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 June 30, 1998
[ ] 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..
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Ohio 31-1529973
- --------------------------------------------------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No,)
Incorporation of Organization)
7001 Center Street, Mentor, Ohio 44060
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(440) 974-0000
- --------------------------------------------------------------------------------
(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 June 30, 1998, there were 2,133,906 shares of the Registrant's Common
Stock outstanding.
2
GLB BANCORP, INC.
TABLE OF CONTENTS
Part I. Financial Information Page
Item 1. Consolidated Financial Statements
Consolidated Statements of Financial Condition 3
as of June 30, 1998 (unaudited) and June 30, 1997 (unaudited)
Consolidated Statements of Earnings for the three months and 4
six months ended June 30, 1998 (unaudited) and June 30, 1997
(unaudited)
Consolidated Statements of Cash Flows for the six months ended 5
June 30, 1998 (unaudited) and June 30, 1997(unaudited)
Notes to unaudited Consolidated Financial Statements 6
Item 2. Management Discussion and Analysis of Financial Conditions 7
and Results of Operations
Part II. Other Information 10
Signatures 11
3
GLB BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In actual dollars, unaudited)
June 30, 1998 June 30, 1997
Assets
Cash and due from banks $2,918,168 $3,359,412
Federal Funds sold 25,993,000 3,750,000
Total Cash and Cash Equivalents 28,911,168 7,109,412
Investment Securities Available for Sale 116,150 0
Investment Securities held to maturity 1,016,007 1,144,011
Loans, net of allowance for loan losses 55,112,208 45,994,730
Stock in Federal Home Loan Bank of Cincinnati, cost 443,100 412,600
Premises and equipment, net 2,848,277 2,641,563
Intangibles, net 526,243 535,492
Other assets 455,069 545,204
Total Assets $89,428,222 $58,383,012
============================ ==========================
Liabilities and Shareholder's Equity
Liabilities
Non-interest bearing demand deposits $9,845,932 $8,651,651
Interest bearing demand deposits 4,926,537 3,878,391
Savings accounts 30,007,694 22,943,158
Certificates 11,659,432 8,727,451
Total Deposits 56,439,595 44,200,651
Advances from the Federal Home Loan Bank 7,500,000 7,500,000
Accrued expenses and other liabilities 473,716 457,455
Total Liabilities 64,413,311 52,158,106
Shareholder's Equity
Common Stock, no par value,
10,000,000 shares authorized; 2,133,906 and
596,342 shares issued and outstanding 5,334,765 1,490,855
Additional paid-in capital 19,180,304 4,667,642
Accumulated Other Comprehensive Income 4,188 0
Retained Earnings 495,654 66,409
Total Shareholder's Equity 25,014,911 6,224,906
Total Liabilities and Shareholder's Equity $89,428,222 $58,383,012
============================ ==========================
See accompanying notes to financial statements.
4
GLB BANCORP, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(In actual dollars, unaudited)
Three Months Ended June 30, Six Months Ended June 30,
1998 1997 1998 1997
Interest Income:
Loans $ 1,169,518 $ 959,920 $ 2,310,358 $ 1,829,500
Federal funds sold 219,249 50,098 300,282 118,342
Investment securities 22,663 26,145 45,687 51,775
Total Interest Income 1,411,430 1,036,163 2,656,327 1,999,617
Interest Expense:
Deposits 461,219 342,791 913,743 670,754
FHLB advance 126,839 94,013 252,284 177,849
Total Interest Expense 588,058 436,804 1,166,027 848,603
Net Interest Income 823,372 599,359 1,490,300 1,151,014
Provision for loan losses 30,000 21,000 60,000 42,000
Net Interest Income After Provision 793,372 578,359 1,430,300 1,109,014
Non-Interest Income:
Service charges on demand deposits 42,540 36,631 76,448 68,333
Loan fees 38,776 46,151 74,884 98,930
Other service charges and fees 37,420 34,515 70,632 71,534
Gain/(loss) on sale of assets 34,759 (827) 87,150 (827)
Total Non-Interest Income 153,495 116,470 309,114 237,970
Non-Interest Expense:
Compensation and related benefits 354,660 277,613 658,261 561,887
Office occupancy and equipment, net 123,269 118,080 235,619 216,075
Professional fees 64,483 9,123 104,023 19,213
Advertising 16,747 19,768 32,105 35,051
Amortization of intangibles 20,617 21,741 47,796 43,482
Ohio franchise tax 22,545 21,750 47,979 43,500
Data processing 34,538 31,336 69,328 53,223
Office supplies and printing 29,314 16,544 46,047 31,153
FDIC deposit insurance 1,568 1,340 3,055 2,032
Credit Card processing 11,387 10,574 21,545 38,142
Other operating expense 57,371 36,774 94,466 73,170
Total Non-Interest Expense 736,499 564,643 1,360,224 1,116,928
Income Before Federal Income Tax 210,368 130,186 379,190 230,056
Federal Income Tax Expense 82,412 45,457 148,252 84,406
Net Income $ 127,956 $ 84,729 $ 230,938 $ 145,650
Earnings per share basic and diluted $ 0.10 $ 0.14 $ 0.25 $ .24
See accompanying notes to financial statements.
