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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20552
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES ACT OF 1934
For the quarterly Period Ended December 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
O-19445
SHELBY COUNTY BANCORP
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(Exact name of registrant as specified in its charter)
Indiana 35-1832715
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(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
29 East Washington Street
Shelbyville, Indiana 46176
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(Address of principal executive (Zip Code)
office)
Registrant's telephone number, including area code:
(317) 398-9721
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 report(s), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X . No .
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As of February 6, 1998, there were 175,950 shares of the Registrant's Common
Stock issued and outstanding.
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SHELBY COUNTY BANCORP AND SUBSIDIARY
INDEX
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Page
Number
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PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Statements
of Financial Condition as of
December 31, 1997 (Unaudited)
and September 30, 1997. 3
Consolidated Statements
of Earnings for the three
months ended December 31, 1997
and 1996 (Unaudited) 4
Consolidated Statements of Cash Flows
for the three months ended
December 31, 1997 and 1996 (Unaudited) 5
Notes to Consolidated
Financial Statements (Unaudited) 6-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-10
PART II. OTHER INFORMATION 11
SIGNATURE PAGE 12
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SHELBY COUNTY BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
December 31, September 30,
1997 1997
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ASSETS
Cash $ 846,268 663,335
Interest-bearing Deposits 4,821,320 1,772,848
Investment Securities Available
for Sale 8,177,547 7,886,663
Investment Securities Held to
Maturity (market value: $782,948
and $806,995) 770,023 808,817
Loans Receivable, Net 79,590,610 76,524,167
Accrued Interest Receivable on
Investment Securities 150,959 133,053
Stock of FHLB of Indianapolis 920,200 920,200
Premises and Equipment 1,760,063 1,774,961
Real Estate Owned 36,727 36,727
Prepaid Expenses and Other Assets 147,265 88,607
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TOTAL ASSETS $ 97,220,982 90,609,378
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LIABILITIES AND SHAREHOLDERS'
EQUITY
Liabilities:
Deposits $ 70,783,787 64,633,384
FHLB Advance & Other Borrowings 18,054,180 18,057,629
Accrued Interest on Deposits 129,408 126,484
Income Taxes Payable 184,217 70,789
Deferred Income Taxes 443,653 333,912
Accrued Expenses and Other
Liabilities 137,685 215,858
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TOTAL LIABILITIES $ 89,732,930 83,438,056
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SHAREHOLDERS' EQUITY:
Common Stock, without par value:
Shares authorized of 5,000,000;
Shares issued and outstanding of 175,950 $ 1,358,123 1,358,123
Retained earnings-substantially restricted 5,339,650 5,187,531
Unrealized Appreciation on
Investment Securities Available
for Sale 790,279 625,668
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TOTAL SHAREHOLDERS' EQUITY $7,488,052 7,171,322
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TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $97,220,982 90,609,378
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See accompanying notes to consolidated financial statements.
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SHELBY COUNTY BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Three Months Ended
December 31,
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1997 1996
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Interest Income:
Loans Receivable $1,672,604 1,439,242
Mortgage-Backed Securities 48,129 70,479
Interest-Bearing Deposits 62,288 21,687
Investment Securities 65,442 58,876
Dividends from FHLB 18,555 12,336
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Total Interest Income 1,867,018 1,602,520
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Interest Expense on FHLB Advances 268,421 145,602
Interest Expense on Deposits & Loans 848,616 758,008
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Total Interest Expense 1,117,037 903,610
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Net Interest Income 749,981 698,910
Provision for Loan Losses 30,000 23,000
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Net Interest Income After
Provision for Loan Losses 719,981 675,910
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Non-Interest Income:
Service Charges and Fees 63,074 59,740
Other 37,675 25,114
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Total Non-Interest Income 100,749 84,854
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Non-Interest Expense:
Salaries and Employee Benefits 240,757 243,789
Premises and Equipment 62,985 65,217
Federal Deposit Insurance 22,019 26,270
Data Processing 74,641 60,504
Advertising 24,350 35,298
Bank Fees and Charges 13,324 22,764
Other 95,279 90,992
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Total Non-Interest Expense 533,355 544,834
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Earnings Before Income Taxes 287,375 215,930
Income Taxes 113,262 87,002
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NET EARNINGS 174,113 128,928
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BASIC EARNINGS PER SHARE $.99 $.73
DILUTIVE EARNINGS PER SHARE $.96 $.72
See accompanying notes to consolidated financial statements.
