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 June 30, 1997
Commission file number 0-23134
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 August 1, 1997, was 1,545,738 shares.
INTERCOUNTY BANCSHARES, INC.
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets -
June 30, 1997, December 31, 1996
and June 30, 1996 . . . . . . . . . . . . . . . . . . . .1
Consolidated Statements of Income -
Six Months Ended June 30, 1997 and 1996. . . . . . . . . .2
Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1997 and 1996 . . . . . . . . .3
Notes to Consolidated Financial Statements . . . . . . . . 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. . . . .5-11
Part II. Other Information
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . 12-13
Item 2. Changes in Securities . . . . . . . . . . . . . . . . 12-13
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . 12-13
Item 4. Submission of Matters to a Vote of Security Holders . 12-13
Item 5. Other Information . . . . . . . . . . . . . . . . . . 12-13
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . 12-13
Part I - Financial Information
Item 1. Financial Statements
INTERCOUNTY BANCSHARES, INC. and
THE NATIONAL BANK & TRUST COMPANY
CONSOLIDATED BALANCE SHEETS
At June 30, 1997, December 31, 1996 and June 30, 1996
(thousands)
June 30, December 31, June 30,
1997 1996 1996
(unaudited) (a) (unaudited)
ASSETS:
Cash and due from banks $ 16,919 11,005 13,850
Federal funds sold 2,962 1,016 -
------- ------- -------
Total cash and cash equivalents 19,881 12,021 13,850
Interest-bearing deposits in banks 26 126 135
Securities available for sale, at
market value 97,686 81,368 75,465
Securities held to maturity (market
value-$7,457, $8,016, and $8,214) 7,054 7,463 7,531
------- ------- -------
Total securities 104,740 88,831 82,996
Loans 278,227 269,282 259,432
Less-allowance for loan losses 2,667 2,686 2,647
------- ------- -------
Net loans 275,560 266,596 256,785
Premises and equipment 9,387 8,653 8,322
Earned income receivable 3,436 3,308 3,064
Other assets 1,378 1,072 2,036
------- ------- -------
TOTAL ASSETS $414,408 380,607 367,188
======= ======= =======
LIABILITIES:
Demand deposits $ 34,022 35,731 36,085
Savings, NOW, and money market
deposits 115,194 112,726 107,222
Certificates $100,000 and over 26,658 18,788 19,740
Other time deposits 146,586 141,883 134,649
------- ------- -------
Total deposits 322,460 309,128 297,696
Short-term borrowings 49,728 31,113 31,258
Long-term debt 869 914 1,065
Other liabilities 2,759 2,704 2,576
------- ------- -------
TOTAL LIABILITIES 375,816 343,859 332,595
------- ------- -------
SHAREHOLDERS' EQUITY:
Preferred stock-no par value,
authorized 100,000 shares; none
issued
Common stock-no par value, authorized
3,000,000 shares; issued 1,909,475
shares 1,000 1,000 1,000
Surplus 7,385 7,246 7,236
Net unrealized gain on securities
available for sale 390 424 281
Unearned ESOP shares, at cost (730) (732) (843)
Retained earnings 33,633 31,869 29,729
Treasury shares, at cost, 362,237
shares at June 30, 1997; 369,436
at December 31, 1996; 360,079 shares
at June 30, 1996 (3,086) (3,059) (2,810)
------- ------- -------
TOTAL SHAREHOLDERS' EQUITY 38,592 36,748 34,593
------- ------- -------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $414,408 380,607 367,188
======= ======= =======
<FN>
(a) Financial information as of December 31, 1996, 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
INTERCOUNTY BANCSHARES, INC. and
THE NATIONAL BANK & TRUST COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(thousands)
(unaudited)
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
1997 1996 1997 1996
INTEREST INCOME:
Interest and fees on loans $ 5,964 5,440 11,785 10,746
Interest on securities
available for sale - taxable 1,732 1,413 3,188 2,871
Interest on securities held
to maturity - non-taxable 147 156 299 313
Interest on deposits in banks 1 3 3 5
Interest on federal funds sold 23 25 35 63
----- ----- ------ ------