5
GLB BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In actual dollars, unaudited)
Six Months Ended June 30,
1998 1997
------------ ------------
Cash flows from operating activities:
Net income $ 230,938 $ 145,650
Adjustments required to reconcile net income to net
cash provided by operating activities:
Amortization of intangibles 47,796 43,482
Depreciation 92,124 80,580
Premium amortization and discount accretion, net 2,400 (1,723)
Net deferred loan origination fees 39,088 (13,789)
Loss on sale of securities 0 0
Proceeds from sale of loans held for sale 4,753,316 0
(Gain) or Loss on sale of loans (87,150) 827
Provision for loan losses 60,000 42,000
Gain on disposal of premises and equipment 0 0
Origination of mortgage servicing rights (42,116) 0
(Increase)/decrease in other assets 27,036 (172,471)
Increase/(decrease) in accrued expenses and other
liabilities (217,162) (288,100)
Net cash provided by operating activities: 4,906,270 (163,544)
Cash flows from investing activities:
Purchases of investment securities (1,115,257) (500,000)
Maturities and payments of investment securities 1,600,000 500,197
Proceeds from sales of investment securities 0 0
Purchase of FHLB stock (15,400) (14,100)
Origination of loans, net of principal collected (6,780,010) (7,390,097)
Purchases of premises and equipment (294,471) (140,448)
Disposals of premises and equipment 0 0
Net cash used in investing activities: (6,605,138) (7,544,448)
Cash flows from financing activities:
Cash proceeds from issuance of common stock 19,915,000 40,000
Payments for public offering expenses (1,563,428) 0
Net increase in deposits 4,427,679 1,948,122
Net gain /loss on securities 4,188 0
Cash proceeds from FHLB advances 0 2,500,000
Net cash provided by financing activities 22,783,439 4,488,122
Net increase/(decrease) in cash and cash equivalents 21,084,571 (3,219,870)
Cash and cash equivalents at beginning of period 7,826,597 10,329,282
Cash and cash equivalents at end of period $ 28,911,168 $ 7,109,412
See accompanying notes to financial statements.
6
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 June 30,
1998 are not necessarily indicative of the results to be expected for the year
ending December 31, 1998. 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 ending December 31,
1997, contained in the Corporation's 1997 Annual Report and the Corporation's
most recent filing of it's registration statement on May 12, 1998.
Note 2 EARNINGS PER SHARE
Earnings per share is computed in accordance with Statement of Financial
Accounting Standards FAS 128. This calculation was based on 935,006 and 595,475
weighted average shares outstanding for the six months ended June 30, 1998 and
1997, respectively, and 1,267,838 and 595,475 weighted average shares for the
three months ended June 30, 1998 and 1997, respectively.
7
GLB BANCORP, INC.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
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 delinqency 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.
FINANCIAL STATEMENTS
The Corporation's total assets were $89,428,222 at June 30, 1998, compared to
$58,383,012 at June 30, 1997, an increase of 53.2%. This increase was primarily
the result of an infusion of capital of $17.9 million due to a public offering
completed in May 1998. In addition, the company experienced a $12.2 million
increase in deposits which were used to fund a net increase of $9.1 million in
loan growth. The remainder of the funds were invested in federal funds sold.
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.
CAPITAL RESOURCES
Shareholder's equity was $25,014,911 at June 30, 1998 and $6,224,906 at June 30,
1997, an increase of $18,790,005 or 301.9%. The increase is due to a public
offering completed in May 1998 which raised $17.9 million in capital.