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CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
December 31,
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1997 1996
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Cash Flows From Operating Activities:
Net Earnings $174,113 128,928
Adjustments to Reconcile Net Earnings
To Net Cash Provided By Operating
Activities:
Depreciation and Amortization 42,443 37,904
Net Deferred Loan Origination Fees 12,967 6,446
Provision For Loan Losses 30,000 23,000
Gain on Sale of Securities AFS 10,240 (258)
Change in Accrued Int. Rec. (17,906) 14,333
Change in Other Assets (58,658) 251
Change in Other Liabilities 38,179 (293,448)
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Net Cash Provided by (Used) Operating Act. 231,378 (82,844)
Cash Flows From Investing Activities:
Loans Funded Net of Collections (3,109,410) (3,085,872)
Principal Collected on Investment Sec. 92,741 242,115
Investment in FHLB Stock -0- (104,900)
Purchase of Premises and Equipment (17,610) (31,981)
Disposals of Premises and Equipment -0- 16,154
Proceeds From Sale of Securities AFS 1,108,916 187,136
Net Investment in Mtg. Backed Sec. & Inv. (1,199,570) (451,267)
-------------------------
Net Cash Used in Invest. Act. (3,124,933) (3,228,615)
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Cash Flows from Financing Activities:
FHLB Advances -0- 4,500,000
Dividends Paid (21,994) (17,595)
Net Change in Deposits 6,150,403 (998,249)
Repayment of FHLB Advance & Other Borrowings (3,449) (3,359)
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Net Cash Provided by Financing
Activities 6,124,960 3,480,797
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Net Increase in Cash and Cash Equivalents 3,231,405 169,338
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Cash and Cash Equivalents at Beginning of Period 2,436,183 4,923,276
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Cash and Cash Equivalents at End of Period $5,667,588 5,092,614
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Supplemental Cash Flow Information:
Interest Paid $ 843,165 881,822
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Income Taxes Paid $ 111,156 100,000
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See accompanying notes to consolidated financial statements.
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SHELBY COUNTY BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FIANCIAL STATEMENTS
(Unaudited)
Note 1 Basis of Presentation
The consolidated financial statements include the accounts of Shelby County
Bancorp (the "Corporation") and its subsidiary Shelby County Savings Bank, FSB
(the "Bank"). A summary of significant accounting policies is set forth in
Note 1 of Notes to Consolidated Financial Statements included in the September
30, 1997 Annual Report to Shareholders.
The consolidated interim financial statements have been prepared in accordance
with instructions to Form 10-Q, and therefore do not include all information
and footnotes necessary for a fair presentation of financial position, results
of operations and cash flows in conformity with generally accepted accounting
principles.
The consolidated interim financial statements at December 31, 1997 and for the
three months ended December 31, 1997 and 1996 have not been audited by
independent accountants, but reflect, in the opinion of management, all
adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial position, results of operations and cash flows for
such periods.
Note 2 Earnings per Share
Shelby County Bancorp has implemented Statement of Financial Accounting
Standards 128, "Earnings per Share" (EPS) which is effective for interim and
annual periods ending after December 15, 1997, which requires the presentation
of basic and dilutive earnings per share. Accordingly, these amounts appear on
the financial statements in this Form 10-Q. EPS have been computed on the
basis of the weighted average number of common shares outstanding and the
dilutive effect of stock options not exercised during the periods presented
using the treasury stock method. The weighted average number of shares
outstanding for use in the basic EPS computations was 175,950 for the three
months ended December 31, 1997 and 1996. The weighted average number of shares
for use in the dilutive EPS computations was 181,282 and 179,605 for the three
months ended December 31, 1997 and 1996, respectively.
