-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Hpbr4KpduJG4a0c0C9ECERxACAygR+L5kbweYUMm4NDmR5dbSBjIlK/SePklg7Nd cWLa+if5lVq24JDbZE06gA== 0000908834-99-000161.txt : 19990518 0000908834-99-000161.hdr.sgml : 19990518 ACCESSION NUMBER: 0000908834-99-000161 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990517 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CITIZENS BANCORP CENTRAL INDEX KEY: 0001040734 STANDARD INDUSTRIAL CLASSIFICATION: SECURITY BROKERS, DEALERS & FLOTATION COMPANIES [6211] IRS NUMBER: 352017500 STATE OF INCORPORATION: IN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-29031 FILM NUMBER: 99626693 BUSINESS ADDRESS: STREET 1: 60 S MAIN ST STREET 2: P O BOX 635 CITY: FRANKFORT STATE: IN ZIP: 46041 BUSINESS PHONE: 7656548533 MAIL ADDRESS: STREET 1: 60 S MAIN ST STREET 2: P O BOX 635 CITY: FRANKFORT STATE: IN ZIP: 46041 10-Q 1 FORM 10-Q FOR CITIZENS BANCORP SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO Commission file number: 333-29031 CITIZENS BANCORP (Exact name of registrant specified in its charter) Indiana 35-2017500 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 60 South Main Street Frankfort, Indiana 46041 (Address of principal executive offices, including Zip Code) (765) 654-8533 (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 report), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] The number of shares of the Registrant's common stock, without par value, outstanding as of May 12, 1999 was 1,005,100. 1 Citizens Bancorp Form 10-Q Index PART I. FINANCIAL INFORMATION Page No. Item 1. Financial Statements Consolidated Statements of Financial Condition as of March 31, 1999 and June 30, 1998 (Unaudited) 3 Consolidated Statements of Income for the three months ended March 31, 1999 and 1998 (Unaudited) 4 Consolidated Statements of Income for the nine months ended March 31, 1999 and 1998 5 (Unaudited) Consolidated Statement of Changes in Shareholders' Equity for the nine months ended March 31, 1999 (Unaudited) 6 Consolidated Statements of Cash Flows for the nine months ended March 31, 1999 and 1998 (Unaudited) 7 Notes to Unaudited Consolidated Financial Statements 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 9 Item 3. Quantitative and Qualitative Disclosure about Market Risk 12 Part II. OTHER INFORMATION Item 1. Legal Proceedings 12 Item 2. Changes in Securities and Use of Proceeds 12 Item 3. Defaults Upon Senior Securities 12 Item 4. Submission of Matters to a Vote of Security Holders 12 Item 5. Other Information 12 Item 6. Exhibits and Reports on Form 8-K 12 Signatures 13 2 PART I FINANCIAL INFORMATION Item 1. Financial Statements CITIZENS BANCORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CONDITION (dollars in thousands)
March 31, June 30, 1999 1998 (Unaudited) (Note A) Assets Cash on hand and in other institutions $ 531 $ 306 Interest-bearing deposits 2,365 2,227 Investment securities available for sale 400 315 Stock in Federal Home Loan Bank of Indianapolis 352 352 Loans receivable, net 51,268 46,936 Land held for development 922 964 Cash surrender value of life insurance contract 1,151 1,119 Property and equipment 568 565 Other assets 754 658 -------- -------- Total assets $ 58,311 $ 53,442 ======== ======== Liabilities and shareholders' equity Liabilities Deposits $ 36,645 $ 34,067 Federal Home Loan Bank advances 6,000 3,500 Other liabilities 374 707 -------- -------- Total liabilities 43,019 38,274 Shareholders' equity Preferred stock (no par value); 2,000,000shares authorized, no shares issued -- -- Common Stock (no par value);5,000,000 shares authorized; 1999 - 1,058,000 shares issued, 1,016,994 outstanding; 1998 - 1,058,000 issued and outstanding 9,580 10,062 Additional paid-in-capital 59 41 Unearned stock awards (1,251) (1,406) Accumulated other comprehensive income (10) 3 Retained income - substantially restricted 6,914 6,468 -------- -------- Total shareholders' equity 15,292 15,168 -------- -------- Total liabilities and shareholders' equity $ 58,311 $ 53,442 ======== ========
See notes to consolidated unaudited financial statements. 3 CITIZENS BANCORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (dollars in thousands)
Three months ended March 31, 1999 1998 -------- -------- (Unaudited) Interest income: Interest on loans $ 1,049 $ 943 Other interest income 44 87 -------- -------- 1,093 1,030 Interest expense: Interest on deposits 381 407 Interest on borrowings 91 15 -------- -------- 422 472 -------- -------- Net interest income 621 608 Provision for loan losses 15 17 -------- -------- Net interest income after provision for loan losses 606 591 Other income: Fees and service charges 38 35 Gain on sale of real estate 2 -- Other 14 14 -------- -------- 54 49 Other expense: Salaries and employee benefits 159 130 Occupancy expense 30 27 Data processing expense 33 30 Federal insurance premium 6 5 Other 73 97 -------- -------- 301 289 -------- -------- Income before income taxes 359 351 Income taxes 132 134 -------- -------- Net income $ 227 $ 217 ======== ======== Net income per share $ . $ .22 Average shares outstanding 949,507 977,535
