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, 1999
[ ] 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
---------
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 5, 1999, the latest practical date, 445,583 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.
2
INDIAN VILLAGE BANCORP, INC.
INDEX
Page
----
PART I - FINANCIAL INFORMATION
Item 1. Condensed 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 ........................ 7
Notes to Consolidated Financial Statements ................... 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............ 15
PART II - OTHER INFORMATION
Item 1. Legal Proceedings........................................ 25
Item 2. Changes in Securities.................................... 25
Item 3. Defaults Upon Senior Securities.......................... 25
Item 4. Submission of Matters to a Vote of Security Holders...... 25
Item 5. Other Information........................................ 25
Item 6. Exhibits and Reports on Form 8-K......................... 26
SIGNATURES ............................................................. 27
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2.
3
INDIAN VILLAGE BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
- ----------------------------------------------------------------------------------------
September 30, December 31,
1999 1998
---- ----
ASSETS
Cash and due from banks $ 473 $ 409
Interest-bearing deposits in other banks 556 388
------- -------
Total cash and cash equivalents 1,029 797
Time deposits 299 499
Securities available for sale at fair value 14,403 6,195
Loans, net of allowance for loan losses 36,140 31,274
Premises and equipment, net 1,055 447
Real estate owned 118 122
Federal Home Loan Bank stock 786 407
Accrued interest receivable 292 183
Other assets 118 100
------- -------
Total assets $54,240 $40,024
======= =======
LIABILITIES
Deposits $29,631 $30,866
Federal Home Loan Bank advances 15,500 4,000
Accrued interest payable 87 37
Other liabilities 60 19
------- -------
Total liabilities 45,278 34,922
SHAREHOLDERS' EQUITY
Preferred stock, no par value, 1,000,000 shares authorized,
none outstanding -- --
Common stock, $.01 par value, 5,000,000 shares authorized
445,583 shares issued and outstanding 4 --
Additional paid-in capital 4,090 --
Retained earnings - substantially restricted 5,383 5,105
Unearned employee stock ownership plan shares (350) --
Accumulated other comprehensive income (165) (3)
------- -------
Total shareholders' equity 8,962 5,102
------- -------
Total liabilities and shareholders' equity $54,240 $40,024
======= =======
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See accompanying notes to financial statements.
3.
4
INDIAN VILLAGE BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousands, except per share amounts)
- ------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
1999 1998 1999 1998
---- ---- ---- ----
INTEREST AND DIVIDEND INCOME
Loans, including fees $ 722 $616 $2,093 $1,817
Securities 193 136 396 411
Interest-bearing deposits and
Federal funds sold 24 8 51 33
----- ---- ------ ------
Total interest income 939 760 2,540 2,261
INTEREST EXPENSE
Deposits 337 384 1,073 1,145
Federal Home Loan Bank advances 152 42 305 92
----- ---- ------ ------
Total interest expense 489 426 1,378 1,237
----- ---- ------ ------
NET INTEREST INCOME 450 334 1,162 1,024
Provision for loan losses 5 23 11 24
----- ---- ------ ------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 445 311 1,151 1,000
NONINTEREST INCOME
Service charges and other fees 7 2 15 8
Gain on sale of securities
available for sale, net 5 2 15 (9)
Other income (4) 1 5 14
----- ---- ------ ------
Total noninterest income 8 5 35 13
NONINTEREST EXPENSE
Salaries and employee benefits 128 108 340 310
Occupancy and equipment 22 17 57 52
Professional and consulting fees 15 11 42 39
FDIC deposit insurance 5 4 14 18
Franchise taxes 17 19 52 55
Date processing 17 14 58 42
Director and committee fees 19 23 57 56
Other expense 53 37 145 102
----- ---- ------ ------
Total noninterest expense 276 233 765 674
----- ---- ------ ------
INCOME BEFORE INCOME TAXES 177 83 421 339
Income tax expense 60 34 143 119
----- ---- ------ ------
NET INCOME $ 117 $ 49 $ 278 $ 220
===== ==== ====== ======
EARNINGS PER COMMON SHARE $0.29 $N/A $ 0.29 $ N/A
===== ==== ====== ======
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See accompanying notes to financial statements.
4.
5
INDIAN VILLAGE BANCORP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(Dollars in thousands)
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Three Months Ended Nine Months Ended
September 30, September 30,
-------------- --------------
1999 1998 1999 1998
---- ---- ---- ----
NET INCOME $117 $49 $ 278 $220
Other comprehensive income, net of tax
Unrealized gains (losses) on securities
available for sale arising during period (47) 36 (152) 13
Reclassification adjustment for
accumulated (gains) losses included in
net income (3) (1) (10) 6
---- --- ----- ----
Net unrealized gains (losses)
on securities (50) 35 (162) 19
Additional minimum pension
liability adjustment -- -- -- --
---- --- ----- ----
Other comprehensive income (50) 35 (162) 19
COMPREHENSIVE INCOME $ 67 $84 $ 116 $239
==== === ===== ====
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See accompanying notes to financial statements.
