1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
[ ] 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 000-24255
GLB BANCORP, INC.
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(Exact Name of Registrant as Specified in its Charter)
Ohio 31-1529973
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation of Organization)
7001 Center Street, Mentor, Ohio 44060
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(Address of Principal Executive Offices) (Zip Code)
(440) 974-0000
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(Registrant's Telephone Number, including Area Code)
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
requirements for the past 90 days. YES [X] NO [ ]
As of September 30, 2000, there were 2,133,906 shares of the Registrant's Common
Stock outstanding.
Transitional Small Business Disclosure Format Yes No X
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GLB BANCORP, INC.
TABLE OF CONTENTS
Part I. Financial Information Page
Item 1. Consolidated Financial Statements
Consolidated Statements of Financial Condition as of September 30, 2000 3
(unaudited), December 31, 1999, and September 30, 1999 (unaudited)
Consolidated Statements of Earnings (unaudited) for the three 4
months and nine months ended September 30, 2000 and
September 30, 1999
Consolidated Statements of Cash Flows (unaudited) for the 5
nine months ended September 30, 2000 and September 30, 1999
Notes to Consolidated Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition 7
and Results of Operations
Part II. Other Information 9
Signatures 10
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GLB BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
SEPT. 30, 2000 DECEMBER 31, 1999 SEPT. 30, 1999
Assets (UNAUDITED) (UNAUDITED)
-------------- ----------------- --------------
Cash and due from banks $ 6,771,732 $ 5,972,557 $ 4,798,416
Federal funds sold 6,642,950 14,506,895 17,788,678
------------- ------------- -------------
Total Cash and Cash Equivalents 13,414,682 20,479,452 22,587,094
Securities Available for Sale 3,637,010 3,732,250 3,652,437
Securities Held to Maturity 1,990,317 2,000,233 2,001,824
Loans, net of allowance for loan losses 101,764,532 87,412,502 82,633,152
Stock in Federal Home Loan Bank of Cincinnati, at cost 583,300 552,700 543,200
Premises and equipment, net 3,172,349 3,233,718 3,172,364
Intangibles, net 663,712 699,565 716,541
Other assets 1,166,214 963,256 921,083
------------- ------------- -------------
Total Assets $ 126,392,116 $ 119,073,676 $ 116,227,695
============= ============= =============
Liabilities and Shareholders' Equity
Liabilities
Non-interest bearing demand deposits $ 17,400,071 $ 16,526,276 $ 14,893,554
Interest bearing demand deposits 10,628,828 9,116,668 8,301,980
Savings accounts 43,182,694 41,940,268 41,329,532
Certificate of deposit accounts 17,549,221 14,561,451 14,950,355
------------- ------------- -------------
Total Deposits 88,760,814 82,144,663 79,475,421
Advances from the Federal Home Loan Bank 10,500,000 10,500,000 10,500,000
Accrued expenses and other liabilities 731,008 800,208 735,053
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Total Liabilities 99,991,822 93,444,871 90,710,474
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Shareholders' Equity
Common Stock, no par value,
10,000,000 shares authorized;
2,133,906 shares issued and outstanding 5,334,765 5,334,765 5,334,765
Additional Paid-In Capital 19,152,715 19,152,715 19,152,715
Retained Earnings 2,496,683 1,648,221 1,377,115
Accumulated Other Comprehensive Loss (583,869) (506,896) (347,374)
------------- ------------- -------------
Total Shareholders' Equity 26,400,294 25,628,805 25,517,221
------------- ------------- -------------
Total Liabilities and Shareholders' Equity $ 126,392,116 $ 119,073,676 $ 116,227,695
============= ============= =============
See accompanying notes to financial statements
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GLB BANCORP, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
THREE MONTHS ENDED SEPT. 30, NINE MONTHS ENDED SEPT. 30,
2000 1999 2000 1999
---------------- --------------- ---------------- ----------------
Interest Income:
Loans $2,127,004 $1,662,002 $5,959,375 $4,486,102
Federal funds sold 153,855 247,840 533,701 801,598
Securities 74,542 64,775 229,946 180,169
---------------- --------------- ---------------- ----------------
Total Interest Income 2,355,401 1,974,617 6,723,022 5,467,869
Interest Expense:
Deposits 676,288 592,019 1,939,133 1,709,359
FHLB Advances 171,620 172,090 511,130 441,544
---------------- --------------- ---------------- ----------------
Total Interest Expense 847,908 764,109 2,450,263 2,150,903
---------------- --------------- ---------------- ----------------
Net Interest Income 1,507,493 1,210,508 4,272,759 3,316,966
