UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended March 31, 2001
Commission file number 0-23134
NB&T FINANCIAL GROUP, INC.
(Formerly known as INTERCOUNTY BANCSHARES, INC.)
------------------------------------------------------
(Exact name of registrant as specified in its charter)
OHIO 31-1004998
- ------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
48 North South Street, Wilmington, Ohio 45177
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(513) 382-1441
----------------------------------------------------
(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 filing
requirements for the past 90 days.
Yes X No
The number of shares outstanding of the issuer's common stock, without par
value, as of May 1, 2001, was 3,205,554 shares.
NB&T FINANCIAL GROUP, INC.
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets -
March 31, 2001, December 31, 2000
and March 31, 2000. . . . . . . . . . . . . . . . . . .1
Consolidated Statements of Income -
Three Months Ended March 31, 2001 and 2000. . . . . . .2
Consolidated Statements of Comprehensive Income
and Changes in Shareholders' Equity -
Three Months Ended March 31, 2001 and 2000.. . . . . .3-4
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 2001 and 2000 . . . . . .5
Notes to Consolidated Financial Statements . . . . . . 6-7
Independent Accountants' Review Report . . . . . . . . . 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. . . . . 9-14
Item 3. Quantitative and Qualitative Disclosures
about Market Risk . . . . . . . . . . . . . . . . . . 14
Part II. Other Information
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . .15
Item 2. Changes in Securities and Use of Proceeds . . . . . . . .15
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . .15
Item 4. Submission of Matters to a Vote of Security Holders . . .15
Item 5. Other Information . . . . . . . . . . . . . . . . . . . .15
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . .16
Part I - Financial Information
Item 1. Financial Statements
NB&T FINANCIAL GROUP, INC. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
At March 31, 2001, December 31, 2000 and March 31, 2000
(thousands)
March 31, December 31, March 31,
2001 2000 2000
(unaudited) (a) (unaudited)
ASSETS:
Cash and due from banks $ 18,500 $19,331 $17,380
Federal funds sold 25,782 15 83
Interest bearing deposits in bank 144 49 852
------- ------- -------
Total cash and cash equivalents 44,426 19,395 18,315
Securities available for sale, at
market value 120,297 115,836 103,074
Securities held to maturity (market
value-$45,147, $44,268, and $41,499) 44,387 44,374 44,335
------- ------- -------
Total securities 164,684 160,210 147,409
Loans 367,161 374,101 358,754
Less-allowance for loan losses 3,922 3,802 3,336
------- ------- -------
Net loans 363,239 370,299 355,418
Loans held for sale 1,511 1,519 1,622
Premises and equipment 12,054 11,532 11,802
Earned income receivable 4,234 5,002 3,941
Other assets 11,318 11,275 3,683
------- ------- -------
TOTAL ASSETS $601,466 $579,232 $542,190
======= ======= =======
LIABILITIES:
Demand deposits $ 39,257 $ 42,965 $ 40,142
Savings, NOW, and money market
deposits 154,034 147,470 147,248
Certificates $100,000 and over 59,814 43,040 44,044
Other time deposits 170,689 173,213 155,806
------- ------- -------
Total deposits 423,794 406,688 387,240
Short-term borrowings 36,922 40,148 26,762
Long-term debt 86,323 80,323 80,431
Other liabilities 3,358 2,591 3,075
------- ------- -------
TOTAL LIABILITIES 550,397 529,750 497,508
------- ------- -------
SHAREHOLDERS' EQUITY:
Preferred shares - no par value,
authorized 100,000 shares; none
issued - - -
Common shares-no par value, authorized
6,000,000 shares; issued 3,818,950
shares 1,000 1,000 1,000
Surplus 8,136 8,128 7,936
Unearned ESOP shares, at cost (301) (299) (405)
Retained earnings 45,517 44,742 43,834
Accumulated other comprehensive
income (loss), net of taxes 1,027 223 (3,410)
Treasury shares, at cost, 613,396
shares at March 31, 2001; 613,666 at
December 31, 2000; and 630,636 shares
at March 31, 2000 (4,310) (4,312) (4,273)
------- ------- -------
TOTAL SHAREHOLDERS' EQUITY 51,069 49,482 44,682
------- ------- -------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $601,466 $579,232 $542,190
======= ======= =======
<FN>
(a) Financial information as of December 31, 2000, has been derived from the
audited, consolidated financial statements of the Registrant.
