SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1999
Commission File Number 000-24147
KILLBUCK BANCSHARES, INC.
(Exact name of registrant as specified in its Charter)
OHIO 34-1700284
----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
165 N. Main Street, Killbuck, OH 44637
--------------------------------------
(Address of principal executive offices and zip code)
(330) 276-2771
--------------
(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
---- ------
State the number of shares outstanding for each of the issuer's classes of
common equity as of the latest practicable date:
Class: Common Stock, no par value
Outstanding at July 8, 1999: 705,331
KILLBUCK BANCSHARES, INC.
Index
PART I. FINANCIAL INFORMATION Page Number
- ------------------------------ -----------
Item 1. Financial Statements (Unaudited):
Consolidated Balance Sheet (unaudited) as of
June 30, 1999 and December 31, 1998 3
Consolidated Statement of Income (unaudited)
For the six months ended June 30, 1999 and 1998 4
Consolidated Statement of Income (unaudited)
For the three months ended June 30, 1999 and 1998 5
Consolidated Statement of Changes in Shareholders' Equity
(unaudited)
For the six months ended June 30, 1999 6
Consolidated Statement of Cash Flows (unaudited)
For the six months ended June 30, 1999 and 1998 7
Notes to Unaudited Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial Condition
And Results of Operations 9-14
PART II. OTHER INFORMATION
- --------------------------
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Default Upon Senior Securities 15
Item 4. Submissions of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
-2-
Killbuck Bancshares, Inc. and Subsidiary
CONSOLIDATED BALANCE SHEET (UNAUDITED)
June 30, December 31,
1999 1998
----------- ----------------
ASSETS
Cash and cash equivalents:
Cash and amounts due from depository institutions $ 6,161,707 $ 6,972,224
Federal funds sold 8,600,000 15,200,000
-------------- -------------
Total cash and cash equivalents 14,761,707 22,172,224
------------- -------------
Investment securities:
Securities available for sale 38,142,885 39,228,084
Securities held to maturity (market value of $32,031,251
and $30,389,000) 32,280,756 27,549,053
-------------- ------------
Total investment securities 70,423,641 66,777,137
-------------- ------------
Loans (net of allowance for loan losses of
$1,944,179 and $1,851,175) 138,171,333 135,644,314
Loans held for sale - 233,750
Premises and equipment, net 3,486,465 3,368,645
Accrued interest 1,621,484 1,629,508
Other assets 2,463,300 2,168,315
------------- -------------
Total assets $230,927,930 $231,993,893
============= =============
LIABILITIES
Deposits:
Noninterest bearing demand $ 24,847,242 $ 26,150,636
Interest bearing demand 24,685,635 25,576,971
Money market 11,180,347 12,182,491
Savings 26,004,075 25,707,998
Time 104,811,347 102,460,585
-------------- ------------
Total deposits 191,528,646 192,078,681
Short term borrowings 3,120,000 3,335,000
Federal Home Loan Bank advances 7,788,585 8,587,302
Accrued interest and other liabilities 390,371 555,699
-------------- ------------
Total liabilities 202,827,602 204,556,682
============== ============
SHAREHOLDERS' EQUITY
Common stock no par value: 1,000,000 shares authorized,
718,431 issued 8,846,670 8,846,670
Retained earnings 20,272,699 19,215,493
Accumulated other comprehensive income (loss) (385,553) 8,536
Treasury stock, at cost (13,100 shares) (633,488) (633,488)
-------------- ------------
Total shareholders' equity 28,100,328 27,437,211
-------------- ------------
Total liabilities and shareholders' equity $ 230,927,930 $231,993,893
============== ============
See accompanying notes to the unaudited consolidated financial statements.
