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 June 30, 1997.
[ ] 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 0-22641
PEOPLES BANCORP, INC.
-------------------------------------
(Exact name of registrant as specified in its charter)
United States of America 22-3516910
- -----------------------------------------------------------------
(State or other jurisdiction (IRS Employer Identification
of incorporation or Number)
organization)
134 Franklin Corner Road, Lawrenceville, New Jersey 08648
- -----------------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code:
609-844-3100
- -----------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report
Indicate by check 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 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 / /
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date: 9,037,160.
<PAGE>
PEOPLES BANCORP, INC.
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Condition as of
June 30, 1997 and December 31, 1996 4
Consolidated Statements of Income for the
three and six months ended June 30, 1997
and 1996 5
Consolidated Statements of Stockholders'
Equity for the six months ended
June 30, 1997 and 1996 6
Consolidated Statements of Cash Flows for
the six months ended June 30, 1997 and 1996 7
Notes to the Consolidated Financial Statements 8-9
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations
PART II. OTHER INFORMATION 12
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
PEOPLES BANCORP, INC.
CONSOLIDATED STATEMENTS OF CONDITION
(In Thousands of Dollars)
<TABLE>
ASSETS June 30 December 31
1997 1996
------- -----------
(unaudited)
<S> <C> <C>
Cash and due from banks $ 10,448 $ 12,938
Federal Funds sold 15,700 8,000
---------- ----------
Total cash and cash equivalents 26,148 20,938
---------- ----------
Securities available for sale 112,588 87,648
Investment securities held to maturity 37,142 37,935
mortgage-backed securities held to maturity 43,674 48,618
Federal Home Loan Bank stock, at cost 3,386 3,089
Loans, net 384,097 380,288
Bank premises and equipment, net 6,649 6,982
Accrued interest receivable 4,818 3,602
Prepaid expenses 1,637 1,471
Intangible assets 8,788 9,164
Other assets 2,073 1,281
---------- ----------
Total assets $ 631,000 $ 601,016
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 487,855 $ 491,246
Borrowed funds 30,000 0
Accrued expenses and other liabilities 6,632 6,418
---------- ----------
Total liabilities 524,487 497,664
---------- ----------
Stockholders' Equity
Common Stock, par value $0.10 904 904
authorized 20,000,000 shares, issued &
outstanding 9,037,160 shares as of
June 30, 1997 and December 31, 1996
Additional paid in capital 30,357 30,357
Retained earnings-substantially restricted 76,209 72,545
Unearned Management Recognition Plan shares (1,375) (1,543)
Net unrealized gain on securities available
for sale, net of taxes 418 1,089
---------- ----------
Total stockholders' equity 106,513 103,352
---------- ----------
Total liabilities and stockholders' equity $ 631,000 $ 601,016
---------- ----------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
PEOPLES BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands of Dollars)
(unaudited)
<TABLE>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
----------------------- ---------------------
1997 1996 1997 1996
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Interest and dividend income:
Interest and fees on loans $ 7,402 $ 6,004 $ 14,680 $ 11,818
Interest on securities 3,293 2,706 6,524 5,531
Interest on Federal funds sold 132 140 270 344
------- ------- ------- --------
Total interest income 10,827 8,850 21,474 17,693
------- ------- ------- --------
Interest expense 5,324 4,217 10,652 8,510
------- ------- ------- --------
Net interest income 5,503 4,633 10,822 9,183
Provision for loan losses 204 0 214 0
------- ------- ------- --------
Net interest income after provision for loan losses 5,299 4,633 10,608 9,183
------- ------- ------- --------
Other income:
Service fees on deposit accounts 204 88 451 169
Fees and other income 193 74 376 168
Net gain on ale of other real estate 22 0 22 0
Net gain on sale of securities 913 617 1,247 2,189
------- ------- ------- --------
Total other income 1,332 779 2,096 2,526
------- ------- ------- --------
Operating expense:
Salaries and employee benefits 1,665 1,095 3,322 2,196