</FN>
The accompanying notes to financial statements are an integral part of these
statements.
-1-
Part I - Financial Information
(Continued)
Item 1. Financial Statements
NB&T FINANCIAL GROUP, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(thousands)
(unaudited)
Three Months Ended
March 31
----------------------
2001 2000
INTEREST INCOME:
Interest and fees on loans $ 8,018 $7,490
Interest on securities available for sale -
taxable 1,866 1,663
non-taxable 108 108
Interest on securities held to maturity -
non-taxable 569 579
Interest on deposits in banks 1 7
Interest on federal funds sold 152 5
------ -----
TOTAL INTEREST INCOME 10,714 9,852
----- -----
INTEREST EXPENSE:
Interest on savings, NOW and money
market deposits 1,156 962
Interest on time certificates $100,000 and over 786 556
Interest on other deposits 2,529 1,999
Interest on short-term borrowings 513 516
Interest on long-term debt 1,124 1,066
------ -----
TOTAL INTEREST EXPENSE 6,108 5,099
------ -----
NET INTEREST INCOME 4,606 4,753
PROVISION FOR LOAN LOSSES 375 475
------ -----
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 4,231 4,278
------ -----
NON-INTEREST INCOME:
Trust services 294 286
Service charges on deposits 429 379
Other service charges and fees 78 87
ATM network fees 203 161
Insurance agency commissions 280 299
Income from bank owned life insurance policies 162 -
Other 258 179
------ -----
TOTAL NON-INTEREST INCOME 1,704 1,391
------ -----
NON-INTEREST EXPENSES:
Salaries 1,781 1,717
Employee benefits 325 325
Equipment 588 563
Occupancy 239 215
State franchise tax 138 137
Marketing 111 56
Other 993 946
------ -----
TOTAL NON-INTEREST EXPENSE 4,175 3,959
------ -----
INCOME BEFORE INCOME TAX 1,760 1,710
PROVISION FOR INCOME TAX 315 392
------ -----
NET INCOME $ 1,445 $1,318
====== =====
Basic earnings per common share $ 0.45 $ 0.42
Diluted earnings per common share 0.45 0.41
AVERAGE SHARES OUTSTANDING:
To compute basic earnings
per common share 3,196,149 3,175,061
To compute diluted earnings
per common share 3,207,715 3,212,137
-2-
Part I - Financial Information
(Continued)
Item 1. Financial Statements
NB&T FINANCIAL GROUP, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME and CHANGES IN SHAREHOLDERS' EQUITY
(thousands)
(unaudited)
Retained
Unearned Earnings Accumulated
ESOP Less Cost Other Total Total
Common Shares of Treasury Comprehensive Shareholders' Comprehensive
Shares Surplus at Cost Shares Income (Loss) Equity Income
Balance January 1, 2000 $1,000 $7,921 $(405) $38,846 $(3,331) $44,031
Comprehensive
Income:
Net income 1,318 1,318 $1,318
Net unrealized (losses)
on securities available
for sale (net of taxes
of $41) (79) (79) (79)
-----
Total comprehensive income $1,239
=====
Dividends declared
($0.19 per share) (603) (603)
ESOP shares earned 15 15
----- ----- --- ------ ----- ------
Balance March 31, 2000 $1,000 $7,936 $(405) $39,561 $(3,410) $44,682
===== ===== === ====== ===== ======
-3-
Part I - Financial Information
(Continued)
Item 1. Financial Statements
NB&T FINANCIAL GROUP, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME and CHANGES IN SHAREHOLDERS' EQUITY (Continued)
(thousands)
(unaudited)
Retained
Unearned Earnings Accumulated
ESOP Less Cost Other Total Total
Common Shares of Treasury Comprehensive Shareholders' Comprehensive
Shares Surplus at Cost Shares Income (Loss) Equity Income
Balance January 1, 2001 $1,000 $8,128 $(299) $40,430 $ 223 $49,482
Comprehensive
Income:
Net income 1,445 1,445 $1,445
Net unrealized gains
on securities available
for sale (net of taxes
of $414) 804 804 804
-----
Total comprehensive income $2,249
=====
Dividends declared
($0.21 per share) (670) (670)
Stock option exercised 2 2 4
ESOP shares earned 6 (2) 4
----- ----- --- ------ ----- ------
Balance March 31, 2001 $1,000 $8,136 $(301) $41,207 $1,027 $51,069
===== ===== === ====== ===== ======
-4-
Part I - Financial Information
(Continued)
Item 1. Financial Statements
NB&T FINANCIAL GROUP, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(thousands)