Note 3 Stock Option Plan
The Corporation has adopted a stock option plan whereby 17,250 shares of
authorized but unissued common stock were reserved for future issuance upon the
exercise of stock options granted to key employees and directors at an option
price of $10 per share. Options for 12,075 shares at an option price of $10
per share have been granted under the plan. Three thousand four hundred and
fifty shares of stock have been issued under the plan as of December 31, 1997.
Options for 1,725 shares at an option price of $18 per share have also been
granted under the plan. Options for 3,450 shares at an option price of $20 per
share have also been granted under the plan. Through December 31, 1997, 3,450
options have been exercised, leaving 13,800 unexercised options.
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SHELBY COUNTY BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 4 Dividends
On December 15, 1997, the Board of Directors declared a quarterly cash dividend
of $.125 per share. The dividend was paid January 13, 1998 to shareholders of
record as of December 30, 1997.
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SHELBY COUNTY BANCORP AND SUBSIDIARY
Management's Discussion and Analysis of Financial Condition and
Results of Operations
(a) Financial Condition:
Total assets at December 31, 1997, were $97,221,000, an increase of
$6,612,000 from total assets of $90,609,000 at September 30, 1997. The most
significant increases in assets were in net loans receivable and interest
bearing deposits. Total net loans receivable increased from $76,524,000 at
September 30, 1997 to $79,591,000 at December 31, 1997. Interest bearing
deposits increased from $1,773,000 at September 30, 1997 to $4,821,000 at
December 31, 1997. Mortgage loans increased from $61,634,000 at September 30,
1997 to $64,320,000 at December 31, 1997. Consumer loans increased from
$14,732,000 at September 30, 1997 to $15,094,000 at December 31, 1997. The
increase in mortgage loans is attributed to a very strong local economy and
loan demand. The two branches that were opened in 1995 have contributed over
$6,585,000 in mortgage and consumer lending.
Total deposits at September 30, 1997 of $64,633,000 increased to
$70,784,000 at December 31, 1997. This increase in deposits is primarily due
to an increase in certificates of deposit and checking accounts.
Non-performing assets increased from $404,000 at September 30, 1997 to
$534,000 at December 31, 1997. It is management's opinion that the bank's
allowance for possible loan losses is adequate to absorb any anticipated future
losses from loan at December 31, 1997.
(b) Results of Operations:
During the three month period ended December 31, 1997, net earnings
increased to $174,000 (basic EPS of $.99 per share) compared to net earnings of
$129,000 (basic EPS of $.73 per share) during the three month period ended
December 31, 1996. The increase in earnings is primarily the result of an
increase in interest income on loans receivable in excess of the increase in
interest expense.
Net interest income was $720,000, after provision for loan losses, for the
three months ended December 31, 1997, compared to $676,000 for the three months
ended December 31, 1996. The interest rate margin for the three months ended
December 31, 1997 was 3.09%, compared to 3.36% for the same period one year
ago.
Interest income increased from $1,603,000 for the three months ended
December 31, 1996 to $1,867,000 for the three months ended December 31, 1997.
Interest expense for the three month period ended December 31, 1997 was
$1,117,000 compared to $904,000 for the three months ended December 31, 1996.
This increase is primarily attributed to the increase in deposit accounts.
Total non-interest income was $101,000 for the three months ended December
31, 1997, compared to $85,000 for the same period in 1996.
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SHELBY COUNTY BANCORP AND SUBSIDIARY
Management's Discussion and Analysis of Financial Condition and
Results of Operation
Non-interest expense totaled $533,000 for the quarter ended December 31,
1997 compared to $545,000 for the same period in the prior year. The primary
decrease in non-interest expense relates to cost cutting measures in most
expense categories.