Net occupancy expense 381 282 762 609
Equipment expense 27 26 57 44
FDIC insurance premium 19 20 19 39
Amortization of intangible assets 126 100 258 195
Data processing fees 188 68 376 136
Other operating expense 667 411 1,299 846
------- ------- ------- --------
Total operating expense 3,073 2,002 6,093 4,065
------- ------- ------- --------
Income before income taxes 3,558 3,410 6,611 7,644
Income taxes 1,282 1,227 2,381 2,752
------- ------- ------- --------
Net income $ 2,276 $ 2,183 $ 4,230 $ 4,892
------- ------- ------- --------
Net income per common share $ 0.25 $ 0.25 $ 0.47 $ 0.55
------- ------- ------- --------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
PEOPLES BANCORP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Six Month Period ended June 30, 1997 and 1996
(In Thousands)
(unaudited)
<TABLE>
Unrealized
Net gain
on Unearned
Securities Management
Number Additional available Recognition Total
of Common paid-in Retained for sale Plan stockholders'
shares stock capital earnings net of taxes shares equity
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1995 8,912,500 $891 $28,687 $65,267 $ 2,697 $ 0 $ 97,542
Net income for the six months
ended June 30, 1996 0 0 0 4,892 0 0 4,892
Dividends declared
[$.0875 per share] 0 0 0 (545) 0 0 (545)
Net change in unrealized net
gains on securities available
for sale 0 0 0 0 (1,839) 0 (1,839)
--------- ---- ------- ------- ------- ------- --------
Balance at June 30, 1996 8,912,500 $891 $28,687 $69,614 $ 858 $ 0 $100,050
--------- ---- ------- ------- ------- ------- --------
Balance at December 31,
1996 9,037,160 $904 $30,357 $72,545 $ 1,089 $(1,543) $103,352
Net income for the six months
ended June 30, 1997 0 0 0 4,230 0 0 4,230
Dividends declared
[$0.0875 per share] 0 0 0 (566) 0 0 (566)
Net change in unrealized net
gains on securities available
for sale 0 0 0 0 (671) 0 (671)
Amortization of unearned
Management Recognition Plan
shares 0 0 0 0 0 168 168
--------- ---- ------- ------- ------- ------- --------
Balance at June 30, 1997 9,037,160 $904 $30,357 $76,209 $ 418 $(1,375) $106,513
--------- ---- ------- ------- ------- ------- --------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
PEOPLES BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars)
(unaudited)
<TABLE>
Six Months Ended June 30,
1997 1996
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 4,230 $ 4,892
Adjustments to reconcile net income to net cash used
in operating activities:
Provision for loan losses 214 0
Depreciation and amortization expense 801 369
Net accretion of premiums and discounts on securities (42) (88)
Increase in accrued interest receivable and other assets (2,174) (1,751)
Decrease in accrued interest payable and other liabilities 214 (338)
Net gain on sale of securities (1,247) (2,189)
Net cash provided by operating activities 1,996 895
Cash flows used in investing activities:
Proceeds from maturities of securities available for sale
and held to maturity $ 24, 842 $ 33,055
Purchase of investment securities held to maturity 0 (11,522)
Purchase of securities available for sale (50,260) (16,997)
Proceeds from sales of securities available for sale 1,859 3,583
Purchase of Federal Home Loan Bank Stock (297) (225)
Maturities and repayments of mortgage-backed securities 4,974 7,033
Net increase in loans (4,023) (22,538)
Net additions to bank premises, furniture, & equipment (236) (247)
Proceeds from sale of bank premises, furniture & equipment 312 0
Net cash used in investing activities (22,829) (7,858)
Cash flows from financing activities:
Net (decrease) increase in savings and time deposits (3,391) 1,663
Dividends paid (566) (545)
Net increase in borrowings 30,000 0
Net cash provided by financing activities 26,043 1,118
Net decrease in cash and cash equivalents 5,210 (5,845)
Cash and cash equivalents as of beginning of year $ 20,938 $ 16,253
Cash and cash equivalents as of end of period $ 26,148 $ 10,408
Supplemental disclosure of cash flow information:
Cash paid:
Interest $ 10,390 $ 8,601
Income taxes $ 2,790 $ 3,150
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
The accompanying unaudited financial statements have been
prepared in accordance with generally accepted accounting
principles for interim financial information and in conformity
with the instructions to Form 10-Q and Article 10 of Regulation
S-X for Peoples Bancorp, Inc. (the "Bancorp").
