SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTER ENDED SEPTEMBER 30, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________________
TO _________________
Commission File Number: 0001060244
PEOPLES BANCORP, INC.
(Exact name of issuer as specified in its charter)
_______Maryland________ _____________52-2027776____________
(State of incorporation) (I.R.S. Employer Identification No.)
P. O. BOX 210, 100 SPRING STREET, CHESTERTOWN, MARYLAND 21620
(Address of principal executive offices)
_______(410) 778-3500_____
(Issuer's telephone number)
_____________________________ Not Applicable_________________________________
(Former name,former address and former fiscal year,if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES__X__ NO_____
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
THE REGISTRANT HAS 843,237 SHARES OF COMMON STOCK ($10.00 par) OUTSTANDING AS OF
NOVEMBER 9, 2000.
Transitional Small Business Disclosure Format (check one) YES_____ NO__X__
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PEOPLES BANCORP, INC. AND SUBSIDIARY
FORM 10-QSB
INDEX
Part I - Financial Information Page
Item 1 Financial Statements
Consolidated Statements of Condition 3
Consolidated Statements of Income 4
Consolidated Statements of Cash Flows 5
Notes to Financial Statements 6
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operation 7-9
Part II - Other Information
Item 1 Legal Proceedings 10
Item 2 Changes in Securities 10
Item 3 Defaults Upon Senior Securities 10
Item 4 Submission of Matters to a Vote of Security Holders 10
Item 5 Other Information 10
Item 6 Exhibits and Reports on Form 8-K 10
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PEOPLES BANCORP, INC. AND SUBSIDIARY
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF CONDITION
(DOLLAR AMOUNTS IN THOUSANDS)
(unaudited)
September 30 December 31,
2000 1999
ASSETS
Cash and due from banks $3,184 $5,070
Federal funds sold 1,226 6,531
Interest-bearing deposits 0 0
Investment securities available for sale 26,666 28,479
Investment securities held to maturity
(approximate fair value of $48 and $1,550) 49 1,558
Loans, less allowance for credit losses
of $1,010 and $903 99,596 88,587
Premises and equipment 3,175 3,119
Accrued interest income 1,074 972
Other real estate owned 0 0
Deferred income taxes 258 346
Other assets 635 424
$135,863 $135,086
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing $16,773 $15,718
Interest-bearing 91,081 94,576
107,854 110,294
Fed funds purchased and repurchase agreements 9,118 7,634
Accrued interest payable 335 347
Accrued expenses 387 64
Other liabilities 801 99
118,495 118,438
Stockholders' equity
Common stock, par value $10 per share authorized
876,000 shares, issued and outstanding 843,237
shares as of September 30, 2000 8,432 8,512
Capital surplus 2,921 2,921
Retained earnings 6,219 5,546
17,572 16,979
Net unrealized gain on securities
available for sale (204) (331)
17,368 16,648
$135,863 $135,086
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PEOPLES BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER-SHARE DATA)
For the three For the nine
months ended months ended Year End
September 30 September 30 December
2000 1999 2000 1999 1999
Interest and dividend revenue
Loans, including fees $2,177 $1,918 $6,252 $5,762 $7,687
U.S. Treasury securities 21 56 71 326 359
Government Agencies Securites 374 340 1,157 777 1,145
Municipal Securities 0 0 0 0 0
Federal funds sold 47 68 203 227 308
Deposits with banks 0 0 0 0 0
Equity securities 8 7 24 21 28
Total interest and
dividend revenue 2,627 2,389 7,707 7,113 9,527
Interest expense
Deposit and Repurchase
Agreement 1,048 994 3,064 2,973 3,938
Total interest expense 1.048 994 3,064 2,973 3,938
Net interest income 1,579 1,395 4,643 4,140 5,589
Provision for credit losses 42 5 112 27 51
Net interest income after
provision for credit losses 1,537 1,390 4,531 4,113 5,538
Other operating revenue
Service charges on deposit
accounts 151 137 447 405 522
Miscellaneous revenue 29 20 94 95 127
Total other operating revenue 180 157 541 500 649
Other expenses
Salaries and employee benefits 554 525 1,647 1,563 2,111
Occupancy 48 43 136 126 188
Furniture and equipment 51 61 143 146 211
Other operating 236 218 699 652 887
Total other expenses 889 847 2,625 2,487 3,397
Income before income taxes 828 700 2,447 2,126 2,790
Income taxes 298 250 881 766 1,006
Net income $530 $450 $1,566 $1,360 $1,784
Basic earnings per common share $0.62 $0.53 $1.84 $1.59 $2.09
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PEOPLES BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
For the Nine Months Ended
September 30
2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received $7,590 $7,008
Other revenue received 372 502
Cash paid for operating expenses (1,728) (2,429)
Interest paid (3,076) (3,034)
Taxes paid (682) (645)
2,476 1,402
CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for premises, equipment, intangibles,
and construction in progress (161) (257)
Net customer loans repaid (advanced) (11,163) (1,370)
Proceeds from sales and maturities of securities
Available for sale 5,500 6,525
Held to maturity 9 3,000
Investment in securities available for sale (2,000) (14,598)
Proceeds from other real estate 76 -
(7,739) (6,700)
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in time deposits (677) 700
Net change in other deposits (1,763) (981)
Net change in repurchase agreements 1,485 1,119
Cash paid to repurchase stock, net of proceeds
of sale of 40 shares (301) (231)
Dividends paid (672) (624)
(1,928) (17)
NET INCREASE (DECREASE) IN CASH (7,191) (5,315)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 11,601 10,250
CASH AND EQUIVALENTS AT END OF PERIOD $4,410 $4,935
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED
FROM OPERATING ACTIVITIES
Net income $1,566 $1,360
Adjustments
Depreciation and amortization 108 113
Provision for loan losses 112 27
Security discount accretion, net of premium
Amortization 19 34
Decrease (increase) in accrued interest
Receivable and other assets (308) (150)
Increase (decrease)
Deferred origination fees and costs, net (34) (16)
Accrued Interest payable and other liabilities 1,013 34
$2,476 $1,402
NONCASH ACTIVITIES
Other real estate acquired through foreclosure $ 76 $ 0
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PEOPLES BANCORP, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for the
interim financial information and with the instructions to Form 10-QSB and
Regulation S-X of the Securities and Exchange Commission. Accordingly, they do
not include all the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results of the
quarters ended September 30, 2000 and 1999 are not necessarily indicative of the
results that may be expected for the years ending December 31, 2000 and 1999.
For further information, refer to the financial statements and footnotes
included in the Company's annual report for the year ended December 31, 1999.
2. Cash Flows
For purposes of reporting cash flows, cash and cash equivalents include
cash on hand, amounts due from banks and overnight investments in federal funds
sold.
3. Comprehensive Income
For the nine months ended September 30, 2000 and 1999, total comprehensive
income, net of taxes, was $1,693,000 and $1,122,000 respectively.
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PEOPLES BANCORP, INC. AND SUBSIDIARY
PART I FINANCIAL INFORMATION
ITEM 2 MANAGEMENT'S DISUSSION AND ANALYSIS OR PLAN OF OPERATION.
This Report contains statements which constitute forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. These statements appear in a number of
places in this Report and include all statements regarding the intent, belief or
current expectations of the Company, its directors or its officers with respect
to, among other things: (i) the Company's financing plans; (ii) trends affecting
the Company's financial condition or results of operations; (iii) the Company's
growth strategy and operating strategy, and (iv) the declaration and payment of
dividends. Investors are cautioned that any such forward-looking statements are
not guarantees of future performance and involve risks and uncertainties, and
that actual results may differ materially from those projected in the
forward-looking statements as a result of various factors discussed herein and
those factors discussed in detail in the Company's filings with the Securities
and Exchange Commission.
The following discussion of the financial condition and results of
operations of the Registrant (the Company) should be read in conjunction with
the Company's financial statements and related notes and other statistical
information included elsewhere herein.
GENERAL
The Company was incorporated in Maryland on December 10, 1996 as a bank
holding company. Stock of a Maryland state bank with the name Peoples Bank of
Kent County, Maryland (the "Bank") was exchanged in March, 1997 for the
outstanding stock of the Company.
The Bank was established and incorporated in 1910. The Company currently
engages in no business other than owning and managing the Bank.
FINANCIAL CONDITION, LIQUIDITY AND SOURCES OF CAPITAL
The primary sources of liquidity of the Bank are from loan payments,
short-term investments, including federal funds sold, and cash and due from
banks. Average liquid assets (cash and amounts due from banks, interest bearing
deposits in other banks, federal funds sold, and investment securities) compared
to average deposits were 28.78% at September 30, 2000 as compared to 32.90% at
the same period last year. Another source of liquidity is a secured line of
credit for $18,159,000 from the Federal Home Loan Bank as well as lines of
credit in the amount of $8,000,000 from correspondent banks, namely, Bank of
America and Allfirst Bank.