5.
6
INDIAN VILLAGE BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Nine Months Ended September 30, 1999 and 1998
(Unaudited)
(Dollars in thousands)
- -------------------------------------------------------------------------------------------------------------
Unrealized
Additional Gain on
Additional Unearned Minimum Securities
Common Paid-In Retained ESOP Pension Available
Stock Capital Earnings Shares Liability for Sale Total
----- ------- -------- ------ --------- -------- -----
Balance at January 1, 1998 $-- $ -- $4,859 $ -- $(68) $ 61 $4,852
Net income for the period -- -- 220 -- -- -- 220
Change in fair value of securities
available for sale -- -- -- -- -- 19 19
--- ------ ------ ----- ---- ----- ------
Balance at September 30, 1998 $-- $ -- $5,079 $ -- $(68) $ 80 $5,091
=== ====== ====== ===== ==== ===== ======
Balance at January 1, 1999 $ -- $ -- $5,105 $ -- $(53) $ 50 $5,102
Net income for the period -- -- 278 -- -- -- 278
Sale of 445,583 shares of no
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 -- -- -- -- -- (162) (162)
--- ------ ------ ----- ---- ----- ------
Balance at March 31, 1998 $ 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 CASH FLOWS
(Unaudited)
(Dollars in thousands)
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Nine Months Ended
September 30,
-------------
1999 1998
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 278 $ 220
Adjustments to reconcile net income to net cash from
operating activities:
Depreciation 37 26
Premium amortization, net of accretion 8 (6)
Provision for loan losses 11 24
Federal Home Loan Bank stock dividends (25) (21)
Gain/Loss on sale of securities available for sale (15) 9
Compensation expense on ESOP shares 7 --
Net change in accrued interest receivable and other assets (252) (93)
Net change in accrued expenses and other liabilities 216 (59)
-------- -------
Net cash from operating activities 265 100
CASH FLOWS FROM INVESTING ACTIVITIES
Net change in time deposits 200 --
Purchases of securities available for sale (11,343) (2,438)
Proceeds from sales of securities available for sale 1,428 816
Proceeds from maturities of securities available for sale 1,545 1,136
Net change in loans (4,866) (2,231)
Premises and equipment expenditures, net (645) (22)
Purchases of Federal Home Loan Bank stock (354) --
-------- -------
Net cash from investing activities (14,035) (2,739)
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposits (1,235) 468
Net change in short-term Federal Home Loan Bank advances 3,500 --
Proceeds from long-term Federal Home Loan Bank advances 8,000 2,000
Proceeds from issuance of common stock, net of conversion costs 4,093 --
Cash provided to ESOP (356) --
-------- -------
Net cash from financing activities 14,002 2,468
-------- -------
Net change in cash and cash equivalents 232 (171)
Cash and cash equivalents at beginning of period 797 923
-------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,029 $ 752
======== =======
Supplemental disclosures of cash flow information
Cash paid during the period for
Interest $ 1,334 $ 1,225
Income taxes 35 124
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See accompanying notes to financial statements.
7.
8
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. ("Corporation") at
September 30, 1999, 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 financial statements and notes
thereto of Indian Village Community Bank ("Bank") for the year ended December
31, 1998. The accounting policies of the Bank described in the notes to
financial statements contained in the Bank's December 31, 1998, financial
statements, filed as part of the Registration Statement on Form SB-2, as
amended, have been consistently followed in preparing this Form 10-QSB.
The consolidated financial statements include the accounts of Indian Village
Bancorp, Inc. and its wholly-owned subsidiary, Indian Village Community 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. This community 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.
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(Continued)
8.
9
INDIAN VILLAGE BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Table dollar amounts in thousands)
- --------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
As more fully discussed in Note 2, the Bank converted from the mutual to stock
form of ownership with the concurrent formation of a holding company effective
July 1, 1999. Accordingly, earnings per share for the three and nine months
ended September 30, 1999 was computed based on the net income of the Corporation
since July 1, 1999. The weighted average number of shares outstanding during the
three and nine months ended September 30, 1999 was 410,243. Unreleased ESOP
shares are not considered to be outstanding shares for the purpose of
determining the weighted average number of shares used in the earnings per
common share calculation. Net income of the Corporation subsequent to July 1,
1999 was $117,000. No earnings per common share is shown for the three and nine
months ended September 30, 1998, as prior to July 1, 1999, the Bank was a mutual
company. The financial information for the three and nine months ended September
30, 1998 reflects the Bank prior to the conversion.
