1
FORM 10-QSB
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For 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 0-25971
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INDIAN VILLAGE BANCORP, INC.
----------------------------
(Exact name of small business issuer as specified in its charter)
Pennsylvania 34-1891199
------------ ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
100 South Walnut Street, Gnadenhutten, Ohio 44629
-------------------------------------------------
(Address of principal executive offices)
(740) 254-4313
--------------
(Issuer's telephone number)
As of November 1, 2000, the latest practical date, 423,304 of the issuer's
common shares, $.01 par value, were issued and outstanding.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
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1.
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INDIAN VILLAGE BANCORP, INC.
INDEX
Page
PART I -FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (Unaudited)
Consolidated Balance Sheets ............................................................ 3
Consolidated Statements of Income ...................................................... 4
Consolidated Statements of Comprehensive Income ........................................ 5
Consolidated Statements of Changes in Shareholders' Equity.............................. 6
Consolidated Statements of Cash Flows .................................................. 8
Notes to Consolidated Financial Statements ............................................. 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations...................................... 15
Part II - Other Information
Item 1. Legal Proceedings.................................................................. 21
Item 2. Changes in Securities.............................................................. 21
Item 3. Defaults on Senior Securities...................................................... 21
Item 4. Submission of Matters to a Vote of Security Holders................................ 21
Item 5. Other Information.................................................................. 21
Item 6. Exhibits and Reports on Form 8-K................................................... 21
SIGNATURES ........................................................................................... 22
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2.
3
INDIAN VILLAGE BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
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September 30, June 30,
2000 2000
---- ----
ASSETS
Cash and due from banks $ 1,149 $ 980
Interest-bearing deposits in other banks 299 107
------- -------
Total cash and cash equivalents 1,448 1,087
Time deposits -- 200
Securities available for sale at fair value 20,062 20,061
Loans, net of allowance for loan losses 42,922 40,799
Premises and equipment, net 1,587 1,564
Real estate owned 133 118
Federal Home Loan Bank stock 1,119 1,099
Accrued interest receivable and other assets 486 716
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Total assets $67,757 $65,644
======= =======
LIABILITIES
Deposits $38,450 $36,586
Federal Home Loan Bank advances 21,250 20,250
Accrued interest payable and other liabilities 100 151
------- -------
Total liabilities 59,800 56,987
SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value, 1,000,000 shares authorized, -- --
none outstanding
Common stock, $.01 par value, 5,000,000 shares authorized,
423,304 shares issued and outstanding 4 4
Additional paid-in capital 3,243 4,022
Retained earnings - substantially restricted 5,542 5,498
Unearned employee stock ownership plan shares (393) (333)
Treasury stock, at cost, 22,279 shares (273) (273)
Accumulated other comprehensive income (166) (261)
------- -------
Total shareholders' equity 7,957 8,657
------- -------
Total liabilities and shareholders' equity $67,757 $65,644
======= =======
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See accompanying notes to consolidated financial statements.
3.
4
INDIAN VILLAGE BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousands, except per share data)
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Three Months Ended
September 30,
2000 1999
---- ----
INTEREST AND DIVIDEND INCOME
Loans, including fees $ 851 $ 722
Securities 380 193
Interest-bearing deposits and Federal funds sold 15 24
------ -----
Total interest income 1,246 939
INTEREST EXPENSE
Deposits 482 337
Federal Home Loan Bank advances 315 152
------ -----
Total interest expense 797 489
------ -----
NET INTEREST INCOME 449 450
Provision for loan losses 8 5
------ -----
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 441 445
NONINTEREST INCOME
Service charges and other fees 16 7
Gain on sale of securities available for sale, net 15 5
Other income (loss) (1) (4)
------ -----
Total noninterest income 30 8
NONINTEREST EXPENSE
Salaries and employee benefits 171 128
Occupancy, furniture and fixtures 39 22
Professional and consulting fees 43 15
Franchise taxes 13 17
Data processing 20 17
Director and committee fees 19 19
Other expense 66 58
------ -----
Total noninterest expense 371 276
------ -----
INCOME BEFORE INCOME TAXES 100 177
Income tax expense 28 60
------ -----
NET INCOME $ 72 $ 117
====== =====
EARNINGS PER COMMON SHARE $ 0.18 $0.29
====== =====
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See accompanying notes to consolidated financial statements.
4.
5
INDIAN VILLAGE BANCORP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(Dollars in thousands)
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Three Months Ended
September 30,
2000 1999
---- ----
NET INCOME $ 72 $117
Other comprehensive income, net of tax
Unrealized gains (losses) on securities available for sale arising 105 (47)
during period
Reclassification adjustment for accumulated gains included in
net income (10) (3)
---- ----
Net unrealized gains (losses) on securities 95 (50)
Additional minimum pension liability adjustment -- --
---- ----
Other comprehensive income 95 (50)
---- ----
COMPREHENSIVE INCOME $167 $ 67
==== ====
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See accompanying notes to financial statements.
