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, 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 No. 0-23571
PROGRESSIVE BANCORP, INC.
(Exact name of registrant as specified in its charter)
Delaware 36-4178818
----------- ------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or 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 changedsince 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, 1999
---------------- -----------------------------
Common Stock, par value $.01per share 174,473
<PAGE>
PROGRESSIVE BANCORP, INC. AND SUBSIDIARIES
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
December 31, 1999 (Unaudited) and
September 30, 1999................................. ...1
Condensed Consolidated Statements of Income
(Unaudited) for the Three months ended
December 31, 1999 and 1998............................2
Condensed Consolidated Statements of Cash Flows
(Unaudited) for the Three months ended
December 31, 1999 and 1998............................4
Notes to Condensed Consolidated Financial Statements.....5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...................6
PART II. OTHER INFORMATION
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
PROGRESSIVE BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
December 31,
1999 September 30,
(Unaudited) 1999
------------ -------------
Assets
<S> <C> <C>
Cash and amounts due from banks $ 1,697 $ 1,714
Interest-bearing deposits 3,740 2,655
Money market investments and investment securities:
Held-to-maturity, at amortized cost (estimated fair
value of $2,224 and $2,244, respectively) 2,271 2,270
Available-for-sale, at fair value 12,024 11,738
Mortgage-backed securities:
Held-to-maturity, at amortized cost (estimated fair
value of $548 and $842, respectively) 544 835
Available-for-sale, at fair value 8,779 9,207
Loans receivable, net of allowance for loan loss of
$243 and $239, respectively 64,122 63,054
Other assets 2,843 2,737
----------- ----------
Total assets $ 96,020 $ 94,210
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 78,661 $ 75,311
Borrowed funds 10,000 11,500
Accrued expenses and other liabilities 1,069 1,045
---------- ----------
Total liabilities 89,730 87,856
---------- ----------
Stockholders' equity:
Serial preferred stock, $.10 par value, 50,000 shares
authorized, no shares issued and outstanding - -
Common stock, $.01 par value, 250,000 shares authorized,
174,473 shares issued at December 31, 1999 and
September 30, 1999 2 2
Paid-in surplus 1,430 1,430
Retained earnings, substantially restricted 6,865 6,722
Accumulated other comprehensive loss, net of taxes (707) (500)
---------- ----------
7,590 7,654
Treasury stock, 25,000 shares at cost (1,300) (1,300)
---------- ----------
Total stockholders' equity 6,290 6,354
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 96,020 $ 94,210
========== ==========
</TABLE>
See accompanying notes to condensed consoldiated financial statements
1
<PAGE>
PROGRESSIVE BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Income Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
1999 1998
----- -----
<S> <C> <C>
Interest income
Loans receivable:
First mortgage loans $ 965 $ 927
Other loans 290 284
Mortgage-backed securities 154 110
Interest-bearing deposits 50 49
Money market investments and investment securities 238 174
------------ -------------
Total interest income 1,697 1,544
------------ -------------
INTEREST ON DEPOSITS 937 884
INTEREST ON BORROWED FUNDS 145 138
------------ -------------
Total interest expense 1,082 1,022
------------ -------------
Net interest income 615 522
PROVISION FOR LOAN LOSSES 5 4
------------ -------------
Net interest income after provision
for loan losses 610 518
------------ -------------
NONINTEREST INCOME
Travel agency fees, net of direct costs 49 56
Net gain on sales of loans held-for-sale 7 -
Loan origination fees 24 35
Other 89 69
------------ -------------
Total noninterest income 169 160
------------ -------------
NONINTEREST EXPENSE
Compensation and benefits 306 279
Other operating expenses 251 307
------------ -------------
Total noninterest expense 557 586
------------ -------------
</TABLE>
2
<PAGE>
PROGRESSIVE BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Income Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
1999 1998
---- ----
<S> <C> <C>
Income before income taxes and
cumulative effect of change
in accounting principle $ 222 $ 92
INCOME TAXES 79 34
------------ -----------
Income before cumulative effect of
change in accounting principle 143 58
CUMULATIVE EFFECT ON PRIOR YEARS
(TO SEPTEMBER 30, 1998) OF EXPENSING
ORGANIZATIONAL COSTS AS INCURRED,
NET OF INCOME TAXES OF $21 - 33
------------ ------------
NET INCOME $ 143 $ 25
============ ============
BASIC INCOME PER SHARE
Before cumulative effect of accounting change $ .96 $ .39
Accounting change - (.22)
------------ ------------
Basic income per share $ .96 $ .17
============ ============
DILUTED INCOME PER SHARE
Before cumulative effect of accounting change $ .93 $ .37
Accounting change - (.21)
------------ ------------
Diluted income per share $ .93 $ .16
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING
Basic 149,473 149,473
============ ============
Diluted 153,850 154,712
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial
statements.