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities"
requires companies to record derivatives on the balance sheet as assets or
liabilities, measured at fair value. Gains or losses resulting from changes in
the values of those derivatives would be accounted for depending on the use of
the derivative and whether it qualifies for hedge accounting. The key criterion
for hedge accounting is that the hedging relationship must be highly effective
in achieving offsetting changes in fair value or cash flows. SFAS No. 133 does
not allow hedging of a security which is classified as held to maturity. Upon
adoption of SFAS No. 133, companies may reclassify any security from held to
maturity to available for sale if they wish to be able to hedge the security in
the future. SFAS No. 133 is effective for fiscal years beginning after June 15,
1999 with early adoption encouraged for any fiscal quarter beginning July 1,
1998 or later, with no retroactive application. Management does not expect the
adoption of SFAS No. 133 to have a significant impact on the Corporation's
financial statements.
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
bank to a federally chartered stock 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 Company 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 Company were sold at $10.00 per share. The company received
net proceeds of $4,093,682, after deducting conversion costs of $362,147.
The Company 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.
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(Continued)
9.
10
INDIAN VILLAGE BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Table dollar amounts in thousands)
- --------------------------------------------------------------------------------
NOTE 2 - CONSUMMATION OF THE CONVERSION TO A STOCK SAVINGS AND LOAN
ASSOCIATION WITH THE CONCURRENT FORMATION OF A HOLDING 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. The regulation establishes a three-tiered system of restrictions,
with the greatest flexibility afforded to thrifts, like the Bank, that are both
well capitalized and well managed.
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, 1999---------------
U.S. Treasury securities $ 249 $ 2 $ -- $ 251
U.S. Government agencies 7,931 -- (72) 7,859
Mortgage-backed securities 6,392 -- (99) 6,293
------- --- ----- -------
$14,572 $ 2 $(171) $14,403
======= === ===== =======
---------------December 31, 1998---------------
U.S. Treasury securities $ 747 $13 $ -- $ 760
U.S. Government agencies 1,050 6 -- 1,056
Obligations of states and
political subdivisions 147 5 -- 152
Mortgage-backed securities 4,175 70 (18) 4,227
------- --- ----- -------
$ 6,119 $94 $ (18) $ 6,195
======= === ===== =======
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(Continued)
10.
11
INDIAN VILLAGE BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Table dollar amounts in thousands)
- --------------------------------------------------------------------------------
NOTE 3 - SECURITIES AVAILABLE FOR SALE (Continued)
The amortized cost and estimated fair values of securities available for sale,
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 within one year $ 249 $ 251
Due after one year through five years 247 246
Due after five years through ten years 5,935 5,920
Due after ten years 1,749 1,693
Mortgage-backed securities 6,392 6,293
------- -------
$14,572 $14,403
======= =======
Proceeds from sales of securities available for sale during the three and nine
months ended September 30, 1999 were $300,000 and $1,428,000. Gross gains of
$5,000 and $15,000 were realized on those sales. Proceeds from sales of
securities available for sale during the three and nine months ended September
30, 1998 were $275,000 and $816,000. Gross gains of $2,000 and $2,000 and gross
losses of $11,000 were realized on those sales.
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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, December 31,
1999 1998
---- ----
Real estate loans:
One- to four-family residential $28,427 $26,080
Multi-family residential 1,635 1,736
Nonresidential 1,308 647
Construction 1,757 677
Land 155 135
------- -------
33,282 29,275
Consumer loans:
Home equity loans and lines of credit 1,333 887
Home improvement 44 301
Automobile 710 516
Loans on deposit accounts 213 294
Unsecured 71 12
Other 746 274
------- -------
3,117 2,284
Commercial business loans 96 27
------- -------
36,495 31,586
Less:
Net deferred loan fees and costs (65) (54)
Loans in process (61) (40)
Allowance for loan losses (229) (218)
------- -------
$36,140 $31,274
======= =======
Activity in the allowance for loan losses is summarized as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
1999 1998 1999 1998
---- ---- ---- ----
Balance at beginning of period $224 $177 $218 $176
Provision for losses 5 23 11 24
Charge-offs -- (18) -- (18)
Recoveries -- -- -- --
---- ---- ---- ----
Balance at end of period $229 $182 $229 $182
==== ==== ==== ====
As of and for the three and nine months ended September 30, 1999 and 1998, no
loans were considered impaired within the scope of SFAS No. 114.
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(Continued)
12.
13
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, 1999, variable rate and fixed rate commitments to make loans
or fund outstanding lines of credit amounted to approximately $450,000 and
$612,000. As of December 31, 1998, variable rate and fixed rate commitments to
make loans or fund outstanding lines of credit amounted to approximately
$494,000 and $1,891,000. 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
establishment of the ESOP and the purchase by the ESOP of the common shares of
the Corporation are subject to the receipt of a favorable determination letter
on the qualified status of the ESOP under applicable provisions of the Internal
Revenue Code. Although no assurances can be given, the Corporation expects that
the ESOP will receive a favorable determination letter.
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. All dividends on
unallocated shares received by the ESOP are used to pay debt service. The shares
purchased with the loan proceeds are held in a suspense account for allocation
among participants as the loan is repaid. As payments are made and the shares
are released from the suspense account, such shares will be validly, issued
fully paid and nonassessable.
