARY
Notes to Consolidated Financial Statements
Unaudited
Note I Basis of Presentation
The financial information included herein on Spring Bancorp, Inc. and
Subsidiary is unaudited, however, the information reflects all adjustments,
consisting solely of normal recurring adjustments, which are in managements
opinion necessary for a fair statement or results for the period.
The financial statements as of September 30, 1996 include the accounts of
the Spring Bancorp, Inc. and its wholly owned subsidiary, Bank of Springfield
after eliminations of all material intercompany balances and transactions.
Note II Commitments and Contingent Liabilities
In the normal course of business, there are outstanding various commitments
and contingent liabilities such as guarantees, commitments to extend credit,
etc., which are not reflected in the accompanying financial statements. No
material losses are anticipated as a result of these transactions.
Note III Loans
Loans are stated at the amount of unpaid principal, reduced by unearned
interest and an allowance for credit losses. Unearned interest on installment
loans is recognized as income over the term of the loans primarily on the
sum-of-the-year-digits method. Interest on other loans is calculated by using
the simple interest method based on daily balances of the principal amount
outstanding. The accrual of interest on loans is discontinued when payment of
principal or interest is in doubt. Interest income on non-accrual loans is
recognized only to the extent payments are received.
Note IV Investment Securities
Effective January 1, 1994, the company adopted Financial Accounting
Standards Board Statement No. 115, Accounting for Certain Investments in Debt
and Equity Securities. Statement 115 addresses the accounting and reporting for
investments in equity securities that have readily determinable fair values, and
all investments in debt securities. Under Statement 115, the company is required
to classify debt and equity securities into one of three categories:
Held to Maturity - includes investments in debt securities which the
company has the positive intent and ability to hold until maturity.
-6-
SPRING BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements (cont'd)
Unaudited
Note IV Investment Securities continued:
Trading Securities - includes investments in debt and equity securities
purchased and held principally for the purpose of selling them in the near-term.
Available for Sale - includes investments in debt and equity securities not
classified as held to maturity or trading.
Debt securities classified as held to maturity are carried at amortized cost, in
which the amortization of premiums and accretion of discounts, which are
recognized as adjustments to interest income, are recorded using a method which
approximates the interest method. Securities classified as available for sale
are recorded at estimated fair value, which is based on quoted market prices.
Unrealized gains and losses for trading securities (for which no securities were
so designated) are to be included in income, while such gains and losses for
available for sale securities are to be excluded from income and reported as a
separate component of stockholders' equity, net of a deferred income tax
effect, until realized. For available for sale securities, gains or losses are
realized and included in noninterest income or expense upon sale, based on the
amortized cost of the individual security sold. All previous fair value
adjustments included in the separate component of stockholder's equity are
reversed upon sale. Gains and losses on the sale of securities available for
sale are determined using the specific-identification method.
Prior to January 1, 1994, investment in debt and equity securities were stated
at cost, adjusted for amortization of premium to the call date or maturity and
accretion of discount to maturity using methods which approximate the interest
method. Gains or losses on disposition were based upon the adjusted cost of the
specific security.
-7-
Spring Bancorp Inc. and Subsidiary
Managements Discussion and Analysis of Financial
Condition and Results of Operation
The following is management's discussion and analysis of certain factors which
have affected Spring Bancorp Inc. and Subsidiary's financial position and
operating results during the periods included in the accompanying consolidated
financial statements.
Nine Months Ended September 30, 1996 and 1995
---------------------------------------------
The income for the first nine months of 1996 was $894,000.00 compared to the
same period of 1995 which was $907,000.00.
Interest Income on loans saw an increase of $935,000.00 over the same period in
1995. This income resulted from growth in the subsidiary's loan portfolio as
compared to 1995. The company realized growth in both commercial and real estate
areas. Interest income on investments in 1996, continued to show a slight
increase for the nine months of 1996. Maturities, monthly paydowns on Government
Agency Obligations and collateralized mortgage securities have resulted in a
increase of interest income on investment securities.
Interest on Federal Funds sold in 1996 for the nine month period showed
$229,000.00 as compared to $167,000.00 in 1995. This is attributed to deposits
in time deposits to the company's subsidiary. The subsidiary saw a growth of
$7,461,000.00 in time deposits from 1995 to 1996.
The interest income on deposits in financial institutions showed a moderate
decrease over the same period in 1995 by $3,000.00. This was the result of less
dollars in deposits with other financial institutions.
Interest Expense in the first nine months of 1996 saw on increase from 1995. The
increase in interest expense was $833,000.00. This increase resulted from higher
interest rates being paid on deposits in 1996. In the second quarter of 1996 the
subsidiary introduced a new product, Power Account, which is an interest bearing
demand account. the accounts rate is based upon the 90 day Treasury Bill rate
and is subject to change weekly as of September 30, 1996. This account reflected
a balance of $8,554,307.85. This continual rise is seen on interest rates being
paid on the interest bearing accounts, also growth of time deposits to the
subsidiary. Close monitoring is being maintained on the upward trend of interest
rates being paid by the subsidiary.
-8-
The provision for loan loss account was reviewed at the end of the first nine
months of 1996 and it was decided by the board of directors that it was
necessary to replenish the loan loss account for the first nine months of 1996,
by $14,000.00 The board continues to review and monitor the loan loss account
on a monthly review, along with management.
Other Income
The subsidiary realized a gain on sale of loans in the amount of $305,000.00
in the first nine months of 1996 as compared to that of 1995 which was
$172,000.00. The bank is servicing approximately $246,707,798.00 in real estate
loans, which have been sold off on the secondary market to Freddie Mac, Fannie
Mae, Independent National Mortgage Co. and Illinois Housing Development
Authority. With rates being on the upward trend, the subsidiary has seen a
decline in the amount of refinancing of first mortgages in the first nine months
of 1996.
The servicing income from these loans above shows an amount of $608,409.00 for
the first nine months of 1996. Service charges on deposit accounts saw a
moderate increase of $19,000.00 for the first nine months of 1996.
Other Expense in 1996 was up by $553,000.00 as compared to that of 1995. The
largest line item expense is salaries and employee benefits. The increase in
personnel is merely due to volume of real estate loans and the servicing being
maintained by the subsidiary. F.D.I.C. assessment fees were down in 1996.
The operating expenses are continually being monitored closely by management
on a daily basis.
It is management's opinion that with stabilizing of deposit structure,
controlling expenses, proper pricing of the institutions services and continuous
monitoring of liquidity will result in a continued profit margin of the
institution operations.
-9-
PART II - OTHER INFORMATION
ITEM 6 REPORTS ON FORM 8-K
- ------ -------------------
No Reports on Form 8-K have been filed during the six months ending
September 30, 1996.
-10-
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report on its behalf by the undersigned
thereunto duly authorized.
November 8, 1996
- ----------------------------------------
Jack A. Marantz, Chief Executive Officer
(Duly authorized officer)
- ----------------------------------------
T. Edward McEvers, Secretary
(Principal Financial Officer)