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 JUNE 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 849,031 SHARES OF COMMON STOCK ($10.00 par)
OUTSTANDING AS OF AUGUST 1, 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 7-8
Part II - Other Information
Item 1 Legal Proceedings 9
Item 2 Changes in Securities 9
Item 3 Defaults Upon Senior Securities 9
Item 4 Submission of Matters to a Vote of Security Holders 9
Item 5 Other Information 9
Item 6 Exhibits and Reports on Form 8-K 9
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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)
June 30 December 31,
2000 1999
ASSETS
Cash and due from banks $3,860 $5,070
Federal funds sold 1,302 6,531
Interest-bearing deposits 0 0
Investment securities available for sale 29,477 28,479
Investment securities held to maturity
(approximate fair value of $50 and $1,550) 51 1,558
Loans, less allowance for credit losses
of $971 and $903 95,299 88,587
Premises and equipment 3,130 3,119
Accrued interest income 1,062 972
Other real estate owned 66 0
Deferred income taxes 333 346
Other assets 618 424
$135,198 $135,086
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing $14,923 $15,718
Interest-bearing 91,354 94,576
106,277 110,294
Fed funds purchased and repurchase agreements 11,146 7,634
Accrued interest payable 314 347
Accrued expenses 271 64
Other liabilities 21 99
118,029 118,438
Stockholders' equity
Common stock, par value $10 per share
authorized 876,000 shares, issued and
outstanding 849,031 shares as of June 30, 2000 8,490 8,512
Capital surplus 2,921 2,921
Retained earnings 6,081 5,546
17,492 16,979
Net unrealized gain on securities
available for sale (323) (331)
17,169 16,648
$135,198 $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 six Year
months ended months ended End
June 30 June 30 December
2000 1999 2000 1999 1999
Interest and dividend revenue
Loans, including fees $2,105 $1,887 $4,075 $3,801 $7,687
U.S. Treasury securities 25 119 50 270 359
Government Agencies Securites 389 246 783 437 1,145
Municipal Securities 0 0 0 0 0
Federal funds sold 70 90 156 159 308
Deposits with banks 0 0 0 0 0
Equity securities 8 7 16 14 28
Total interest and dividend revenue 2,597 2,349 5,080 4,681 9,527
Interest expense
Deposit interest 1,021 994 2,016 1,979 3,938
Total interest expense 1,021 994 2,016 1,979 3,938
Net interest income 1,576 1,355 3,064 2,702 5,589
Provision for credit losses 21 23 70 22 51
Net interest income after
provision for credit losses 1,555 1,332 2,994 2,680 5,538
Other operating revenue
Service charges on deposit accounts 152 138 296 268 522
Miscellaneous revenue 18 26 65 75 127
Total other operating revenue 170 164 361 343 649
Other expenses
Salaries and employee benefits 554 498 1,093 993 2,111
Occupancy 36 48 88 83 188
Furniture and equipment 39 46 92 85 211
Other operating 263 234 463 436 887
Total other expenses 892 826 1,736 1,597 3,397
Income before income taxes 833 670 1,619 1,426 2,790
Income taxes 300 241 583 516 1,006
Net income $533 $429 $1,036 $910 $1,784
Earnings per common share $0.63 $0.50 $1.22 $1.07 $2.09
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PEOPLES BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) For the Six Months Ended
June 30
2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received $5,390 $4,659
Other revenue received (267) 329
Cash paid for operating expenses (1,620) (1,406)
Interest paid (2,049) (2,053)
Taxes paid (475) (401)
979 1,128
CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for premises, equipment, intangibles,
and construction in progress (71) (196)
Net customer loans repaid (advanced) (6,837) (1,178)
Proceeds from sales and maturities of securities
Available for sale 2,507 6,001
Held to maturity 0 20
Investment in securities available for sale (2,000) (10,515)
Proceeds from other real estate 10 -
(6,391) (5,868)
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in time deposits (2,454) 468
Net change in other deposits (1,563) (940)
Net change in repurchase agreements 3,513 1,584
Cash paid to repurchase stock, net of proceeds (81) (200)
Dividends paid (442) (411)
(1,027) 501
NET INCREASE (DECREASE) IN CASH (6,439) (4,239)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 11,601 10,250
CASH AND EQUIVALENTS AT END OF PERIOD $5,162 $6,011
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED
FROM OPERATING ACTIVITIES
Net income $1,036 $910
Adjustments
Depreciation and amortization 62 75
Provision for loan losses 70 22
Security discount accretion, net of premium
amortization 14 25
Decrease (increase) in accrued interest
Receivable and other assets (278) (6)
Increase (decrease)
Deferred origination fees and costs, net (21) (9)
Accrued Interest payable and other liabilities 96 111
$979 $1,128
NONCASH ACTIVITIES
OTHER REAL ESTATE ACQUIRED THROUGH FORCLOSURE $(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
six months ended June 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 annual report as of 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 six months ended June 30, 2000 and 1999, total comprehensive
income, net of taxes, was $1,044,000 and $706,000 respectively.