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(Continued)
13.
14
INDIAN VILLAGE BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Table dollar amounts in thousands)
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NOTE 7 - EMPLOYEE STOCK OWNERSHIP PLAN (Continued)
The Corporation accounts for its ESOP in accordance with Statement of Position
93-6. Accordingly, the shares pledged as collateral are reported as unearned
ESOP shares in the Consolidated Balance Sheet. As shares are released from
collateral, the Corporation reports compensation expense equal to the current
market price of the shares, and the shares become outstanding for earnings per
share computations. Dividends on allocated ESOP shares are recorded as a
reduction of retained earnings; dividends on unallocated ESOP shares are
recorded as a reduction of debt and accrued interest. ESOP compensation expense
was $7,000 for the three and nine months ended September 30, 1999. The ESOP
shares as of September 30, 1999 were as follows:
Shares released for allocation 594
Unreleased shares 35,043
--------
Total ESOP shares 35,637
========
Fair value of unreleased shares at September 30, 1999 $411,755
========
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14.
15
INDIAN VILLAGE BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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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, 1999 compared to
December 31, 1998, and results of operations for the three and nine months ended
September 30, 1999 compared with the same periods in 1998. 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.
In addition to the historical information contained herein, the following
discussion contains forward-looking statements that involve risks and
uncertainties. Economic circumstances, the Corporation's operations and the
Corporation's actual results could differ significantly from those discussed in
the forward-looking statements. Some of the factors that could cause or
contribute to such differences are discussed herein but also include changes in
the economy and interest rates in the nation and the Bank's general market area.
FINANCIAL CONDITION
Total assets at September 30, 1999 were $54.2 million compared to $40.0 million
at December 31, 1998, an increase of $14.2 million, or 35.5%. The increase in
total assets was primarily due to an increase in securities available for sale
of $8.2 million and an increase in loans of $4.9 million. The increase in loans
consisted primarily of an increase in one- to four-family residential real
estate loans of $2.4 million, as well as increases in construction loans,
consumer loans and nonresidential real estate loans of $1.1 million, $833,000
and $661,000, respectively. These increases are reflective of a stable local
economy and the Bank's more aggressive promotion of consumer loans. The increase
in securities was funded primarily by the net proceeds of the conversion and
Federal Home Loan Bank ("FHLB") advances.
The $833,000, or 36.5%, increase in the consumer loan portfolio between December
31, 1998 and September 30, 1999 consisted primarily of increases in other
consumer loans of $472,000 and home equity loans and lines of credit of
$446,000. Consumer loans represented 8.5% and 7.2% of gross loans at September
30, 1999 and December 31, 1998, respectively.
Total deposits were $29.6 million on September 30, 1999 compared to $30.9
million at December 31, 1998, a decrease of $1.2 million, or 4.0%. The
Corporation experienced modest decreases in negotiable order of withdrawal
("NOW") accounts, and savings accounts aggregating $117,000. Decreases in
certificates of deposit, money market accounts and noninterest-bearing demand
deposit accounts totaled $1.1 million. Management attributes the decrease in
deposits to increased competition and the overall lack of growth in its local
market area. The certificate of deposit portfolio as a percent of total deposits
increased slightly from 73.8% at December 31, 1998 to 74.3% at September 30,
1999. Almost all certificates of deposit held by the Corporation mature in less
than three years with the majority maturing in the next year.
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15.
16
INDIAN VILLAGE BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
As a secondary source of liquidity, the Corporation obtains borrowings from the
Federal Home Loan Bank of Cincinnati, from which it held advances totaling $15.5
million at September 30, 1999 and $4.0 million at December 31, 1998. Due to
continued loan demand and in order to better leverage the Corporation's capital,
the Corporation used these funds to originate mortgage loans and purchase
securities available for sale as well as provide for short-term liquidity needs.
FHLB advances at September 30, 1999 consisted of $3.5 million in short-term
advances, a $1.0 million advance due December 2003 with a fixed rate of interest
of 4.20%, a $1.0 million advance due April 2009 with a fixed rate of interest of
4.67%, a $1.0 million advance due April 2009 with a fixed rate of interest of
5.44%, a $2.0 million advance due April 2009 with a fixed rate of interest of
5.60%, a $5.0 million advance due August 2009 with a fixed rate of interest of
5.56%, and a $2.0 million advance due August 2008 with a fixed rate of interest
of 5.93%. Additional advances may be obtained from the Federal Home Loan Bank to
fund future loan growth and liquidity as needed.
COMPARISON OF RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
AND SEPTEMBER 30, 1998
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 $278,000 for the nine months ended September 30, 1999, compared
to $220,000 for the nine months ended September 30, 1998. The increase in net
income for the nine months ended September 30, 1999 was primarily the result of
an increase in net interest income, partially offset by an increase in
noninterest expense.