TOTAL INTEREST INCOME 7,867 7,037 15,310 13,998
----- ----- ------ ------
INTEREST EXPENSE:
Interest on savings, NOW and
money market deposits 812 728 1,605 1,431
Interest on time certificates
$100,000 and over 346 242 598 504
Interest on other deposits 2,070 1,934 4,100 3,882
Interest on short-term borrowings 611 410 1,067 847
Interest on long-term debt 21 22 40 43
----- ----- ------ ------
TOTAL INTEREST EXPENSE 3,860 3,336 7,410 6,707
----- ----- ------ ------
NET INTEREST INCOME 4,007 3,701 7,900 7,291
PROVISION FOR LOAN LOSSES 200 150 400 300
----- ----- ------ ------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 3,807 3,551 7,500 6,991
----- ----- ------ ------
NON-INTEREST INCOME:
Trust income 216 174 414 339
Service charges on deposits 326 275 612 516
Other service charges and fees 67 76 138 151
Securities gains - 86 - 86
Other 162 117 323 265
----- ----- ------ ------
TOTAL NON-INTEREST INCOME 771 728 1,487 1,357
----- ----- ------ ------
NON-INTEREST EXPENSES:
Salaries 1,195 1,049 2,357 2,100
Pension and benefits 258 156 492 447
Equipment 308 211 581 399
Occupancy 164 159 335 307
Deposit insurance 17 9 23 19
State franchise tax 141 118 281 246
Advertising 66 66 135 129
Other 687 786 1,378 1,455
----- ----- ------ ------
TOTAL NON-INTEREST EXPENSE 2,836 2,554 5,582 5,102
----- ----- ------ ------
INCOME BEFORE INCOME TAX 1,742 1,725 3,405 3,246
INCOME TAX 541 506 1,058 950
----- ----- ------ ------
NET INCOME $ 1,201 1,219 2,347 2,296
===== ===== ====== ======
Earnings per common share $ 0.78 0.79 1.53 1.50
Dividends declared per
common share $ 0.19 0.14 0.38 0.28
Average shares outstanding 1,534,814 1,534,468 1,531,506 1,534,047
The accompanying notes to financial statements are an integral part of these
statements.
-2-
Part I - Financial Information
(Continued)
Item 1. Financial Statements
INTERCOUNTY BANCSHARES, INC. and
THE NATIONAL BANK & TRUST COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(thousands)
(unaudited)
Six Months Ended
June 30
----------------------
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,347 2,296
Adjustments for non-cash items -
Depreciation and amortization 463 332
Provision for loan losses 400 300
Net discount accretion of securities held for sale (72) (166)
Net discount accretion of securities held to maturity (66) (49)
Net realized gains from sale of securities
available for sale - (86)
(Increase) decrease in income receivable (128) 161
Increase in other assets (310) (1,263)
Decrease in interest payable (56) (166)
(Decrease) increase in income taxes payable (49) 312
Increase in other accrued expenses 34 18
FHLB stock dividends (111) (102)
------ ------
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,452 1,587
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease (increase) in interest-bearing
deposits in banks 100 (2)
Proceeds from maturities of securities available
for sale 8,256 10,907
Proceeds from sale of securities available for sale - 5,395
Purchases of securities available for sale (24,443) (10,548)
Proceeds from maturities of securities held to
maturity 525 709
Net increase in loans (9,364) (17,222)
Purchases of premises and equipment (1,166) (1,115)
------ ------
NET CASH USED IN INVESTING ACTIVITIES (26,092) (11,876)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 13,333 6,193
Repayment of capital lease obligation (45) (43)
Net increase in short-term borrowings 18,615 148
Cash dividends paid (505) (372)
Proceeds from stock options exercised 230 6
Purchase of treasury shares (128) -
------ ------
NET CASH PROVIDED BY FINANCING ACTIVITIES 31,500 5,932
------ ------
NET CHANGE IN CASH AND CASH EQUIVALENTS 7,860 (4,357)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 12,021 18,207
------ ------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 19,881 13,850
====== ======
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 7,513 6,873
Income taxes paid 1,109 638
The accompanying notes to financial statements are an integral part of these
statements.
