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 September 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 November 1, 1997, was 1,545,738 shares.
INTERCOUNTY BANCSHARES, INC.
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets -
September 30, 1997, December 31, 1996
and September 30, 1996 . . . . . . . . . . . . . . . . . . ..1
Consolidated Statements of Income -
Three Months Ended September 30, 1997 and 1996 and
Nine Months Ended September 30, 1997 and 1996. . . . . . . . .2
Consolidated Statements of Cash Flows -
Nine Months Ended September 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. . . . . . 5-12
Part II. Other Information
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . .13-14
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . .13-14
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . .13-14
Item 4. Submission of Matters to a Vote of Security Holders . . .13-14
Item 5. Other Information . . . . . . . . . . . . . . . . . . . .13-14
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . .13-14
Part I - Financial Information
Item 1. Financial Statements
INTERCOUNTY BANCSHARES, INC. and
THE NATIONAL BANK & TRUST COMPANY
CONSOLIDATED BALANCE SHEETS
At September 30, 1997, December 31, 1996 and September 30, 1996
(thousands)
September 30, December 31, September 30,
1997 1996 1996
(unaudited) (a) (unaudited)
ASSETS:
Cash and due from banks $ 17,925 11,005 11,798
Federal funds sold 7,657 1,016 10,087
------- ------- -------
Total cash and cash equivalents 25,582 12,021 21,885
Interest-bearing deposits in banks 25 126 137
Securities available for sale, at
market value 86,589 81,368 74,058
Securities held to maturity (market
value-$7,398, $8,061, and $8,189) 7,051 7,463 7,554
------- ------- -------
Total securities 93,640 88,831 81,612
Loans 278,238 269,282 268,361
Less-allowance for loan losses 2,652 2,686 2,732
------- ------- -------
Net loans 275,586 266,596 265,629
Premises and equipment 10,162 8,653 8,563
Earned income receivable 3,745 3,308 3,368
Other assets 768 1,072 1,523
------- ------- -------
TOTAL ASSETS $409,508 380,607 382,717
======= ======= =======
LIABILITIES:
Demand deposits $ 35,920 35,731 36,456
Savings, NOW, and money market
deposits 119,322 112,726 111,017
Certificates $100,000 and over 27,780 18,788 21,784
Other time deposits 145,397 141,883 140,707
------- ------- -------
Total deposits 328,419 309,128 309,964
Short-term borrowings 37,966 31,113 33,887
Long-term debt 847 914 1,044
Other liabilities 2,603 2,704 2,523
------- ------- -------
TOTAL LIABILITIES 369,835 343,859 347,418
------- ------- -------
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 7,393 7,246 7,241
Net unrealized gain on securities
available for sale 433 424 354
Unearned ESOP shares, at cost (729) (732) (841)
Retained earnings 34,706 31,869 30,604
Treasury shares, at cost; 363,737
shares at September 30, 1997; 369,436
at December 31, 1996; 369,436 shares
at September 30, 1996 (3,130) (3,059) (3,059)
------- ------- -------
TOTAL SHAREHOLDERS' EQUITY 39,673 36,748 35,299
------- ------- -------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $409,508 380,607 382,717
======= ======= =======
<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 Nine Months Ended
September 30 September 30
------------------ ----------------
1997 1996 1997 1996
INTEREST INCOME:
Interest and fees on loans $6,188 5,790 17,974 16,535
Interest on securities
available for sale - taxable 1,629 1,344 4,817 4,216
Interest on securities held
to maturity - non-taxable 158 159 457 472
Interest on deposits in banks - 2 3 7
Interest on federal funds sold 35 46 70 108
----- ----- ------ ------
TOTAL INTEREST INCOME 8,010 7,341 23,321 21,338
----- ----- ------ ------
INTEREST EXPENSE:
Interest on savings, NOW and
money market deposits 840 783 2,444 2,213
Interest on time certificates
$100,000 and over 392 285 990 789
Interest on other deposits 2,103 1,995 6,204 5,876
Interest on short-term borrowings 560 435 1,628 1,282
Interest on long-term debt 16 21 56 65
----- ----- ------ ------
TOTAL INTEREST EXPENSE 3,911 3,519 11,322 10,225
----- ----- ------ ------
NET INTEREST INCOME 4,099 3,822 11,999 11,113
PROVISION FOR LOAN LOSSES 200 150 600 450
----- ----- ------ ------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 3,899 3,672 11,399 10,663
----- ----- ------ ------
NON-INTEREST INCOME:
Trust income 248 193 662 532
Service charges on deposits 331 288 943 804
Other service charges and fees 79 79 218 230
Securities gains 292 - 292 86
Other 119 147 440 411
----- ----- ------ ------
TOTAL NON-INTEREST INCOME 1,069 707 2,555 2,063
----- ----- ------ ------
NON-INTEREST EXPENSES:
Salaries 1,253 1,123 3,610 3,223
Pension and benefits 284 238 776 685
Equipment 302 265 884 663
Occupancy 168 163 503 470
Deposit insurance 12 106 35 126