-3-
Killbuck Bancshares, Inc. and Subsidiary
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
Six Months Ended
June 30,
1999 1998
------------ ------------
INTEREST INCOME
Interest and fees on loans $ 6,297,877 $5,978,483
Federal funds sold 281,904 210,948
Investment securities:
Taxable 1,108,322 1,019,793
Tax exempt 681,891 583,711
-------------- ------------
Total interest income 8,369,994 7,792,935
-------------- ------------
INTEREST EXPENSE
Deposits 3,775,159 3,440,965
Federal Home Loan Bank advances 279,760 298,920
Short term borrowings 35,401 40,569
-------------- ------------
Total interest expense 4,090,320 3,780,454
-------------- ------------
NET INTEREST INCOME 4,279,674 4,012,481
Provision for loan losses 120,000 90,000
-------------- ------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN
LOSSES 4,159,674 3,922,481
-------------- ------------
OTHER INCOME
Service charges on deposit accounts 233,797 200,081
Gain on sale of loans 30,938 18,975
Other income 58,827 54,524
-------------- ------------
Total other income 323,562 273,580
-------------- ------------
OTHER EXPENSE
Salaries and employee benefits 1,176,059 1,128,746
Occupancy expense 84,081 85,245
Equipment expense 283,891 232,427
Professional fees 158,235 131,934
Franchise tax 176,760 165,968
Other expenses 651,278 458,752
-------------- -----------
Total other expense 2,530,304 2,203,072
-------------- -----------
INCOME BEFORE INCOME TAXES 1,952,932 1,992,989
Income taxes 472,527 483,159
-------------- -----------
NET INCOME $ $1,480,405 $ 1,509,830
============== ===========
Earnings per share $ 2.10 $ 2.28
============== ===========
Average shares outstanding 705,331 661,900
============== ===========
See accompanying notes to the unaudited consolidated financial statements.
-4-
Killbuck Bancshares, Inc.
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
Three Months Ended
June 30,
1999 1998
---------- --------
INTEREST INCOME
Interest and fees on loans $ 3,163,073 $3,012,437
Federal funds sold 166,911 103,604
Investment securities:
Taxable 528,523 513,930
Tax exempt 356,362 296,476
----------- ----------
Total interest income 4,214,869 3,926,447
----------- ----------
INTEREST EXPENSE
Deposits 1,900,248 1,756,153
Federal Home Loan Bank advances 137,082 151,237
Short term borrowings 17,219 18,276
----------- ----------
Total interest expense 2,054,549 1,925,666
----------- ----------
NET INTEREST INCOME 2,160,320 2,000,781
Provision for loan losses 60,000 45,000
----------- ----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN
LOSSES 2,100,320 1,955,781
----------- ----------
OTHER INCOME
Service charges on deposit accounts 121,031 104,354
Gain on sale of loans 16,130 12,795
Other income 32,287 20,235
----------- ----------
Total other income 169,448 137,384
----------- ----------
OTHER EXPENSE
Salaries and employee benefits 591,912 511,061
Occupancy expense 35,094 34,744
Equipment expense 144,321 121,131
Professional fees 84,257 63,524
Franchise tax 90,272 82,984
Other expenses 329,751 240,433
----------- ----------
Total other expense 1,275,607 1,053,877
----------- ----------
INCOME BEFORE INCOME TAXES 994,161 1,039,288
Income taxes 243,469 245,755
----------- ----------
NET INCOME $ 750,692 $ 793,533
=========== ==========
Earnings per share $ 1.06 $ 1.20
=========== ==========
Average shares outstanding $ 705,331 $ 661,900
=========== ==========
See accompanying notes to the unaudited consolidated financial statements.
-5-
Killbuck Bancshares, Inc. and Subsidiary
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 1999
Accumulated
Other Total
Common Retained Comprehensive Treasury Shareholders Comprehensive
Stock Earnings Income (Loss) Stock Equity Income
---------- ----------- --------------- -------- ------------- ---------------
Balance, December 31, 1998 $8,846,670 $19,215,493 $ 8,536 $(633,488) $27,437,211
Net income 1,480,405 1,480,405 $1,480,405
Other comprehensive income:
Net unrealized loss on (394,089) (394,089) (394,089)
----------
securities
Comprehensive icome $1,086,316
==========
Dividends paid (423,199) (423,199)
---------- ----------- --------- --------- -----------
Balance, June 30, 1999 $8,846,670 $20,272,699 $(385,553) $(633,488) $28,100,328
========== =========== ========= ========= ===========
See accompanying notes to the unaudited consolidated financial statements.
