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, 1998
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 May 1, 1998, was 1,553,933 shares.
INTERCOUNTY BANCSHARES, INC.
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets -
March 31, 1998, December 31, 1997
and March 31, 1997. . . . . . . . . . . . . . . . . . .1
Consolidated Statements of Income -
Three Months Ended March 31, 1998 and 1997. . . . . . .2
Consolidated Statements of Changes in
Shareholders' Equity -
Three Months Ended March 31, 1997 and 1998.. . . . . .3-4
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1998 and 1997 . . . . . .5
Notes to Consolidated Financial Statements . . . . . . 6-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. .. . . .8-12
Item 3. Quantitative and Qualitative Disclosures
about Market Risks. . . . . . . . . . . . . . . . . . .13
Part II. Other Information
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . .14
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . .14
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . .14
Item 4. Submission of Matters to a Vote of Security Holders . . .14
Item 5. Other Information . . . . . . . . . . . . . . . . . . . .14
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . .14
Part I - Financial Information
Item 1. Financial Statements
INTERCOUNTY BANCSHARES, INC. and
THE NATIONAL BANK AND TRUST COMPANY
CONSOLIDATED BALANCE SHEETS
At March 31, 1998, December 31, 1997 and March 31, 1997
(thousands)
March 31, December 31, March 31,
1998 1997 1997
(unaudited) (a) (unaudited)
ASSETS:
Cash and due from banks $ 15,331 17,787 13,781
Federal funds sold 14,717 4,176 2,962
Other short-term investments 12 1,538 -
------- ------- -------
Total cash and cash equivalents 30,060 23,501 16,743
Interest-bearing deposits in banks - - 124
Securities available for sale, at
market value 101,403 111,975 88,110
Securities held to maturity (market
value-$18,643, $11,624, and $7,458) 18,248 11,164 7,018
------- ------- -------
Total securities 119,651 123,139 95,128
Loans 275,979 277,711 270,118
Less-allowance for loan losses 2,820 2,761 2,650
------- ------- -------
Net loans 273,159 274,950 267,468
Premises and equipment 10,446 10,503 9,160
Earned income receivable 3,359 3,691 3,223
Other assets 832 660 2,315
------- ------- -------
TOTAL ASSETS $437,507 436,444 394,161
======= ======= =======
LIABILITIES:
Demand deposits $ 38,224 38,662 34,589
Savings, NOW, and money market
deposits 121,146 117,552 115,013
Certificates $100,000 and over 28,140 26,899 22,363
Other time deposits 143,249 146,219 143,672
------- ------- -------
Total deposits 330,759 329,332 315,637
Short-term borrowings 61,148 62,734 37,503
Long-term debt 693 716 892
Other liabilities 3,074 2,756 2,953
------- ------- -------
TOTAL LIABILITIES 395,674 395,538 356,985
------- ------- -------
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 7,594 7,462 7,380
Unearned ESOP shares, at cost (620) (620) (731)
Retained earnings 36,464 35,674 32,723
Accumulated other comprehensive
income 455 515 (110)
Treasury shares, at cost, 355,542
shares at March 31, 1998; 363,137
at December 31, 1997; 362,237 shares
at March 31, 1997 (3,060) (3,125) (3,086)
------- ------- -------
TOTAL SHAREHOLDERS' EQUITY 41,833 40,906 37,176
------- ------- -------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $437,507 436,444 394,161
======= ======= =======
<FN>
(a) Financial information as of December 31, 1997, 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 AND TRUST COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(thousands)
(unaudited)
Three Months Ended
March 31
----------------------
1998 1997
INTEREST INCOME:
Interest and fees on loans $ 6,003 5,822
Interest on securities available for sale -
taxable 1,745 1,456
Interest on securities held to maturity -
non-taxable 197 152
Interest on deposits in banks 7 2
Interest on federal funds sold 202 12
----- -----
TOTAL INTEREST INCOME 8,154 7,444
----- -----
INTEREST EXPENSE:
Interest on savings, NOW and money
market deposits 829 793
Interest on time certificates $100,000 and over 376 252
Interest on other deposits 2,050 2,030
Interest on short-term borrowings 840 456
Interest on long-term debt 15 19
----- -----
TOTAL INTEREST EXPENSE 4,110 3,550
----- -----
NET INTEREST INCOME 4,044 3,894
PROVISION FOR LOAN LOSSES 225 200
----- -----
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 3,819 3,694