-3-
PART I. FINANCIAL INFORMATION
(Continued)
Item 1. Notes to Consolidated Financial Statements
INTERCOUNTY BANCSHARES, INC. and
THE NATIONAL BANK & TRUST COMPANY
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with 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 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 preparation of financial statements in conformity with 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 and six month periods ended
June 30, 1997, are not necessarily indicative of the results to be expected
for the full year to end December 31, 1997. 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, 1996 filed with the Commission.
WEIGHTED AVERAGE SHARES OUTSTANDING
Earnings per common share (EPS) is calculated by dividing net income by the
weighted average number of shares of common stock outstanding during the
period. The assumed exercise of stock options would not have a material
dilutive effect. In accordance with generally accepted accounting principles,
certain shares held in suspense by the Company's employee stock ownership plan
(ESOP) are not considered outstanding until they are committed to be released
for allocation to participants' accounts. The following table shows the
computation of the weighted average shares outstanding.
Three Months Ended Six Months Ended
June 30 June 30
1997 1996 1997 1996
Weighted Average Shares:
Common shares issued 1,547,238 1,549,224 1,544,211 1,549,100
Unreleased common shares
held by ESOP (12,424) (14,756) (12,705) (15,053)
--------- --------- --------- ---------
Common shares
outstanding 1,534,814 1,534,468 1,531,506 1,534,047
========= ========= ========= =========
-4-
PART I. FINANCIAL INFORMATION
(Continued)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
INTERCOUNTY BANCSHARES, INC. and
THE NATIONAL BANK & TRUST COMPANY
RECENTLY ISSUED ACCOUNTING STANDARD
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation," effective January 1, 1996, encourages, but does not
require, adoption of a fair-value-based accounting method for employee stock
options. Management elected to continue to recognize compensation cost using
the intrinsic-value-based method of accounting in Accounting Principles Board
(APB) Opinion No. 25, "Accounting for Stock Issued to Employees." However, the
nature of the Company's stock options is such that the accounting treatment is
the same under both pronouncements. Compensation cost is recorded during the
service period of the optionees based on changes in the book value of the
shares since at the election of the optionees, when the options are exercised,
the Company is obligated to repurchase the shares at book value. If the
Company's shares begin trading on an established market at greater than book
value such that optionees will likely not elect to put the shares to the
Company, the accrued compensation will be recognized as additional
consideration for the stock issued.
SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities" as amended by SFAS No. 127, "Deferral of the
Effective Date of Certain Provisions of (SFAS) Statement No. 125," provides
accounting and reporting standards to distinguish transfers of financial
assets that are sales from transfers that are secured borrowings. Generally,
the new standards are first applicable to transactions occurring after
December 31, 1997. Adoption of SFAS No. 125 is not expected to have a
material effect on the consolidated financial statements.
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 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.
RESULTS OF OPERATIONS
Net income for the second quarter of 1997 was $1,201,000, a decrease of 1.4%
from the $1,219,000 earned in the second quarter of 1996. Net income for the
second quarter of 1996 included $86,000 in securities gains and $100,000 less
in retirement plan expenses than the second quarter of 1997. During the
second quarter of 1997, net interest income increased 8.3%, non-interest
income excluding securities gains increased 20.2%, and non-interest expense
increased 11.0% from the second quarter last year. This quarter also showed a
33% increase in provision for loan losses. Net income per share decreased
1.3% to $.78 from $.79 for the second quarter of 1996.
Net income for the first six months of 1997 was $2.35 million, an increase of
2.3% from the $2.30 million earned in the first six months of 1996.
-5-
PART I. FINANCIAL INFORMATION
(Continued)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
INTERCOUNTY BANCSHARES, INC. and
THE NATIONAL BANK & TRUST COMPANY
(Continued)
Net interest income for the second quarter of 1997 increased $306,000 over the
second quarter of 1996. Average interest-earning assets during the second
quarter of 1997 increased $38.1 million (11.1%) from the second quarter of
1996 to $379.9 million. The volume increase consisted primarily of $20.8
million in loans, and $17.7 million in securities. The average yield
increased from 8.27% during the 1996 quarter to 8.30% during the 1997 quarter.
The average loan yield increased from 8.65% in the second quarter of 1996 to
8.75% in the second quarter of 1997. The average yield on securities
decreased from 7.24% in 1996 to 7.18% in 1997.