-6-
Killbuck Bancshares, Inc. and Subsidiary
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
Six Months Ended
June 30,
1999 1998
------------- --------------
Operating Activities
Net income $ 1,480,405 $ 1,509,830
Adjustments to reconcile net income to net cash provided by
Operating activities:
Provision for loan losses 120,000 90,000
Depreciation, amortization and accretion, net 193,196 142,995
Gain on sale of loans held for sale (30,938) (18,975)
Origination of loans held for sale (2,899,650) (2,005,249)
Proceeds from the sale of loans held for sale 3,164,338 2,024,224
Federal Home Loan Bank stock dividend (29,400) (28,400)
Increase in accrued interest and other assets (84,399) (123,169)
Decrease in accrued expenses and other liabilities (165,327) (111,934)
------------- ------------
Net cash provided by operating activities 1,748,225 1,479,322
------------- ------------
INVESTING ACTIVITIES
Investment securities available for sale:
Proceeds from maturities and repayments 10,499,688 10,625,657
Purchases (9,988,175) (9,479,160)
Investment securities held to maturity:
Proceeds from maturities and repayments 442,974 799,585
Purchases (5,206,311) (2,027,548)
Net increase in loans (2,647,019) (4,590,059)
Purchase of premises and equipment (272,947) (131,025)
------------- ------------
Net cash used in investing activities (7,171,790) (4,802,550)
------------- ------------
FINANCING ACTIVITIES
Net decrease in demand, money market, and savings deposits (2,900,797) (3,459,310)
Increase in time deposits 2,350,762 7,166,124
Proceeds from Federal Home Loan Bank advances - 1,500,000
Repayment of Federal Home Loan Bank advances (798,718) (511,770)
Net decrease in short term borrowings (215,000) (125,000)
Dividends paid (423,199) (330,950)
------------- ------------
Net cash (used in) provided by financing activities (1,986,952) 4,239,094
------------- ------------
Net (decrease) increase in cash and cash equivalents (7,410,517) 915,866
Cash and cash equivalents at beginning of period 22,172,224 14,600,777
------------- ------------
Cash and cash equivalents at end of period $14,761,707 $15,516,643
============= ============
Supplemental Disclosures of Cash Flows Information
Cash paid during the period for:
Interest on deposits and borrowings $ 4,076,413 $ 3,775,016
============= ============
Income taxes $ 440,000 $ 500,000
============= ============
See accompanying notes to the unaudited consolidated financial statements.
-7-
Killbuck Bancshares, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Killbuck
Bancshares, Inc. (the "Company") and its wholly-owned subsidiary Killbuck
Savings Bank Company (the "Bank"). All significant intercompany balances
and transactions have been eliminated in the consolidation.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and, therefore,
do not necessarily include all information that would be included in audited
financial statements. The information furnished reflects all adjustments
which are, in the opinion of management, necessary for a fair statement of
the results of operations. All such adjustments are of a normal recurring
nature. The results of operations for the interim periods are not
necessarily indicative of the results to be expected for the full year.
These statements should be read in conjunction with the consolidated
statements of and for the year ended December 31, 1998 and related notes
which are included on the Form 10-K (file no. 000-24147)
NOTE 2 - EARNINGS PER SHARE
The Company currently maintains a simple capital structure; therefore, there
are no dilutive effects on earnings per share. As such, earnings
per share are calculated using the weighted number of shares for the period.
-8-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Financial Condition
Total assets at June 30, 1999 were approximately $230,928,000 compared to
approximately $231,994,000 at December 31, 1998.
Cash and cash equivalents decreased by approximately $7,411,000 or 33.4% from
December 31, 1998, to June 30, 1999, with liquid funds held in the form of
federal funds sold decreasing $6,600,000. These funds were used to help fund
loan growth and the purchases of securities held to maturity.