Tier one capital ratios of the Bank, based on average assets for the nine
months ended September 30, 2000 and 1999 were 16.25% and 16.92%, respectively.
Both are substantially in excess of regulatory minimum requirements. The Bank
expects that its current capital and short-term investments will satisfy the
Bank's cash requirements for the foreseeable future. However, no assurance can
be given in this regard as rapid growth, deterioration in loan quality or a
downturn in earnings, or a combination of these factors could change the Bank's
capital position in a relatively short period of time.
At September 30, 2000, the Bank's interest rate sensitivity, as measured by
gap analysis, showed the bank was liability-sensitive with a twelve month
cumulative gap, as a percentage of interest-earning assets, of 2.26%. This
shows that the bank is fairly evenly matched where any rate change will affect
the same amount of both assets and liabilities. Generally, asset sensitivity
indicates that a higher dollar amount of assets re-price than liabilities and in
a declining rate environment net interest income decreases. On the other hand,
if interest rates increase, then typically the net interest income should
increase. The bank controls this matching of assets to liabilities to minimize
interest rate risk while ate the same time maximizing income.
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RESULTS AND PLAN OF OPERATION
Net income for the nine months ended September 30, 2000, was $1,566,000,
or $1.84 per share, compared to $1,360,000, or $1.59 per share, for the first
nine months of 1999. The primary reason net income increased is due to an
increase of $503,000 in net interest income. The Bank's profits have been
earned evenly throughout the year with net income of $503,000, $533,000, and
$530,000 for the first, second, and third quarters, respectively.
Loan income has increased $490,000 or 8.50% from $5,762,000 for the first
nine months of 1999 to $6,252,000 for the first nine months ended September 30,
2000. This is the result of increased loan volume and rates. Total investment
securities revenue increased $128,000 or 11.39% from $1,124,000 to $1,252,000
because matured securities have been replaced with higher yielding investments.
Salaries and employee benefits have increased $84,000 or 5.37% from
$1,563,000 as of September 30,1999 to $1,647,000 at September 30, 2000, and
except for taxes, represents the largest increase in non-interest expense.
Taxes for the first nine months of both 2000 and 1999 have been accrued at 36%.
The bank is building its permanent office at their branch location in
Millington, Kent County, Maryland. The approximate cost is estimated to be
$450,000.00 with a completion date of April 2001. The branch will have 2584
square feet of office/teller space and will be staffed initially with four
employees. As a result of this expansion, operating expenses in 2000 are
expected to increase.
The Bank reviewed its loan portfolio and determined the allowance, at 1.00%
of gross loans, was adequate at September 30, 2000. At December 31, 1999, the
allowance was 1.01% of gross loans. At September 30, 2000, there were five non-
accruing mortgage loans totaling $ 110,525.33, and only 1.19% of the portfolio
was delinquent ninety days or more including non-accruing loans.
The Bank employed sixty-six full time equivalent employees during the third
quarter of 2000. The Company employs no employees outside those hired by the
Bank.
The Bank offers a variety of commercial banking services in its trade area,
which encompasses all of Kent County, northern Queen Anne's County and southern
Cecil County, Maryland. This primary service area is located between the
Chesapeake Bay and the western boundary of Delaware. The Bank emphasizes its
primary goal of meeting the banking needs of individuals and small to medium
sized business in its daily operations. The Bank offers a full range of deposit
services that are generally available in most banks and other similar
institutions, i.e., checking accounts, now accounts, savings accounts and other
time deposits of various types, ranging from daily money market accounts to
long-term certificates of deposit.
The Bank also offers a broad range of short and medium term commercial and
personal loans. The bank originates demand and balloon type mortgage loans to
fit may types of loan requests, i.e., real estate construction, acquisition,
home equity and a variety of commercial purposes. Loans originated to date are
anticipated to be held in the Bank's portfolio.
The Bank's services also include cash management opportunities, safe
deposit boxes, direct deposit of various types of needs, automatic transfers of
funds, as well as discount brokerage services and financial planning, along with
security sales and purchases, including mutual funds and annuities. The bank
also offers ATM services through the Star and Cirrus networks. The Bank offers
Master Card and Visa credit card services through a correspondent bank as an
agent for the Bank as well as debit card services.