State franchise tax 141 123 422 369
Advertising 66 67 201 196
Other 758 761 2,134 2,215
----- ----- ------ ------
TOTAL NON-INTEREST EXPENSE 2,984 2,846 8,565 7,947
----- ----- ------ ------
INCOME BEFORE INCOME TAX 1,984 1,533 5,389 4,779
INCOME TAX 620 445 1,677 1,395
----- ----- ------ ------
NET INCOME $ 1,364 1,088 3,712 3,384
===== ===== ====== ======
Earnings per common share $ 0.89 0.71 2.42 2.21
Dividends declared per
common share $ 0.19 0.14 0.57 0.42
Average shares outstanding 1,534,122 1,527,500 1,532,384 1,531,845
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)
Nine Months Ended
September 30
----------------------
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,712 3,384
Adjustments for non-cash items -
Depreciation and amortization 791 541
Provision for loan losses 600 450
Net discount accretion of securities held for sale (101) (211)
Net discount accretion of securities held to maturity (113) (76)
Net realized gains from sale of securities
available for sale (292) (86)
(Increase) decrease in income receivable (437) (138)
Increase in other assets (8) (421)
Decrease in interest payable (154) (106)
(Decrease) increase in income taxes payable 85 25
Increase in other accrued expenses (148) (187)
FHLB stock dividends (170) (155)
------ ------
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,765 3,020
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease (increase) in interest-bearing
deposits in banks 101 (4)
Proceeds from maturities of securities available
for sale 28,620 13,514
Proceeds from sale of securities available for sale 6,763 5,395
Purchases of securities available for sale (40,028) (11,538)
Proceeds from maturities of securities held to
maturity 525 713
Net increase in loans (9,590) (26,216)
Purchases of premises and equipment (1,934) (1,547)
------ ------
NET CASH USED IN INVESTING ACTIVITIES (15,543) (19,683)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 19,292 18,461
Repayment of capital lease obligation (67) (65)
Net increase in short-term borrowings 6,853 2,777
Cash dividends paid (797) (589)
Proceeds from stock options exercised 230 6
Purchase of treasury shares (172) (249)
------ ------
NET CASH PROVIDED BY FINANCING ACTIVITIES 25,339 20,341
------ ------
NET CHANGE IN CASH AND CASH EQUIVALENTS 13,561 3,678
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 12,021 18,207
------ ------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 25,582 21,885
====== ======
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 11,476 10,331
Income taxes paid 1,654 1,370
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 nine month periods
ended September 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 Nine Months Ended
September 30 September 30
1997 1996 1997 1996
Weighted Average Shares:
Common shares issued 1,545,983 1,541,666 1,544,808 1,546,604
Unreleased common shares
held by ESOP (11,861) (14,166) (12,424) (14,759)
--------- --------- --------- ---------
Common shares
outstanding 1,534,122 1,527,500 1,532,384 1,531,845
========= ========= ========= =========
-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 STANDARDS
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.
SFAS No. 128 "Earnings Per Share" requires, in all instances, dual
presentation of a basic EPS, which excludes dilution, and a diluted EPS, which
gives effect to all dilutive potential common shares that were outstanding
during the period. The requirements of this Statement are first effective for
the Company's year end December 31, 1997. Early adoption is not permitted.
It also requires a reconciliation of the income available to common
shareholders and weighted-average shares of the basic EPS computation to the
income available to common shareholders and weighted-average shares plus
dilutive potential common shares of the diluted EPS computation. Basic and
diluted EPS pursuant to the requirements of Statement No. 128 would be as
follows:
Three Months Ended Nine Months Ended
September 30 September 30
------------------ ----------------
1997 1996 1997 1996
Basic earnings per share $.89 .71 2.42 2.21
Diluted earnings per share $.86 .69 2.35 2.16
-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
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 third quarter of 1997 was $1,364,000, an increase of 25.4%
from the $1,088,000 earned in the third quarter of 1996. A large portion of
the increase from the third quarter of 1996 was the result of $193,000 in
after-tax gains on the sale of securities. Also during the third quarter of
1997, net interest income increased 7.2%, non-interest income was up 9.9%, and
non-interest expense increased 4.9% from the third quarter last year. This
quarter also showed a 33.3% increase in provision for loan losses. Net income
per share increased 25.4% to $.89 from $.71 for the third quarter of 1996.