Investment securities available for sale decreased by approximately
$1,086,000 or 2.8% from December 31, 1998, as a result of maturities in
excess of purchases of available for sale securities. Investments held to
maturity increased approximately $4,732,000 or 17.2%. Management increases
the held to maturity investments, which are municipal securities, due to
favorable tax equivalent rates for this type of investment during the first
six months of 1999.
The loan portfolio increased by approximately $2,386,000 or 1.7% from
December 31, 1998, to June 30, 1999. An increase of approximately $4,444,000
occurred in the commercial loan category while real estate loan balances
decreased approximately $1,385,000 and consumer loan balances decreased
approximately $673,000. Management attributes the growth in commercial
lending to favorable local economic conditions and a decline in real estate
loans to the Bank selling their fixed rate loans in the secondary market.
Total deposits at June 30, 1999 were approximately $191,529,000 compared to
$192,079,000 at December 31, 1998. Noninterest bearing accounts decreased
approximately $1,303,000; interest bearing demand and money market accounts
decreased approximately $1,893,000 and time deposit accounts increased
approximately $2,351,000. Management attributes these changes to normal
activity within the deposit accounts.
Shareholders' Equity increased by approximately $663,000 or 2.4%, which was
mainly due to net earnings of approximately $1,480,000 for the first six
months of 1999, offset by a $394,000 unrealized loss on securities included
in other comprehensive income and the payment of approximately $423,000 in
dividends. Management monitors risk-based capital and leveraged capital
ratios in order to assess compliance of the regulatory guidelines. At June
30, 1999, the total capital ratio was 19.78%; the Tier I capital ratio was
18.53%, and the leverage ratio was 11.54%, compared to regulatory capital
requirements of 8%, 4% and 4% respectively. These ratios are well in excess
of regulatory capital requirements.
Construction began on a new branch office in Sugarcreek, Ohio in July, 1999
with completion anticipated in late 1999 or early 2000.
-9-
Rapid and accurate data processing is essential to the Bank's operations.
Many computer programs that can only distinguish the final two digits of the
year entered (a common programming practice in prior years) are expected to
read entries for the year 2000 as the year 1900 or as zero and incorrectly
attempt to compute payment, interest, delinquency and other data. The Bank
has been evaluating both information technology (computer systems) and
non-information technology systems (e.g. vault timers, electronic door lock and
elevator controls). Based upon such evaluations, management has determined
that the Bank has year 2000 risk in three areas: (1) Bank's own computer and
software, (2) computers of others used by the Bank's borrowers, and (3)
computers of others who provide the Bank with processing of certain services.
BANK'S OWN COMPUTERS AND SOFTWARE
The Bank has spent approximately $23,000 to upgrade its computer system and
software during the first six months of 1999. The Bank does not expect to
have material costs to address this risk through the rest of 1999. The Bank
believes that they are year 2000 compliant in this risk area. However, there
is no assurance that the year 2000 issue could not have a material impact on
the operations of the Bank.
COMPUTERS OF OTHERS USED BY OUR BORROWERS
The Bank has evaluated most of their borrowers and does not believe the year
2000 problem should, on an aggregate basis, impact their ability to make
payments to the Bank. The Bank believes that most of their residential
borrowers are not dependent on their home computers for income and that none
of their commercial borrowers are so large that a year 2000 problem would
render them unable to collect revenue or rent and, in turn, continue to make
loan payments to the Bank. The Bank does not expect any material costs for
the rest of 1999 to address this risk area and believes they are year 2000
compliant in this risk area.
COMPUTERS OF OTHERS WHO PROVIDE US WITH PROCESSING OF CERTAIN SERVICES
This risk is primarily focused on vendors who provide the Bank processing
services in the areas of credit cards, individual retirement accounts and
automatic teller machine transactions. All of these vendors have represented
to the Bank that they are year 2000 compliant.