RESULTS OF OPERATION
Net Income: The Corporation had net income of $127,956 for the quarter ended
June 30, 1998, compared to $84,729 for the quarter ended June 30, 1997 which
represented an increase of $43,227 or 51.0%. Net income for the six month period
ended June 30, 1998 was $230,938 compared to $145,650 for the six months ended
June 30, 1997 a difference of $85,288 or 58.6%. This increase was due to the
increase in average loan balances and the sale of loans in the secondary market
plus additional fed fund investment income.
Interest Income: Interest income was $1,411,430 for the quarter ended June 30,
1998, compared to $1,036,163 for the quarter ended June 30, 1997, an increase of
$375,267 or 36.2%. Interest income for the six-month period ended June 30, 1998
was $2,656,327 compared to $1,999,617 for the six months ended June 30, 1997, a
difference of $656,710 or 32.8%. This increase was due primarily to the increase
in federal fund balances from the proceeds of the stock sale.
Interest Expense: Interest expense was $588,058 for the quarter ended June 30,
1998, compared to $436,804 for the quarter ended June 30, 1997, an increase of
$151,254 or 34.6%. Interest expense for
8
the six month period ended June 30, 1998 was $1,166,027 compared to $848,603 for
the six month period ended June 30, 1997, a difference of $317,424 or 37.4%. The
increase was due primarily to the increase in average deposits balances and FHLB
advances.
Provision for Loan Losses: The provision for loan losses is based upon
management's assessment of relevant factors, including types and amounts of
nonperforming loans, historical and anticipated loss experience on such types of
loans, and current and projected economic conditions. The provision for loan
losses was $30,000 for the quarter ended June 30, 1998, compared to $21,000 for
the quarter ended June 30, 1997. The provision for loan losses was $60,000 for
the six month period ended June 30, 1998, compared to $42,000 for the six month
period ended June 30, 1997. The increase in the provision was principally a
result of increased loan volume since net loan chargeoffs remain nominal with
$0 for the quarter ended June 30, 1998 and $5,000 for the quarter ended June
30, 1997. Net loan chargeoffs were $5,000 for the six month period ended June
30, 1998 and $7,000 for the six month period ended June 30, 1997. Additionally,
non-performing assets as a percentage of total assets were .18% at June 30,
1998 compared to .20% at June 30, 1997.
Non-Interest Income: Non-interest income was $153,495 for the quarter ended June
30, 1998 and $116,470 for the quarter ended June 30, 1997, an increase of
$37,025 or 31.8%. Non-interest income for the six month period ended June 30,
1998 was $309,114 compared to $237,970 for the six month period ended June 30,
1997, an increase of $71,144 or 29.9%. The increase was largely due to gains on
the sale of loans in the secondary market and increased service charges paid on
demand deposits. The Corporation sells residential loans in the secondary market
and delivers shortly after funding. At June 30, 1998, the Corporation had loan
commitments to sell approximately $638,000 in the secondary market.
Non-Interest Expense: Non-interest expense was $736,499 for the quarter ended
June 30, 1998 and $564,643 for the quarter ended June 30, 1997, an increase of
$171,856 or 30.4%. Non interest expense for the six month period ended June 30,
1998 were $1,360,224 compared to $1,116,928 for the six month ended June 30,
1997, an increase of $243,296 or 21.8%. The increase was the result of an
increase in professional fees and an increase in compensation due to increased
staff to operate our new branches.
Effective tax rate for the six months ended June 30, 1998 was 37% compared
to 37.8% for the six month period ended June 30, 1997.
ACCOUNTING DEVELOPMENTS
The Financial Accounting Standards Board ("FASB") issued SFAS No. 130,
"Reporting Comprehensive Income" which is effective for fiscal years beginning
after December 15, 1997. It requires an entity to report comprehensive income
separately from retained earnings and additional paid-in capital. The
Corporation's comprehensive income for the six months and three months ended
June 30, 1998 and 1997 are as follows:
For the six months ended June 30,
1998 1997
---- ----
Net Income $230,938 $145,650
Other comprehensive income:
Unrealized gain on securities
Available for sale $4,188 $0
-------- --------
Accumulated comprehensive income $235,126 $145,650
For the three months ended June 30,
1998 1997
---- ----
Net Income $127,956 $84,729
Other comprehensive income:
Unrealized gain on securities
Available for sale $4,188 $0
-------- -------
Accumulated comprehensive income $132,144 $84,729
The Financial Accounting Standards Board ("FASB") issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information" with an
effective date for years beginning after December 15, 1997. It redefines how
operating segments are determined and requires disclosure of certain financial
and descriptive information about the Corporation's operating segments.
