UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
450 5TH STREET, N.W.
WASHINGTON, D. C. 20549
FORM 10-QSB
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1997
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 No. 0-23571
PROGRESSIVE BANCORP, INC.
----------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 36-4178818
- -----------------------------------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification
of incorporation or No.)
organization)
601-617 Court Street, Pekin, Illinois 61554
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code
(309)-347-5101
Not applicable
------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Sections 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 / /
Indicate the number of shares outstanding of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding December 31, 1997
- -----------------------------------------------------------------
Common Stock, par value 168,172
$.01 per share
<PAGE>
PROGRESSIVE BANCORP, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Balance Sheets as of
December 31, 1997 (Unaudited) and
September 30, 1997 1
Consolidated Statements of Income (Unaudited)
for the three months ended December 31, 1997
and 1996 2-3
Consolidated Statements of Cash Flows (Unaudited)
for the three months ended December 31, 1997
and 1996 4-5
Notes to Consolidated Financial Statements
(Unaudited) 6-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8-10
PART II. OTHER INFORMATION 11
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
PROGRESSIVE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
December 31, September 30,
1997 1997
(Unaudited)
ASSETS
<S> <C> <C>
Cash and amounts due from banks $ 1,239,144 $ 925,795
Interest-bearing deposits 2,943,019 4,042,707
Money market investments and investment securities:
Held-to-maturity, at amortized cost (estimated market
value of $5,681,000 and $6,101,695, respectively) 5,706,000 6,095,717
Available-for-sale, at market value 6,813,511 5,788,174
Mortgage-backed securities:
Held-to-maturity, at amortized cost (estimated market
value of $4,642,000 and $5,219,101, respectively) 4,616,067 5,185,045
Available-for-sale, at fair value 3,298,000 2,937,508
Loans receivable, net 58,238,731 57,937,437
Accrued interest receivable 501,568 502,868
Real estate owned, net of allowance for losses of
$4,600 and zero, respectively 236,841 -
Premises and equipment 1,029,153 1,050,625
Other assets 957,147 946,365
Total assets $ 85,579,181 $ 85,412,241
LIABILITIES AND STOCKHOLDER'S EQUITY
Deposits $ 68,911,039 $ 69,058,706
Borrowed funds 8,000,000 8,000,000
Advances from borrowers for taxes and insurance 364,141 188,439
Accrued expenses and other liabilities 808,576 845,356
Total liabilities 78,083,756 78,092,501
Stockholder's equity:
Serial preferred stock, $.01 par value, 50,000
shares authorized, no shares issued and outstanding - -
Common stock, $.01 par value, 250,000 shares
authorized, 168,172 shares issued and outstanding
December 31, 1997 and September 30, 1997,
respectively 1,682 1,682
Paid-in surplus 1,367,605 1,367,605
Retained earnings, substantially restricted 6,057,063 5,898,816
Net unrealized gain on available-for-sale securities,
net of taxes 69,075 51,637
Total stockholder's equity 7,495,425 7,319,740
Total liabilities and stockholder's equity $ 85,579,181 $ 85,412,241
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
PROGRESSIVE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
Three Months Ended
December 31,
1997 1996
<S> <C> <C>
Interest income
Loans receivable:
First mortgage loans $ 896,203 $ 878,669
Other loans 283,168 250,809
Mortgage-backed securities 128,426 174,686
Interest-bearing deposits 51,941 33,061
Money market investments and investment
securities 191,744 173,426
Total interest income 1,551,482 1,510,651
Interest on deposits 879,458 835,874
Interest on borrowed funds 116,074 122,104
Total interest expense 995,532 957,978
Net interest income 555,950 552,673
Provision for loan losses 3,001 3,000
Net interest income after provision
for loan losses 552,949 549,673
Noninterest income
Service charges 37,730 33,702
Travel agency fees, net of direct expenses 51,742 58,814
Commissions from annuities - 9,346
Net gain on sale of loans held for sale 21,446 38,542
Loan origination fees 26,038 24,885
Other 33,492 38,063
Total noninterest income 170,448 203,352
</TABLE>
<PAGE>
PROGRESSIVE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Continued)
(Unaudited)
<TABLE>
Three Months Ended
December 31,
1997 1996
<S> <C> <C>
Noninterest expense
Compensation and benefits $ 263,384 $ 251,603
Premises and equipment 72,286 65,064
Advertising and promotion 8,391 17,877
Data processing 29,293 31,693
Federal insurance premiums 10,761 10,362
Real estate owned expense, net of income 5,875 11,630
Other operating expenses 86,577 90,217
Total noninterest expense 476,567 478,446
Income before income taxes 246,830 274,579
Income taxes 88,583 92,590
Net income $ 158,247 $ 181,989
Per common share data
Basic earnings per share $ .94 $ 1.09
Weighted average shares outstanding $ 168,172 $ 167,550
Earnings per common share-assuming dilution $ .89 $ 1.03
Weighted average shares outstanding-
assuming dilution $ 178,757 $ 176,329
</TABLE>
<PAGE>
PROGRESSIVE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
Three Months Ended
December 31,
1997 1996
<S> <C> <C>