See notes to consolidated unaudited financial statements. 4 CITIZENS BANCORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (dollars in thousands) Nine months ended March 31, 1999 1998 -------- -------- (Unaudited) Interest income: Interest on loans $ 3,133 $ 2,720 Other interest income 17 267 -------- -------- 3,304 2,987 Interest expense: Interest on deposits 1,204 1,232 Interest on borrowings 238 69 -------- -------- 1,442 1,301 -------- -------- Net interest income 1,862 1,686 Provision for loan losses 50 57 -------- -------- Net interest income after provision for loan losses 1,812 1,629 Other income: Fees and service charges 121 103 Gain on sale of real estate 13 180 Other 44 46 -------- -------- 17 329 Other expense: Salaries and employee benefits 497 399 Occupancy expense 92 83 Data processing expense 103 85 Federal insurance premium 18 17 Other 265 250 -------- -------- 975 834 -------- -------- Income before income taxes 1,015 1,124 Income taxes 40 442 -------- -------- Net income $ 608 $ 682 ======== ======== Net income per share $ .6 $ .74 (1) Average shares outstanding 967,852 977,344 (2) (1) Pro forma earnings per share. (2) See Note D to the consolidated unaudited financial statements. See notes to consolidated unaudited financial statements. 5 CITIZENS BANCORP AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES TO SHAREHOLDERS' EQUITY (dollars in thousands)
Accumulated Additional Other Total Common Stock Paid in Unearned Comprehensive Retained Shareholders' Shares Amount Capital Stock Awards Income Income Equity --------- ---------- ---------- ------------ ------ ------ -------- Balance, July 1, 1998 1,058,000 $ 10,062 $ 41 $ (1,406) $ 3 $ 6,468 $ 15,168 Net Income -- -- -- -- -- 608 608 Common stock repurchased (41,006) (482) -- -- -- -- (482) Change in unrealized gain (loss) on securities available -- -- -- -- (13) -- (13) for sale (net) Dividends declared on common stock -- -- -- -- -- (162) (162) Allocation of RRP shares -- -- -- 77 -- -- 77 Release of ESOP Shares -- -- 18 78 -- -- 96 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Balance, March 31, 1999 1,016,994 $ 9,580 $ 59 ($ 1,251) ($ 10) $ 6,914 $ 15,292 ========== ========== ========== ========== ========== ========== ==========
See notes to consolidated unaudited financial statements. 6 CITIZENS BANCORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands) Nine months ended March 31, 1999 1998 -------- -------- (Unaudited) Operating activities: Net income $ 608 $ 682 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 50 57 Depreciation and amortization 13 22 Deferred federal income tax credit 4 (21) Release of ESOP/RRP shares 173 82 (Increase) decrease in other assets (112) 15 Increase (decrease) in other liabilities (338) 285 -------- -------- Net cash provided by operating activities 39 1,122 Investing activities: Purchases of investment securities (107) (146) Principal collected on loans 18,334 13,195 Loans originated (22,695) (17,104) Loans purchased -- (2,494) Decrease in land held for development 42 40 Purchases of equipment (37) (1) -------- -------- Net cash used by investing activities (4,463) (6,510) Financing activities: Increase (decrease) in NOW, MMDA and passbook deposits 32 (312) Increase in certificates of deposit 2,545 2,284 Advances from Federal Home Loan Bank 9,500 -- Payments to Federal Home Loan Bank (7,000) (3,000) Sale of common stock, net of costs -- 9,216 Repurchase of common stock -- Dividend paid on common stock (167) -- -------- -------- Net cash provided by financing activities 4,428 8,188 -------- -------- Increase in cash and cash equivalents 363 2,800 Cash and cash equivalents at beginning of period 2,533 4,125 -------- -------- Cash and cash equivalents at end of period $ 2,896 $ 6,925 ======== ======== See notes to consolidated unaudited financial statements. 