Net income for the first nine months of 1997 was $3.71 million, an increase of
9.7% from the $3.38 million earned in the first nine months of 1996. Net
income per share increased 9.7% to $2.42 from $2.21.
-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)
Net interest income for the third quarter of 1997 was $4.1 million, 7.2% above
the third quarter of 1996. Average interest-earning assets during the third
quarter of 1997 increased $31.9 million (9.1%) from the third quarter of 1996
to $382.2 million. The volume increase consisted primarily of $15.6 million
in loans, and $17.4 million in securities. The average yield on average
interest-earning assets decreased from 8.34% during the third quarter of 1996
to 8.33% during the third quarter of 1997. Average loan yield increased from
8.74% in the third quarter of 1996 to 8.80% in the third quarter of 1997. The
average securities yield decreased from 7.22% in 1996 to 7.08% in 1997.
Average interest-bearing liabilities during the third quarter of 1997
increased $30.1 million (10.0%) compared to the same quarter in 1996, to
$332.0 million, and their cost increased to 4.67% from 4.64% for the third
quarter of 1996. Certificates of deposit $100,000 and over increased $6.8
million, and their cost rose from 5.37% to 5.58%. Borrowings from the Federal
Home Loan Bank were increased $4.9 million from the third quarter of 1996 and
their cost increased from 5.70% to 5.77%. The net interest margin decreased
from 4.35% in the third quarter of 1996 to 4.27% in the third quarter of 1997.
Net interest income for the first nine months of 1997 increased 8.0% from the
same period last year. Average interest-earning assets increased 9.3% from
the first nine months of last year, and the yield on these increased from
8.31% to 8.32%. Average interest-bearing liabilities during the first nine
months of 1997 increased 10.3%, while the cost increased from 4.64% to 4.66%.
The net interest margin has averaged 4.28% in 1997 compared to 4.33% for the
first nine months of 1996.
The provision for loan losses was increased to $200,000 for the third 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 third quarter
of 1997 were .08% of average loans, compared to .07% for the prior year. Net
charge-offs for the first nine months of 1997 were .23% of average loans,
compared to .14% for the first nine months of last year.
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
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 September 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.
-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)
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):
September 30 December 31 September 30
1997 1996 1996
-------- ----------- --------
Loans accounted for on
non-accrual basis $568 535 559
Accruing loans which are
past due 90 days or more 207 90 318
Renegotiated loans - - -
--- --- ---
Total $775 625 877
=== === ===
Total non-accrual loans have increased very little since December 31, 1996.
At September 30, 1997, non-accrual loans consisted of two consumer loans
totalling $101,000, two real estate loans totaling $48,000 and seven business
loans totalling $419,000. Most of these loans should be off non-accrual
status by the end of 1997; three 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 $85,000, including costs of collection. See
Exhibit 99 attached hereto, which is incorporated herein by reference.
-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)
At September 30, 1997, the Bank's allowance for loan losses totaled $2.65
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 Nine Months Ended
September 30 September 30
1997 1996 1997 1996
------------------ ----------------
Balance, beginning of period $2,667 2,647 2,686 2,644
Charge-offs:
Commercial 98 (12) 178 31
Residential real estate - - - 1
Installment 154 109 506 386
Credit Card - 49 64 119
Other - 1 5 2
----- ----- ----- -----
Total 252 147 753 539
----- ----- ----- -----
Recoveries:
Commercial 7 42 9 50
Residential real estate - - - -
Installment 26 36 99 113
Credit Card 4 4 11 8
Other - - - 6
----- ----- ----- -----
Total 37 82 119 177
----- ----- ----- -----
Net Charge-offs (215) (65) (634) (362)
Provision for loan losses 200 150 600 450
----- ----- ----- -----
Balance, end of period $2,652 2,732 2,652 2,732
===== ===== ===== =====
Non-interest income was $777,000, exclusive of securities gains, for the third
quarter of 1997, an increase of 9.9% from the $707,000 earned in the third
quarter of 1996. This quarter included gains on the sale of securities of
$292,000. Although most other categories in this section have shown increases
over the third quarter of 1996, increased trust income (28.6%), deposit
service charges (14.9%), and loan related processing fees (26.0%) accounted
for the majority of the improvement. For the first nine months of 1997,
non-interest income, exclusive of securities gains, is up 14.5% from the same
period in 1996.