Cash flows from operating activities
Net income $ 158,247 $ 181,989
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation 26,774 25,155
Loss on sale of real estate owned - 1,651
Provision for losses on real estate owned 4,600 -
Provision for loan losses 3,001 3,000
Net gain on sale of loans held for sale (21,446) (38,542)
(Increase) decrease in accrued interest
receivable 1,300 (350)
Premium amortization, net of discount
accretion on mortgage-backed and investment
securities (2,759) (4,616)
Decrease in accrued expenses and other
liabilities (36,780) (293,009)
(Increase) decrease in other assets (19,766) 4,033
Total adjustments (45,076) (302,678)
Origination of loans held for sale (1,613,837) (2,936,998)
Proceeds from sales of loans held for sale 1,635,283 2,975,540
Net cash provided by (used in)
operating activities 134,617 (82,147)
Cash flows from investing activities
Principal received on mortgage-backed securities:
Held-to-maturity 569,912 232,045
Available-for-sale 158,310 135,301
Proceeds from the maturity of investment
securities held-to-maturity 500,000 500,000
Proceeds from the sale of investment securities
available-for-sale - 1,903
Purchase of mortgage-backed securities:
Available-for-sale (502,500) -
Purchase of investment securities:
Available-for-sale (1,013,675) (5,703)
Held-to-maturity (110,000) -
Net increase (decrease) in loans receivable (545,736) 1,689,091
Purchases of premises and equipment (5,302) (35,665)
Proceeds from sale of real estate owned - 25,000
Capital expenditures on real estate owned - (17,640)
Net cash provided by (used in)
investing activities (948,991) 2,524,332
</TABLE>
<PAGE>
PROGRESSIVE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
<TABLE>
Three Months Ended
December 31,
1997 1996
<S> <C> <C>
Cash flows from financing activities
Net decrease in deposits $ (147,667) $ (339,472)
Net increase in advances from borrowers 175,702 173,755
Common stock options exercised - 14,343
Net cash provided by (used in) financing
activities 28,035 (151,374)
Net (DECREASE) increase in cash and cash
equivalents (786,339) 2,290,811
Cash and cash equivalents at
beginning of period 4,968,502 2,690,256
Cash and cash equivalents at end of
period $ 4,182,163 $ 4,981,067
Supplemental disclosures of
cash flow information
Cash paid during the periods for:
Interest on deposits and borrowed funds $ 995,232 $ 957,861
Income taxes, net of refunds $ - $ -
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING ACTIVITIES
Transfers from loans to real estate acquired
through foreclosure $ 241,441 $ 18,328
</TABLE>
<PAGE>
PROGRESSIVE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Basis of Presentation
On October 10, 1997, the stockholders approved the reorganization
of Pekin Savings, s.b. (Bank) into a holding company form of
ownership to which the Bank became a wholly owned subsidiary of
Progressive Bancorp, Inc. (Company), a newly formed Delaware
corporation, and each outstanding share of common stock of the
Bank was exchanged for one share of common stock of Progressive
Bancorp, Inc. On November 6, 1997, the reorganization was
completed. The transaction was accounted for in a manner similar
to the pooling-of-interest method of accounting. Accordingly, the
financial information relating to periods prior to November 6,
1997 is reported under the name of Progressive Bancorp, Inc.
The stockholders also approved an amendment to the Articles of
Incorporation of the Bank to change the name of the Bank from
Pekin Savings, s.b. to "Pekin Savings Bank."
The Company's unaudited consolidated financial statements were
prepared in accordance with the instructions for Form 10-QSB and,
therefore, do not include information or footnotes necessary for
a complete presentation of financial position, results of
operations, and cash flows in conformity with generally accepted
accounting principles. In the opinion of management of the
Company, however, the consolidated financial statements reflect
all adjustments (consisting of only normal recurring accruals)
which are necessary to present fairly the consolidated financial
position and the consolidated results of operations of the
Company. The consolidated results of operations for the three
month periods ended December 31, 1997 and 1996 are not
necessarily indicative of the results which may be expected for
an entire year.
NOTE 2 - ACCOUNTING CHANGES
In March 1997, the Financial Accounting Standards Board (FASB)
issued SFAS No. 128, Earnings Per Share, which is effective for
financial statements issued for periods ending after December 15,
1997. SFAS No. 128 simplifies the calculation of earnings per
share (EPS) by replacing primary EPS with basic EPS. It also
requires dual presentation of basic EPS and diluted EPS for
entities with complex capital structures. Basic EPS includes no
dilution and is computed by dividing income available to common
shareholders by the weighted-average common shares outstanding
for the period. Diluted EPS reflects the potential dilution of
securities that could share in earnings, such as stock options,
warrants, or other common stock equivalents. The adoption of
SFAS No. 128 had no impact on its earnings per share
calculations, other than changing terminology for earnings per
share assuming dilution. All prior period EPS data was restated
to conform with the new presentation.