7 CITIZENS BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS NOTE A: Basis of Presentation The unaudited interim consolidated financial statements include the accounts of Citizens Bancorp ("Company") and its wholly-owned subsidiary, Citizens Savings Bank of Frankfort ("Citizens"). The unaudited interim consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all information and disclosures required by generally accepted accounting principles for complete financial statements. The significant accounting policies followed by the Company and Citizens for interim financial reporting are consistent with the accounting policies followed for annual financial reporting. All adjustments, consisting of normal recurring adjustments, which in the opinion of management are necessary for a fair presentation of the results for the periods reported, have been included in the accompanying consolidated financial statements. Financial and other data contained herein prior to September 18, 1997 relates solely to Citizens (See Note B). The results of operations for the three- and nine-month periods ended March 31, 1999 are not necessarily indicative of those expected for the remainder of the year. The balance sheet at June 30, 1998, has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. NOTE B: Conversion to Federal Stock Savings Bank In April, 1997, the Board of Directors adopted a Plan of Conversion ("Plan") to convert Citizens from a federal-chartered mutual savings bank to a federal-chartered stock savings bank (the "Conversion"). The Plan provided for the sale of Citizens' capital stock to the Company, which was formed in connection with the Conversion. On September 18, 1997, Citizens completed the Conversion and the formation of the Company as the holding company of Citizens. As part of the Conversion, the Company issued 1,058,000 shares of common stock at $10 per share of which 84,640 shares were issued to an Employee Stock Ownership Plan (the "ESOP"). Net proceeds of the Company's stock issuance, after costs, were approximately $9,216,000 of which $5,031,000 was used to acquire 100% of the stock and ownership of Citizens. Costs associated with the Conversion were deducted from the proceeds of stock sold by the Company. The transaction was accounted for in a manner similar to a pooling of interests. Since the Company did not commence operations until September 18, 1997, financial and other data contained herein prior to September 18, 1997, relates solely to Citizens. At the date of the Conversion, Citizens established a liquidation account of $5,691,000 which equaled Citizens' retained earnings as of the most recent financial statements, June 30, 1997, contained in the final Conversion prospectus. The liquidation account was established to provide a limited priority claim to the assets of Citizens to qualifying depositors who continue to maintain deposits with Citizens after the Conversion. In the unlikely event of a complete liquidation of Citizens, and only in such event, qualifying depositors would receive a liquidation distribution based on their proportionate share of the then total remaining qualifying deposits. The Company, subject to certain supervisory policies of the Office of Thrift Supervision, may pay dividends to its shareholders if its assets exceed its liabilities and it is able to pay its debts as they come due. Current regulations allow Citizens to pay dividends on its stock after the Conversion if its regulatory capital would not be reduced below the amount then required for the liquidation account, and if those dividends do not exceed its net income to date in the calendar year plus 50% of the excess capital of Citizens. NOTE C: New Accounting Pronouncements As of July 1, 1998, the Company adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income". Statement 130 establishes standards for the reporting and display of comprehensive income and its components in a full set of general-purpose financial statements as well as in condensed financial statements of interim periods issued for external purposes. Statement 130 requires gains or losses on the Company's available-for-sale securities, which prior to adoption were reported separately in shareholders' equity, to be included in other comprehensive income. Prior year financial statements have been reclassified to conform to the requirements of Statement 130. For the three months ended March 31, 1999 and 1998, total comprehensive income was $234,000 and $228,000, respectively. For the nine months ended March 31, 1999 and 1998, total comprehensive income was $595,000 and $693,000, respectively. 8 NOTE D: Earnings Per Share The Company completed its stock conversion on September 18, 1997. Earnings per share information is not meaningful for the quarter ended September 30, 1997, and is not applicable for any years prior to the Conversion. The Company had $.24 and $.63 earnings per share for the three and nine months ended March 31, 1999, respectively. Earnings per share for the three months ended March 31, 1998, were $.22. Pro forma earnings per share would have been $.74 for the nine months ended March 31, 1998. Earnings per share on a pro forma basis assumes the stock offering and the formation of the ESOP occurred on July 1, 1997, and includes the increase in earnings associated with the investment of the net proceeds raised in regard to the issuance of common stock in the subscription stock offering. Pro forma earnings per share is computed by dividing pro forma net income by the weighted average number of common shares outstanding during the period assuming the stock offering occurred July 1, 1997. Unearned ESOP shares have been excluded from the computation of average shares outstanding. Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations. General The Company was organized in June, 1997. On September 18, 1997, it acquired the common stock of Citizens upon the conversion of Citizens from a federal mutual savings bank to a federal stock savings bank. Citizens was organized as a state-chartered building and loan association in 1916 and currently conducts its business from one full-service office located in Frankfort, Indiana. Citizens' principal business consists of attracting deposits from the general public and originating fixed-rate and adjustable-rate loans secured primarily by first mortgage liens on one- to four-family real estate. Citizens' deposit accounts are insured up to applicable limits by the Savings Association Insurance Fund ("SAIF") of the Federal Deposit Insurance Corporation ("FDIC"). Citizens offers a number of consumer and commercial financial services. These services include: (i) residential real estate loans; (ii) multi-family loans; (iii) construction loans; (iv) nonresidential real estate loans; (v) home equity loans; (vi) single-pay loans; (vii) installment loans; (viii) automobile loans; (ix) NOW accounts; (x) money market demand accounts ("MMDAs"); (xi) passbook savings accounts; (xii) certificates of deposit; and (xiii) individual retirement accounts. Citizens currently owns one subsidiary, Citizens Loan and Service Corporation ("CLSC"), which primarily engages in the purchase and development of tracts of undeveloped land. Because CLSC engages in activities that are not permissible for a national bank, OTS regulations prohibit Citizens from including its investment in CLSC in its calculation of regulatory capital. CLSC purchases undeveloped land, constructs improvements and infrastructure on the land, and then sells lots to builders, who construct homes for sale to home buyers. CLSC ordinarily receives payment when title is transferred. Citizens' results of operations depend primarily upon the level of net interest income, which is the difference between the interest income earned on interest-earnings assets, such as loans and investments, and costs incurred with respect to interest-bearing liabilities, primarily deposits and borrowings. Results of operations also depend upon the level of the Company's non-interest income, including fee income and service charges, and the level of its non-interest expenses, including general and administrative expenses. Financial Condition Total assets increased to $58.3 million at March 31, 1999, compared to $53.4 million at June 30, 1998. Cash increased $225,000 to $531,000 at March 31, 1999, from $306,000 at June 30, 1998, while interest bearing deposits, consisting primarily of overnight deposits at the Federal Home Loan Bank ("FHLB") of Indianapolis and certificates of deposit at other FDIC insured financial institutions, increased to $2.4 million at March 31, 1999, from $2.2 million at June 30, 1998. Net loans receivable increased $4.4 million to $51.3 million at March 31, 1999, from $46.9 million at June 30, 1998. The increase in loans and interest-bearing deposits was funded by an increase in deposits and borrowings during the period. Deposits increased $2.6 million primarily as a result of an increase in the amount of public funds on deposit. Borrowings at the Federal Home Loan Bank increased $2.5 million to $6.0 million as of March 31, 1999, from $3.5 million at June 30, 1998. Shareholders' equity increased $124,000 during the nine months ended March 31, 1999. This was primarily a result of the profit of $608,000 for the period, which increased shareholders' equity, less the cost of the Company's repurchase of $482,000 of its common stock at various times and market prices during the period. The company declared a dividend of $.06 per share of common stock held as of March 31, 1999, payable on April 14, 1999. Shareholders' equity decreased by $56,000 as a result of the declaration of the dividend. Comparison of operating results for the three-month periods ended March 31, 1999 and 1998. The Company had an increase in net income of $10,000 to $227,000 for the three months ended March 31, 1999, compared to a net income of $217,000 for the three-month period ended March 31, 1998. Net interest income increased $13,000 to $621,000 for the quarter ended March 31, 1999, compared to $608,000 for the same period in 1998. The 9 increase resulted primarily from an increase in earning assets during the 1999 period. The provision for loan