Provision for loan losses 150,000 39,000 255,000 108,000
---------------- --------------- ---------------- ----------------
Net Interest Income After Provision 1,357,493 1,171,508 4,017,759 3,208,966
---------------- --------------- ---------------- ----------------
Non-Interest Income:
Service charges on demand deposits 87,588 57,996 248,541 150,702
Loan fees 75,048 61,162 208,970 174,738
Other service charges and fees 54,220 46,381 152,983 124,701
Gain on sale of loans 2,574 12,933 23,529 37,821
---------------- --------------- ---------------- ----------------
Total Non-Interest Income 219,430 178,472 634,023 487,962
Non-Interest Expense:
Compensation and related benefits 562,086 483,535 1,603,855 1,369,600
Office occupancy and equipment, net 256,619 217,475 732,579 572,932
Professional fees 26,871 31,359 95,878 95,987
Advertising 40,691 24,693 91,060 73,643
Amortization of intangibles 25,150 30,181 73,742 79,369
Ohio franchise tax 31,875 29,423 96,125 87,685
Data processing 62,913 49,518 185,881 134,835
Office supplies and printing 30,685 23,400 109,727 100,797
FDIC deposit insurance 4,110 1,960 12,276 5,640
Credit card processing 26,873 19,598 78,394 52,561
Year 2000 expenses 0 1,052 7,223 18,551
Acquisition expenses 0 9,460 0 168,354
Other operating expenses 99,353 75,312 257,253 213,556
---------------- --------------- ---------------- ----------------
Total Non-Interest Expenses 1,167,226 996,966 3,343,993 2,973,510
---------------- --------------- ---------------- ----------------
Income Before Income Tax Expense 409,697 353,014 1,307,789 723,418
Federal and State Income Tax 144,248 133,930 459,327 283,283
---------------- --------------- ---------------- ----------------
Net Income $ 265,449 $ 219,084 $ 848,462 $ 440,135
================ =============== ================ ================
Earnings per share basic and diluted $ 0.12 $ 0.10 $ 0.40 $ 0.21
================ =============== ================ ================
See accompanying notes to financial statements
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GLB BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30,
------------------------------
2000 1999
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Cash flows from operating activities:
Net income $ 848,462 $ 440,135
Adjustments required to reconcile net income to net cash
Provided by operating activities:
Amortization of intangibles 73,742 79,369
Depreciation 226,946 194,818
Premium amortization and discount accretion, net (18,192) 4,981
Net deferred loan origination fees (costs) (16,610) 22,152
Origination of loans held for sale (2,785,964) (5,848,151)
Proceeds from sale of loans held for sale 2,775,728 5,819,734
Gain on sale of loans (23,529) (37,821)
Provision for loan losses 255,000 108,000
Origination of mortgage servicing rights (37,889) (103,886)
Increase in other assets (160,991) (22)
Decrease in accrued expenses and other liabilities (69,200) (46,182)
------------ ------------
Net cash provided by operating activities: 1,067,503 633,127
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Cash flows from investing activities:
Purchases of securities available for sale (23,700) (1,395,045)
Purchases of securities held to maturity (471,892) (499,063)
Maturities and payments of securities held to maturity 500,000 500,000
Purchase of FHLB stock (30,600) (84,200)
Origination of loans, net of principal collected (14,556,655) (22,366,605)
Purchases of premises and equipment (165,577) (661,875)
Disposals of premises and equipment 0 (1,052)
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Net cash used in investing activities: (14,748,424) (24,507,840)
------------ ------------
Cash flows from financing activities:
Net increase in deposits 6,616,151 10,820,295
Net Cash proceeds for FHLB advances 0 1,500,000
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Net cash provided by financing activities: 6,616,151 12,320,295
------------ ------------
Net decrease in cash and cash equivalents (7,064,770) (11,554,418)
Cash and cash equivalents at beginning of period 20,479,452 34,141,512
------------ ------------
Cash and cash equivalents at end of period $ 13,414,682 $ 22,587,094
============ ============
Supplemental disclosures of cash flow information:
Interest paid on deposits and borrowings $ 2,434,370 $ 2,144,958
Income taxes paid $ 507,887 $ 221,000
See accompanying notes to financial statements
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GLB BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
GLB Bancorp, Inc. is a one-bank holding company that owns all of the outstanding
common stock of Great Lakes Bank (the Bank). The Corporation, a consolidation of
the holding company and the Bank, was incorporated under Ohio law in March 1997
with the reorganization of the Bank completed in September 1997.