----- -----
NON-INTEREST INCOME:
Trust services 238 198
Service charges on deposits 321 286
Other service charges and fees 77 71
Other 252 161
----- -----
TOTAL NON-INTEREST INCOME 888 716
----- -----
NON-INTEREST EXPENSES:
Salaries 1,295 1,164
Employee benefits 238 231
Equipment 292 273
Occupancy 178 171
State franchise tax 156 141
Marketing 69 69
Other 797 698
----- -----
TOTAL NON-INTEREST EXPENSE 3,025 2,747
----- -----
INCOME BEFORE INCOME TAX 1,682 1,663
INCOME TAX 509 517
----- -----
NET INCOME $ 1,173 1,146
===== =====
Basic earnings per common share $ 0.76 0.75
Diluted earnings per common share $ 0.74 0.73
AVERAGE SHARES OUTSTANDING:
To compute basic earnings
per common share 1,537,487 1,528,163
To compute diluted earnings
per common share 1,579,870 1,571,427
-2-
Part I - Financial Information
(Continued)
Item 1. Financial Statements
INTERCOUNTY BANCSHARES, INC. and
THE NATIONAL BANK AND TRUST COMPANY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(thousands)
(unaudited)
Retained
Unearned Earnings Accumulated
ESOP Less Cost Other Total
Common Shares of Treasury Comprehensive Comprehensive Shareholders'
Shares Surplus at Cost Shares Income Income Equity
Balance January 1, 1997 $1,000 7,246 (732) 28,810 424 36,748
Comprehensive
Income:
Net income 1,146 1,146 1,146
Net unrealized
loss on available-
for-sale securities,
net of tax (534) (534) (534)
---
Total comprehensive income 612
=====
Dividends declared
($.19 per share) (292) (292)
Treasury shares purchased (128) (128)
Stock options exercised 129 101 230
ESOP shares earned 5 1 6
----- ----- --- ------ --- ------
Balance March 31, 1997 $1,000 7,380 (731) 29,637 (110) 37,176
===== ===== === ====== === ======
-3-
Part I - Financial Information
(Continued)
Item 1. Financial Statements
INTERCOUNTY BANCSHARES, INC. and
THE NATIONAL BANK AND TRUST COMPANY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Continued)
(thousands)
(unaudited)
Retained
Unearned Earnings Accumulated
ESOP Less Cost Other Total
Common Shares of Treasury Comprehensive Comprehensive Shareholders'
Shares Surplus at Cost Shares Income Income Equity
Balance January 1, 1998 $1,000 7,462 (620) 32,549 515 40,906
Comprehensive
Income:
Net income 1,173 1,173 1,173
Net unrealized
loss on available-
for-sale securities,
net of tax (60) (60) (60)
-----
Total comprehensive income 1,113
=====
Dividends declared
($.25 per share) (383) (383)
Stock options exercised 121 65 186
ESOP shares earned 11 11
----- ----- ---- ------ --- ------
Balance March 31, 1998 $1,000 7,594 (620) 33,404 455 41,833
===== ===== ==== ====== === ======
-4-
Part I - Financial Information
(Continued)
Item 1. Financial Statements
INTERCOUNTY BANCSHARES, INC. and
THE NATIONAL BANK AND TRUST COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(thousands)
(unaudited)
Three Months Ended
March 31
---------------------
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,173 1,146
Adjustments for non-cash items -
Depreciation and amortization 294 231
Provision for loan losses 225 200
Net discount amortization (accretion)of securities
held for sale 13 (37)
Net discount accretion of securities held to maturity (36) (30)
Decrease in income receivable 332 85
Increase in other assets (450) (975)
Decrease in interest payable (870) (103)
Increase in income taxes payable 762 426
Increase (Decrease)in other accrued expenses 649 (207)
FHLB stock dividends (72) (54)
------ ------
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,020 682
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease in interest-bearing deposits in banks - 2
Proceeds from maturities of securities available
for sale 26,560 4,401
Purchases of securities available for sale (16,019) (11,861)
Proceeds from maturities of securities held to
maturity 1,840 525
Purchases of securities held to maturity (8,888) -
Net (increase) decrease in loans 1,596 (1,072)
Purchases of premises and equipment (186) (722)
------ ------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 4,903 (8,727)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 1,427 6,510
Repayment of capital lease obligation (23) (22)
Net increase (decrease) in short-term borrowings (1,586) 6,390
Cash dividends paid (291) (213)
Proceeds from stock options exercised 109 230
Purchase of treasury shares - (128)
------ ------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (364) 12,767
------ ------