Note 3 - EARNINGS PER COMMON Share
Basic earnings per share is computed based upon the weighted
average number of common shares outstanding during the period.
Earnings per common share - assuming dilution is computed based
upon the weighted average number of shares outstanding during the
period plus the shares that would be outstanding assuming the
exercise of the dilutive stock options which are considered to be
common stock equivalents. The number of shares that would be
issued from the exercise of stock options has been reduced by the
number of shares that could have been purchased from the proceeds
at the average market price of the Company's stock.
<PAGE>
PROGRESSIVE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 4 - NEW ACCOUNTING STANDARDS
In June 1997, the FASB issued SFAS 130, Reporting Comprehensive
Income. This statement establishes standards for the reporting
and display of comprehensive income and its components in a full
set of general-purpose financial statements. Comprehensive
income is defined as "the change in equity of a business
enterprise during a period from transactions and other events and
circumstances from nonowner sources. It includes all changes in
equity during a period except those resulting from investments by
owners and distributions to owners." Presently, there are
certain changes in assets and liabilities not reported in a
statement that reports results of operations for the period in
which they are recognized but instead are included in balances
within a separate component of equity in a statement of financial
position. SFAS 130 amends SFAS 87 and 115 to require that
changes in the balances of items that under those statements are
reported directly in a separate component of equity in a
statement of financial position be reported in a financial
statement that is displayed as prominently as other financial
statements. Items required by accounting standards to be
reported as direct adjustments to paid-in-capital, retained
earnings, or other nonincome equity accounts are not to be
included as components of comprehensive income. SFAS 130 shall
be effective for fiscal years beginning after December 15, 1997
with earlier application permitted. All comparative financial
statements provided for earlier periods shall be reclassified to
reflect application of the provisions of this statement.
NOTE 5 - YEAR 2000 COMPLIANCE
A significant issue has emerged in the banking industry and for
the economy overall regarding how existing application software
programs and operating systems can accommodate the date value for
the year 2000. The financial impact to the Company to ensure
year 2000 compliance is not anticipated by management to be
material to the financial position, results of operations, or
cash flow of the Company.
<PAGE>
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
FINANCIAL CONDITION
Total assets increased by $167,000 or 0.2 percent from September
30, 1997 to December 31, 1997. Interest-bearing deposits
decreased $1.1 million or 27.2 percent from September 30, 1997 to
December 31, 1997. All money market investments and investment
securities increased $636,000 or 5.3 percent from September 30,
1997 to December 31, 1997. Loans receivable, net increased
$302,000 or 0.5 percent for this period. Real estate owned, net
of allowance for losses, was $237,000 at December 31, 1997,
compared to no balance at September 30, 1997. Deposits decreased
$148,000 or 0.2 percent from September 30, 1997 to December 31,
1997.
CAPITAL
Total equity increased $175,000 or 2.4 percent to $7.5 million
during the three months ended December 31, 1997. This increase
included an improvement in net unrealized gain on the available-
for-sale securities, net of taxes, of $17,000 or 33.8 percent.
The FDIC requires that the Company meet minimum amounts and
ratios of total and Tier I Capital (as defined in the
regulations) to risk-weighted assets (as defined), and Tier I
Capital (as defined) to average assets (as defined). As of
December 31, 1997, the Company had total capital of $7.6 million
or 18.5 percent of risk-weighted assets, Tier I Capital of $7.4
million or 17.9 percent of risk-weighted assets, and Tier I
Capital of $7.4 million or 8.6 percent of average assets. As of
December 31, 1997, the Company was in full compliance with all
three minimum capital requirements.
LIQUIDITY
FDIC regulations require that savings banks maintain an average
daily balance of liquid assets (cash, certain time deposits,
bankers' acceptances, and specified United States Government,
state, or federal agency obligations) equal to a monthly average
of not less than 5 percent of its net withdrawable deposits plus
short-term borrowing. At December 31, 1997, the Company's
average liquidity position was $9.9 million or 14.2 percent
compared to $12.9 million or 18.1 percent at September 30, 1997.
The Company adjusts its liquidity levels in order to meet funding
needs for deposit outflows, payment of real estate taxes escrowed
on mortgage loans, repayment of borrowing, when applicable, and
loan commitments. The Company also adjusts liquidity as
appropriate to meet its asset, liability, and management
objectives.