(unaudited)
Three Months Ended
March 31
---------------------
2001 2000
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,445 $ 1,318
Adjustments for non-cash items -
Depreciation, amortization and accretion 325 257
Provision for loan losses 375 475
Gain on loan sale (82) -
Origination of mortgage loans held for sale (1,261) (23)
Proceeds from sales of mortgage loans held for sale 1,271 -
Decrease in income receivable 740 380
Increase in other assets (15) (858)
Increase in interest payable 52 145
Increase in income taxes payable 153 501
Increase (decrease) in other accrued expenses 82 (321)
FHLB stock dividends (106) (96)
ESOP shares earned 4 15
------ ------
NET CASH FLOW FROM OPERATING ACTIVITIES 2,983 1,793
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of securities available
for sale 22,645 2,640
Proceeds from sales of securities available for sale - 4,951
Purchases of securities available for sale (25,731) -
Proceeds from loan sales 8,950 -
Net increase in loans (2,183) (8,160)
Purchases of premises and equipment (911) (420)
------ ------
NET CASH FLOW FROM INVESTING ACTIVITIES 2,770 (989)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 17,106 7,308
Net decrease in short-term borrowings (3,226) (13,596)
Additions to long-term debt 6,000 5,000
Cash dividends paid (606) (539)
Proceeds from stock options exercised 4 -
------ ------
NET CASH FLOW FROM FINANCING ACTIVITIES 19,278 (1,827)
------ ------
NET CHANGE IN CASH AND CASH EQUIVALENTS 25,031 (1,023)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 19,395 19,338
------ ------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 44,426 $18,315
====== ======
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 6,056 $ 4,954
Income taxes paid - -
The accompanying notes to financial statements are an integral part of these
statements.
-5-
PART I. FINANCIAL INFORMATION
(Continued)
Item 1. Notes to Consolidated Financial Statements
NB&T FINANCIAL GROUP, INC. and SUBSIDIARIES
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with U.S. generally accepted accounting principles
for interim financial information and the instructions to Form 10-Q.
Accordingly, they do not include all of the information and footnotes
required by U.S. generally accepted accounting principles for complete
financial statements. In the opinion of management, the unaudited
consolidated financial statements include all adjustments (consisting of
normal, recurring accruals) considered necessary for a fair presentation
of financial position, results of operations and cash flows for the
interim periods.
The financial information presented on pages 1 through 7 of this Form 10-Q
has been subject to a review by J.D. Cloud & Co. L.L.P., the Company's
independent certified public accountants, as described in their report on
page 8.
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Results of operations and cash flows for the three month period ended
March 31, 2001, are not necessarily indicative of the results to be expected
for the full year to end December 31, 2001. These unaudited consolidated
financial statements should be read in conjunction with the consolidated
financial statements, accounting policies and financial notes thereto
included in the Company's Annual Report and Form 10-K for the year ended
December 31, 2000 filed with the Commission.
LOANS
During the quarter ended March 31, 2001, the Company sold $8.8 million
or real estate loans and recognized a gain of $82 thousand.
-6-
PART I. FINANCIAL INFORMATION
(Continued)
Item 1. Notes to Consolidated Financial Statements, continued
Changes in the allowance for loan losses for the three month periods ended
March 31 were as follows:
2001 2000
------ ------
Balance at beginning of period $3,802 $3,222
Provision for loan losses 375 475
Charge-offs (317) (438)
Recoveries 62 77
----- -----
Balance at end of period $3,922 $3,336
===== =====
EMPLOYEE STOCK OPTIONS
The Company applies APB No. 25 in accounting for its stock option plans.