3
<PAGE>
PROGRESSIVE BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITES
Net cash provided by (used in) operating activities $ 133 $ (20)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Principal received on mortgage-backed securities 634 816
Proceeds from the maturity of investment securities - 2,000
Purchase of investment securities (500) (1,997)
Purchase of mortgage-backed securities - (492)
Net (increase) decrease in loans receivable (1,073) 47
---------- ----------
Net cash provided by (used in) investing
activities (939) 374
---------- ---------
Cash flows from financing activities
Net increase in deposits 3,350 2,079
Proceeds from FHLB advances 500 -
Repayment of FHLB advances (2,000) -
Other 24 198
---------- ---------
Net cash provided by financing activities 1,874 2,277
---------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,068 2,631
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 4,369 3,947
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 5,437 $ 6,578
========== =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the periods for:
Interest on deposits and borrowed funds $ 1,086 $ 1,022
========== =========
Income taxes, net of refunds $ 58 $ 194
========== =========
SUPPLEMENTAL DISCLOSURES ON NONCASH
INVESTING ACTIVITIES
Transfers from loans to real estate acquired through
foreclosure $ - $ 57
========== =========
</TABLE>
See accompanying notes to condensed consolidated financial
statements.
4
<PAGE>
PROGRESSIVE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
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, 1999 and 1998 are not necessarily indicative of
the results which may be expected for an entire year.
NOTE 2 - EARNINGS PER COMMON SHARE
Basic earnings per share is computed based upon the weighted average number of
common shares outstanding during the period. Diluted income per share 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.
NOTE 3 - YEAR 2000 COMPLIANCE
Like most entities, the Company and its subsidiaries may be exposed to risks
associated with Year 2000 dating problems. This problem affects computer
software and hardware; transactions with customers, vendors, and other entities;
and equipment dependent on microchips. The Company recognizes that Year 2000
dating problems pose a risk beyond January 1, 2000 as errors may not become
evident until after that date. The Company has performed the remediation steps
it believes necessary to address Year 2000 dating problems. It is not possible
for any entity to guarantee the results of its own remediation efforts or to
accurately predict the impact of Year 2000 dating problems on third parties with
which the Company does business. If remediation efforts of the Company or third
parties with which it does business are not successful, it is possible the Year
2000 dating problem could negatively impact the Company's consolidated financial
condition and results of operations. The Company does not believe any
significant Year 2000 dating problems have occurred.
NOTE 4 - COMPREHENSIVE INCOME
Total comprehensive income (loss), which was comprised of net income and net
change in unrealized gain (loss) on available-for-sale securities, was
approximately $(64,000) and $49,000 for the three months ended December 31, 1999
and 1998, respectively.
5
<PAGE>
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
FINANCIAL CONDITION
Total assets increased $1.8 million or 1.9 percent from September 30, 1999 to
December 31, 1999. Interest-bearing deposits increased $1.1 million or 40.9
percent from September 30, 1999 to December 31, 1999. All mortgage-backed
securities decreased $719,000 or 7.2 percent from September 30, 1999 to December
31, 1999. Loans receivable, net, increased $1.1 million or 1.7 percent for this
period. Deposits increased $3.4 million or 4.5 percent from September 30, 1999
to December 31, 1999 resulting from the offering of certificate of deposit
products at premiums to attract and retain deposits. Borrowed funds decreased
$1.5 million or 13.0 percent from September 30, 1999 to December 31, 1999. The
Company used part of its deposit flows increase to repay outstanding overnight
borrowed funds. Also, a portion of the increase was used to fund mortgage loans.
With interest rates increasing, borrowers elected to close loans before any
further increases might price them out of the market, resulting in the increase
to net loans receivable.