losses was $15,000 for the March 31, 1999 period, as compared to $17,000 for the 1998 period. At March 31, 1999, the allowance for loan loss was 0.60% of the total loans, compared to 0.57% at June 30, 1998. Total non-interest income increased $5,000 to $54,000 for the quarter ended March 31, 1999, compared to $49,000 during the same period in 1998. The increase is primarily the result of a net gain of $2,000 on the sale of real estate during the 1999 period, as well as an increase of $3,000 in fees and service charges during the 1999 period. Total non-interest expense increased $12,000 to $301,000 for the quarter ended March 31, 1999, compared to $289,000 for the same quarter in 1998. The increase was primarily due to an increase in salaries and benefits of $29,000 during the 1999 period due to compensation expense related to the ESOP and the Recognition and Retention Plan and Trust which was adopted by the Company on March 24, 1998 ("the RRP"). Office occupancy expense and data processing expenses increased by $6,000 for the 1999 period, and other expenses, consisting of legal, accounting and other operating expenses, decreased by $24,000 to $73,000 for the quarter ended March 31, 1999, compared to $97,000 for the 1998 period. The decrease was primarily due to legal, accounting and printing fees incurred during the first quarter of 1998 related to the special meeting of shareholders held in March of 1998. Income tax expense decreased by $2,000 to $132,000 for the three months ended March 31, 1999, compared to $134,000 for the three months ended March 31, 1998. Comparison of operating results for the nine-month periods ended March 31, 1999 and 1998. The Company had a decrease in net income of $74,000 to $608,000 for the nine months ended March 31, 1999, compared to a net income of $682,000 for the nine-month period ended March 31, 1998. Net interest income increased $176,000 to $1,862,000 for the nine months ended March 31, 1999, compared to $1,686,000 for the same period in 1998. The increase resulted primarily from an increase in earning assets during the 1999 period. The provision for loan losses was $50,000 for the period ended March 31, 1999, as compared to $57,000 for the 1998 period. At March 31, 1999, the allowance for loan loss was 0.60% of the total loans, compared to 0.57% at June 30, 1998. Total non-interest income decreased $151,000 to $178,000 for the nine months ended March 31, 1999, compared to $329,000 for the same period in 1998. The decrease primarily resulted from a net gain on the sale of a tract of real estate of $172,000 ($103,000 net of tax) during the 1998 period. This was offset by an increase in fees and service charges of $18,000 during the 1999 period. Total non-interest expense increased $141,000 to $975,000 for the nine months ended March 31, 1999, compared to $834,000 for the same period in 1998. The increase was primarily due to an increase in salaries and benefits of $98,000 during the 1999 period due to compensation expense related to the ESOP and the RRP. Office occupancy expense and data processing expense increased by $27,000 for the 1999 period and other expenses, consisting primarily of legal and accounting fees, increased by $15,000 during the 1999 period, due to the increased reporting requirements for public companies. Income tax expense decreased by $35,000 to $407,000 for the nine months ended March 31, 1999, compared to $442,000 for the same period in 1998. This primarily resulted from a decrease in net income before income taxes in the 1999 period as a result of the gain on the sale of real estate that increased non-interest income for the 1998 period. Asset Quality The allowance for loan losses was $306,000 at March 31, 1999, compared to $269,000 at June 30, 1998. Management considered the allowance for loan losses at March 31, 1999 to be adequate to cover estimated losses inherent in the loan portfolio at that date, taking into consideration probable losses that could be reasonably estimated. Such belief is based upon an analysis of loans currently outstanding, past loss experience, current economic conditions and other factors and estimates which are subject to change over time. The following table sets forth the changes affecting the allowance for loan losses for the nine months ended March 31, 1999. Balance, July 1, 1998 $ 268,837 Provision for loan losses 50,000 Recoveries -- Charge-offs (12,498) --------- Balance, March 31, 1999 $ 306,339 ========= 10 Non-performing loans totaled $539,000 or 1.05% of total loans at March 31, 1999, compared to $170,000 or .36% of total loans at June 30, 1998. Liquidity and Capital Resources The Company's most liquid assets are cash and interest-bearing deposits. The levels of these assets are dependent on the Company's operating, financing, and