<PAGE>
RESULTS OF OPERATIONS
INTEREST INCOME
Interest income increased 2.7 percent or $41,000 for the three
months ended December 31, 1997, compared to the three months
ended December 31, 1996. The balance of average earning assets
was $82.2 million for a $2.7 million increase for the three
months ended December 31, 1997, compared to $79.5 million for the
three months ended December 31, 1996. The average yield on
interest earning assets was 7.8 percent during both the three
months ended December 31, 1997 and December 31, 1996. The
increase in the Company's earning assets resulted in the increase
in interest income.
INTEREST EXPENSE
Interest expense increased 3.9 percent or $38,000 for the three
months ended December 31, 1997, compared to the three months
ended December 31, 1996. This increase resulted from an increase
in the average costs of deposits and borrowed funds to 5.2
percent for the three months ended December 31, 1997, compared to
5.1 percent for the three months ended December 31, 1996. Also,
contributing to this increase was an increase in the Company's
average deposit base of $1.4 million from December 31, 1996 to
December 31, 1997.
NET INTEREST INCOME
Net interest income increased by 0.6 percent or $3,000 for the
three months ended December 31, 1997, compared to the three
months ended December 31, 1996. This resulted from the net
increase in average earning assets over the average deposit base
of $1.3 million for the three months ended December 31, 1997
compared to the three months ended December31, 1996. Offsetting
this increase, the Company's net interest spread decreased from
2.7 percent for the three months ended December 31, 1996, to an
interest spread of 2.6 percent for the three months ended
December 31, 1997.
PROVISION FOR LOAN LOSSES
The Company made provision for loan losses of $3,000 for the
three months ended December 31, 1997 and 1996. The Company
experienced an increase in the three months ended December 31,
1997 in real estate owned; however, loan charge-off remains low
and the Company's delinquencies remain stable.
NONINTEREST INCOME
Noninterest income decreased 16.2 percent or $33,000 for the
three months ended December 31, 1997, compared to the three
months ended December 31, 1996. The lower level of noninterest
income resulted from decreased activity in the Company's wholly
owned service corporation, Pekin Financial Services. Travel
agency fees, net of direct expenses, decreased $7,000 and
commissions from annuities decreased $9,000 for the three months
ended December 31, 1997 compared to the three months ended
December 31, 1996. Net gain on sale of loans held for sale
decreased $17,000 for the three months ended December 31, 1997,
compared to the three months ended December 31, 1996.
<PAGE>
NONINTEREST EXPENSE
Noninterest expense decreased 0.4 percent or $2,000 for the three
months ended December 31, 1997, compared to the three months
ended December 31, 1996. Compensation and benefits costs
increased $12,000. Any discussion of "Income Taxes" primarily a
result of regular compensation merit increases. Advertising and
promotion costs decreased $10,000, mainly due to a reduction in
promotion costs related to the Company's ATM units since they
have been operational for a full year. Real estate owned
expense, net of income decreased $6,000. This decrease resulted
from less activity in the Company's real estate owned operations.
NET INCOME
Net income decreased 13.0 percent or $24,000 for the three months
ended December 31, 1997, compared to the three months ended
December 31, 1996. The decrease in net income was primarily a
result of decreased noninterest income of $33,000.
<PAGE>
PROGRESSIVE BANCORP, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 1. Legal Proceeding
There are no material legal proceedings to which the
Company or the Bank is a party or of which any of their property
is subject. From time to time, the Bank is a party to various
legal proceedings incident to its business.
Item 2. Changes in Securities
None.
Item 3. Defaults upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
The following matters were submitted to a vote of
security holders at a Special Meeting of Stockholders of the Bank
on October 10, 1997:
(i) The approval of the reorganization of the Bank
into the holding company form of ownership by approving an
Agreement and Plan of Reorganization, pursuant to which the Bank
will become a wholly owned subsidiary of Progressive Bancorp,
Inc., a newly formed Delaware corporation, and each outstanding
share of Common Stock of the Bank will be converted into one
share of Common Stock of Progressive Bancorp, Inc.;
(ii) The adjournment of the Special Meeting to a later
date if an insufficient number of shares are present in person or
by proxy at the Special Meeting to approve the Agreement and Plan
of Reorganization; and
(iii) The approval of an amendment to the Articles of
Incorporation of the Bank to change the name of the Bank to
"Pekin Savings Bank."
The ratification of the Agreement and Plan of Reorganization
was approved by a vote of 129,726 votes in favor, 825 opposed and
300 abstaining. The ratification of the amendment to the
Articles of Incorporation was approved by a vote of 141,354 votes
in favor, 25 opposed and 100 abstaining.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: none
(b) Reports on Form 8-K: none
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
PROGRESSIVE BANCORP, INC.
(Registrant)
DATE: February 13, 1998 BY: /s/ Arthur E. Krile, Jr.
------------------------------
Arthur E. Krile, Jr.,
President and Chief Executive
Officer