(c) Capital Resources and Liquidity
The Corporation is subject to regulation as a savings and loan holding
company, and is subject to certain restrictions in its dealings with the Bank.
The Bank is subject to the regulatory requirements applicable to a federal
savings bank.
Current capital regulations required savings institutions to have minimum
tangible capital equal to 1.5% to total assets and a core capital ratio equal
to 3% of total assets. Additionally, savings institutions are required to meet
a risk based capital ratio equal to 8.0% for risk-weighted assets. At December
31, 1997, the Bank satisfied its capital requirements.
The following is a summary of the Bank's regulatory capital and capital
requirements at December 31, 1997 based on capital regulations currently in
effect for savings institutions.
Tangible Core Risk-based
Capital Capital Capital
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Regulatory Capital $5,790,000 $5,790,000 $6,212,000
Minimum Capital Requirement 1,422,000 2,844,000 5,255,000
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Excess Capital $4,368,000 $2,946,000 $ 957,000
Regulatory Capital Ratio 6.02% 6.02% 9.46%
Required Capital Ratio 1.50% 3.00% 8.00%
Liquidity measures the Bank's ability to meet its savings withdrawals and
lending commitments. Management believes that the Bank's liquidity is adequate
to meet current requirements, such as the funding of $1,365,000 in loan
commitments as of December 31, 1997. The Bank maintains liquidity of at least
4% of net withdrawable assets. At December 31, 1997, its regulatory liquidity
ratio was 11.46%.
A Year 2000 Committee has been established by the Corporation
consisting of officers and employees of the Corporation to address problems
which could arise from the forthcoming Year 2000 rollover. The Committee is
charged with providing regular reports to the Board of Directors detailing
progress in this area. Based on progress by the Committee to date, it is not
anticipated that the Year 2000 rollover will present material financial or
operational burdens for the Corporation.
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SHELBY COUNTY BANCORP AND SUBSIDIARY
Management's Discussion and Analysis of Financial Condition and
Results of Operation
There are no other known trends, events, or uncertainties, including
current recommendations by regulatory authorities, that should have, or that
are reasonably likely to have a material effect on the liquidity, capital
resources, or operations of Shelby County Bancorp.
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II. OTHER INFORMATION
Item 1. Legal Proceedings
The Bank is not engaged in any legal proceedings of a material
nature at the present time. From time to time, the Bank is a party to legal
proceedings wherein it enforces its security interest in mortgage loans made by
it.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes in market risk exposures that
affect the quantitative or qualitative disclosures presented as of the
preceding fiscal year in the Corporation's Annual Report on Form 10-K.
Item 5. Other Information
On February 5, 1998, Shelby County Bancorp and Blue River
Bancshares, Inc. jointly announced the signing of an Agreement of and
Affiliation of Merger into Blue River Bancshares, Inc. The press release
issued February 5, 1998, concerning the merger is incorporated herein by
reference and is attached hereto as Exhibit (99).
Item 6. Exhibits and Reports on Form 8-K
a) Not applicable
b) Reports on 8-K--There were no reports on
Form 8-K filed during the three months ended
December 31, 1997.
c) Exhibit 2--Agreement of and Affiliation and
Merger, dated February 5, 1998, by and among Shelby County
Bancorp, Blue River Bancshares, Inc., and Shelby County
Savings Bank, FSB.
d) Exhibit 27--Financial Data Schedule
e) Exhibit 99--Press Release dated February 5, 1998
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed and its behalf by the
undersigned thereunto duly authorized.
SHELBY COUNTY BANCORP
Date: February 6, 1998 By /s/ Rodney L. Meyerholtz
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Rodney L. Meyerholtz
President
Date: February 6, 1998 By /s/ Jack D. Disser
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Jack D. Disser
Treasurer
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