Had compensation expense for the Company's stock options granted after 1996
been recognized under the methodology prescribed in SFAS No. 123, the
Company's net income and earnings per share for the three months ended
March 31 would have been impacted as follows: (in thousands, except per
share data)
2001 2000
------ ------
Reported net income $1,445 $1,318
Proforma net income 1,425 1,309
Reported earnings per share-
assuming dilution 0.45 0.41
Proforma earnings per share-
assuming dilution 0.44 0.41
FORWARD-LOOKING STATEMENTS
Certain matters disclosed herein may be deemed to be forward-looking
statements that involve risks and uncertainties, including regulatory policy
changes, interest rate fluctuations, loan demand, loan delinquencies and
losses, and other risks. Actual strategies and results in future time
periods may differ materially from those currently expected. Such forward-
looking statements represent the Company's judgment as of the current date.
The Company disclaims, however, any intent or obligation to update such
forward-looking statements. See Exhibit 99 attached hereto, which is
incorporated herein by reference.
-7-
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
To the Shareholders and Board of Directors
NB&T FINANCIAL GROUP, INC.
We have reviewed the accompanying consolidated balance sheets of NB&T
Financial Group, Inc. (formerly known as InterCounty Bancshares, Inc.)
and subsidiaries as of March 31, 2001 and 2000, and the related
consolidated statements of income, comprehensive income and changes in
shareholders' equity, and cash flows for each of the three-month periods
ended March 31, 2001 and 2000. These financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with U.S. generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying consolidated interim financial statements
for them to be in conformity with U. S. generally accepted accounting
principles.
We previously audited, in accordance with U.S. generally accepted auditing
standards, the consolidated balance sheet as of December 31, 2000 (presented
herein), and the related consolidated statements of income, comprehensive
income and changes in shareholders' equity, and cash flows for the year then
ended (not presented herein), and in our report dated February 7, 2001, we
expressed an unqualified opinion on those consolidated financial statements.
In our opinion, the information set forth in the accompanying consolidated
balance sheet as of December 31, 2000, is fairly stated in all material
respects.
/s/ J.D. Cloud & Co. L.L.P.
Cincinnati, Ohio
May 8, 2001
-8-
PART I. FINANCIAL INFORMATION
(Continued)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operation
Net income for the first quarter of 2001 was $1.45 million, an increase of
9.6% from the $1.32 million earned in the first quarter of 2000. Net income
per share-basic was $.45, compared to $.42 per share, an increase of 7.1%.
Net interest income was $4.61 million for the first quarter of 2001, a
decrease of 3.1% compared to the same quarter last year. Although interest
income increased 8.8%, interest expense increased 19.8% when comparing
these two amounts to the same period last year. Average loans increased
5.6% and average securities increased 6.8% when compared to the same period
last year, which resulted in an increase of 8.1% in average interest-earning
assets. Loan growth was concentrated in the average amount of small business
loans, up 5.3%, and the average amount of real estate loans, up 14.7%. The
tax equivalent yield on interest-earning assets increased from 8.00% in the
first quarter of 2000 to 8.08% in the first quarter of 2001.
Average interest-bearing liabilities increased 9.4% to $493.0 million, and
their cost increased to 5.03% from 4.55% in the first quarter of 2000. The
volume growth in average interest-bearing liabilities was composed of $8.4
million in NOW and money market accounts; $29.1 million in both retail and
large certificates of deposit; and $8.3 million in additional long-term
borrowing. As a result, tax equivalent net interest margin decreased from
3.95% in the first quarter of 2000 to 3.56% in the first quarter of 2001.
The provision for loan losses was $100,000 less than the first quarter of
last year, in part because net charge-offs for the first quarter of 2001
were $255,000, .07% of average loans, compared to $361,000, .10% of average
loans for the prior year. Additionally, as reported in the Annual Report
to Shareholders, the Company experienced an increase in problem loans in
the year 2000, and the provision for loan losses was significantly increased
during that period. Some progress has been made with these credits, and
continued attention has been given to this area. The majority of these loans
were made to long-time customers who have been affected by the downturn in
the economy and reductions in government spending.