NET CHANGE IN CASH AND CASH EQUIVALENTS 6,559 4,722
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 23,501 12,021
------ ------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 30,060 16,743
====== ======
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 4,980 3,653
Income taxes paid (refunded) (160) 93
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
INTERCOUNTY BANCSHARES, INC. and
THE NATIONAL BANK AND 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 month period ended
March 31, 1998, are not necessarily indicative of the results to be expected
for the full year to end December 31, 1998. 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,
1997 filed with the Commission.
RECENTLY ISSUED ACCOUNTING STANDARDS
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation," effective January 1, 1996, encouraged, but did 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." The nature
of the Company's agreements with optionees prior to 1997 was such that the
accounting treatment was the same under both pronouncements. Prior to 1997,
compensation cost was recorded because the Company had a contingent obligation
to repurchase the shares. During 1997, all outstanding option agreements were
revised, eliminating the Company's contingent obligation. Because recording
compensation cost is no longer appropriate under APB No. 25, beginning in 1997
the Company is disclosing the proforma information required by SFAS No. 123.
SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities" provides accounting and reporting standards to
distinguish transfers of financial assets that are sales from transfers that
are secured borrowings. Adoption of SFAS No. 125 had no effect on the 1998
and 1997 consolidated financial statements.
Effective January 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income." The new rules establish standards for reporting of
comprehensive income and its components in financial statements.
Comprehensive income consists of net income and other gains and losses
affecting shareholders' equity that, under generally accepted accounting
principles, are excluded from net income. For the Company, such items consist
solely of unrealized gains and losses on investment securities available for
sale. The adoption of SFAS No. 130 did not affect the consolidated statement
-6-
PART I. FINANCIAL INFORMATION
(Continued)
Item 1. Notes to Consolidated Financial Statements
INTERCOUNTY BANCSHARES, INC. and
THE NATIONAL BANK AND TRUST COMPANY
of income, but did affect the presentation of the Company's consolidated
statement of changes in shareholders' equity and consolidated balance sheet.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information" requires financial and descriptive information about operating
segments of a business. The consolidated statement also requires companies to
report revenues for each major product and service. It is effective for
fiscal years beginning after December 15, 1997. SFAS No. 131 will result in
additional financial statement disclosures, with no effect on the Company's
reported consolidated financial position or net income. SFAS No. 131 is not
required for interim financial reporting purposes during 1998. The Company is
in the process of assessing the additional disclosures, if any, required by
SFAS No. 131.
SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement
Benefits", effective for fiscal years beginning after December 15, 1997,
revises current disclosure requirements. It does not change the measurement
or recognition of the obligation or costs associated with employer provided
postretirement benefits. The effects of this statement are limited to defined
benefit plans. The Company terminated its only defined benefit plan in 1997
and, accordingly, this statement will not change the nature of its
postretirement benefit disclosures.
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 would have been impacted as
follows: (in thousands, except per share data)
Three Months Ended
March 31
1998 1997
------------------
Reported net income $1,173 1,146
Proforma net income 1,169 1,142
Reported earnings per share-
assuming dilution 0.74 0.73
Proforma earnings per share-
assuming dilution 0.74 0.73
-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 AND 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
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.