5.
6
INDIAN VILLAGE BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
(Dollars in thousands)
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Unrealized
Additional Gain on
Additional Unearned Minimum Securities
Common Paid-In Retained ESOP Treasury Pension Available
Stock Capital Earnings Shares Stock Liability for Sale Total
----- ------- -------- ------ ----- --------- -------- -----
Balance at July 1, 1999 $-- $ -- $5,266 $ -- $ -- $(53) $ (62) $5,151
Net income for the period -- -- 117 -- -- -- -- 117
Sale of 445,483 shares of par
common stock, net of
conversion costs 4 4,089 -- -- -- -- -- 4,093
Purchase of 35,637 shares
under ESOP plan -- -- -- (356) -- -- -- (356)
Release of 594 ESOP shares -- 1 -- 6 -- -- -- 7
Change in fair value of securities
available for sale -- -- -- -- -- -- (50) (50)
--- ------ ------ ----- ---- ---- ----- ------
Balance at September, 1999 $ 4 $4,090 $5,383 $(350) $ -- $(53) $(112) $8,962
=== ====== ====== ===== ==== ==== ===== ======
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See accompanying notes to financial statements.
6.
7
INDIAN VILLAGE BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
(Dollars in thousands)
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Unrealized
Additional Gain on
Additional Unearned Minimum Securities
Common Paid-In Retained ESOP Treasury Pension Available
Stock Capital Earnings Shares Stock Liability for Sale Total
----- ------- -------- ------ ----- --------- -------- -----
Balance at July 1, 2000 $ 4 $4,022 $5,498 $(333) $(273) $-- $(261) $8,657
Net income for the period -- -- 72 -- -- -- -- 72
Cash dividend - $.07 per share -- -- (28) -- -- -- -- (28)
Return of capital - $2.00 per share -- (780) -- (66) -- -- -- (846)
Release of 594 ESOP shares -- 1 -- 6 -- -- -- 7
Change in fair value of securities
available for sale -- -- -- -- -- -- 95 95
--- ------ ------ ----- ----- --- ----- ------
Balance at September 30, 2000 $ 4 $3,243 $5,542 $(393) $(273) $-- $(166) $7,957
=== ====== ====== ===== ===== === ===== ======
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See accompanying notes to financial statements.
7.
8
INDIAN VILLAGE BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Three Months Ended
September 30,
2000 1999
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 72 $ 117
Adjustments to reconcile net income to net cash from operating
activities:
Depreciation 26 21
Net premium amortization (discount accretion) (17) --
Provision for loan losses 8 5
Federal Home Loan Bank stock dividends (20) (11)
Gain on sale of securities available for sale (15) (5)
Compensation expense on ESOP shares 7 7
Net change in accrued interest receivable and other assets 215 38
Net change in accrued expenses and other liabilities (100) (2,824)
------- -------
Net cash from operating activities 176 (2,652)
CASH FLOWS FROM INVESTING ACTIVITIES
Net change in time deposits 200 200
Purchases of securities available for sale (2,791) (8,802)
Proceeds from sales of securities available for sale 2,670 300
Proceeds from maturities of securities available for sale 296 238
Net change in loans (2,131) (379)
Premises and equipment expenditures (49) (368)
Purchases of Federal Home Loan Bank stock -- (354)
------- -------
Net cash from investing activities (1,805) (9,165)
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposits 1,864 (1,320)
Net change in short-term FHLB advances 1,000 1,000
Proceeds from long-term FHLB advances -- 7,000
Proceeds from issuance of common stock, net of conversion costs -- 4,024
Cash dividends paid (28) --
Return of capital distribution (846) --
Cash provided to ESOP -- (356)
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Net cash from financing activities 1,990 10,348
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Net change in cash and cash equivalents 361 (1,469)
Cash and cash equivalents at beginning of period 1,087 2,498
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,448 $ 1,029
======= =======
Supplemental disclosures of cash flow information
Cash paid during the period for
Interest $ 591 $ 459
Income taxes -- 30
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See accompanying notes to financial statements.
8.
9
INDIAN VILLAGE BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Table dollar amounts in thousands)
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NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These interim financial statements are prepared without audit and reflect all
adjustments which, in the opinion of management, are necessary to present fairly
the financial position of Indian Village Bancorp, Inc. (the "Corporation") at
September 30, 2000, and its results of operations and cash flows for the periods
presented. All such adjustments are normal and recurring in nature. The
accompanying consolidated financial statements have been prepared in accordance
with the instructions for Form 10-QSB and, therefore, do not purport to contain
all the necessary financial disclosures required by generally accepted
accounting principles that might otherwise be necessary in the circumstances,
and should be read in conjunction with the audited financial statements and
notes thereto of the Corporation for the transition period ended June 30, 2000.