Average interest-bearing liabilities during the second quarter of 1997
increased $37.3 million (12.7%) compared to the same quarter in 1996, to
$330.1 million and their cost increased to 4.69% from 4.58% for the second
quarter of 1996. Certificates of deposit $100,000 and over increased $6.8
million, and their cost rose from 5.30% to 5.51%. Borrowings from the Federal
Home Loan Bank were increased $12.3 million from the second quarter of 1996 to
the second quarter of 1997, and their cost increased from 5.73% to 5.82%. As
a result, net interest margin decreased from 4.35% in the second quarter of
1996 to 4.23% in the second quarter of 1997.
Net interest income for the first half of 1997 increased $609,000 (8.4%) from
the same period last year. Average interest-earning assets increased $31.6
million (9.3%) from the first six months of last year, and the yield on these
increased from 8.70% to 8.76%. Average interest-bearing liabilities during
the first half of 1997 increased $30.6 million (10.5%), while the cost
increased from 4.64% to 4.66%. Net interest margin has averaged 4.29% in 1997
compared to 4.32% for the first six months of 1996.
The provision for loan losses was increased to $200,000 for the second quarter
of 1997, compared to $150,000 for the same period in 1996. The Bank has
increased its provision to reflect slightly higher net charge-offs so far this
year and growth in the loan portfolio. Net charge-offs for the second quarter
of 1997 were .07% of average loans, compared to .05% for the prior year. Net
charge-offs for the first six months of 1997 were .16% of average loans,
compared to .12% for the first six months of the prior year.
Installment loans are generally charged off if four payments have been missed.
Generally, all other loans are placed on non-accrual status if they are 90
days or more delinquent. A loan may remain on an accrual status after it is
90 days delinquent if it is reasonably certain the account will be settled in
its entirety or brought current within a 30-day period. The current year's
accrued interest on loans placed on non-accrual status is charged against
earnings. The previous year's accrued interest is charged against the
allowance for loan losses. Cash payments received on non-accrual loans are
applied against principal until the balance is repaid. Any remaining payments
are credited to earnings. Non-performing loans include non-accrual loans,
renegotiated loans and ninety days or more past due loans. Loans that are ten
-6-
PART I. FINANCIAL INFORMATION
(Continued)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
INTERCOUNTY BANCSHARES, INC. and
THE NATIONAL BANK & TRUST COMPANY
(Continued)
days delinquent, excluding one- to four-family real estate loans, are sent to
the Collections Department for collection. One- to four-family real estate
loans are sent when they are fifteen days delinquent. As of June 30, 1997,
management knew of no significant loans not now disclosed that would cause
management to have serious doubts as to the ability of the borrowers to comply
with present loan repayment terms.
The following table sets forth certain information regarding the past-due,
non-accrual and renegotiated loans of the Bank at the dates indicated (in
thousands):
June 30 December 31 June 30
1997 1996 1996
-------- ----------- --------
Loans accounted for on
non-accrual basis $541 535 629
Accruing loans which are
past due 90 days or more 112 90 125
Renegotiated loans - - -
--- --- ---
Total $653 625 754
=== === ===
Total non-accrual loans have increased very little since December 31, 1996.
At June 30, 1997, non-accrual loans consisted of two real estate loans
totalling $49,000 and seven commercial loans totalling $492,000. Most of
these loans should be worked out by the end of the third quarter; two of these
are anticipated to be long-term workouts. Management believes the value of
the related collateral, if necessary to collect the principal outstanding,
limits the Bank's exposure to a potential loss of less than $110,000,
including costs of collection. See Exhibit 99 attached hereto, which is
incorporated herein by reference.