-9-
PART I. FINANCIAL INFORMATION
(Continued)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
The following table sets forth certain information regarding the past-due,
non-accrual and renegotiated loans of the Company at the dates indicated (in
thousands):
March 31 December 31 March 31
2001 2000 2000
------ ------ ------
Loans accounted for on
non-accrual basis $3,703 $4,098 $2,785
Accruing loans which are
past due 90 days or more 222 113 90
Renegotiated loans 0 0 0
----- ----- -----
Total $3,925 $4,211 $2,875
----- ----- -----
As of March 31, 2001, the $3,703,000 in non-accrual loans consisted of
fifteen loans collateralized with a first mortgage, twelve have a second
mortgage, two have partial Farm Services Agency (FSA) and US Department of
Agriculture (USDA) government guarantees, five are titled collateral and one
is collateralized by a general chattel on inventory.
All loans are expected to be resolved through payments or through liquidation
of collateral in the normal course of business. The anticipated loss in the
year 2001 from all but two of these relationships is $115,000. One of the
remaining two relationships is with Bush Leasing, Inc., a company whose
primary owner is George F. Bush, a former director of the Company. The
servicing and collection of the related receivables of $754,000 has been
outsourced. Management is unable to determine the potential for losses on
these accounts since the receivables are collateralized with vehicles whose
condition at the end of the lease can either negatively or positively impact
the final amount received. The second relationship is with a longstanding
customer whose outstanding balances with the Company are approximately $6.0
million, $4.3 million of which has an 80% guarantee by a U.S Government
agency. Several meetings have taken place with the customer with the intent
of restructuring a portion of the debt. Due to the many variables affecting
the restructuring, a loss, if any to the Company cannot be determined.
Projected losses are based on currently available information and actual
losses may differ significantly from those discussed above.
-10-
PART I. FINANCIAL INFORMATION
(Continued)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
In addition, management has identified two relationships that are not
included in the non-performing categories at March 31, 2001, but about
which management, through normal credit review procedures, has become aware
of information regarding possible credit problems that could cause the
borrowers future difficulties in complying with present loan repayment
terms. These two relationships total $757,000 with a government guarantee
of $300,000 supporting one of the relationships. Management is unable to
determine any potential loss due to the early stages of these situations.
At March 31, 2001, the Company's allowance for loan losses totaled $3.92
million, was allocated to specifically classified loans and was generally
based on a three-year net charge-off history. The following table sets
forth an analysis of the Company's allowance for losses on loans for the
periods indicated (in thousands):
Three Months Ended
March 31
2001 2000
------------------
Balance, beginning of period $3,802 $3,222
Charge-offs:
Commercial 24 259
Residential real estate 1 1
Installment 290 176
Credit Card - -
Other 2 2
----- -----
Total 317 438
----- -----
Recoveries:
Commercial 9 20
Residential real estate - -
Installment 52 56
Credit Card - 1
Other 1 -
----- -----
Total 62 77
----- -----
Net Charge-offs (255) (361)
Provision for loan losses 375 475
----- -----
Balance, end of period $3,922 $3,336
===== =====
-11-
PART I. FINANCIAL INFORMATION
(Continued)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Non-interest income was $1,704,000 for the first quarter of 2001, an increase
of 22.4% from the $1,391,000 earned in the first quarter of 2000. Bank
Owned Life Insurance (BOLI) income accounts for $162,000 of the increase.
Most other categories in this section have shown increases. Trust income
increased 2.7%, deposit service charges were up 13.1%, and ATM network fees
were up 26.4%. Additionally, an $82,000 gain was recorded on the sale of
$8.8 million of real estate loans. Insurance agency commissions were down
6.4% as a result of decreased sales of annuity products because of staffing
issues.
Non-interest expense increased 5.4% for the quarter over the same period in
2000. Salaries and benefits increased 3.1% for the quarter due to general
wage increases and the increased cost of retirement and medical benefits.
Equipment expense increased 4.4% from last year due to the continued upgrade
of our computer network. Occupancy expense increased 11.0% for the quarter
primarily the result of increased utility costs. Other expense has increased
5.0% from the first quarter of last year primarily due to legal fees related
to problem loan workouts.
The Company's effective tax rate decreased to 17.9% during the first quarter
of 2001 from 22.9% for the first quarter of 2000, primarily due to non-
taxable BOLI income.
Performance ratios for the first quarter of 2001 included a return on assets
of 1.00%, and a return on equity of 11.79%.