On May 18, 2000, the Corporation changed its fiscal year end from December 31 to
June 30, effective June 30, 2000. Therefore, the Corporation filed a transition
report on Form 10-KSB covering the transition period from January 1, 2000
through June 30, 2000. The accounting policies of the Corporation described in
the notes to consolidated financial statements contained in the Corporation's
June 30, 2000, financial statements, have been consistently followed in
preparing this Form 10-QSB. The results of operations for the three months ended
September 30, 2000 are not necessarily indicative of the results of operations
that may be expected for the full year.
The consolidated financial statements include the accounts of the Corporation
and its wholly-owned subsidiary, Indian Village Community Bank (the "Bank"). All
significant intercompany transactions and balances have been eliminated.
The Corporation's and Bank's revenues, operating income and assets are primarily
from the financial institution industry. The Bank is engaged in the business of
residential mortgage lending and consumer banking with operations conducted
through its main office located in Gnadenhutten, Ohio and a branch office in New
Philadelphia, Ohio. These communities and the contiguous areas are the source of
substantially all the Bank's loan and deposit activities. The majority of the
Bank's income is derived from residential and consumer lending activities and
investments.
To prepare financial statements in conformity with generally accepted accounting
principles, management makes estimates and assumptions based on available
information. These estimates and assumptions affect the amounts reported in the
financial statements and disclosures provided, and future results could differ.
The allowance for loan losses, fair values of financial instruments and pension
liabilities are particularly subject to change.
The provision for income taxes is based on the effective tax rate expected to be
applicable for the entire year. Income tax expense is the total of the
current-year income tax due or refundable and the change in deferred tax assets
and liabilities. Deferred tax assets and liabilities are the expected future tax
amounts for the temporary differences between carrying amounts and tax bases of
assets and liabilities, computed using enacted tax rates. A valuation allowance,
if needed, reduces deferred tax assets to the amount expected to be realized.
Basic earnings per common share is net income divided by the weighted average
number of common shares outstanding during the period. The weighted average
number of shares outstanding during the three months ended September 30, 2000
was 423,304. Employee Stock Ownership Plan ("ESOP") shares are considered
outstanding for this calculation unless unallocated. The Corporation currently
has no potentially dilutive common shares.
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(Continued)
9.
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INDIAN VILLAGE BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Table dollar amounts in thousands)
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NOTE 2 - CONSUMMATION OF THE CONVERSION TO A STOCK SAVINGS AND LOAN
ASSOCIATION WITH THE CONCURRENT FORMATION OF A HOLDING COMPANY
On January 20, 1999, the Board of Directors of the Bank, subject to regulatory
approval and approval by the members of the Bank, unanimously adopted a Plan of
Conversion under which the Bank would convert from a federally chartered mutual
savings bank to a federally chartered stock savings bank and concurrently form a
holding company to own 100% of the Bank's stock. The conversion was consummated
on July 1, 1999, and the Corporation sold its common stock in an amount equal to
the pro forma market value of the Bank after giving effect to the conversion. A
total of 445,583 common shares of the Corporation were sold at $10.00 per share.
The Corporation received net proceeds of $4,024,000, after deducting conversion
costs of $432,000.
The Corporation retained 50% of the net proceeds from the sale of common shares.
The remainder of the net proceeds was invested in the capital stock issued by
the Bank to the Company.
As part of the conversion, the Bank established a liquidation account in an
amount equal to its regulatory capital as of December 31, 1998. The liquidation
account will be maintained for the benefit of eligible depositors who continue
to maintain their accounts at the Bank after the conversion. The liquidation
account will be reduced annually to the extent that eligible depositors have
reduced their qualifying deposits. Subsequent increases will not restore an
eligible account holder's interest in the liquidation account. In the event of a
complete liquidation, each eligible depositor will be entitled to receive a
distribution from the liquidation account in an amount proportionate to the
current adjusted qualifying balances for accounts then held. The Bank may not
pay dividends that would reduce shareholders' equity below the required
liquidation account balance.
Under Office of Thrift Supervision ("OTS") regulations, limitations have been
imposed on all "capital distributions" by savings institutions, including cash
dividends. Under OTS regulations, the Bank is not permitted to pay a cash
dividend on its common shares if its regulatory capital would, as a result of
payment of such dividend, be reduced below the amount required for the
liquidation account, or applicable regulatory capital requirements prescribed by
the OTS.
Effective June 29, 2000, the Bank converted from a federally chartered stock
savings bank to an Ohio-chartered institution and assumed the obligation of the
liquidation account.
NOTE 3 - SECURITIES AVAILABLE FOR SALE
The amortized cost and estimated fair values of securities available for sale
are summarized as follows:
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
September 30, 2000
------------------
U.S. Government agencies $ 7,435 $-- $(165) $ 7,270
Obligations of states and
political subdivisions 1,271 21 -- 1,292
Corporate debt securities 795 3 -- 798
Mortgage-backed securities 9,914 21 (133) 9,802
Equity securities 899 1 -- 900
------- --- ----- -------
$20,314 $46 $(298) $20,062
======= === ===== =======
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(Continued)
10.