In the opinion of management, all adjustments (consisting of
only normal recurring accruals) necessary to present fairly the
financial condition, results of operations, and changes in cash
flows have been made at and for the six months ended June 30,
1997 and 1996. The results of operations for the six months
ended June 30, 1997 are not necessarily indicative of results
that may be expected for the entire year ending December 31,
1997.
(2) Reorganization into a Two-Tier Mutual Holding Company
Structure
At the Annual Stockholders meeting on April 25, 1997, the
stockholders approved the reorganization of Trenton Savings Bank
(the "Bank") into a two-tier structure, whereby, the Bank becomes
a wholly owned subsidiary of Peoples Bancorp, Inc. The Bank
anticipates that this restructuring will provide enhanced ability
to invest through a mid-tier structure, facilitate mergers and
acquisitions, and facilitate stock repurchases. The Bank
completed the reorganization on May 28, 1997.
(3) Non Performing Loans, Non Performing Assets and the
Allowance for Loan Losses
Non performing loans at June 30, 1997 and December 31, 1996
are as follows (in thousands of dollars):
<TABLE>
June 30, 1997 December 31, 1996
<S> <C> <C>
Loans delinquent 90 days or more 3,798 3,704
Loans delinquent 90 days or more
as a percentage of net loans
receivable .99% .97%
</TABLE>
An analysis of the allowance for loan losses for the six
month periods ended June 30, 1997 and 1996 is as follows (in
thousands of dollars):
<TABLE>
June 30, 1997 June 30, 1996
<S> <C> <C>
Balance at beginning of the period $ 2,901 $ 1,767
Provision charged to operations 214 0
Charge-offs, net (526) (22)
Balance at the end of the period $ 2,589 $ 1,745
</TABLE>
Generally, the Bancorp's loans are placed on a non-accrual
status when a default of principal or interest has existed for a
period of 90 days except when, in the opinion of management, the
collection of principal or interest is reasonably anticipated or
adequate collateral exists. In addition, the Bancorp places any
loan on non-accrual if any part of it is classified as doubtful
or loss or if any part has been charged to the allowance for loan
losses. Real estate owned consists of property acquired through
formal foreclosures and acquired by deed in lieu of foreclosure,
and is recorded at the lower of cost or fair value. At June 30,
1997, the Bancorp has $163 thousand classified as real estate
owned.
As part of the acquisition of Burlington County Bancorp
("BCB"), the Bancorp acquired BCB's loan portfolio. BCB's
underwriting standards and related risk characteristics of the
loan portfolio differed from those of the Bancorp. The addition
of this portfolio has increased the Bancorp's non-performing
portfolio and negatively effected certain coverage ratios.
However, management believes that the Bancorp's asset quality
remains strong. Management believes that the allowance for loan
losses is adequate based on historical experience, the volume and
type of lending conducted by the Bancorp, the amount of non-
performing
<PAGE>
loans, general economic conditions and other factors relating to
the Bancorp's loan portfolio. However, there can be no assurance
that actual losses will not exceed estimated amounts.
As of June 31, 1997, the Bancorp's total non-performing
loans and foreclosed assets amounted to $3.2 million, or .51% of
total assets, compared to $3.4 million, or .57% of total assets
at December 31, 1996.
Federal regulations required that each insured savings
institution classify its assets on a regular basis. There are
four categories for problem assets: "special mention,"
"substandard," "doubtful" and "loss."
At June 30, 1997, the Bancorp has $.9 million of loans
criticized as special mention, $5.9 million classified as
substandard and $58 thousand classified as doubtful or loss. As
of June 30, 1997, total classified assets, which includes
substandard doubtful and loss assets, repossessed assets,
amounted to $6.0 million, 0.95% of total assets.