Financial Condition
The changes that have occurred in the Company's financial condition during
2001 are as follows (in thousands):
March 31 December 31
2001 2000 Amount Percent
------- ------------ ------ --------
Total Assets $601,466 $579,232 $22,234 4%
Federal Funds Sold 25,782 15 25,767 N/M
Loans 367,161 374,101 (6,940) (2)
Securities 164,684 160,210 4,474 3
Demand deposits 39,257 42,965 (3,708) (9)
Savings, Now, MMDA deposits 154,034 147,470 6,564 4
CD's $100,000 and over 59,814 43,040 16,774 39
Other time deposits 170,689 173,213 (2,524) (1)
Total deposits 423,794 406,688 17,106 4
Short-term borrowing 36,922 40,148 (3,226) (8)
Long-term borrowing 86,323 80,323 6,000 7
-12-
PART I. FINANCIAL INFORMATION
(Continued)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Total assets have increased $22.2 million as a result of funds generated
from increases in deposits and long-term borrowing during 2001. The loan
portfolio grew $1.9 million during the first quarter of 2001, but shows a
net decrease from December 31, 2000 due to an $8.8 million loan sale at
the end of the first quarter. The securities portfolio has increased
slightly since year-end, however the majority of the excess funds have
remained short-term in Federal Funds sold. Deposit growth has occurred
in large certificates due to public funds deposits of tax receipts. Short-
term borrowing has been reduced as a result of the elimination of the need
for overnight borrowing.
Total assets grew 10.9% from the end of the first quarter of 2000, to a
total of $601.5 million. Total loans increased to $367.2 million, an
increase of 2.3% from March 31, 2000. Commercial loan average grew $7.7
million (5.3%), and the real estate loan average grew $9.8 million (9.5%).
These parts of the loan portfolio continue to provide the majority of
increase in the portfolio. The securities portfolio average has increased
$10.1 million (6.8%) from the first quarter of last year. Most of the
purchases were of U.S. Agency callable bonds with maturities in the two-
year to five-year range.
Total deposits increased 9.4% from the end of the first quarter of 2000
to $423.8 million. Average non-interest bearing deposits increased 7.8%
from last year. Average interest-bearing liabilities grew $42.4 million
(9.4%). Average interest-bearing transaction accounts increased $8.4
million (7.7%), average large certificates increased $11.6 million (28.5%),
and average small certificates increased $17.5 million (11.5%). Average
long-term borrowing increased $8.3 million (10.9%) from the first quarter
of 2000. Total equity increased 14.3% from March 31, 2000 to $51.1 million
at March 31, 2001.
At March 31, 2001 and 2000, the Bank had outstanding $86.0 million and $80.0
million, respectively, of total borrowings from the Federal Home Loan Bank
(FHLB). In January 2001 a $30 million variable-rate note that adjusts
quarterly at the three-month LIBOR rate was paid off and restructured into
three $12 million notes with a weighted average rate of 5.01% and maturity
dates in January 2011.
Book value per share was $15.93 at March 31, 2001 compared to $14.01 at
March 31, 2000. Equity to assets was 8.49%, compared to 8.24% at the end of
the first quarter last year. These increases are attributable, in part, to
the general decreases in market interest rates and the resulting net
unrealized gain on securities available for sale of $1.0 million at March 31,
2001 compared to a net unrealized loss of $3.4 million a year ago.
-13-
PART I. FINANCIAL INFORMATION
(Continued)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Liquidity and Capital Resources
Effective liquidity management ensures that the cash flow requirements of
depositors and borrowers, as well as Company cash needs, are met. The
Company manages liquidity on both the asset and liability sides of the
balance sheet. The loan to deposit ratio at March 31, 2001, was 86.6%,
compared to 92.6% at the same date in 2000. Loans to total assets were
61.0% at the end of the first quarter of 2001, compared to 66.2% at the
same time last year. Management strives to keep this ratio below 70%.
The securities portfolio consists of 73% available-for-sale securities
that are readily marketable. Approximately 49% of the available-for-sale
portfolio is pledged to secure public deposits, short-term and long-term
borrowings and for other purposes as required by law. The balance of the
available-for-sale securities could be sold if necessary for liquidity
purposes. Also, a stable deposit base, consisting of 86% core deposits,
makes the Company less susceptible to large fluctuations in funding needs.