investing activities. At March 31, 1999 and June 30, 1998, cash and interest-bearing deposits totaled $2.9 million and $2.5 million, respectively. The Company's primary sources of funds are deposits, borrowings and the proceeds from principal and interest payments on loans. While maturities and scheduled amortization of loans are a predictable source of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition. If the Company requires funds beyond its ability to generate them internally, it has the ability to borrow funds from the FHLB of Indianapolis. Federal law limits an institution's borrowings from the FHLB to 20 times the amount paid for capital stock in the FHLB, subject to regulatory capital requirements. As a policy matter, however, the FHLB of Indianapolis typically limits the amount of borrowings from the FHLB to 50% of adjusted assets (total assets less borrowings). At March 31, 1999, borrowings from the FHLB totaled $6.0 million. Year 2000 Compliance The Company's lending and deposit activities, like those of most financial institutions, depend significantly upon computer systems. The Company is addressing the potential problems associated with the possibility that the computers which control its operating systems, facilities and infrastructure may not be programmed to read four-digit date codes. This could cause some computer applications to be unable to recognize the change from the year 1999 to the year 2000, which could cause computer systems to generate erroneous data or to fail. The Company is working with the companies that supply or service its systems that rely on computers to identify and remedy any Year 2000 related problems. As of March 31, 1999, the Company has completed an assessment of all systems that could be significantly affected by Year 2000 related problems and has begun remediating its non-compliant systems. The bulk of the Company's computer processing is provided under contract by BISYS, Inc. in Houston, Texas ("BISYS"). BISYS has completed the remediation phase of its Year 2000 efforts and began testing of its upgraded systems and interfaces with the Company in November, 1998. BISYS expects to be in Year 2000 compliance by June, 1999. BISYS will assist the Company with other phases of Year 2000 compliance throughout the remainder of 1999. Citizens' loan document preparation system is provided by Banker's Systems and is also expected to be in Year 2000 compliance by June 30, 1999. The Company has contacted the approximately twenty other companies that supply or service its material operations requesting that they certify that they have plans to make their respective computer systems Year 2000 compliant. As of March 31, 1999, the Company has received such certification from all of these companies. Once the Company receives certification from a service provider, it continuously monitors the progress that it makes in meeting its targeted schedule for becoming Year 2000 compliant. Should the Company find that a provider is not making satisfactory progress in its Year 2000 compliance efforts the Company will identify and contract with an alternative service provider. The Company does not expect the expense of such changes in suppliers or servicers to be material to its operations, financial condition or results. Notwithstanding the efforts the Company has made, no assurances can be given that the systems of its service providers will be timely renovated to address the Year 2000 issue. The Company's Board of Directors reviews on a monthly basis the progress made in addressing Year 2000 issues. Management estimates that the Company's expenses related to upgrading its systems and software for Year 2000 compliance will not exceed $50,000. At March 31, 1999, the Company had spent approximately $19,000 in connection with Year 2000 compliance. Although management believes it is taking the necessary steps to address the Year 2000 compliance issue, no assurances can be given that some problems will not occur or that the Company will not incur significant additional expenses in future periods. In the event that the Company is ultimately required to purchase replacement computer systems, programs and equipment, or to incur substantial expenses to make its current systems, programs and equipment Year 2000 compliant, its net income and financial condition could be adversely affected. In addition to possible expenses related to the Company's own systems and those of its service providers, the Company could incur losses if Year 2000 problems affect any of its depositers or borrowers. Such problems could include delayed loan payments due to Year 2000 problems affecting any of the Company's significant borrowers or impairing the payroll systems of large employers in its market area. Because the Company's