11
INDIAN VILLAGE BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Table dollar amounts in thousands)
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NOTE 3 - SECURITIES AVAILABLE FOR SALE (Continued)
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
June 30, 2000
-------------
U.S. Government agencies $ 7,934 $-- $(233) $ 7,700
Obligations of states and
political subdivisions 1,986 40 -- 2,026
Corporate debt securities 149 -- -- 149
Mortgage-backed securities 9,888 25 (230) 9,684
Equity Securities 500 2 -- 502
------- --- ----- -------
$20,457 $67 $(463) $20,061
======= === ===== =======
The amortized cost and estimated fair values of debt securities available for
sale at September 30, 2000, by contractual maturity, are shown below. Actual
maturities could differ from contractual maturities because borrowers may have
the right to call or prepay obligations with or without call or prepayment
penalties. Securities not due at a single maturity date, primarily
mortgage-backed securities, are shown separately.
Estimated
Amortized Fair
Cost Value
---- -----
Due after one year through five years $ 745 $ 736
Due after five years through ten years 5,210 5,158
Due after ten years 3,546 3,466
Mortgage-backed securities 9,914 9,802
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$19,415 $19,162
======= =======
Proceeds from sales of securities available for sale during the three months
ended September 30, 2000 and 1999 were $2.7 million and $300,000. Gross gains of
$16,000 and gross losses of $1,000 were realized on those sales during the three
months ended September 30, 2000. Gross gains of $5,000 were realized on those
sales during the three months ended September 30, 1999.
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(Continued)
11.
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INDIAN VILLAGE BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Table dollar amounts in thousands)
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NOTE 4 - LOANS
Loans are summarized as follows:
September 30, June 30,
2000 2000
---- ----
Real estate loans:
One- to four-family residential $30,242 $29,618
Multi-family residential 2,291 2,307
Nonresidential 2,585 2,102
Construction 1,421 1,632
Land 277 254
------- -------
36,816 35,913
Consumer loans:
Home equity loans and lines of credit 1,810 1,703
Home improvement 837 738
Automobile 1,155 961
Loans on deposit accounts 399 251
Unsecured 159 85
Other 1,611 1,408
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5,971 5,146
Commercial business loans 507 94
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43,294 41,153
Less:
Net deferred loan fees and costs (69) (68)
Loans in process (64) (49)
Allowance for loan losses (239) (237)
------- -------
$42,922 $40,799
======= =======
Activity in the allowance for loan losses is summarized as follows:
Three Months Ended
September 30,
2000 1999
---- ----
Balance at beginning of period $237 $224
Provision for losses 8 5
Charge-offs (6) --
Recoveries -- --
---- ----
Balance at end of period $239 $229
==== ====
As of and for the three months ended September 30, 2000 and 1999, no loans were
considered impaired within the scope of SFAS No. 114.
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(Continued)
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INDIAN VILLAGE BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Table dollar amounts in thousands)
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NOTE 5 - COMMITMENTS, OFF-BALANCE SHEET RISK AND CONTINGENCIES
There are various contingent liabilities that are not reflected in the financial
statements, including claims and legal actions arising in the ordinary course of
business. In the opinion of management, after consultation with legal counsel,
the ultimate disposition of these matters is not expected to have a material
effect on financial condition or results of operations.
The Corporation is a party to financial instruments with off-balance sheet risk
in the normal course of business to meet the financing needs of customers. These
financial instruments include commitments to make loans. The Corporation's
exposure to credit loss in case of nonperformance by the other party to the
financial instrument for commitments to make loans is represented by the
contractual amount of those instruments. The Corporation follows the same credit
policy to make such commitments as is followed for those loans recorded in the
financial statements.
As of September 30, 2000, variable rate and fixed rate commitments to make loans
or fund outstanding lines of credit amounted to approximately $776,000 and
$1,318,000. As of June 30, 2000, variable rate and fixed rate commitments to
make loans or fund outstanding lines of credit amounted to approximately
$808,000 and $1,506,000. Since loan commitments may expire without being used,
the amounts do not necessarily represent future cash commitments.
NOTE 6 - EMPLOYEE STOCK OWNERSHIP PLAN
The Bank has established an employee stock ownership plan ("ESOP") for the
benefit of substantially all employees of the Corporation and the Bank. The ESOP
borrowed funds from the Corporation with which to acquire common shares of the
Corporation. The loan is secured by the shares purchased with the loan proceeds
and will be repaid by the ESOP with funds from the Bank's discretionary
contributions to the ESOP and earnings on ESOP assets. The shares purchased with
the loan proceeds are held in a suspense account for allocation among
participants as the loan is repaid. When loan payments are made, ESOP shares are
allocated to participants based on relative compensation.
ESOP compensation expense was $7,000 for both the three months ended September
30, 2000 and 1999. The ESOP shares as of September 30, 2000 and June 30, 2000
were as follows:
September 30, June 30,
2000 2000
---- ----
Shares released for allocation 2,970 2,376
Unreleased shares 32,667 33,261
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Total ESOP shares 35,637 35,637
======= =======
Fair value of unreleased shares $ 384 $ 392
======= =======
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(Continued)
13.