CONTINGENCY PLAN
The Bank has continually monitored its year 2000 situation by thoroughly
assessing its systems and programs. Although the Bank anticipates its systems
and programs to be year 2000 compliant, a contingency plan has been developed
as of June 30, 1999.
-10-
RESULTS OF OPERATIONS
Comparison of the Six Months Ended June 30, 1999 and 1998
---------------------------------------------------------
Total interest income of approximately $8,370,000 for the six month period
ended June 30, 1999, compares to approximately $7,793,000 for the same period
in 1998, an increase of $577,000 or 7.4%. The majority of the overall
increase in total interest income is attributed to an increase in interest and
fees on loans of approximately $319,000 or 55.3% of the overall increase. The
increase in interest and fees on loans is due primarily to increased volume in
the loan portfolio due to the loans acquired in the merger of the Commercial
and Savings Bank of Danville, Ohio with and into Killbuck Bancshares, Inc. in
November, 1998. Average loan balances were approximately $139,846,000 for the
first six months of 1999 compared to $125,338,000 for the first six months of
1998. The increase in federal funds sold interest of approximately $71,000
and interest on investment securities of $187,000 is due mainly to increased
average balances outstanding for 1999 compared to 1998.
Total interest expense of approximately $4,090,000 for the six month period
ending June 30, 1999, represents an increase of $310,000 from the
approximately $3,780,000 reported for the same six month period in 1998. The
increase in interest expense on deposits of approximately $334,000 is due
mainly to increases in volume due to the deposits acquired in the merger.
Average interest bearing deposits were approximately $166,769,000 for the
first six months of 1999 compared to $145,020,000 for the first six months of
1998.
Net interest income of approximately $4,280,000 for the six months ended June
30, 1999, compares to approximately $4,012,000 for the same six month period
in 1998, an increase of $268,000 or 6.7%.
Total other income for the six month period ended June 30, 1999, of
approximately $324,000 compares to approximately $274,000 for the same six
month period in 1998, an increase of $50,000 or 18.3%. The service fee income
on deposits increased approximately $34,000 due to an increase in the accounts
being serviced due to the merger. Gains on sale of loans increased
approximately $12,000 due to the Bank's increased involvement in offering
fixed rate loans for sale in the secondary market.
Total other expense of approximately $2,530,000 for the six months ended June
30, 1999, compares to approximately $2,203,000 for the same six month period
in 1998. This represents an increase of $327,000 or 14.8%. Salary and
employee benefits increased only approximately $47,000 due to an unexpected
refund of approximately $33,000 for employee hospitalization benefits. The
increase in other expenses of approximately $193,000 was due in part to the
merger which caused an increase in data processing of approximately $23,000,
advertising and promotion of approximately $17,000, stationery and postage of
approximately $15,000, correspondent bank charges of approximately $11,000 and
goodwill amortization of approximately $55,000. Increases in other expenses
were brought about by those items that are generally thought to be normal and
recurring in nature.
Net income for the six month period ended June 30, 1999, was approximately
$1,480,000, a decrease of $30,000 or 2.0% from the approximately $1,510,000
reported at June 30, 1998.
-11-
RESULTS OF OPERATIONS
Comparison of the Three Months Ended June 30, 1999 and 1998
-----------------------------------------------------------
Total interest income of approximately $4,215,000 for the three month period
ended June 30, 1999, compares to approximately $3,926,000 for the same period
in 1998, an increase of $289,000 or 7.4%. The majority of the overall
increase in total interest income is attributed to an increase in interest and
fees on loans of approximately $151,000 or 52.2% of the overall increase. The
increase in interest and fees on loans is due primarily to increased volume in
the loan portfolio due to the loans acquired in the merger of the Commercial
and Savings Bank of Danville, Ohio with and into Killbuck Bancshares, Inc. in
November, 1998. Average loan balances were approximately $141,471,000 for
this three months of 1999 compared to $126,663,000 for the same three months
of 1998. The increase in federal funds sold interest of approximately $63,000
and interest on investment securities of $75,000 is due mainly to increased
average balances outstanding for 1999 compared to 1998.