-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)
Non-interest expense for the third quarter of 1997 increased 4.9% over the
same period in 1996. Salaries increased 11.6% for the quarter due mostly to
an increase of 11 full-time equivalent employees. Benefits were 19.5% higher
in the third quarter of 1997 compared to the third quarter 1996. Equipment
expense increased 14.4% from last year as a result of our continued investment
in current technology. Occupancy expense increased 2.9% for the quarter.
State franchise tax for the third quarter of 1997 has increased 14.3% over the
same period last year due to the increase in Company capital on which it is
based. Deposit insurance expense for the third quarter of 1997 represented a
decrease of $94,000 or 88.7% from 1996 due to a one-time assessment incurred
in 1996. For the first nine months of the year, total non-interest expense
was up 7.8% from the same period last year.
Performance ratios for the third quarter of 1997 included a return on assets
of 1.33% and a return on equity of 13.88%, compared to 1.16% and 12.37%,
respectively, for the third quarter of 1996. Performance ratios for the
first nine months of 1997 included a return on assets of 1.25%, and a return
on equity of 13.10%, compared to 1.24% and 13.02%, respectively, for the first
nine months of 1996.
FINANCIAL CONDITION
The changes that have occurred in InterCounty's financial condition during
1997 are as follows (in thousands):
September 30 December 31
1997 1996 Amount Percent
-------- ----------- ------ -------
Total assets $409,508 380,607 28,901 8
Loans 278,238 269,282 8,956 3
Securities 93,640 88,831 4,809 5
Savings, NOW, MMDA
deposits 119,322 112,726 6,596 6
CD's $100,000 and over 27,780 18,788 8,992 48
Other time deposits 145,397 141,883 3,514 2
Short-term borrowings 37,966 31,113 6,853 22
-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 loan portfolio growth was primarily in commercial, $6.0 million, and real
estate, $2.4 million. The securities portfolio has increased as a result of
excess funds and are primarily purchases of U.S. Agency callable bonds and
collateralized mortgage obligations ("CMOs"). Deposit growth has occurred in
interest-bearing transaction accounts and large certificates of deposit.
Increases in short-term borrowings include increases in both customer
repurchase agreement balances and Federal Home Loan Bank advances. Book value
per share was $25.67 compared to $23.86 at December 31, 1996. Equity to
assets was 9.69% compared to 9.66% at the end of last year.
Total assets grew 7.0% from September 30, 1996, to a total of $409.5 million.
Total loans increased to $278.2 million, an increase of 3.7%. Commercial,
home equity, and residential real estate loans provided the majority of the
growth. The average balance during the first nine months of 1997 of
commercial loans, home equity loans, and residential real estate loans
represented increases of $14.3 million (15.6%), $1.9 million (10.1%), and $3.1
million (4.9%), respectively, from the averages during the first nine months
of 1996. The securities portfolio average during the first nine months of
1997 was 14.5% greater than the average for the first nine months of 1996,
primarily in U.S. Agency callable bonds and CMOs. Total average deposits
during the first nine months of 1997 increased 8.0% to $316.5 million from the
average for the first nine months of 1996. Non-interest bearing deposits
remained at about the same amount as last year. Average interest-bearing
liabilities grew $30.3 million, or 10.3%, between the two periods. Average
interest-bearing transaction accounts increased $10.8 million, or 15.5%, and
average retail certificates of deposit increased $10.0 million, or 7.4%,
between the first nine months of 1996 and the first nine months of 1997.
Total equity increased 12.4% from September 30, 1996, to $39.7 million at
September 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
September 30, 1997, was 76%, compared to 78% 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 63% 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.
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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 September 30, 1997,
InterCounty had a total risk-based capital ratio of 14.26%, a Tier 1 risk-
based capital ratio of 13.35%, and a Tier 1 leverage ratio of 9.56%.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
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 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 - 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 Nine Months
Ended September 30, 1997 and 1996
27 Financial Data Schedule for
the Nine Months Ended
September 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 September 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: November 14, 1997 Charles L. Dehner
Charles L. Dehner
Treasurer, Executive Vice President
and Principal Accounting Officer
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