Net interest income totaled $1.2 million for the nine months ended September 30,
1999, as compared to $1.0 million for the nine months ended September 30, 1998,
representing an increase of $138,000, or 13.5%. The change in net interest
income is attributable to an increase in the ratio of average interest-earning
assets to average interest-bearing liabilities offset by a decrease in the
interest rate spread.
Interest and fees on loans increased approximately $276,000, or 15.2%, from $1.8
million for the nine months ended September 30, 1998 to $2.1 million for the
nine months ended September 30, 1999. The increase in interest income was due to
higher average loans, partially offset by a decrease in the yield earned.
- --------------------------------------------------------------------------------
16.
17
INDIAN VILLAGE BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
Interest earned on securities totaled $396,000 for the nine months ended
September 30, 1999, as compared to $411,000 for the nine months ended September
30, 1998. The decrease was a result of lower average balances of securities
combined with a decreased yield earned.
Interest on interest-bearing deposits and overnight deposits increased to
$51,000 for the nine months ended September 30, 1999, as compared to $33,000 for
the same period in 1998. This increase was the result of higher average balances
on interest-bearing deposits and overnight deposits combined with the yield
earned remaining relatively unchanged.
Interest paid on deposits decreased $72,000 for the nine months ended September
30, 1999, compared to the nine months ended September 30, 1998. The decrease in
interest expense was due to a decrease in the cost of funds combined with a
decrease in the average balances of deposits.
Interest on Federal Home Loan Bank advances totaled $305,000 for the nine months
ended September 30, 1999, compared to $92,000 for the nine months ended
September 30, 1998. The increase was the result of a higher average balance
partially offset by a lower 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 reasonably foreseeable losses
inherent in the loan portfolio. While management utilizes its best judgment and
information available, the ultimate adequacy of the allowance is dependent on a
variety of factors, including the performance of the Corporation's loan
portfolio, the economy, changes in real estate values and interest rates and the
view of the regulatory authorities toward loan classifications. 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 losses inherent in
the loan portfolio. The amount of the provision is based on management's monthly
review of the loan portfolio and consideration of such factors as historical
loss experience, general prevailing economic conditions, changes in the size and
composition of the loan portfolio and specific borrower considerations,
including the ability of the borrower to repay the loan and the estimated value
of the underlying collateral.
The provision for loan losses for the nine months ended September 30, 1999
totaled $11,000 compared to $24,000 for the nine months ended September 30,
1998. The Corporation did not experience any net charge-offs during the nine
months ended September 30, 1999 compared to net charge-offs of $18,000 for the
nine months ended September 30, 1998. 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 $229,000 or .63% of gross loans at
September 30, 1999, compared with $218,000, or .69% of gross loans at December
31, 1998.
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17.
18
INDIAN VILLAGE BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
Noninterest income includes service charges and other fees, net gains on sales
of securities available for sale and other income. For the nine months ended
September 30, 1999, noninterest income totaled $35,000 compared to $13,000 for
the nine months ended September 30, 1998. During the 1999 period, the
Corporation experienced an increase in service charges and other fees and net
gains on sales of securities available for sale that was partially offset by a
slight decrease in other miscellaneous income.
Noninterest expense totaled $765,000 for the nine months ended September 30,
1999 compared to $674,000 for same period in 1998. The increase in noninterest
expense was primarily the result of a $43,000 increase in other expense due to
increases in stationary and printing expense and advertising expense. The
increase in stationary and printing expense was attributable to the Bank's name
change in January 1999 and the increase in advertising expense was due to
consumer loan and debit card advertising. Additionally, salaries and employee
benefits expense increased by $30,000 from period to period, due primarily to
increased staffing in anticipation of the opening of the new branch office,
normal annual merit increases and the establishment of the Corporation's ESOP.
The volatility of income tax expense is primarily attributable to the change in
net income before income taxes. The provision for income taxes totaled $143,000
for the nine months ended September 30, 1999 compared to $119,000 for the nine
months ended September 30, 1998.
COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30,
1999 AND SEPTEMBER 30, 1998
Net income was $117,000 for the three months ended September 30, 1999, compared
to $49,000 for the three months ended September 30, 1998. The increase in net
income for the three months ended September 30, 1999 was primarily the result of
an increase in net interest income, partially offset by an increase in
noninterest expense.
Net interest income totaled $450,000 for the three months ended September 30,
1999, as compared to $334,000 for the three months ended September 30, 1998,
representing an increase of $116,000, or 34.7%. The change in net interest
income is attributable to an increase in the ratio of average interest-earning
assets to average interest-bearing liabilities offset by a decrease in the
interest rate spread.
Interest and fees on loans increased approximately $106,000, or 17.2%, from
$616,000 for the three months ended September 30, 1998 to $722,000 for the three
months ended September 30, 1999. The increase in interest income was due to
higher average loans, partially offset by a decrease in the yield earned.
Interest earned on securities totaled $193,000 for the three months ended
September 30, 1999, as compared to $136,000 for the three months ended September
30, 1998. The increase was a result of higher average balances of securities
partially offset by a decreased yield earned.