Total interest expense of approximately $2,055,000 for this three month period
ending June 30, 1999, represents an increase of $129,000 from the
approximately $1,926,000 reported for the same three month period in 1998.
The increase in interest expense on deposits of approximately $144,000 is due
mainly to increases in volume due to the deposits acquired in the merger.
Average interest bearing deposits were approximately $169,216,000 for this
three month period of 1999 compared to $146,282,000 for the same three months
of 1998.
Net interest income of approximately $2,160,000 for the three months ended
June 30, 1999, compares to approximately $2,001,000 for the same three month
period in 1998, an increase of $159,000 or 7.9%.
Total other income for the three month period ended June 30, 1999, of
approximately $169,000 compares to approximately $137,000 for the same three
month period in 1998, an increase of $32,000 or 23.4%. The service fee income
on deposits increased approximately $17,000 due mostly to an increase in the
accounts being serviced due to the merger. Gains on sale of loans increased
approximately $3,000 due to the Bank's increased involvement in offering fixed
rate loans for sale in the secondary market. Other income increased
approximately $12,000, due mainly to an increase in the alternative investment
income account of approximately $9,100 caused by increased activity in this
area.
Total other expense of approximately $1,276,000 for the three months ended
June 30, 1999, compares to approximately $1,054,000 for the same three month
period in 1998. This represents an increase of $222,000 or 21.1%. Salary and
employee benefits expense increased approximately $81,000 in part to new
employees due to the merger in 1998 and normal recurring employee cost
increases for salary, staff additions and benefits. The increase in other
expenses of approximately $89,000 was due in part to the merger which caused
an increase in data processing of approximately $4,700, advertising and
promotion of approximately $7,500, stationery and postage of approximately
$4,700, and goodwill amortization of approximately $28,000. Increases in
other expenses were brought about by those items that are generally thought to
be normal and recurring in nature.
Net income for the three month period ended June 30, 1999, was approximately
$751,000, a decrease of $43,000 or 5.4% from the approximately $794,000
reported at June 30, 1998.
-12-
Liquidity
---------
Management monitors projected liquidity needs and determines the level
desirable based in part on the Bank's commitments to make loans and
management's assessment of the Bank's ability to generate funds.
The primary sources of funds are deposits, repayment of loans, maturities of
investments, funds provided from operations and advances from the FHLB of
Cincinnati. While scheduled repayments of loans and maturities of investment
securities are predictable sources of funds, deposit flows and loan repayments
are greatly influenced by the general level of interest rates, economic
conditions and competition. The Bank uses its sources of funds to fund
existing and future loan commitments, to fund maturing time deposits and
demand deposit withdrawals, to invest in other interest-earning assets, to
maintain liquidity, and to meet operating expenses.
Cash and amounts due from depository institutions and federal funds sold
totaled approximately $14,762,000 at June 30, 1999. These assets provide the
primary source of liquidity for the Bank. In addition, management has
designated a substantial portion of the investment portfolio, approximately
$38,143,000 as available for sale and has an available unused line of credit
of approximately $9,835,514 with the Federal Home Loan Bank of Cincinnati to
provide additional sources of liquidity at June 30, 1999.
Cash was provided during the six month period ended June 30, 1999, mainly from
proceeds from the maturity and repayment of investment securities of
approximately $10.9 million and $1.7 million from operating activities. Cash
was used during the six month period ended June 30, 1999, mainly for the
purchase of investment securities of approximately $15.2 million and to fund a
net increase in loans of $2.6 million. In addition, approximately $1.4
million was also used to reduce Federal Home Loan Bank advances, short term
borrowings, and pay dividends during the first six months of 1999. Cash and
cash equivalents totaled $14.8 million at June 30, 1999, a decrease of $7.4
million from $22.2 million at December 31,1998.
Management is not aware of any conditions, including any regulatory
recommendations or requirements, which would adversely affect its liquidity or
ability to meet its funding needs in the normal course of business.