RESULTS OF OPERATIONS
Net income for the first quarter of 1998 was $1,173,000, an increase of 2.4%
from the $1,146,000 earned in the first quarter of 1997. The primary reasons
for the increase in earnings were a 3.8% increase in net interest income and a
24.2% increase in non-interest income. This quarter also showed a 12.5%
increase in provision for loan losses and a 10.1% increase in non-interest
expense. Net income per share increased 1.3% to $.76 from $.75 for the first
quarter of 1997.
Net interest income was $4.0 million, 3.8% above the first quarter of 1997.
Average interest-earning assets increased $46.0 million (12.7%) to $406.9
million. The volume increase consisted primarily of $6.3 million in loans,
$25.3 million in securities, and an increase of $14.0 million in federal funds
sold. The average yield on interest-earning assets decreased from 8.34% to
8.11%. Average interest-bearing liabilities increased 13.2% to $352.6 million
and their cost increased to 4.73% from 4.62% in the first quarter of 1997.
Most of the volume growth in interest-bearing liabilities was in additional
borrowing from the Federal Home Loan Bank (FHLB) to fund U.S. Agency mortgage-
backed securities purchases. Also, more aggressive bidding on certificates
over $100,000 resulted in an increase of $8.2 million in the average balance.
As a result, net interest margin decreased from 4.35% in the first quarter of
1997 to 4.01% in 1998.
The provision for loan losses was increased to $225,000 for the first quarter
of 1998, compared to $200,000 for the same period in 1997. Net charge offs
for the first quarter of 1998 were .06% of average loans, compared to .09% for
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 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
March 31, 1998, 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.
-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 AND 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):
March 31 December 31 March 31
1998 1997 1997
-------- ----------- --------
Loans accounted for on
non-accrual basis $ 532 509 689
Accruing loans which are
past due 90 days or more 241 241 100
Renegotiated loans - - -
--- --- ---
Total $ 773 750 789
=== === ===
There has been no significant change in non-accrual loans from December 31,
1997. Most of these loans are collateralized with first mortgages, one with
a second mortgage, and three with both equipment and second mortgages as
collateral. All but four are expected to be resolved this year, and those
four are expected to be loan-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 $60,000. Management has
also identified a $495,000 loan collateralized by receivables not included
in the non-performing totals above that is in jeopardy of default. This
loan is in the process of being worked out, and there is a 50% chance that
it will be collected in full.
-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 AND TRUST COMPANY
At March 31, 1998, the Bank's allowance for loan losses totaled $2.82 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
March 31
--------
1998 1997
---- ----
Balance, beginning of period $2,761 2,686
Charge-offs:
Commercial 59 46
Residential real estate - -
Installment 152 166
Credit Card - 61
Other 3 -
----- -----
Total 214 273
----- -----
Recoveries:
Commercial 1 -
Residential real estate 1 -
Installment 42 34
Credit Card 4 3
Other - -
----- -----
Total 48 37
----- -----
Net Charge-offs (166) (236)
Provision for loan losses 225 200
----- -----
Balance, end of period $2,820 2,650
===== =====
Non-interest income was $888,000 for the first quarter of 1998, an increase
of 24.2% from the $715,000 earned in the first quarter of 1997. Most
categories in this section have shown increases. Trust income increased
20.4% and deposit service charges were up 12.5%. Loan related insurance and
processing fees were up $130,000 (259%) due primarily to an increase of
$74,000 in the annual experience-related rebate on credit life insurance
sales.
Non-interest expense increased 10.1% for the quarter over the same period in
1997. Salaries and benefits increased 9.9% for the quarter due mostly to an
increase of 12 full-time equivalent employees. The increase was the result
of opening a new branch office in Hillsboro and additional support staff in
various areas of the Bank. Equipment expense increased 6.7% from last year
and occupancy expense increased 4.1% for the quarter. State franchise tax
has increased 10.6% due to the increase in Bank capital on which it is
based. Other expense has increased 13.6% from the first quarter of last
year.
-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 AND TRUST COMPANY
(Continued)
Performance ratios for the first quarter of 1998 included a return on assets
of 1.10%, and a return on equity of 11.53%, compared to 1.21% and 12.53%,
respectively for the first quarter of 1997.