The accompanying unaudited consolidated financial statements have been prepared
in accordance with instructions to Form 10-QSB. Accordingly, they do not include
all of the information and footnotes required by generally accepted accounting
principles for complete financial statements. However, such information reflects
all adjustments (consisting solely of normal recurring adjustments) which are,
in the opinion of management, necessary for a fair statement of results for the
interim periods.
The results of operations and cash flows reported for the period ended September
30, 2000 are not necessarily indicative of the results to be expected for the
year ending December 31, 2000. The unaudited consolidated financial statements
and notes included herein should be read in conjunction with the audited
consolidated financial statements and notes for the year ended December 31,
1999, contained in the Corporation's 1999 Annual Report and the Corporation's
Form 10-KSB filed for December 31, 1999.
Note 2. EARNINGS PER SHARE
Basic and diluted earnings per share were computed based on 2,133,906 weighted
average number of shares outstanding for the three months and nine months ended
September 30, 2000 and 1999, respectively.
Note 3. COMPREHENSIVE INCOME
The Corporation's comprehensive income for the three months and nine months
ended September 30, 2000 and 1999 are as follows:
FOR THE THREE MONTHS ENDED SEPT. 30,
2000 1999
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Net Income $265,449 $219,084
Other comprehensive income:
Change in unrealized loss on securities
available for sale, net of tax (10,098) (127,188)
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Comprehensive income $255,351 $ 91,896
FOR THE NINE MONTHS ENDED SEPT. 30,
2000 1999
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Net Income $848,462 $440,135
Other comprehensive income:
Change in unrealized loss on securities
available for sale, net of tax (76,973) (354,566)
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Comprehensive income $771,489 $ 85,569
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GLB BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
This report may contain certain "forward-looking statements". The Corporation
desires to take advantage of the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995 with respect to all forward-looking
statements. The words "believe", "expect", "anticipate", "estimate", "project",
and similar expressions are intended to identify forward-looking statements. The
Corporation's ability to predict the results or effect of future plans is
inherently uncertain. Factors which could affect actual results include interest
rate trends, the economic climate in the Corporation's market area and the
country, loan delinquency rates, and changes in federal and state regulations.
These factors should be considered in evaluating forward-looking statements and
undue reliance should not be placed on such statements.
STATEMENTS OF FINANCIAL CONDITION
The Corporation's total assets were $126,392,116 at September 30, 2000, compared
to $119,073,676 at December 31, 1999, an increase of 6.1%. Growth on the balance
sheet of the Corporation was slower than prior periods with loans increasing
16.4% and deposits increasing 8.1% for the nine months ended September 30, 2000
compared to loans increasing 37.0% and deposits increasing 15.8% for the nine
months ended September 30, 1999. The Federal Reserve Bank Board's actions to
raise the Fed Funds rate five times since the beginning of the year has slowed
the economy.
The rising rate environment has naturally caused loan and savings interest rates
to increase. While customers may enjoy receiving higher rates on savings
instruments, they are also paying a higher rate of interest on any new or
adjustable loan. This has decreased the volume of new loans as customers hold
back waiting to see if rates will decrease. Statistics in our local lending area
of Lake County, reveal that property transfers comparing 1999 to 2000 have
declined by 9%, indicative that the real estate market has softened as a result
of higher mortgage rates.
GLB Bancorp's core deposits remain strong while growing at a more conservative
pace than the prior period. Customers are being flooded by the news media with
stock market information, shifting the peer competition for deposits from our
banking competitors to the stock market.