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INDIAN VILLAGE BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Table dollar amounts in thousands)
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NOTE 6 - EMPLOYEE STOCK OWNERSHIP PLAN (Continued)
The ESOP provides for the repurchase of any stock distributed to a participant
at its fair market value. The fair market value of the allocated shares subject
to repurchase was approximately $35,000 and $28,000 at September 30, 2000 and
June 30, 2000.
In September 2000, the Corporation declared and paid a $2.00 per share capital
distribution, the majority of which is expected to be treated as a tax-free
return of capital. Confirmation of the exact amount of the distribution that
will qualify as a tax-free return of capital to shareholders will not be known
until after the Corporation's tax year ended on December 31, 2000. The ESOP
received $66,000 from the capital distribution on 33,261 unallocated shares. The
ESOP will purchase additional shares with the proceeds from the capital
distribution; however, as of September 30, 2000, no additional shares had been
purchased. The additional shares purchased will be held in suspense and
allocated to participants in a manner similar to the original ESOP shares.
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14.
15
INDIAN VILLAGE BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Table dollar amounts in thousands)
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INTRODUCTION
In the following pages, management presents an analysis of the financial
condition of Indian Village Bancorp, Inc. as of September 30, 2000 compared to
June 30, 2000, and results of operations for the three months ended September
30, 2000 compared with the same period in 1999. This discussion is designed to
provide a more comprehensive review of the operating results and financial
position than could be obtained from an examination of the financial statements
alone. This analysis should be read in conjunction with the interim financial
statements and related footnotes included herein.
FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning of
the federal securities laws. The Corporation intends such forward-looking
statements to be covered by the safe harbor provisions for forward-looking
statements contained in the Private Securities Reform Act of 1995, and is
including this statement for purposes of these safe harbor provisions.
Forward-looking statements, which are based on certain assumptions and describe
future plans, strategies and expectations of the Corporation, are generally
identified by use of the words "believe," "expect," "intend," "anticipate,"
"estimate," "project," or similar expressions. The Corporation's ability to
predict results or the actual effect of future plans or strategies is inherently
uncertain. Factors which could have a material effect on the operations of the
Corporation and the subsidiaries include, but are not limited to, changes in:
interest rates, general economic conditions, legislative/regulatory changes,
monetary and fiscal policies of the U.S. Government, including policies of the
U.S. Treasury and the Federal Reserve Board, the quality or composition of the
loan or investment portfolios, demand for loan products, deposit flows,
competition, demand for financial services in the Corporation's market area and
accounting principles and guidelines. These risks and uncertainties should be
considered in evaluating forward-looking statements and undue reliance should
not be placed on such statements. Further information concerning the Corporation
and its business, including additional factors that could materially affect the
Corporation's financial results, is included in the Corporation's filings with
the SEC.
FINANCIAL CONDITION
Total assets at September 30, 2000 were $67.8 million compared to $65.6 million
at June 30, 2000, an increase of $2.2 million, or 3.4%. The increase in total
assets was primarily due to an increase in loans of $2.1 million. The increase
in loans consisted primarily of increases in consumer loans of $825,000, one- to
four-family residential real estate loans of $624,000, and nonresidential real
estate loans of $483,000, as well as an increase in commercial loans of
$413,000. These increases are reflective of a stable local economy and the
Bank's more aggressive promotion of consumer loans.
The $825,000, or 16.0%, increase in the consumer loan portfolio between June 30,
2000 and September 30, 2000 consisted primarily of increases in other consumer
loans of $203,000, an increase in auto loans of $194,000, an increase in loans
on deposit accounts of $148,000, and an increase in home equity loans and lines
of credit of $107,000. Consumer loans represented 13.8% and 12.5% of gross loans
at September 30, 2000 and June 30, 2000, respectively.
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15.
16
INDIAN VILLAGE BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Table dollar amounts in thousands)
- --------------------------------------------------------------------------------
Total deposits were $38.5 million on September 30, 2000 compared to $36.6
million at June 30, 2000, an increase of $1.9 million or 5.2%. The Corporation
experienced an increase in noninterest-bearing demand deposits of $372,000 that
was offset by a decrease in negotiable order of withdrawal ("NOW") accounts of
$404,000. Increases in certificates of deposit, money market accounts and
savings accounts totaled $1.7 million. Management attributes the increase in
deposits to the opening of the new branch office in New Philadelphia, Ohio in
November 1999. The certificate of deposit portfolio as a percent of total
deposits increased from 73.2% at June 30, 2000 to 75.9% at September 30, 2000.
Almost all certificates of deposit held by the Corporation mature in less than
three years with the majority maturing in the next year.