CAPITAL
Total equity decreased $64,000 or 1.0 percent to $6.3 million during the three
months ended December 31, 1999. Total equity includes $707,000 in net unrealized
losses on available-for-sale securities, net of taxes at December 31, 1999. The
Company has elected to carry the majority of its investment securities in the
"available-for-sale" category. The recent increase in interest rates has caused
the value of these investments to decrease. The Company intends to allocate the
proceeds of sales of investment securities to higher yielding mortgage and
commercial loans as demand for such loans and market conditions dictate. 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, 1999, the Company had total capital of $7.2 million or 17.7 percent of
risk-weighted assets and Tier I Capital of $7.0 million or 17.1 percent of
risk-weighted assets or 7.5 percent of average assets. As of December 31, 1999,
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, 1999, the Company's average liquidity
position was $18.6 million or 22.5 percent compared to $15.3 million or 19.4
percent at September 30, 1999. 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 borrowings, when applicable, and loan
commitments. The Company also adjusts liquidity as appropriate to meet its
asset, liability, and management objectives.
6
<PAGE>
RESULTS OF OPERATIONS
INTEREST INCOME
Interest income increased 9.9 percent or $153,000 for the three months ended
December 31, 1999, compared to the three months ended December 31, 1998. The
increase in interest income for the three months ended December 31, 1999
reflected an increase in average interest-earnings assets to $92.2 million from
$84.5 million for a 9.1 percent increase or $7.7 million for the three months
ended December 31, 1999, compared to the three months ended December 31, 1998.
The average yields on interest-earnings assets of 7.59 percent for the three
months ended December 31, 1999 was unchanged from the 7.59 percent for the three
months ended December 31, 1998.
INTEREST EXPENSE
Interest expense increased 5.9 percent or $60,000 for the three months ended
December 31, 1999, compared to the three months ended December 31, 1998. The
increase was due to an increase in average deposits of 9.5 percent or $6.7
million from $70.7 million to $77.4 million. Average borrowed funds increased
$900,000 or 9.5 percent to $10.4 million for the three months ended December 31,
1999, compared to $9.5 million for the three months ended December 31, 1998.
Helping to offset this increase, the average cost of the deposits and borrowed
funds decreased to 4.89 percent from 5.09 percent for the three months ended
December 31, 1999, compared to the three months ended December 31, 1998. The
Company continues to offer "Certificate Specials" at premiums to attract and
retain deposits. This limits higher rates being paid on all the Company's
deposit and certificate accounts.
NET INTEREST INCOME
Net interest income increased 17.8 percent or $93,000 for the three months ended
December 31, 1999, compared to the three months ended December 31, 1998. The
Company had an increase in mortgage loan originations even as mortgage interest
rates increased for the three months ended December 31, 1999, compared to the
three months ended December 31, 1998. Refinances of existing mortgages decreased
because of higher mortgage interest rates for the respective three months ended
December 31, 1999 and December 31, 1998. This helped to maintain the overall
mortgage portfolio yield. Also, increases in the balances of other earning
assets, mortgage-backed securities, and money market investments and investment
securities, at higher interest rates, helped to maintain the Company's interest
rate spread. The Company, by offering "Certificate Specials," has been able to
reduce the cost of deposits and borrowed funds for the three months ended
December 31, 1999, compared to the three months ended December 31, 1998. The
above factors contributed to the increase in the Company's net interest spread
to 2.70 percent from 2.50 percent for the comparable three months ended December
31, 1999 and December 31, 1998.
7
<PAGE>
PROVISION FOR LOAN LOSSES
The provision for loan losses was $5,000 for the three months ended December 31,
1999, compared to $4,000 for the three months ended December 31, 1998.
Provisions for losses on first mortgage loans and real estate sold on contract
are charged to operations when the loss becomes probable and estimable, based
upon the Bank's past loan loss experience, known and inherent risk in the
portfolio, estimated values of the underlying collateral, and current and
prospective economic conditions. In addition, various regulatory agencies, as an
integral part of their examination process, periodically review the Bank's
allowance for loan losses. Such agencies may require the Bank to recognize
additions to the allowance for loan losses based on their judgment of
information available to them at the time of their examination.
NONINTEREST INCOME
Noninterest income increased 5.6 percent or $9,000 for the three months ended
December 31, 1999, as compared to the three months ended December 31, 1998. Net
gains on sales of loans held-for-sale were $7,000 for the three months ended
December 31, 1999, compared to no gain for the three months ended December 31,
1998. Because of the decrease in loan refinances, loan origination fees for the
three months ended December 31, 1999 were $11,000 less than for the three months
ended December 31, 1998.