LIQUIDITY
The maintenance of an adequate level of liquidity is necessary to ensure
sufficient funds are available to meet customer loan demand, deposit
withdrawals, and expenses. The primary sources of funds are deposits, principal
and interest payments on loans, proceeds of loan sales, federal funds, and FHLB
borrowings and other correspondent banking arrangements. The Corporation feels
it has adequate resources to fund its required commitments as of September 30,
2000, routinely monitoring its funding sources.
CAPITAL RESOURCES
Shareholders' equity was $26,400,294 at September 30, 2000 and $25,628,805 at
December 31, 1999. Net income for the nine months ended September 30, 2000 of
$848,462 was offset by the change in unrealized losses on securities available
for sale of $76,973, net of taxes, recorded as a component of accumulated other
comprehensive loss. The decrease in market value of the securities is due to
market interest rate fluctuations and not due to the deterioration of the
security purchased.
RESULTS OF OPERATIONS
Net Income: The Corporation had net income of $265,449 for the three months
ended September 30, 2000, compared to $219,084 for the three months ended
September 30, 1999 , an increase of 21.2%. The Corporation had net income of
$848,462 for the nine months ended September 30, 2000, compared to $440,135 for
the nine months ended September 30, 1999, an increase of 92.8%.Return on average
assets (ROA) for the nine months ended September 30, 2000 was 0.93%, compared to
0.54% for the nine months ended September 30, 1999. Return on average equity
(ROE) for the nine months ended September 30, 2000 was 4.34%, compared to 2.30%
for the nine months ended September 30, 1999. ROA and ROE have increased
partially due to the prior year results including $168,354 in acquisition
expenses. Also, increases in the volume of new DDA accounts have increased
service charges and overdraft charges. New loan volume at higher rates has
generated additional loan interest income.
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Interest Income: Interest income was $2,355,401 for the three months ended
September 30, 2000, compared to $1,974,617 for the three months ended September
30, 1999, an increase of 19.3%. Interest income was $6,723,022 for the nine
months ended September 30, 2000, compared to $5,467,869 for the nine months
ended September 30, 1999, an increase of 23.0%. Interest income increased
largely due to new loan volume and increases in rates on loans using the index,
prime. The Bank currently has $16.2 million in loans tied to prime which would
have adjusted upward with each of the fed fund rate increases. Since the growth
in deposits has been less than loans, Fed Fund income has decreased 33.4% for
the nine months ended September 30, 2000 compared to the same period in 1999,
with the Bank using Fed Funds to fund loans and operations.
Interest Expense: Interest expense was $847,908 for the three months ended
September 30, 2000, compared to $764,109 for the three months ended September
30, 1999, an increase of 11.0%. Interest expense was $2,450,263 for the nine
months ended September 30, 2000, compared to $2,150,903 for the nine months
ended September 30, 1999, an increase of 13.9%. This increase was due to normal
fluctuations in existing account balances and the continued opening of new
deposit accounts with current and new customers. In the current rising rate
environment GLB Bancorp has raised its rates on certificates of deposit when
deemed necessary to be competitive in the market place. Interest expense also
increased due to an additional FHLB advance of $3 million purchased in May 1999
with five months of expense in the prior period compared to nine months in the
current period. The Bank typically does not borrow funds, instead it tries to
match its loan and deposit growth as much as is possible in today's market.
Provision for Loan Losses: The provision for loan losses is based upon
management's assessment of relevant factors, including types and amounts of
non-performing loans, historical and anticipated loss experience on such types
of loans, current, and projected economic conditions. The provision for loan
losses was $150,000 for the three months ended September 30, 2000 compared to
$39,000 for the three months ended September 30, 1999. The provision for loan
losses was $255,000 for the nine months ended September 30, 2000 compared to
$108,000 for the nine months ended September 30, 1999. The increase in the
provision for loan losses was principally a result of increased loan volume. Net
charge-offs for the three months ended September 30, 2000 were $58,469 compared
to $994 in net charge-offs for the three months ended September 30, 1999. Net
charge-offs for the nine months ended September 30, 2000 were $92,772 compared
to $6,859 in net charge-offs for the nine months ended September 30, 1999. The
increase in net charge-offs for the nine months ended September 30, 2000 is
primarily due to charging off a commercial loan for $50,000 and $46,742 in our
consumer loan portfolio largely attributable to one customer with several loans.