Interest on interest-bearing deposits and overnight deposits for the three
months ended September 30, 1999 totaled $24,000, compared to $8,000 in the same
quarter in 1998. This increase was the result of an increase in the average
balance of interest-bearing deposits and overnight funds. The yield earned on
interest-bearing deposits and overnight funds remained relatively unchanged.
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18.
19
INDIAN VILLAGE BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
Interest paid on deposits decreased $47,000 for the three months ended September
30, 1999, compared to the three months ended September 30, 1998. The decrease in
interest expense was due to a decrease in the cost of funds combined with a
decrease in the average balances of deposits.
Interest on Federal Home Loan Bank advances totaled $152,000 for the three
months ended September 30, 1999, compared to $42,000 for the three months ended
September 30, 1998. 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 provision for loan losses for the three months ended September 30, 1999
totaled $5,000 compared to $23,000 for the three months ended September 30,
1998. The Corporation did not experience any net charge-offs during the three
months ended September 30, 1999 while net charge-offs totaled $18,000 for the
three months ended September 30, 1998.
For the three months ended September 30, 1999, noninterest income totaled
$8,000, compared to $5,000 for the three months ended September 30, 1998. During
the 1999 period, the Corporation experienced a gain on the sale of a security
available for sale that was partially offset by a decrease in other
miscellaneous income.
Noninterest expense totaled $276,000 for the three months ended September 30,
1999 compared to $233,000 for same period in 1998. The increase in noninterest
expense was primarily the result of a $20,000 increase in salaries and employee
benefits expense and a $16,000 increase in other expense due to advertising
expense. The increase in salaries and employee benefits expense was the result
of increased staffing in anticipation of the opening of the new branch office,
normal annual merit increases and the establishment of the Corporation's ESOP.
The increase in advertising expense was due to consumer loan and debit card
advertising.
The volatility of income tax expense is primarily attributable to the change in
net income before income taxes. The provision for income taxes totaled $60,000
for the three months ended September 30, 1999 compared to $34,000 for the three
months ended September 31, 1998.
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19.
20
INDIAN VILLAGE BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
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 nine months ended September 30, 1999 and
1998.
Nine Months Ended
September 30,
-------------
1999 1998
---- ----
(In thousands)
Net income $ 278 $ 220
Adjustments to reconcile net income to
net cash from operating activities (13) (143)
-------- -------
Net cash from operating activities 265 77
Net cash from investing activities (14,035) (2,716)
Net cash from financing activities 14,002 2,468
-------- -------
Net change in cash and cash equivalents 232 (171)
Cash and cash equivalents at beginning of period 797 923
-------- -------
Cash and cash equivalents at end of period $ 1,029 $ 752
======== =======
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.
OTS regulations presently require the Bank to maintain an average daily balance
of investments in United States Treasury, federal agency obligations and other
investments having maturities of five years or less in an amount equal to 4% of
the sum of the Bank's average daily balance of net withdrawable deposit accounts
and borrowings payable in one year or less. The liquidity requirement, which may
be changed from time to time by the OTS to reflect changing economic conditions,
is intended to provide a source of relatively liquid funds on which the Bank may
rely, if necessary, to fund deposit withdrawals or other short-term funding
needs. At September 30, 1999, the Bank's regulatory liquidity was 8.24%. The
Bank considers its liquidity and capital reserves sufficient to meet its
outstanding short- and long-term needs. See Note 5 of the Notes to Financial
Statements.
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20.
21
INDIAN VILLAGE BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
The Bank 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, 1999,
and December 31, 1998, the Bank complied with all regulatory capital
requirements. Based on the Bank's computed regulatory capital ratios, the Bank
is considered well capitalized under the prompt corrective-action provisions of
the Federal Deposit Insurance Corporation Improvement Act at September 30, 1999
and December 31, 1998.
At September 30, 1999, and December 31, 1998 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
------ ----- ------ ----- ------ -----
(In thousands)
SEPTEMBER 30, 1999
Total capital (to risk-
weighted assets) $7,210 26.0% $2,215 8.0% $2,769 10.0%
Tier 1 (core) capital (to
risk-weighted assets) 6,981 25.2 1,108 4.0 1,661 6.0
Tier 1 (core) capital (to
adjusted total assets) 6,981 12.9 1,630 3.0 2,717 5.0
Tangible capital (to
adjusted total assets) 6,981 12.9 815 1.5 N/A
DECEMBER 31, 1998
Total capital (to risk-
weighted assets) $5,226 25.8% $1,621 8.0% $2,026 10.0%
Tier 1 (core) capital (to
risk-weighted assets) 5,008 24.7 810 4.0 1,215 6.0
Tier 1 (core) capital (to
adjusted total 5,008 12.5 1,202 3.0 1,997 5.0
Tangible capital (to
adjusted total assets) 5,008 12.5 599 1.5 N/A
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21.