NONINTEREST EXPENSE
Noninterest expense decreased 4.9 percent or $29,000 for the three months ended
December 31, 1999, compared to the three months ended December 31, 1998. The
Company's compensation and benefits cost increased 9.7 percent or $27,000 for
the three months ended December 31, 1999, compared to the three months ended
December 31, 1998. Compensation costs increased primarily due to the addition of
a commercial loan officer. To enable Pekin Savings Bank, a wholly owned
subsidiary of the Company, to enhance its business opportunities and better
serve the community, a commercial loan department was established during the
three months ended December 31, 1999. Employee benefits costs increased 32.6
percent or $15,000 for the three months ended December 31, 1999, compared to the
three months ended December 31, 1998. The increase resulted from the Company
changing its officer insurance coverage and changing insurance carriers. Other
expenses decreased 18.2 percent or $56,000 for the comparable three months ended
December 31, 1999 and December 31, 1998. This was primarily a result of one-time
expenses related to the Company's on-line conversion costs incurred for the
three months ended December 31, 1998.
NET INCOME
Net income increased 472.0 percent or $118,000 for the comparable three months
ended December 31, 1999 and 1998. Contributing to the increase, the Company's
net interest income increased 17.8 percent or $93,000 for the comparable three
months ended December 31, 1999 and 1998. The Company, during the three months
ended December 31, 1998, incurred costs associated with the on-line conversion
of $107,000 and expensed $33,000 of unamortized organizational costs, net of
income taxes, associated with the formation of the Company's bank holding
company in October 1997. These costs were not present for the three months ended
December 31, 1999.
8
<PAGE>
SAFE HARBOR STATEMENT
This report contains certain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The Company intends such
forward-looking statements to be covered by the safe harbor provisions for
forward-looking statements contained in the Private Securities Reform Act of
1995, and is including this statement for purposes of these safe harbor
provisions. Forward-looking statements, which are based on certain assumptions
and describe future plans, strategies, and expectations of the Company, are
generally identifiable by use of the words "believe", "expect", "intend",
"anticipate", "estimate", "project", or similar expressions. The Company's
ability to predict results or the actual effect of future plans or strategies is
inherently uncertain.
Factors which could have a material adverse effect on the operations and future
prospects of the Company and the subsidiaries include, but are not limited to,
changes in: interest rates, general economic conditions, the
legislative/regulatory situation, monetary and fiscal policies of the U.S.
Government, including policies of the U.S. Treasury and the Federal Reserve
Board, the quality of composition of the loan or investment portfolios, demand
for loan products, deposit flows, competition, demand for financial services in
the Company's market area, and accounting principles, policies, and guidelines.
These risks and uncertainties should be considered in evaluating forward-looking
statements and undue reliance should not be placed on such statements.
Further information concerning the Company and its business, including
additional factors that could materially affect the Company's financial results,
is included in the Bank's filings with the Federal Deposit Insurance
Corporation.
9
<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
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: none
(b) Reports on Form 8-K: none
10
<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 14, 2000 BY: /s/ Arthur E. Krile, Jr.
----------------------------
Arthur E. Krile, Jr., President
and Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-Mos
<FISCAL-YEAR-END> sep-30-1999
<PERIOD-END> dec-31-1999
<CASH> 1,697
<INT-BEARING-DEPOSITS> 3,740
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 20,803
<INVESTMENTS-CARRYING> 2,815
<INVESTMENTS-MARKET> 2,772
<LOANS> 64,122
<ALLOWANCE> 243
<TOTAL-ASSETS> 96,020
<DEPOSITS> 78,661
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,069
<LONG-TERM> 10,000
0
0
<COMMON> 2
<OTHER-SE> 6,288
<TOTAL-LIABILITIES-AND-EQUITY> 96,020
<INTEREST-LOAN> 1,255
<INTEREST-INVEST> 392
<INTEREST-OTHER> 50
<INTEREST-TOTAL> 1,697
<INTEREST-DEPOSIT> 937
<INTEREST-EXPENSE> 1,082
<INTEREST-INCOME-NET> 615
<LOAN-LOSSES> 5
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 557
<INCOME-PRETAX> 222
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 143
<EPS-BASIC> 0.96
<EPS-DILUTED> 0.93
<YIELD-ACTUAL> 2.67
<LOANS-NON> 0
<LOANS-PAST> 365
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 365
<ALLOWANCE-OPEN> 239
<CHARGE-OFFS> 3
<RECOVERIES> 2
<ALLOWANCE-CLOSE> 243
<ALLOWANCE-DOMESTIC> 243
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