Additionally requiring that comparative information from earlier periods be
restated to conform to the requirements of this standard. The adoption of this
statement is not expected to be material to the Corporation.
The Financial Accounting Standards Board ("FASB") issued SFAS No. 132,
"Employers' Disclosure about Pensions and Other Postretirement Benefits" is
effective for fiscal years beginning after December 15, 1997. This Statement
provides for standardized disclosures of benefit plans, dropping some
information which is no longer useful (amending FASB Statements No. 87, 88, and
106), and requiring additional information on changes in benefit obligations and
fair values of plan assets that will facilitate financial analysis.
The Financial Accounting Standards Board ("FASB") issued 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. 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 it's resulting
designation. This Statement should not be applied retroactively to prior period
financial statements. At the present time, the Corporation has not fully
analyzed the effect or timing of the adoption of this statement on the
Corporation's consolidated statements.
FUTURE DEVELOPMENTS
Year 2000 Problem: The Corporation is aware of the current concerns throughout
the business community of reliance upon computer software programs that do not
properly recognize the year 2000 in date formats, commonly referred to as the
"Year 2000 Problem". The Corporation's primary data processing function is
undertaken pursuant to a contract with an electronic data processing firm that
services banking institutions nationwide. Based upon ongoing discussions with
the Corporation's electronic data processing provider, the Company currently
expects that it's Year 2000 computer compliance will be achieved principally
pursuant to
9
that contract. Also confirmations from other outside primary vendors that plans
have been developed or are in process by them to address this issue associated
with the Year 2000 Problem have been received. Additionally, the Bank has
completed a written customer impact process which documents the Bank's approach
to identifying risks from customers who may be affected by the Year 2000
situation. The Bank anticipates having customer impact assessments completed by
September 30, 1998. The Corporation does not expect the Year 2000 Problem to
materially affect the Corporation's financial condition or results of operation,
and the Corporation likewise does not expect costs associated with prevention or
remediation of the Year 2000 Problem to be material. The Corporation's current
estimate of cost related to this issue is $25,000. This figure is subject to
change as we continue the Year 2000 process.
GLB BANCORP, INC.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS-Not applicable
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS
Proceeds from the public stock offering were $17.9 million net of
expenses following the offering made by the underwriters, Roney Capital Markets.
The Corporation intends to use the net proceeds from the Offering, from time to
time, to finance its growth strategy, including (i) external growth through
selected acquisitions of other community banks (or other financial institutions)
and / or branch offices and (ii) internal growth through the expansion of its
existing branch network by opening new branches in selected communities. Prior
to any such uses, the net proceeds will be and are invested in high quality,
short term, liquid investments. In addition, the Corporation may contribute up
to $1,500,000 of the net proceeds to the Bank to support the Bank's lending
activities. All of the foregoing uses are, however, subject to change, and the
Corporation's management will have discretion to employ the net proceeds in any
manner management deems to be in the Corporation's best interest in light of the
Corporation's business strategy and banking industry and economic conditions
generally.
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
3 (i) Articles of Incorporation and (ii) by-laws-Not Applicable
4 Not Applicable
10 Material Contracts-Not Applicable
11 Statement re computation of per-share earnings-Not Applicable
15 Letter re unaudited interim financial statements-Not Applicable
18 Letter re change in accounting principles-Not Applicable
19 Report furnished to security holders-Not Applicable
22 Published report regarding matters submitted to vote of security
holders-Not Applicable
23 Consents of experts and council (excluding accountants)- Not
Applicable
24 Power of Attorney-Not Applicable
27 Financial Data Schedule
No report on Form 8-K was filed during the quarter ended June 30, 1998.
10
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: August 12, 1998
--------------------------- ---------------
Richard T. Flenner, Jr., President
Chief Executive Officer and Director
By: /s/ Cheryl J. Mihitsch, Treasurer Date: August 12, 1998
--------------------------------- ----------------
Cheryl J. Mihitsch
Principal Financial and Accounting Officer