The Company has short-term borrowing lines of credit with several
correspondent banks. The Company also has both short- and long-term
borrowing available through the Federal Home Loan Bank (FHLB). The
Company has the ability to obtain deposits in the brokered certificate
of deposit market to help provide liquidity to fund loan growth.
The Federal Reserve Board has adopted risk-based capital guidelines that
assign risk weightings to assets and off-balance sheet items and also
define and set minimum capital requirements (risk-based capital ratios).
Bank holding companies must maintain total risk-based, Tier 1 risk-based
and Tier 1 leverage ratios of 8%, 4% and 3%, respectively. At March 31,
2001, the Company had a total risk-based capital ratio of 14.12%, a Tier 1
risk-based capital ratio of 13.09%, and a Tier 1 leverage ratio of 8.32%.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Since December 31, 2000, the Company has become slightly asset sensitive
(2.8%) compared to being liability sensitive (12.0%) in the zero- to one-year
range. This is the result of a four percent deposit growth and a two percent
decrease in loans being invested in short-term instruments. This change has
not caused any guidelines established by the Asset Liability Management
Committee to be violated.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings - Not Applicable
Item 2. Changes in Securities and Use of Proceeds - Not Applicable
Item 3. Defaults Upon Senior Securities - Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders - Not
Applicable
Item 5. Other Information
At the Company's annual meeting held on April 24, 2001, shareholders
voted to change the name of InterCounty Bancshares, Inc., to NB&T
Financial Group, Inc., in order to establish name recognition for the
family of financial service companies owned by the Company.
This name change was effective May 3, 2001. The new stock symbol is
NBTF and the new CUSIP number is 62874M104.
The following was contained in a press release issued by NB&T Financial
Group, Inc., on or about May 11, 2001:
Bacon & Associates Joins NB&T Insurance Agency
It was announced by NB&T Insurance Agency, Inc. that it has completed its
merger with Bacon & Associates Agency, Inc. of Wilmington, Ohio and Bacon &
Dettwiller Affiliated Insurance Agencies, Inc. in Greenfield, Ohio. Under
the agreement, the Bacon agencies become part of the NB&T Insurance Agency.
George R. Phillips, president of NB&T Insurance Agency, said, "The addition
of the Bacon agencies gives us the opportunity to work with people who have
a great track record of serving the insurance needs of their clients. This
merger will help us become better known to our clients and the public for
the variety of financial services we can now offer," Phillips said. NB&T
Insurance Agency, Inc. formerly the Phillips Insurance Agency, Inc., is a
subsidiary of The National Bank and Trust Co., which is headquartered in
Wilmington, Ohio.
Larry D. Bacon, president of the Bacon agencies, stated, "The history of
the Bacon agencies can be traced back to 1859. A tradition was established
then that taking care of clients' needs was the most important thing we
could do," Bacon said. "Today, our merger with the NB&T Insurance Agency
means that we will be able to continue living up to that tradition," Bacon
commented.
National Bank and Trust with assets of $600 million has offices located in
Clinton, Brown, Clermont, Warren and Highland counties. Recently, the Bank
announced that the name of its holding company was changed to NB&T Financial
Group, Inc. and is listed on the Over-The-Counter (OTC) Bulletin Board under
the symbol NBTF.
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PART II. OTHER INFORMATION
(Continued)
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
Exhibit
No. Description
11 Computation of Consolidated
Earnings Per Common Share
For the Three Months Ended
March 31, 2001 and 2000
15 Letter of J.D. Cloud & Co. L.L.P.
Independent Certified
Public Accountants,
dated May 8, 2001,
relating to Financial Information
99 Safe Harbor Under the Private
Securities Litigation Reform Act
of 1995
b. The Company filed a Form 8-K with the Securities and Exchange
Commission on January 24, 2001 regarding a press release
announcing the results of operations for the fourth quarter
and year 2000.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NB&T FINANCIAL GROUP, INC.
Registrant
Date: May 14, 2001 /s/ Charles L. Dehner
-------------------------------
Charles L. Dehner
Treasurer, Executive Vice President
and Principal Accounting Officer
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