As a secondary source of liquidity, the Corporation obtains borrowings from the
Federal Home Loan Bank of Cincinnati, from which it held advances totaling $21.3
million at September 30, 2000 and $20.3 million at June 30, 2000. Due to
continued loan demand and in order to better leverage the Corporation's capital,
the Corporation used these funds to originate loans and purchase securities
available for sale, as well as provide for short-term liquidity needs. FHLB
advances at September 30, 2000 consisted of $3.3 million in short-term advances
and $18.0 million in long-term callable fixed-rate advances. The long-term
callable advances have specified call dates ranging from one to five years at
which time the advances may be called at the option of the Federal Home Loan
Bank. Additional advances may be obtained from the Federal Home Loan Bank to
fund future loan growth and liquidity as needed.
Total shareholders' equity decreased from $8.7 million at June 30, 2000 to $8.0
million at September 30, 2000. The decrease resulted from the $2.00 per share
capital distribution, which reduced shareholders' equity by $846,000. The
decrease in capital is part of management's capital planning strategy to utilize
or distribute its excess capital.
COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30,
2000 AND SEPTEMBER 30, 1999
The general economic conditions, the monetary and fiscal policies of federal
agencies and the regulatory policies of agencies that regulate financial
institutions affect the operating results of the Corporation. Interest rates on
competing investments and general market rates of interest influence the
Corporation's cost of funds. Lending activities are influenced by the demand for
real estate loans and other types of loans, which in turn is affected by the
interest rates at which such loans are made, general economic conditions and the
availability of funds for lending activities.
The Corporation's net income primarily depends on its net interest income, which
is the difference between the interest income earned on interest-earning assets,
such as loans and securities, and interest expense incurred on interest-bearing
liabilities, such as deposits and borrowings. The level of net interest income
is dependent on the interest rate environment and the volume and composition of
interest-earning assets and interest-bearing liabilities. Provisions for loan
losses, service charges, gains on the sale of assets, other income, noninterest
expense and income taxes also affect net income.
Net income was $72,000 for the three months ended September 30, 2000, compared
to $117,000 for the three months ended September 30, 1999. Earnings per common
share was $0.18 for the three months ended September 30, 2000 compared to $0.29
for the three months ended September 30, 1999.
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16.
17
INDIAN VILLAGE BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Table dollar amounts in thousands)
- --------------------------------------------------------------------------------
Net interest income remained relatively stable totaling $449,000 for the three
months ended September 30, 2000, as compared to $450,000 for the three months
ended September 30, 1999. The stability in net interest income was attributable
to a decrease in the interest rate spread offset by an increase in the average
balance of interest-bearing assets and interest-bearing liabilities.
Interest and fees on loans increased approximately $129,000, or 17.9%, from
$722,000 for the three months ended September 30, 1999 to $851,000 for the three
months ended September 30, 2000 while interest earned on securities totaled
$380,000 for the three months ended September 30, 2000, as compared to $193,000
for the three months ended September 30, 1999. The increases in interest income
were due to higher average balances of loans and securities partially offset by
a decrease in the yield earned.
Interest income on interest-bearing deposits and overnight deposits decreased to
$15,000 for the three months ended September 30, 2000, as compared to $24,000
for the same period in 1999.
Interest paid on deposits increased $145,000, or 43.0% for the three months
ended September 30, 2000, compared to the three months ended September 30, 1999.
The increase in interest expense was due to an increase in the cost of funds
combined with an increase in the average balances of deposits.
Interest on Federal Home Loan Bank advances totaled $315,000 for the three
months ended September 30, 2000, compared to $152,000 for the three months ended
September 30, 1999. The increase was the result of a higher average balance
combined with a higher cost of funds. The additional borrowings were used to
provide funding for loan demand and to better leverage the Corporation's
capital.
The Corporation maintains an allowance for loan losses in an amount that, in
management's judgment, is adequate to absorb probable losses inherent in the
loan portfolio. While management utilizes its best judgment and information
available, the ultimate adequacy of the allowance depends on a variety of
factors, including past loan loss experience, known and inherent risks in the
nature and volume of the portfolio, information about specific borrower
situations and estimated collateral values, economic conditions and other
factors. The provision for loan losses is determined by management as the amount
to be added to the allowance for loan losses after net charge-offs have been
deducted to bring the allowance to a level which is considered adequate to
absorb probable losses inherent in the loan portfolio.
The provision for loan losses for the three months ended September 30, 2000
totaled $8,000 compared to $5,000 for the three months ended September 30, 1999.
The Corporation experienced net charge-offs of $6,000 during the three months
ended September 30, 2000 and no charge-offs during the three months ended
September 30, 1999. The Corporation's low charge-off history is the product of a
variety of factors, including the Corporation's underwriting guidelines, which
generally require a loan-to-value or projected completed value ratio of 80% for
the purchase or construction of one- to four-family residential properties and
75% for commercial real estate and land loans, established income information
and defined ratios of debt to income. Despite this history, the Corporation
cannot give any assurances as to the level of future charge-offs. The allowance
for loan losses totaled $239,000 or .55% of gross loans at September 30, 2000,
compared with $237,000, or .58% of gross loans at June 30, 2000.