22
INDIAN VILLAGE BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
In February 1999, the Corporation received Office of Thrift Supervision approval
to establish a branch office in New Philadelphia, Ohio. The Corporation
purchased the land in December 1998 for $213,000. Based on preliminary
architectural estimates, the Corporation expects the total cost of the
construction and furniture, fixtures and equipment to be $1.0 million. At
September 30, 1999, the Corporation had paid costs related to this office
totaling $787,000 including the purchase of the land. The new branch is expected
to open for business during the fourth quarter of 1999.
YEAR 2000 ISSUE
Indian Village uses computers, computer software and equipment using embedded
microprocessors that will be affected by the Year 2000 issue. The Year 2000
issue exists because many computer systems and applications use two-digit date
fields to designate a year. As the century date change occurs, date-sensitive
systems may recognize the year 2000 as 1900, or not at all. This inability to
recognize or properly treat the year 2000 may cause erroneous results, ranging
from system malfunctions to incorrect or incomplete processing.
Indian Village's Year 2000 committee consists of Cindy S. Knisely, Michael A.
Cochran, Marty R. Lindon and Lori S. Frantz. The committee reports monthly to
the Board of Directors. The committee has developed and is implementing a
comprehensive plan to make all information and noninformation technology assets
Year 2000 compliant. The plan is comprised of the following phases:
1. Awareness - Educational initiatives on Year 2000 issues and concerns.
This phase is ongoing, especially as it relates to informing customers of
Indian Village's Year 2000 preparedness.
2. Assessment - Inventory of all technology assets and identification of
third-party vendors and service providers. Indian Village has analyzed
the operation of all date-sensitive computer systems and identified, in
writing, all third-party vendors and service providers associated with
these systems. This phase was completed as of June 30, 1998.
3. Renovation - Review of vendor and service providers responses to Indian
Village's Year 2000 inquiries and development of a follow-up plan and
timeline. This phase was completed as of December 31, 1998.
4. Validation - Testing all systems and third-party vendors for Year 2000
compliance. Indian Village has replaced all in-house equipment, such as
teller station equipment, with Year 2000 compliant equipment. A
third-party service bureau processes all customer transactions and has
completed upgrades to its systems to be Year 2000 compliance. Indian
Village conducted in-house proxy testing in August 1998 and on-line
testing in February 1999. The results of both forms of testing were
satisfactory and without material exceptions. Other parties whose Year
2000 compliance may affect Indian Village include the Federal Home Loan
Bank of Cincinnati, brokerage firms, the operator of Indian Village's
automated teller machines network and Indian Village's pension plan
administrator. These third parties have indicated their compliance or
intended compliance. Where it is possible to do so, Indian Village has
scheduled testing with these third parties. Where testing is not
possible, Indian Village will rely on certifications from vendors and
service providers. Management believes this phase has been completed as
of September 30, 1999.
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22.
23
INDIAN VILLAGE BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
5. Implementation - Replacement or repair of noncompliant technology. As
Indian Village progresses through the validation phase, Indian Village
expects to determine necessary remedial actions and provide for their
implementation. Indian Village has already implemented a new Year 2000
compliant computerized teller system and has verified the Year 2000
compliance of its computer hardware and other equipment containing
embedded microprocessors. This phase was completed as of June 30, 1999.
Management of Indian Village has had discussions with a majority of its
commercial borrowers, including all of its large borrowers, regarding their Year
2000 readiness. These discussions have revealed that these borrowers are not
heavily dependent on computers. Accordingly, Indian Village does not believe
that its commercial borrowers will be adversely affected by the year 2000.
Indian Village has incurred costs of approximately $35,000 to replace computer
equipment, software programs or other equipment containing embedded
microprocessors that were not Year 2000 compliant. System maintenance or
modification costs are charged to expense as incurred, while the cost of new
hardware, software or other equipment is capitalized and amortized over their
estimated useful lives. Indian Village does not separately track the internal
costs and time that its own employees spend on Year 2000 issues, which are
principally payroll costs.
Because Indian Village depends substantially on its computer systems and those
of third parties, the failure of these systems to be Year 2000 compliant could
cause substantial disruption of Indian Village's business and could have a
material adverse financial impact on Indian Village. Failure to resolve Year
2000 issues presents the following risks to Indian Village, which it believes
reflects its most reasonably likely worst-case scenario:
1. Indian Village could lose customers to other financial institutions,
resulting in a loss of revenue, if Indian Village's third-party service
bureau is unable to properly process customer transactions;
2. Governmental agencies, such as the Federal Home Loan Bank of Cincinnati,
and corespondent institutions could fail to provide funds to Indian
Village, which could materially impair Indian Village's liquidity and
affect Indian Village's ability to fund loans and deposit withdrawals;
3. Concern on the part of depositors that Year 2000 issues could impair
access to their deposit account balances could result in Indian Village
experiencing deposit outflows before December 31, 1999; and,
4. Indian Village could incur increased personnel costs if additional staff
is required to perform functions that inoperative systems would have
otherwise performed.