It is management's policy to maintain an allowance for
estimated loan losses based upon an assessment [1] in the case of
residential loans, management's review of delinquent loans, loans
in foreclosure and market conditions, [2] in the case of
commercial business loans and commercial mortgage loans, when a
significant decline in value can be identified as well as an
overall assessment of the inherent risk in the portfolio and [3]
in the case of consumer loans, based on the assessment of risks
inherent in the loan portfolio. The Bancorp's allowance for loan
losses, which includes a general valuation allowance, amounted to
approximately $2.6 million at June 30, 1997 and $2.9 million at
December 31, 1996.
(4) Acquisition of Manchester Trust Bancorp
On April 25, 1997, the Bancorp announced the execution of a
Definitive Acquisition Agreement with Manchester Trust Bancorp, a
trust services company with $125 million of assets under
management. Under terms of the agreement, Manchester will be
operated as a wholly owned subsidiary of the Bank.
(5) Recent Accounting Pronouncements
On March 3, 1997, the Financial Accounting Standards Board
(the "FASB") issued Statement of Financial Accounting Standards
("SFAS") No. 128, "Earnings Per Share." SFAS No. 128 establishes
new standards for the computation and presentation of earnings
per share ("EPS") by simplifying the standards prescribed in APB
Opinion No. 15. Under the new requirements, the Bank will be
required to present both basic and diluted EPS on the face of the
income statement. Basic EPS will replace the current EPS
terminology and continue to be computed by dividing income
available to common shareholders by the weighted-average number
of common shares outstanding. Diluted EPS will include any
additional common shares as if all potentially dilutive common
shares were issued. The Bank will be required to adopt SFAS No.
128 for the period ended December 31, 1997. All prior-period EPS
data is required to be restated. The impact of adopting SFAS No.
128 is not expected to be material.
In June 1997, the FASB issued SFAS No. 130, "Reporting
Comprehensive Income." SFAS No. 130 establishes the reporting
and display requirements of total comprehensive income and other
comprehensive income in a full set of general-purpose financial
statements. The statement defines total comprehensive income as
all changes in equity during a period except those resulting for
investments by owners and distribution to owners. Other
comprehensive income would include revenues, expenses, gains and
losses that, under SFAS No. 130 is effective for fiscal years
beginning after December 15, 1997. Comparative financial
statements shall be reclassified to reflect the provisions of
SFAS No. 130.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
Peoples Bancorp, Inc. (the "Company") was formed to become
the holding company for Trenton Savings Bank FSB (the "Bank") in
the reorganization (the "Two-Tier Reorganization") of the Bank
and Peoples Bancorp, MHC (the "Mutual Holding Company") into the
two-tier mutual holding company structure. In the Two-Tier
Reorganization, each of the Bank's outstanding shares of common
stock ("Bank Common Stock"), including shares held by the Mutual
Holding Company, was converted into and became a share of the
Company's common stock ("Company Common Stock"), and the Bank
became the wholly-owned subsidiary of the Company. At the
completion of the Two-Tier Reorganization, the Mutual Holding
Company owned 5,796,000 shares of Company Common Stock and other
shareholders owned the remaining outstanding shares.
Prior to the completion of the Two-Tier Reorganization on
May 28, 1997, the Company had no assets, liabilities, or prior
operating history. Immediately following the Two-Tier
Reorganization, the Company conducted no operations and had no
assets other than 100% of the outstanding shares of common stock
of the Bank. Unless otherwise indicated, the information
presented herein as of a date including or subsequent to May 28,
1997, or relating to a period ended subsequent to such date,
reflects consolidated information of the Company. Information as
of a date prior to May 28, 1997, or for a period ended prior to
May 28, 1997 reflects consolidated information of the Bank.
Financial Condition
Stockholders' equity increased by $3.2 million, or 30.6%, to
$106.5 million at June 30, 1997 from $103.4 million at December
31, 1996. The increase in stockholders' equity was due to net
income of $4.2 million for the six months ended June 30, 1997
combined with a net after tax decrease of $.7 million in the
market value of the portfolio of available for sale investments
largely due to the sale of investments. At June 30, 1997, the
Bank's tangible, core and risk based capital ratios were 15.55%,
15.55%, and 27.49%, respectively.