Noninterest income includes service charges and other fees, net gains on sales
of securities available for sale and other income. For the three months ended
September 30, 2000, noninterest income totaled $30,000 compared to $8,000 for
the three months ended September 30, 1999. During the 2000 period, the
Corporation experienced an increase in service charges, other fees, and in net
gains on sales of securities available for sale and other miscellaneous income.
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17.
18
INDIAN VILLAGE BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Table dollar amounts in thousands)
- --------------------------------------------------------------------------------
Noninterest expense totaled $371,000 for the three months ended September 30,
2000 compared to $276,000 for same period in 1999. The increase in noninterest
expense was primarily the result of increases in salaries and employee benefits
expense of $43,000, occupancy expense of $17,000 and professional and consulting
expense of $28,000. The increase in salaries and employee benefits expense was
due primarily to increased staffing due to the opening of the new branch office
in November 1999 and normal annual merit increases. Additionally, the increase
in occupancy expense also resulted from the opening of the new branch office.
The increase in professional and consulting expense was due to the increased
public reporting obligations associated with being a public company.
The volatility of income tax expense is primarily attributable to the change in
income before income taxes. The provision for income taxes totaled $28,000 for
the three months ended September 30, 2000 compared to $60,000 for the three
months ended September 30, 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Corporation's liquidity, primarily represented by cash and cash equivalents,
is a result of its operating, investing and financing activities. These
activities are summarized below for the three months ended September 30, 2000
and 1999.
Three Months Ended
September 30,
2000 1999
---- ----
Net income $ 72 $ 117
Adjustments to reconcile net income to
net cash from operating activities 104 (2,769)
------- -------
Net cash from operating activities 176 (2,652)
Net cash from investing activities (1,805) (9,165)
Net cash from financing activities 1,990 10,348
------- -------
Net change in cash and cash equivalents 361 (1,469)
Cash and cash equivalents at beginning of period 1,087 2,498
------- -------
Cash and cash equivalents at end of period $ 1,448 $ 1,029
======= =======
The Corporation's principal sources of funds are deposits, loan repayments,
maturities of securities, Federal Home Loan Bank advances and other funds
provided by operations. While scheduled loan repayments and maturing securities
are relatively predictable, deposit flows and early loan prepayments are
influenced by interest rates, general economic conditions, and competition. The
Corporation maintains investments in liquid assets based on management's
assessment of (1) need for funds, (2) expected deposit flows, (3) yields
available on short-term liquid assets and (4) objectives of the asset/liability
management program.
The Corporation has the ability to borrow funds from the Federal Home Loan Bank
and has various federal fund sources from correspondent banks, should the
Corporation need to supplement its future liquidity needs in order to meet loan
demand or to fund investment opportunities. Management believes the
Corporation's liquidity position is strong based on its level of cash, cash
equivalents, core deposits, the stability of its other funding sources and the
support provided by its capital base.
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18.
19
INDIAN VILLAGE BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Table dollar amounts in thousands)
- --------------------------------------------------------------------------------
Total shareholders' equity decreased $700,000 between June 30, 2000 and
September 30, 2000, primarily due to the $2.00 per share capital distribution,
which reduced shareholders' equity by $846,000, partially offset by earnings
retained and other comprehensive income. No shares of treasury stock were
purchased by the Corporation during the three months ended September 30, 2000;
however, management may purchase additional shares in the future, as
opportunities arise. The number of shares to be purchased and the price to be
paid will depend upon the availability of shares, the prevailing market prices
and any other considerations which may, in the opinion of the Corporation's
Board of Directors or management, affect the advisability of purchasing shares.
The Corporation is not subject to any separate regulatory capital requirements.
The Bank, however, is subject to various regulatory capital requirements
administered by federal regulatory agencies. Failure to meet minimum capital
requirements can initiate certain mandatory actions that, if undertaken, could
have a direct material affect on the Bank's financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
the Bank must meet specific capital guidelines involving quantitative measures
of the Bank's assets, liabilities and certain off-balance sheet items as
calculated under regulatory accounting practices. The Bank's capital amounts and
classifications are also subject to qualitative judgments by regulators about
the Bank's components, risk weightings and other factors. At September 30, 2000,
and June 30, 2000, the Bank complies with all regulatory capital requirements.
Based on the Bank's computed regulatory capital ratios at September 30, 2000 and
June 30, 2000, the Bank is considered well capitalized under the Federal Deposit
Insurance Corporation Act.