Management believes that it is impossible to estimate the potential lost revenue
due to the Year 2000 issue, as the extent and longevity of any potential problem
cannot be predicted. Because substantially all of Indian Village's portfolio
consists of loans to individual rather than commercial enterprises, management
believes that Year 2000 issues will not impair materially the ability of Indian
Village's borrowers to repay their debt.
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23.
24
INDIAN VILLAGE BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
There can be no assurances that Indian Village's Year 2000 plan will effectively
address the Year 2000 issue, that Indian Village's estimates of the timing and
costs of completing the plan will ultimately be accurate or that the impact of
any failure of Indian Village or its third-party vendors and service providers
to be Year 2000 compliant will not have a material adverse effect on Indian
Village's business, financial condition or results of operations.
Indian Village has a business-resumption contingency plan for Year 2000
compliance that calls for Indian Village to resort to manual processing of
transactions until the computer systems resume operations.
PENDING LEGISLATION
Pending legislation designed to modernize the regulation of the financial
services industry expands the ability of bank holding companies to affiliate
with other types of financial services companies such as insurance companies and
investment banking companies. However, the legislation provides that companies
that acquire control of a single savings association after May 4, 1999 (or that
filed an application for that purpose after that date) are not entitled to the
unrestricted activities formerly allowed for a unitary savings and loan holding
company. Rather, these companies will have authority to engage in the activities
permitted "a financial holding company" under the new legislation, including
insurance and securities-related activities, and the activities currently
permitted for multiple savings and loan holding companies, but generally not in
commercial activities. The authority for unrestricted activities is
grandfathered for unitary savings and loan holding companies, such as the
Corporation, that existed prior to May 4, 1999. However, the authority for
unrestricted activities would not apply to any company that acquired the
Corporation.
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24.
25
INDIAN VILLAGE BANCORP, INC.
PART II - OTHER INFORMATION
- --------------------------------------------------------------------------------
Item 1. Legal Proceedings
-----------------
None
Item 2. Changes in Securities
---------------------
On July 1, 1999, the Corporation completed an initial offering of
securities registered pursuant to the Securities Act of 1933, as
amended. In connection therewith:
1. The effective date of the Registration Statement on Form SB-2, as
amended (File No. 333-74621) was May 14, 1999.
2. The offering of securities was not underwritten. Trident
Securities acted as marketing agent.
3. The class of securities registered was common stock, $0.01 par
value per share. The amount of such securities registered was
793,500 shares at an offering price of $10.00 per share. The
offering terminated on July 1, 1999 with the sale of 445,583
shares at a price of $10.00 per share.
4. The total offering expenses incurred by the Company were
approximately $362,147, none of which were paid directly or
indirectly to directors or officers of the Company or their
associates.
5. The net proceeds of the offering were $4.1 million of which
$356,370 was loaned to the Bank's employee stock ownership plan to
purchase stock in the offering. One-half of the net proceeds were
invested in the Bank and the remaining was invested in short-term
securities. These uses of proceeds do not represent a material
change in the use of proceeds described in the Corporation's
Prospectus dated May 14,1999.
Item 3. Defaults On Senior Securities
-----------------------------
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None
Item 5. Other Information
-----------------
None
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25.
26
INDIAN VILLAGE BANCORP, INC.
PART II - OTHER INFORMATION (Continued)
- --------------------------------------------------------------------------------
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
3.1 Articles of Incorporation of Indian Village Bancorp, Inc.*
3.2 Bylaws of Indian Village Bancorp, Inc.*
4.0 Specimen Stock Certificate of Indian Village Bancorp, Inc.*
10.1 Indian Village Community Bank Employee Stock Ownership Plan
Trust Agreement
10.2 ESOP Loan Commitment Letter and ESOP Loan Documents
10.3 Employment Agreement between Indian Village Community Bank,
Indian Village Bancorp, Inc. and Marty R. Lindon
10.4 Employment Agreement between Indian Village Community Bank,
Indian Village Bancorp, Inc. and Lori S. Frantz
10.5 Indian Village Community Bank Employee Severance Compensation
Plan
27.0 Financial Data Schedule
(b) No current reports on Form 8-K were filed by the Company during the
quarter ended September 30, 1999.
* Incorporated herein by reference into this document from the
Exhibits on Form SB-2 Registration Statement and amendments thereto,
initially filed on March 18, 1999. Registration No. 333-74621
- --------------------------------------------------------------------------------
26.
27
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 5, 1999 /s/ Marty R. Lindon
-------------------------- ---------------------------------------
Marty R. Lindon
President and Chief Executive Officer
Date: November 5, 1999 /s/ Lori S. Frantz
-------------------------- ---------------------------------------
Lori S. Frantz
Vice President, Treasurer and
Chief Financial Officer
- --------------------------------------------------------------------------------
27