Total assets increased by $30.0 million, or 4.99%, to $631.0
million at June 30, 1997 from $601.0 million at December 31,
1996. In January of 1997 the Board approved a specific borrowing
in the amount of $30 million for reinvestment in federal agency
securities at an earnings spread above the cost of borrowing
which increased assets and securities available for sale in that
amount. Deposits decreased by $3.4 million, or .7%, to $487.9
million at June 30, 1997 from $491.2 million at December 31,
1996. Cash and cash equivalents increased $5.2 million, to $26.1
million at June 30, 1997 from $20.9 million at December 31, 1996.
Securities available for sale increased by $24.9 million or 28.4%
to $112.5 million at June 30, 1997 from $87.6 million at December
31, 1996. Mortgage-backed securities declined by $4.9 million or
10.2% to $43.7 million at June 30, 1997 from $48.6 million at
December 31, 1996. Funds from repayments of mortgage-backed
securities, and security maturities were reinvested in loans and
cash equivalents.
Results of Operations
The annualized return on average assets and return on
average equity were 1.46% and 8.62% respectively for the quarter
ended June 30, 1997 compared to 1.69% and 8.75% respectively for
the quarter ended June 30, 1996. Annualized income included
security gains of $.9 million in the second quarter of 1997 and
$.6 million in the second quarter of 1996.
Net income for the second quarter of 1997 was $2.3 million,
which represents an increase of $93 thousand or 4.3%, as compared
to the second quarter of 1996. Net income for the second quarter
of 1996 and 1997 included $585 thousand $395 thousand,
respectively, of net securities gains. Net income was $4.2
million for the first six months of 1997 compared to $4.9 million
for the first six months of 1996, with net securities gains of
$4.2 million and $2.2 million, respectively, for such periods.
Total interest income increased $2.0 million, or 22.3%, to
$10.8 million for the quarter ended June 30, 1997 from $8.8
million for the quarter ended June 30, 1996. The increase
resulted from an increase in average interest earnings assets to
$594.5 million for the quarter ended June 30, 1997 from $499.4
million for the quarter ended June 30, 1996, along with an
increase in the average yield on interest-earning assets to 7.29%
for the quarter ended June 30, 1997 from 7.09% for the quarter
ended June 30 1996. The $95.1 million increase in average
interest earnings assets was primarily attributed to the
acquisition of Burlington County Bancorp ("BCB") on October 1,
1996, and the $30 million leverage program in January of 1997.
Total interest income increased $3.8 million, or 21.3%, to
$21.5 million for the six months ended June 30, 1997 from $17.7
million for the six months ended June 30, 1996. The increase
resulted from an increase in average interest earnings assets to
$596.5 million for the six months ended June 30, 1997 from $496.4
million for the six months ended June 30, 1996 combined with an
increase in average yield on interest-earnings assets to 7.20%
for the six months ended June 30, 1997 from 7.13% for the six
months ended June 30, 1996. The $110.1 million increase in
average interest earnings was primarily attributed to the
acquisition of BCB and the $30 million leverage program in
January of 1997.
Total interest expense increased by $1.1 million, or 26.3%,
to $5.3 million for the quarter ended June 30, 1997, from $4.2
million for the quarter ended June 30, 1996. The increase was
primarily the result of an increase in average deposits to $482.7
million for the quarter ended June 30, 1997 from $411.7 million
for the quarter ended June 30, 1996 which was partially offset by
a decrease in the average rate paid on deposits to 4.01% for the
quarter ended June 30, 1997 from 4.10% for the quarter ended June
30, 1996. The increase in deposits was primarily attributed to
the acquisition of BCB. The decrease in the average rate paid on
deposits was attributed to the effect of the addition of lower-
cost deposits from the BCB acquisition. Interest expense for the
quarter ended June 30, 1997 includes borrowing costs for the $30
million leverage program.
<PAGE>
Total interest expense increased by $2.1 million, or 25.2%,
to $10.6 million for the six months ended June 30, 1997 from $8.5
million for the six months ended June 30, 1996. The increase was
primarily the result of an increase in average deposits to $484.6
million for the six months ended June 30, 1997 from $410.9
million for the six moths ended June 30, 1996 partially offset by
a decrease in the average rate paid on deposits to 4.01% for the
six months ended June 30, 1997 from 4.14% for the six months
ended June 30, 1996. Interest expense for the six months ended
June 30, 1997 included borrowing costs for the $30 million
leverage program.