FINANCIAL CONDITION
The changes that have occurred in InterCounty's financial condition during
1998 are as follows (in thousands):
March 31 December 31
1998 1997 Amount Percent
-------- ---------- ------ -------
Total Assets $437,507 436,444 1,063 -
Loans 275,979 277,711 (1,732) (1)
Securities 119,651 123,139 (3,488) (3)
Savings, Now, MMDA deposits 121,146 117,552 3,594 3
CD's $100,000 and over 28,140 26,899 1,241 5
Other time deposits 143,249 146,219 (2,970) (2)
Short-term borrowings 61,148 62,734 (1,586) (3)
The loan portfolio showed little change since year end in both balance and
structure. The securities portfolio has decreased slightly because of calls
of U.S. Agency callable bonds. Deposit growth has occurred in interest-
bearing transaction accounts and large certificates of deposit. Book value
per share was $26.92 compared to $26.45 at December 31, 1997. Equity to
assets was 9.56% compared to 9.37% at the end of last year.
Total assets grew 11.0% from the first quarter of 1997, to a total of $437.5
million. Over the same period, total loans increased to $276.0 million, an
increase of 2.2%. Commercial loan average grew $6.6 million (6.6%), and
continues to provide the majority of increase in the portfolio. The
securities portfolio average has grown $25.3 million (27.7%) from the first
quarter of last year through purchases funded with borrowings from the FHLB.
Total deposits increased 4.8% to $330.8 million. Average non-interest
bearing deposits increased 9.6% from the first quarter of last year. Average
interest-bearing liabilities grew $41.1 million (13.2%), of which $25.7
million was increased FHLB borrowing. Average interest-bearing transaction
accounts increased $3.9 million (3.4%), and average retail certificates
increased $1.9 million (1.4%). Total equity increased 12.5% since March
31, 1997, to $41.8 million at March 31, 1998.
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
withdrawal. InterCounty manages liquidity on both the asset and liability
side of the balance sheet. The loan to total funds ratio at March 31, 1998
was 70%, compared to 76% for the same date in 1997. Management strives to
keep this ratio below 80%. The securities portfolio is primarily "available
for sale" securities that are readily marketable. Approximately 50% of the
-11-
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 AND TRUST COMPANY
(Continued)
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 93% core deposits, makes the Bank less susceptible to large
fluctuations in funding needs.
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 March 31, 1998,
InterCounty had a total risk-based capital ratio of 15.05%, a Tier 1 risk-
based capital ratio of 14.08%, and a Tier 1 leverage ratio of 9.44%.
-12-
PART I. FINANCIAL INFORMATION
(Continued)
Item 3. Quantitative and Qualitative Disclosures about Market Risks
INTERCOUNTY BANCSHARES, INC. and
THE NATIONAL BANK AND TRUST COMPANY
(Continued)
Since December 31, 1997, there have been no material changes in the Company's
market risks, which for the Company is primarily interest rate risk.
-13-
PART II. OTHER INFORMATION
INTERCOUNTY BANCSHARES, INC. and
THE NATIONAL BANK AND 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 - 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 Months Ended
March 31, 1998 and 1997
27.1 Financial Data Schedule for
the Three Months Ended
March 31, 1998.
27.2 Restated Financial Data Schedule
for the Three Months Ended
March 31, 1997.
27.3 Restated Financial Data Schedule
for the Six Months Ended
June 30, 1997.
27.4 Restated Financial Data Schedule
for the Nine Months Ended
September 30, 1997.
27.5 Restated Financial Data Schedule
for the Year Ended December 31, 1996.
27.6 Restated Financial Data Schedule
for the Three Months Ended
March 31, 1996.
27.7 Restated Financial Data Schedule
for the Six Months Ended
June 30, 1996.
27.8 Restated Financial Data Schedule
for the Nine Months Ended
September 30, 1996.
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 March 31, 1998.
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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.
INTERCOUNTY BANCSHARES, INC.
Registrant
Date: May 14, 1998 /s/Charles L. Dehner
--------------------
Charles L. Dehner
Treasurer, Executive Vice President
and Principal Accounting Officer
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