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PEOPLES BANCORP, INC. AND SUBSIDIARY
PART I FINANCIAL INFORMATION
ITEM 2 MANAGEMENT'S DISCUSSION 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 30.97% at June 30, 2000 as compared to 32.04% 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
six months ended June 30, 2000 and 1999 were 16.13% and 17.00%, 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 June 30, 2000, the Bank's interest rate sensitivity, as measured by
gap analysis, showed the bank was liability-sensitive with a six month
cumulative gap, as a percentage of interest-earning assets, of 76.67%. This
shows that the bank is fairly evenly matched where any rate change will affect
the same amount of both assets and liabilities. Generally, liability sensitivity
indicates that a higher dollar amount of liabilities re-price than assets and in
a declining rate environment net interest income increases. On the other hand,
if interest rates increase, then typically the net interest income should
decline. The bank controls this matching of assets to liabilities to minimize
interest rate risk while at the same time maximizing income.
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RESULTS AND PLAN OF OPERATION
Net income for the six months ended June 30, 2000, was $1,036,000, or
$1.22 per share, compared to $910,000, or $1.07 per share, for the first six
months of 1999. The primary reason net income increased is due to an increase of
$399,000 in net interest income.
Loan income has increased $274,000 or .07% from $3,801,000 for the
first six months of 1999 to $4,075,000 for the first six months ended June 30,
2000. This is the result of increased loan volume and rates. Government
Agencies security income has increased $346,000 or 79.18% from $437,000 for the
same time period of 1999 to $783,000 at June 30, 2000. This increase is the
result of replacing matured securities at higher interest rates.
Salaries and employee benefits have increased $100,000 or 10.07% from
$993,000 as of June 30, 1999 to $1,093,000 at June 30, 2000.
The Bank reviewed its loan portfolio and determined the allowance, at
0.99% of gross loans, was adequate at June 30, 2000. At December 31, 1999, the
allowance was 1.01% of gross loans. At June 30, 2000, there were four
nonaccruing mortgage loans totaling $111,608 and only 1.98% of the portfolio was
delinquent ninety days or more including nonaccruing loans.
The Bank employed sixty six full time equivalent employees during the
second 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 many 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 though 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.
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 $59,309, 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 Bancorp previously adopted a policy of purchasing stock from
existing stockholders.
During the present quarter 2,124 shares of stock were purchased.
Item 3 DEFAULTS UPON SENIOR SECURITIES
Not applicable
Item 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The slate of directors proposed in the Proxy Statement dated
May 12,2000 were elected at the annual stockholders meeting held on
May 17, 2000. The selection of Rowles & Company as our 2000
independent auditing and accounting firm for tax purposes was also
approved at the meeting.
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
June 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: __AUGUST 9, 2000__ By:__/S/_E. ROY OWENS___________________
E. ROY OWENS
CHAIRMAN AND CEO
Date: __AUGUST 9, 2000__ By:__/S/_THOMAS G. STEVENSON____________
Thomas G. Stevenson
PRESIDENT AND CFO
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PEOPLES BANCORP, INC.
FINANCIAL DATA SCHEDULE
ITEM JUNE 30
NUMBER 2000
9-03(1) Cash and due from banks 3,860
9-03(2) Interest-bearing deposits 0
9-03(3) Federal funds sold 1,302
9-03(4) Trading account assets 0
9-03(6) Investment and mortgage-backed securities
held for sale 29,477
9-03(6) Investment and mortgage-backed securities
held to maturity - carrying value 51
9-03(6) Investment and mortgage-backed securities
held to maturity - market value 50
9-03(7) Loans 96,270
9-03(7)(2) Allowance for losses 971
9-03(11) Total assets 135,198
9-03(12) Deposits 106,277
9-03(13) Short-term borrowings 11,146
9-03(15) Other liabilities 606
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 8,490
9-03(22) Other stockholders' equity 8,679
9-03(23) Total liabilities and stockholders' equity 135,198
PEOPLES BANCORP, INC.
FINANCIAL DATA SCHEDULE
(continued)
SIX MONTHS ENDED
GUIDE JUNE 30
NUMBER 2000
9-04(1) Interest and fees on loans 4,075
9-04(2) Interest and dividends on investments 849
9-04-(4) Other interest income 156
9-04-(5) Total interest income 5,080
9-04-(6) Interest on deposits 1,815
9-04-(9) Total interest expense 2,016
9-04-(10) Net interest income 3,064
9-04-(11) Provision for loan losses 70
9-04-(13)(h) Investment securities gains/(losses) 0
9-04-(14) Other expenses 1,736
9-04(15) Income/loss before income tax 1,619
9-04(17) Income/loss before extraordinary items 1,619
9-04(18) Extraordinary items, less tax 0
9-04(19) Cumulative change in accounting principles 0
9-04(20) Net income or loss 1,036
9-04(21) Earnings per share - basic 1.22
9-04(21) Earnings per share - diluted 1.22
I.B.5 Net yield on interest earning assets 4.95%
III.C.1(a) Loans on nonaccrual 112
III.C.1(b) Accruing loans past due 90 days or more 1,793
III.C.1(c) Troubled debt restructuring 0
III.C.2 Potential problem loans 3,194
IV.A.1 Allowance for loan loss - beginning of period 903
IV.A.2 Total chargeoffs 5
IV.A.3 Total recoveries 3
IV.A.4 Allowance for loan loss - end of period 971
IV.B.1 Loan loss allowance allocated to domestic loans 971
IV.B.2 Loan loss allowance allocated to foreign loans 0
IV.B.3 Loan loss allowance - unallocated 0