-7-
PART I. FINANCIAL INFORMATION
(Continued)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
INTERCOUNTY BANCSHARES, INC. and
THE NATIONAL BANK & TRUST COMPANY
(Continued)
At June 30, 1997, the Bank's allowance for loan losses totaled $2.67 million
and was allocated primarily to the consumer segment of the loan portfolio. A
similar allocation existed for all other dates presented. The following table
sets forth an analysis of the Bank's allowance for losses on loans for the
periods indicated (in thousands):
Three Months Ended Six Months Ended
June 30 June 30
1997 1996 1997 1996
------------------ ----------------
Balance, beginning of period $2,651 2,626 2,686 2,644
Charge-offs:
Commercial 26 35 80 43
Residential real estate - 1 - 1
Installment 194 101 351 278
Credit Card 3 32 64 70
Other 4 1 5 1
----- ----- ----- -----
Total 227 170 500 393
----- ----- ----- -----
Recoveries:
Commercial 2 6 2 8
Residential real estate - - - -
Installment 38 29 72 77
Credit Card 3 1 6 6
Other - 5 1 5
----- ----- ----- -----
Total 43 41 81 96
----- ----- ----- -----
Net Charge-offs (184) (129) (419) (297)
Provision for loan losses 200 150 400 300
----- ----- ----- -----
Balance, end of period $2,667 2,647 2,667 2,647
===== ===== ===== =====
Non-interest income was $771,000 for the second quarter 1997, an increase of
20.2% from the $642,000 earned, exclusive of securities gains, in the second
quarter of 1996. This quarter included the remaining premium of $34,000
related to the sale of the Bank's credit card portfolio. Most other
categories in this section have shown increases, however, increased trust
income, deposit service charges, and loan related processing fees accounted
for the majority of the improvement. For the first half of 1997, non-interest
income, excluding securities gains, is up 17.0% from the same period in 1996.
-8-
PART I. FINANCIAL INFORMATION
(Continued)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
INTERCOUNTY BANCSHARES, INC. and
THE NATIONAL BANK & TRUST COMPANY
(Continued)
Non-interest expense for the second quarter of 1997 increased 11.0% over the
same period in 1996. Salaries increased 13.9% for the quarter due mostly to
an increase of 10 full-time equivalent employees. Benefits were 65.4% higher
in the second quarter of 1997 as a result of a $100,000 increase in expense
related to the Employee Stock Ownership Plan (ESOP). In 1996 the Company
repurchased all the shares distributed from the plan, instead of the ESOP
repurchasing them, which reduced the required contribution to the ESOP from
the Bank. In 1997, the ESOP repurchased most of the shares distributed to
participants, requiring greater contributions to the ESOP from the Bank.
Equipment expense increased 45.9% from last year as a result of our continued
investment in current technology. Occupancy expense increased 3.1% for the
quarter. State franchise tax for the second quarter of 1997 has increased
19.2% over the same period last year due to the increase in Company capital on
which it is based. Other expense has decreased 12.7% from the second quarter
of last year. Reductions were primarily in professional fees, credit card
processing expenses, and miscellaneous losses. For the first six months of
the year, total non-interest expense was up 9.4% from the same period last
year.
Performance ratios for the second quarter of 1997 included a return on assets
of 1.20%, and a return on equity of 12.83%, compared to 1.35% and 14.10%,
respectively, for the second quarter of 1996. Performance ratios for the
first half of 1997 included a return on assets of 1.20%, and a return on
equity of 12.68%, compared to 1.28% and 13.36%, respectively, for the first
half of 1996.
FINANCIAL CONDITION
Some of the changes that have occurred in InterCounty's financial condition
during 1997 are as follows (in thousands):
June 30 December 31
1997 1996 Amount Percent
-------- ----------- ------ -------
Total assets $414,408 380,607 33,801 9
Loans 278,227 269,282 8,945 3
Securities 104,740 88,831 15,909 18
Savings, NOW, MMDA
deposits 115,194 112,726 2,468 2
CD's $100,000 and over 26,658 18,788 7,870 42
Other time deposits 146,586 141,883 4,703 3
Short-term borrowings 49,728 31,113 18,615 60
-9-
PART I. FINANCIAL INFORMATION
(Continued)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
INTERCOUNTY BANCSHARES, INC. and
THE NATIONAL BANK & TRUST COMPANY
(Continued)
The loan portfolio growth was primarily in commercial, $5.7 million, and real
estate, $1.9 million. The securities portfolio has increased because of
purchases of U.S. Agency callable bonds that have been funded through a
similar amount of short-term borrowing from the Federal Home Loan Bank. The
Bank continues to use this strategy on a limited basis to enhance earnings.