-13-
Risk Elements
-------------
The table below presents information concerning nonperforming assets including
nonaccrual loans, renegotiated loans, loans 90 days or more past due, other
real estate loans and repossessed assets at June 30, 1999, and December 31,
1998. A loan is classified as nonaccrual when, in the opinion of management,
there are doubts about collectability of interest and principal. At the time
the accrual of interest is discontinued, future income is recognized only when
cash is received. Renegotiated loans are those loans in which the terms have
been renegotiated to provide a reduction or deferral of principal or interest
as of result of the deterioration of the borrower.
June 30, December 31,
1999 1998
--------- -------------
(dollars in thousands)
Loans on nonaccrual basis $147 $21
Loans past due 90 days or more 184 155
Renegotiated loans - -
---- ----
Total nonperforming loans 331 176
Other real estate 73 73
Repossessed assets - -
---- ----
Total nonperforming assets $404 $249
==== ====
Nonperforming loans as a percent of total loans .24% .13%
==== ====
Nonperforming loans as a percent of total assets .14% .08%
==== ====
Nonperforming assets as a percent of total assets .17% .11%
==== ====
Management monitors impaired loans on a continual basis. As of June 1999,
impaired loans had no material effect on the company's financial position or
results from operations.
The allowance for loan losses at June 30, 1999, totaled approximately
$1,944,000 or 1.4% of total loans as compared to approximately $1,851,000 or
1.3% at December 31, 1998. Provisions for loan losses were $120,000 for the
six months ended June 30, 1999 and $90,000 at June 30, 1998.
The level of funding for the provision is a reflection of the overall increase
in loans and is not an indication of any decline in the quality of the loan
portfolio. Nonperforming loans consist of approximately $67,000 in one to
four family residential mortgages, $123,000 in commercial real estate,
$117,000 in commercial loans and $24,000 in consumer loans. The collateral
requirements on such loans reduce the risk of potential losses to an
acceptable level in management's opinion.
Management performs a quarterly evaluation of the allowance for loan losses.
The evaluation incorporates internal loan review, actual historical losses, as
well as any negative economic trends in the local market. The evaluation is
presented to and approved by the Board of Directors of the Bank. Management,
through the use of the quarterly evaluation, believes that the allowance is
maintained at an adequate level.
-14-
Part II - OTHER INFORMATION
Item 1 - Legal Proceedings
None
Item 2 - Changes in the rights of the Company's security holders
None
Item 3 - Defaults by the Company on its senior securities
None
Item 4 - Results of votes of security holders
The following represents the results of matters submitted to a vote of
the shareholders at the annual meeting held on April 12, 1999:
Affixing the number of directors at ten for 1999:
For 558,499
Abstain 11,256
Against 135,576
Election of Directors:
The following directors were elected with terms to expire April 2002:
For Abstain Absent
--- ------- ------
John W. Baker 558,499 11,256 135,576
Richard L. Fowler 558,499 11,256 135,576
Kenneth E. Taylor 558,499 11,256 135,576
Item 5 - Other Information
None
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Item 6 - Exhibits and Reports on Form 8-K
a) The following exhibits are included in this report or
incorporated herein by reference:
3(i) Articles of Incorporation of Killbuck Bancshares,
Inc.*
3(ii) Code of Regulations of Killbuck Bancshares, Inc.*
10 Agreement and Plan of Reorganization with Commercial
and Savings Bank Co.*
21 Subsidiaries of Registrant*
27 Financial Data Schedule (in electronic filing only)
b) No reports on Form 8-K were filed during the quarter of the
period covered by this report.
*Incorporated by reference to an identically numbered exhibit to
the Form 10 (file No. 0-24147) filed with SEC on April 30, 1998
and subsequently amended on July 8, 1998 and July 31, 1998.
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused the report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Killbuck Bancshares, Inc.
Date: --------------- By:/s/Luther E. Proper
------------------------------
Luther E. Proper
President and Chief Executive Officer
Date: --------------- By:/s/Jon D. Boley
------------------------------
Principal Financial Officer
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