Bancorp provided $204,000 of provision for loan losses for
the three month period ended June 30, 1997 compared to $0
provision for the same period in 1996. Bancorp's provision for
the six month period ended June 30, 1997 totaled $214,000
compared to $0 provision for the same period in 1996. The
increased provision during 1997 reflects additions for increased
commercial loan and asset based lending activity as well as
increased specific reserves on several loans as a result of a
quarterly evaluation of the loan portfolio. The allowance for
loan losses was $2.6 million or 94% of loans delinquent by 90
days or more at June 30, 1997 compared to $2.9 million or 78% of
loans delinquent 90 days or more at December 31, 1996 [see note
three].
Total other income increased by $553 thousand, or 71.0%, to
$1.3 million for the quarter ended June 30, 1997 compared to $.8
million for the quarter ended June 30, 1996. Other income
included $.9 million of gains from the sale of equity securities
for the quarter ended June 30, 1997 compared to $.6 million of
gains from the sale of equity securities for the quarter ended
June 30, 1996. Excluding gains on sales of securities, other
income increased $257 thousand or 158.6% to $419 thousand for the
quarter ended June 30, 1997 compared to $162 thousand for the
quarter ended June 30, 1996. The increase in other income is
attributed to higher fees generated on deposits acquired from
BCB. Total operating expenses increased by $1.1 million, or
53.5%, to $3.1 million for the quarter ended June 30, 1997
compared to $2.0 million for the quarter ended June 30, 1996.
The increase in operating expenses is attributed to the addition
of staff and activities from the BCB acquisition, the
establishment of TSBusiness Finance Corporation and opening the
new West Windsor branch.
Total other income decreased by $.4 million, or 17.0%, to
$2.1 million for the six months ended June 30, 1997 compared to
$2.5 million for the six months ended June 30, 1996. Other
income includes $1.2 million of gains from the sale of equity
securities for the six months ended June 30, 1997 and $2.2
million of gains from the sale of equity securities for the six
months ended June 30, 1996. Excluding gains on sales of
securities, other income increased $512 thousand or 152.0% to
$849 thousand for the six months ended June 30, 1997 compared to
$337 thousand for the six months ended June 30, 1996. The
increase in other income is attributed to higher fees generated
on deposits acquired from BCB. Total operating expenses
increased by $2.0 million or 49.9%, to $6.1 million for the six
months ended June 30, 1997 compared to $4.1 million for the six
months ended June 30, 1996. The increase in operating expenses
is attributed to the addition of staff and activities from the
BCB acquisition, the establishment of TSBusiness Finance
Corporation and opening the new West Windsor branch.
Capital
The OTS requires that the Bank meet minimum tangible, core
and risk-based capital requirements. As of June 30, 1997, the
Bank exceeded all regulatory capital requirements. The Bank's
required, actual, and excess capital levels as of June 30, 1997,
are as follows:
<TABLE>
Excess of
Required Actual Actual Over
% of % of Regulatory
Amount Assets Amount Assets Requirement
------ ------ ------ ------ -----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Tangible Capital 9,314 1.50% 96,566 15.55% 87,252
Core Capital 18,630 3.00% 96,566 15.55% 77,936
Risk-based Capital 28,860 8.00% 99,155 27.49% 70,295
</TABLE>
Liquidity
The Bank is required to maintain minimum levels of liquid
assets as defined by OTS regulations. This requirement, which
varies from time to time depending upon economic conditions and
deposit flows, is based upon percentage of deposits and short-
term borrowings. The required ratio currently is 5%. The Bank's
liquidity ratio averaged 31.32% during the second quarter
<PAGE>
of 1997 and equaled 32.33% at June 30, 1997. The Bank adjusts
liquidity as appropriate to meet its asset and liability
management objectives.
PART II. OTHER INFORMATION
Legal Proceedings
There are various claims and lawsuits in which the Bancorp
is periodically involved incidental to the Bancorp's business.