The non-performing assets as a percent of total assets was 0.14% at September
30, 2000 compared to 0.04% at September 30, 1999.
Non-Interest Income: Non-interest income was $219,430 for the three months ended
September 30, 2000 and $178,472 for the three months ended September 30, 1999,
an increase of 22.9%. Non-interest income was $634,023 for the nine months ended
September 30, 2000 and $487,962 for the nine months ended September 30, 1999, an
increase of 29.9%. The increase was largely due to collection of overdraft
charges which increased with more accounts being opened, generating for the Bank
a 64.9% increase in service charges on the demand deposit accounts. Other
service charges and fees increased 22.7% mostly due to increased volume in
merchant credit card activity from new and existing customers. Also, in August
1999 the Bank raised its ATM non-customer service charges from 75 cents to 95
cents with the nine months ended September 30, 2000 having the full effect of
that change.
Non-Interest Expense: Non-interest expense was $1,167,226 for the three months
ended September 30, 2000 and $996,966 for the three months ended September 30,
1999, a decrease of 17.1%. Non-interest expense was $3,343,993 for the nine
months ended September 30, 2000 and $2,973,510 for the nine months ended
September 30, 1999, an increase of 12.5%. The largest components of non-interest
expense are office occupancy, data processing, and credit card processing. For
the nine months ended September 30, 2000 compared to the nine months ended
September 30, 1999, office occupancy increased 27.9%, data processing increased
37.9%, and credit card processing increased 49.1%. At September 30, 2000, the
Bank had nine full months of rental expense for the three offices opened last
year and five months of additional expense for the new office in Madison, Ohio
which opened August 2000. Also in 1999, the Bank was offsetting its occupancy
expenses with rental income received for leased office space at a rate of $5,000
per month. The Bank decided to discontinue the lease to allow its operations to
expand. Data processing increased with new data transmission line charges for
the new offices opened and additional service charges based on higher volumes of
savings and loan accounts. Credit card processing increased with the Bank
focusing branch customer sales on merchant credit card processing and increased
volume being generated by those new and existing merchants. Additionally during
the nine months ended September 30, 1999, the Bank had expensed acquisition
costs totaling $168,354.
The effective tax rate for the nine months ended September 30, 2000 was 35.1%
compared to 39.2% for the nine months ended September 30,1999.
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ACCOUNTING DEVELOPMENTS
The Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and
Hedging Activities" with an effective date for all fiscal quarters of fiscal
years beginning after June 15, 1999, which was amended by (SFAS) No. 137 which
changed the effective date to fiscal years beginning after June 15, 2000. This
Statement establishes accounting and reporting standards for derivative
instruments and for hedging activities. It requires that an entity recognize
derivatives as either assets or liabilities at fair value with gains or losses
determined depending on the intended use of the derivative and its resulting
designation. This Statement should not be applied retroactively to prior period
financial statements. In June 2000, SFAS No. 133 was also amended by SFAS No.
138, "Accounting for Certain Derivative Instruments and Certain Hedging
Activities" which adds further guidance related to the accounting for derivative
instruments and hedging activities. At the present time, the Corporation feels
the impact on the Corporation's consolidated financial statements as a result of
the adoption of SFAS No.133, as amended by SFAS No. 137 and SFAS No. 138 would
be immaterial, as the Corporation does not currently engage in derivative
activities.
FUTURE DEVELOPMENTS
To date, the Corporation has successfully dealt with the Year 2000 date change.
The Corporation will continue to monitor all core business processes and mission
critical systems in order to identify and address any future problems.
GLB BANCORP, INC.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS-Not applicable
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS-Not Applicable
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES-Not Applicable
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS-Not Applicable
ITEM 5 - OTHER INFORMATION-Not Applicable
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-k
Exhibits
27 Financial Data Schedule
No report on Form 8-K was filed during the three months ended
September 30, 2000.
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SIGNATURES
In accordance with 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.
GLB BANCORP, INC.
By: /s/ Richard T. Flenner, Jr. Date: November 9, 2000
---------------------------------------- -----------------
Richard T. Flenner, Jr., President
Chief Executive Officer and Director
By: /s/ Cheryl J. Mihitsch Date: November 9, 2000
------------------------------------------ ------------------
Cheryl J. Mihitsch
Principal Financial and Accounting Officer
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