-8-
MARKET RISK
Net interest income of the Company is one of the most important factors in
evaluating the financial performance of the Company. The Company uses interest
sensitivity analysis to determine the effect of rate changes. Net interest
income is projected over the one-year period to determine the effect of an
increase or decrease in the prime rate of 100 basis points. If prime were to
decrease 100 basis points, the Company would experience a decrease in net
interest income of $29,876, if all assets and liabilities maturing within that
period were adjusted for the rate change. The sensitivity analysis does not
consider the likelihood of these rate changes nor whether management's reaction
to this rate change would be to reprice its loans and deposits. This paragraph
contains certain forward-looking statements within the meaning of and made
pursuant to the safe harbor provisions of the Private Litigation Securities
Reform Act of 1995.
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PEOPLES BANCORP, INC. AND SUBSIDIARY
PART II OTHER INFORMATION
Item 1 LEGAL PROCEEDINGS
Not applicable.
Item 2 CHANGES IN SECURITIES
The Bank adopted a policy of purchasing stock from existing
stockholders.
During the present quarter 5,794 shares of stock were purchased.
Item 3 DEFAULTS UPON SENIOR SECURITIES
Not applicable.
Item 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
Item 5 OTHER INFORMATION
Not applicable.
Item 6 EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
1. Proxy Statement dated May 12, 2000, is incorporated by reference.
2. Registration statement dated May 1, 1998, is incorporated by
reference.
b) Reports on Form 8-K
There were no reports on Form 8-K filed for the quarter ended
September 30, 2000.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
PEOPLES BANCORP, INC.
Date: __NOVEMBER 13, 2000___ By:__/S/_E. ROY OWENS_____________
E. Roy Owens
Chairman and CEO
Date: __NOVEMBER 13, 2000__ By:__/S/_THOMAS G. STEVENSON______
Thomas G. Stevenson
President and CFO
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PEOPLES BANCORP, INC.
FINANCIAL DATA SCHEDULE
ITEM SEPTEMBER 30
NUMBER 2000
9-03(1) Cash and due from banks 3,184
9-03(2) Interest-bearing deposits 0
9-03(3) Federal funds sold 1,226
9-03(4) Trading account assets
9-03(6) Investment and mortgage-backed securities
held for sale 26,666
9-03(6) Investment and mortgage-backed securities
held to maturity - carrying value 49
9-03(6) Investment and mortgage-backed securities
held to maturity - market value 48
9-03(7) Loans 100,606
9-03(7)(2) Allowance for losses 1,010
9-03(11) Total assets 135,863
9-03(12) Deposits 107,854
9-03(13) Short-term borrowings 9,118
9-03(15) Other liabilities 1,523
9-03(16) Long-term debt 0
9-03(19) Preferred stock - mandatory redemption 0
9-03(20) Preferred stock - no mandatory redemption 0
9-03(21) Common stock 8,432
9-03(22) Other stockholders' equity 8,936
9-03(23) Total liabilities and stockholders' equity 135,863
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FINANCIAL DATA SCHEDULE
(CONTINUED)
NINE MONTHS ENDED
GUIDE SEPTEMBER 30
NUMBER 2000
9-04(1) Interest and fees on loans $6,252
9-04(2) Interest and dividends on investments $1,252
9-04-(4) Other interest income $203
9-04-(5) Total interest income $7,707
9-04-(6) Interest on deposits $3,064
9-04-(9) Total interest expense $3,064
9-04-(10) Net interest income $4,643
9-04-(11) Provision for loan losses $112
9-04-(13)(h) Investment securities gains/(losses) 0
9-04-(14) Other expenses $2,625
9-04(15) Income/loss before income tax $2,447
9-04(17) Income/loss before extraordinary items $2,447
9-04(18) Extraordinary items, less tax $0
9-04(19) Cumulative change in accounting principles $0
9-04(20) Net income or loss $1,566
9-04(21) Earnings per share - basic $1.84
9-04(21) Earnings per share - diluted $1.84
I.B.5 Net yield on interest earning assets 4.88%
III.C.1(a) Loans on nonaccrual $111
III.C.1(b) Accruing loans past due 90 days or more $1,092
III.C.1(c) Troubled debt restructuring $0
III.C.2 Potential problem loans $2,342
IV.A.1 Allowance for loan loss - beginning of period $903
IV.A.2 Total chargeoffs $8
IV.A.3 Total recoveries $3
IV.A.4 Allowance for loan loss - end of period $1,010
IV.B.1 Loan loss allowance allocated to domestic loans $1,010
IV.B.2 Loan loss allowance allocated to foreign loans $0
IV.B.3 Loan loss allowance - unallocated $0
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