loan portfolio to individual borrowers is diversified and its market area does not depend significantly on one employer or industry, management does not expect any such Year 2000 related difficulties that may affect the Company's depositors and borrowers to significantly affect net earnings or cash flows. Because the Company has only two commercial borrowers and neither loan is of a material amount, the Company has not requested certification from those borrowers that their computer systems are Year 2000 compliant. The Company will require borrowers under new commercial loans in 11 excess of $50,000 that it originates to certify that they are aware of the Year 2000 issue and will give all necessary attention to insure that their information technology will be Year 2000 compliant. The Company is in the process of developing contingency plans to be implemented in the event of the failure of all or part of its Year 2000 program or of the Year 2000 programs of any of its service providers. These contingency plans involve, among other actions, manual workarounds, adjusting staffing strategies and temporarily discontinuing services or products which are not considered by management to be critical to the Company's operations. The Company has set a deadline of June 30, 1999, for completion of the contingency plans. Item 3. Quantitative and Qualitative Disclosures About Market Risk There have been no material changes in market interest rates or in the Company's interest rate sensitive instruments which would cause a material change in the market risk exposures which affect the quantitative and qualitative risk disclosures as presented in Item 7A of the Registrant's Annual Report on Form 10-K for the year ended June 30,1998. The Securities and Exchange Commission maintains a Web site that contains reports, proxy and information statements and other information regarding registrants with the commission, including the Company. The address of that Web site is http://www.sec.gov. PART II. OTHER INFORMATION Item 1. Legal Proceedings None. Item 2. Changes in Securities and Use of Proceeds None. Item 3. Defaults Upon Senior Securities None. Item 4. Submission of Matters to Vote of Security Holders None. Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K (a) The exhibits filed herewith or incorporated by reference herein are set forth on the Exhibit Index on page 15. (b) The Company filed a report on form 8-K on March 22, 1999, to report a change in the Company's Certifying Accountant. 12 Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CITIZENS BANCORP Date: May 12, 1999 By: /s/ Fred W. Carter ------------------- Fred W. Carter President and Chief Executive Officer Date: May 12, 1999 By: /s/ Stephen D. Davis -------------------- Stephen D. Davis Treasurer 14 EXHIBIT INDEX EXHIBIT NO. DESCRIPTION 3(1) Registrant's Articles of Incorporation are incorporated by reference to Exhibit 3(1) to the Registration Statement on Form S-1 (Registration No. 333-29031) (the "Registration Statement") (2) Registrant's Code of By-Laws are incorporated by reference to Exhibit 3(2) to the Registration Statement 10(4) Citizens Bancorp Employee Stock Ownership Plan and Trust Agreement is incorporated by reference to Exhibit 10(4) to the Registrant's Form 10-K for the period ended June 30, 1997 (the "1997 Form 10-K") (5) Employment Agreement between Citizens Savings Bank of Frankfort and Fred W. Carter is incorporated by reference to Exhibit 10(5) to the Registration Statement (6) Director Deferred Compensation Agreement -- Fred W. Carter is incorporated by reference to Exhibit 10(6) to the Registration Statement (7) Executive Supplemental Retirement Agreement -- Fred W. Carter is incorporated by reference to Exhibit 10(7) to the Registration Statement (8) Executive Supplemental Retirement Agreement -- Stephen D. Davis is incorporated by reference to Exhibit 10(8) to the Registration Statement (9) Executive Supplemental Retirement Agreement -- Cindy S. Chambers is incorporated by reference to Exhibit 10(9) to the Registration Statement (10) Exempt Loan and Share Purchase Agreement between Trust under Citizens Bancorp Employee Stock Ownership Plan and Trust Agreement and Citizens Bancorp is incorporated by reference to Exhibit 10(10) of the 1997 Form 10-K 27 Financial Data Schedule EX-27 2 FDS FOR CITIZENS BANCORP
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE REGISTRANT'S UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0001040734 Citizens Bancorp 1,000 U.S. Dollars 9-mos JUN-30-1999 JUL-1-1998 MAR-31-1999 1.000 531 2,365 0 0 400 352 352 51,268 306 58,311 36,645 0 374 6,000 9,580 0 0 5,712 58,311 3,133 30 141 3,304 1,204 1,442 1,862 50 0 975 1,015 608 0 0 608 .63 .63 4.57 400 103 36 0 269 13 0 306 0 0 306
-----END PRIVACY-ENHANCED MESSAGE-----