At September 30, 2000, and June 30, 2000 the Bank's actual capital levels and
minimum required levels were:
Minimum
Required To Be
Minimum Required Well Capitalized
For Capital Under Prompt Corrective
Actual Adequacy Purposes Action Regulations
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
September 30, 2000
- ------------------
Total capital (to risk-
weighted assets) $7,584 20.7% $2,934 8.0% $3,668 10.0%
Tier 1 (core) capital (to
risk-weighted assets) 7,344 20.0 1,467 4.0 2,201 6.0
Tier 1 (core) capital (to
adjusted total assets) 7,344 10.9 2,704 4.0 3,379 5.0
Tangible capital (to
adjusted total assets) 7,344 10.9 1,014 1.5 N/A
June 30, 2000
- -------------
Total capital (to risk-
weighted assets) $7,479 22.0% $2,719 8.0% $3,398 10.0%
Tier 1 (core) capital (to
risk-weighted assets) 7,242 21.3 1,359 4.0 2,039 6.0
Tier 1 (core) capital (to
adjusted total 7,242 11.4 2,545 4.0 3,181 5.0
Tangible capital (to
adjusted total assets) 7,242 11.4 954 1.5 N/A
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19.
20
INDIAN VILLAGE BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Table dollar amounts in thousands)
- --------------------------------------------------------------------------------
In May 2000, the Indian Village Bancorp, Inc. 2000 Stock Based Incentive Plan
was approved by shareholders at the Corporation's Annual Meeting. Subject to
certain adjustments to prevent dilution of awards to participants, the number of
shares of common stock reserved for awards under the plan is 62,381 shares,
consisting of 44,558 shares reserved for options and 17,823 shares reserved for
restricted stock awards. Authorized but unissued shares or shares previously
issued and reacquired by the Corporation may be used to satisfy awards under the
plan. If authorized but unissued shares are used to satisfy restricted stock
awards and the exercise of options granted under the plan, the number of
outstanding shares will increase and will have a dilutive effect on the holdings
of existing stockholders. The plan was effective on July 2, 2000. As of
September 30, 2000, no awards had been granted under the plan.
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20.
21
INDIAN VILLAGE BANCORP, INC.
PART II - OTHER INFORMATION
- --------------------------------------------------------------------------------
Item 1. Legal Proceedings
-----------------
None
Item 2. Changes in Securities
---------------------
Not applicable.
Item 3. Defaults on Senior Securities
-----------------------------
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Not applicable.
Item 5. Other Information
-----------------
None
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibit No. 3.1: Articles of Incorporation of Indian Village
Bancorp, Inc. (1)
Exhibit No. 3.2: Bylaws of Indian Village Bancorp, Inc. (1)
Exhibit No. 4.0: Form of Stock Certificate of Indian Village
Bancorp, Inc. (1)
Exhibit No. 10.1: Indian Village Community Bank Employee Stock
Ownership Plan Trust Agreement (2)
Exhibit No. 10.2: ESOP Loan Commitment Letter and ESOP Loan
Documents (2)
Exhibit No. 10.3: Employment Agreement between Indian Village
Community Bank, Indian Village Bancorp,
Inc. and Marty R. Lindon (2)
Exhibit No. 10.4: Employment Agreement between Indian Village
Community Bank, Indian Village Bancorp,
Inc. and Lori S. Frantz (2)
Exhibit No. 10.5: Indian Village Community Bank Employee
Severance Compensation Plan (2)
Exhibit No. 10.6: Indian Village Bancorp, Inc. 2000 Stock
Based Incentive Plan (3)
Exhibit No. 11.0: Statement re: computation of per share
earnings (4)
Exhibit No. 27.0: Financial Data Schedule
(1) Incorporated herein by reference from the Exhibits to
Form SB-2, Registration Statement and amendments
thereto, initially filed on March 18, 1998,
Registration No. 333-74621.
(2) Incorporated herein by reference from the Exhibits to
Form 10-QSB for the quarter ended September 30, 1999,
filed November 15, 1999.
(3) Incorporated herein be reference from the Proxy
Statement filed March 27, 2000.
(4) Reference is hereby made to Consolidated Statements
of Income on page 4, hereof.
(b) On September 5, 2000, the Corporation filed a Current Report on
Form 8-K reporting the Corporation's special cash distribution
of $2.00 per share. The press release, issued September 1, 2000,
was attached as an exhibit to the Form 8-K.
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21.
22
INDIAN VILLAGE BANCORP, INC.
SIGNATURES
- --------------------------------------------------------------------------------
Pursuant to the requirement of the Securities Exchange Act of 1934, the small
business issuer has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 10, 2000 /s/ Marty R. Lindon
------------------- -------------------------------------
Marty R. Lindon
President and Chief Executive Officer
Date: November 10, 2000 /s/ Lori S. Frantz
------------------- -------------------------------------
Lori S. Frantz
Vice President, Treasurer and Chief
Financial Officer
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22.
23
INDIAN VILLAGE BANCORP, INC.
INDEX TO EXHIBITS
- --------------------------------------------------------------------------------
EXHIBIT
NUMBER DESCRIPTION PAGE NUMBER
- ------ ----------- -----------
11.0 Statement re: computation of per share earnings Reference is hereby made to
Consolidated Statements of
Income on page 4 and Note 1
of Notes to Consolidated
Financial Statements on page
8, hereof.
27.0 Financial Data Schedule 22
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23.