Deposit growth has occurred in interest-bearing transaction accounts and large
certificates of deposit. Large certificates were more aggressively sought
during the second quarter as an efficient means of funding loan demand. Book
value per share was $24.94 compared to $23.86 at December 31, 1996. Equity to
assets was 9.31% compared to 9.66% at the end of 1996.
Total assets grew 12.9% from June 30, 1996, to a total of $414.4 million at
June 30, 1997. Total loans increased to $278.2 million, an increase of 7.2%
from June 30, 1996. Commercial, installment and residential real estate loans
provided the majority of the growth. The average balance during the first
half of 1997 of commercial loans, installment loans and residential real
estate loans represented increases of $14.7 million (16.6%), $6.8 million
(9.3%) and $2.6 million (4.1%), respectively, from the averages during the
first half of 1996. The securities portfolio average during the first six
months of 1997 was 13.2% greater than the average for the first six months of
1996, funded primarily through Federal Home Loan Bank borrowings. Total
average deposits during the first half of 1997 increased 8.3% to $313.1
million from the average for the first half of 1996. Average interest-bearing
liabilities grew $30.4 million, or 10.4%, between the two periods. Average
interest-bearing transaction accounts increased $11.4 million, or 16.8%, and
average retail certificates of deposit increased $10.9 million, or 8.2%,
between the first half of 1996 and the first half of 1997. Total equity
increased 11.6% from June 30, 1996, to $38.6 million at June 30, 1997.
LIQUIDITY AND CAPITAL RESOURCES
The maintenance of an adequate level of liquidity is necessary to ensure that
sufficient funds are available to meet customers' loan demand and deposit
withdrawals. InterCounty manages liquidity on both the asset and the
liability sides of the balance sheet. The loan to total funds ratio at
June 30, 1997, was 75%, compared to 79% for the same date in 1996. Management
strives to keep this ratio below 80%. The securities portfolio is primarily
"available for sale" securities that are readily marketable. Approximately
54% of the portfolio is pledged to secure public deposits and for other
purposes as required by law. The balance of the "available for sale"
portfolio could be sold if necessary for liquidity purposes. Also, a stable
deposit base consisting of 92% core deposits, makes the Bank less susceptible
to large fluctuations in funding needs.
-10-
PART I. FINANCIAL INFORMATION
(Continued)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
INTERCOUNTY BANCSHARES, INC. and
THE NATIONAL BANK & TRUST COMPANY
(Continued)
The Federal Reserve Board has adopted risk-based capital guidelines which
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 June 30, 1997, InterCounty
had a total risk-based capital ratio of 14.17%, a Tier 1 risk- based capital
ratio of 13.24%, and a Tier 1 leverage ratio of 9.19%.
Item 3. Quantitative and Qualitative Disclosures about Market Risks
Not yet required.
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PART II. OTHER INFORMATION
INTERCOUNTY BANCSHARES, INC. and
THE NATIONAL BANK & TRUST COMPANY
Item 1. Legal Proceedings - Not Applicable
Item 2. Changes in Securities - Not Applicable
Item 3. Defaults Upon Senior Securities - Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
On April 22, 1997, the Annual Meeting of the shareholders of the Company was
held. The following members of the Board of Directors of the Company were re-
elected for terms expiring in 1999 by the votes indicated:
FOR WITHHELD
S. Craig Beam 1,277,071 0
James W. Foland 1,277,071 0
Darleen M. Myers 1,277,071 0
Robert A. Raizk 1,277,071 0
B. Anthony Williams 1,277,071 0
Item 5. Other Information - Not Applicable
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 and Six Months
Ended June 30, 1997 and 1996
27 Financial Data Schedule for
the Six Months Ended
June 30, 1997.
99 Safe Harbor Under the Private
Securities Litigation Reform Act
of 1995.
b. The Company was not required to file Form 8-K during the quarter
ended June 30, 1997.
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PART II. OTHER INFORMATION
INTERCOUNTY BANCSHARES, INC. and
THE NATIONAL BANK & TRUST COMPANY
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.
INTERCOUNTY BANCSHARES, INC.
Registrant
Date: August 12, 1997 Charles L. Dehner
Charles L. Dehner
Treasurer, Executive Vice President
and Principal Accounting Officer
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