In the opinion of management, no material loss is expected from
any of such pending claims or lawsuits.
Changes in Securities
Not applicable.
Defaults Upon Senior Securities
Not applicable.
Submission of Matters to a Vote of Security Holders
None.
Other Information
On August 8, 1997, the Company and the Bank announced that
the Board of Directors of the Mutual Holding Company determined
to convert the Mutual Holding Company to a capital stock
corporation. Upon conversion of the Mutual Holding Company,
shares of the Company's common stock held by the public will be
exchanged for shares of a to-be-formed Delaware holding company,
which, after the completion of the conversion will be the Bank's
parent holding company. Additional shares of the to-be-formed
Delaware holding company will be offered for sale to depositors
of the Bank, and to the public. The conversion is subject to
regulatory approval as well as the approval of the Mutual Holding
Company's members and the Company's stockholders. The conversion
is expected to be completed in the first half of 1998.
Exhibits and Report on Form 8-K.
(a) Exhibit 99: Press release announcing the MHC's
intention to convert from the mutual to stock form of
organization.
(b) Forms 8-K: (1) On April 29, 1997, the Bank filed a
Form 8-K pertaining to the previously mentioned execution of a
definitive purchase agreement with Manchester Trust Bancorp.
(2) On July 2, 1997, the Bancorp filed a Form 8-K
reporting that the Bank had completed its reorganization into the
two-tier mutual holding company structure.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
by the undersigned thereunto duly authorized.
PEOPLES BANCORP, INC.
Date: August 14, 1997 By: /s/ Wendell T. Breithaupt
------------------------------
Wendell T. Breithaupt
President and Chief Executive
Office
Date: August 14, 1997 By: /s/ Robert Russo
------------------------------
Robert Russo
Vice President and Treasurer
[Principal Financial and
Accounting Officer]
<PAGE>
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<PAGE>
FOR IMMEDIATE RELEASE
August 8, 1997
Contact: Robert Hollenbeck, Vice President
Telephone: (609) 844-3106
Trenton Savings Bank And Peoples Bancorp, M.H.C. Announce Intent
To Convert Mutual Holding Company To Stock Form
Lawrenceville, NJ--Peoples Bancorp, Inc. (the "Company")(Nasdaq:
TSBS) and Trenton Savings Bank (the "Bank") announced that the
Board of Directors of their mutual holding company, Peoples
Bancorp, M.H.C. (the "Mutual Holding Company"), has determined to
convert the Mutual Holding Company to a capital stock
corporation. The Mutual Holding Company is a federally chartered
mutual holding company, and owns 5,796,000 shares, or
approximately 64%, of the issued and outstanding shares of common
stock of the Company, which in turn owns 100% of the issued and
outstanding capital stock of the Bank, a federally chartered
savings bank.
The Mutual Holding Company was formed in 1995 in connection with
the Bank's reorganization into the mutual holding company
structure. On August 3, 1995, the Bank completed its initial
minority stock offering in which it sold 3,116,500 shares of
common stock at a price of $10 per share. On April 25, 1997 the
stockholders of the Bank approved a plan to reorganize into a
two-tier mutual holding company. This reorganization has been
completed.
Upon conversion of the Mutual Holding Company, shares of the
Company's common stock held by the public will be exchanged for
shares of a to-be-formed Delaware holding company, which, after
the completion of the conversion will be the Bank's parent
holding company. Additional shares of the to-be-formed Delaware
holding company will be offered for sale to depositors of the
Bank, and to the public
<PAGE>
Wendell T. Breithaupt, President and Chief Executive Officer of
the Bank and the Mutual Holding Company, commented, "We believe
that the conversion of the Mutual Holding Company is in the best
interests of the Mutual Holding Company, the Bank and the
Company's stockholders. The additional capital raised in the
conversion will provide the Bank with expanded growth
opportunities and greater flexibility to implement its business
plan."
The conversion is subject to regulatory approval as well as the
approval of the Mutual Holding Company's members and the
Company's stockholders. The conversion is expected to be
completed in the first half of 1998. Luse Lehman Gorman Pomerenk
& Schick will act as conversion counsel.
