UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
---------------------------------
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ____________ to _______________
Commission File Number: 333-93047
----------------------------
PEOPLES COMMUNITY BANCORP, INC.
- ----------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 31-1686242
- ------------------------------- -----------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
11 South Broadway, Lebanon, Ohio 45036
- ----------------------------------------------------------------------------
(Address of principal executive offices)
(513) 932-3876
- ----------------------------------------------------------------------------
(Issuer's telephone number)
- ----------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the issuer filed all documents and reports required to be filed by
Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities
under a plan confirmed by a court.
Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: May 15, 2000 - 1,977,760 common
shares, $.01 par value
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
Page 1 of 14 pages
<PAGE>
Peoples Community Bancorp, Inc.
INDEX
Page
PART I - FINANCIAL INFORMATION
Consolidated Statements of Financial Condition 3
Consolidated Statements of Operations 4
Consolidated Statements of Comprehensive Income 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 8
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 10
PART II - OTHER INFORMATION 13
SIGNATURES 14
2
<PAGE>
Peoples Community Bancorp, Inc.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In thousands, except share data)
March 31, September 30,
ASSETS 2000 1999
(Restated)
<S> <C> <C>
Cash and due from banks $ 1,931 $ 171
Federal funds sold 1,200 700
Interest-bearing deposits in other financial institutions 7,702 4,312
------- -------
Cash and cash equivalents 10,833 5,183
Investment securities designated as available for sale - at market 8,468 3,650
Mortgage-backed securities designated as available for sale -
at market 80,304 1,191
Loans receivable - net 166,963 94,551
Office premises and equipment - at depreciated cost 2,371 1,062
Federal Home Loan Bank stock - at cost 4,438 1,021
Accrued interest receivable on loans 747 413
Accrued interest receivable on mortgage-backed securities 404 20
Accrued interest receivable on investments and
interest-bearing deposits 111 22
Prepaid expenses and other assets 473 206
Goodwill, net of accumulated amortization 4,939 -
Deferred federal income taxes 1,187 7
------- -------
Total assets $281,238 $107,326
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $151,381 $ 91,018
Advances from the Federal Home Loan Bank 87,753 -
Accrued interest payable 269 2
Other liabilities 10,529 937
Accrued federal income taxes 868 692
------- -------
Total liabilities 250,800 92,649
Stockholders' equity
Common stock - 10,000,000 shares of $.01 par value authorized;
1,977,760 shares issued 198 -
Additional paid-in capital 18,597 -
Retained earnings - restricted 11,576 13,426
Shares acquired by Employee Stock Ownership Plan (952) -
Accumulated comprehensive income, unrealized gains on securities
designated as available for sale, net of related tax effects 1,019 1,251
------- -------
Total stockholders' equity 30,438 14,677
------- -------
Total liabilities and stockholders' equity $281,238 $107,326
======= =======
</TABLE>
3
<PAGE>
Peoples Community Bancorp, Inc.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share data)
Six months ended Three months ended
March 31, March 31,
2000 1999 2000 1999
(Restated) (Restated)
<S> <C> <C> <C> <C>
Interest income
Loans $3,949 $3,630 $2,042 $1,812
Mortgage-backed securities 254 47 235 24
Investment securities 85 113 44 56
Interest-bearing deposits and other 144 200 65 95
----- ----- ----- -----
Total interest income 4,432 3,990 2,386 1,987
Interest expense
Deposits 2,293 2,335 1,164 1,152
Borrowings 264 39 251 12
----- ----- ----- -----
Total interest expense 2,557 2,374 1,415 1,164
----- ----- ----- -----
Net interest income 1,875 1,616 971 823
Provision for losses on loans 66 20 33 10
----- ----- ----- -----
Net interest income after provision
for losses on loans 1,809 1,596 938 813
Other operating income 13 7 3 4
General, administrative and other expense
Employee compensation and benefits 716 614 369 313
Occupancy and equipment 61 48 29 29
Federal deposit insurance premiums 8 8 4 4
Franchise taxes 66 65 32 34
Data processing 58 56 29 28
Other operating 121 155 53 66
Merger-related expenses 1,010 - 1,010 -
----- ----- ----- -----
Total general, administrative and other expense 2,040 946 1,526 474
----- ----- ----- -----
Earnings (loss) before income taxes (credits) (218) 657 (585) 343
Federal income taxes (credits)
Current 269 223 145 115
Deferred (302) (23) (298) (7)
----- ----- ----- -----
Total federal income taxes (credits) (33) 200 (153) 108
----- ----- ----- -----
NET EARNINGS (LOSS) $ (185) $ 457 $ (432) $ 235
===== ===== ===== =====
EARNINGS PER SHARE N/A N/A N/A N/A
=== === === ===
</TABLE>
4
<PAGE>
Peoples Community Bancorp, Inc.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME
(In thousands)
For the six months For the three months
ended March 31, ended March 31,
2000 1999 2000 1999
(Restated) (Restated)
<S> <C> <C> <C> <C>
Net earnings (loss) $ (185) $ 457 $ (432) $ 235
Other comprehensive income (loss), net of tax:
Unrealized holding gains (losses) on securities during
the period, net of tax effects of $(120), $97, $(57)
and $98 for the respective periods (232) 189 (110) 190
----- ----- ----- -----
Comprehensive income (loss) $ (417) $ 646 $ (542) $ 425
===== ===== ===== =====
Accumulated comprehensive income $1,019 $1,438 $1,019 $1,438
===== ===== ===== =====
</TABLE>
5
<PAGE>
Peoples Community Bancorp, Inc.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended March 31,
(In thousands)
2000 1999
<S> <C> <C>
Cash flows provided by (used in) operating activities:
Net (loss) earnings for the period $ (185) $ 457
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Amortization of deferred loan origination fees (102) (96)
Depreciation and amortization 26 26
Provision for losses on loans 66 20
Federal Home Loan Bank stock dividends (37) (35)
Increase (decrease) in cash, net of acquisition of Harvest Home
Financial Corporation, due to changes in:
Accrued interest receivable on loans (51) (40)
Accrued interest receivable on mortgage-backed securities (168) (2)
Accrued interest receivable on investments and interest-
bearing deposits (34) 20
Prepaid expenses and other assets 21 15
Accrued interest payable 24 18
Other liabilities 7,458 249
Federal income taxes
Current (584) 186
Deferred (302) 201
------ ------
Net cash provided by operating activities 6,132 1,019
Cash flows provided by (used in) investing activities:
Maturity of investment securities - 500
Purchase of Federal Home Loan Bank stock (1,150) -
Purchase of mortgage-backed securities (38,807) -
Principal repayments on mortgage-backed securities 3,291 168
Principal repayments on loans 11,661 12,791
Loan disbursements (22,202) (14,374)
Purchase of office equipment (198) -
Acquisition of Harvest Home Financial Corporation common
stock - net (4,285) -
------ ------
Net cash used in investing activities (51,690) (915)
Cash flows provided by (used in) financing activities:
Net increase (decrease) in deposit accounts (2,895) 4,121
Proceeds from Federal Home Loan Bank advances 43,803 -
Repayment of Federal Home Loan Bank advances - (4,000)
Proceeds from stock issuance - net 10,300 -
------ ------
Net cash provided by financing activities 51,208 121
------ ------
Net increase in cash and cash equivalents 5,650 225
Cash and cash equivalents at beginning of period 5,183 7,748
------ ------
Cash and cash equivalents at end of period $10,833 $ 7,973
====== ======
</TABLE>
6
<PAGE>
Peoples Community Bancorp, Inc.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
For the six months ended March 31,
(In thousands)
2000 1999
<S> <C> <C>
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Federal income taxes $ 125 $ 225
======= =====
Interest on deposits and borrowings $ 2,533 $2,370
======= =====
Supplemental disclosure of noncash investing activities:
Unrealized gains (losses) on securities designated as available
for sale, net of related tax effects $ (232) $ 189
======= =====
Liabilities assumed and consideration paid in acquisition of
Harvest Home Financial Corporation $122,965 $ -
Less: fair value of assets received 118,026 -
------- -----
Amount assigned to goodwill $ 4,939 $ -
======= =====
</TABLE>
7
<PAGE>
Peoples Community Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the six and three month periods ended March 31, 2000 and 1999
1. Basis of Presentation
The accompanying unaudited consolidated financial statements were prepared in
accordance with instructions for Form 10-QSB and, therefore, do not include
information or footnotes necessary for a complete presentation of consolidated
financial position, results of operations and cash flows in conformity with
generally accepted accounting principles. However, in the opinion of management,
all adjustments (consisting of only normal recurring accruals) which are
necessary for a fair presentation of the consolidated financial statements have
been included. The results of operations for the three and six month periods
ended March 31, 2000 are not necessarily indicative of the results which may be
expected for an entire fiscal year.
2. Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Peoples Community Bancorp, Inc. (the "Company") and Peoples Community Bank (the
"Bank"). All significant intercompany items have been eliminated.
3. Business Combinations
On March 29, 2000, the People's Building, Loan and Savings Company ("Peoples")
and The Oakley Improved Building and Loan Company ("Oakley"), (collectively "the
Companies"), jointly executed an Agreement and Plan of Merger (the "Merger")
wherein Oakley merged with and into Peoples. The Merger was accounted for under
the pooling-of-interests method of accounting, whereby prior year amounts are
restated to include the accounts of Oakley. In connection therewith, the
Companies adopted an overall Plan of Conversion (the "Conversion") whereby a new
holding company, Peoples Community Bancorp, Inc. (the "Company") was formed, and
converted from mutual to stock form.
Pursuant to the Plan of Conversion, the Company issued 1,190,000 common shares
to its depositors and members of the community. The costs of issuing the common
stock were deducted from the sale proceeds of the offering.
Immediately following the Merger and Conversion, the Company acquired the
Harvest Home Financial Corporation ("Harvest Home") for consideration of $7.9
million in cash and 787,760 shares of common stock. Under the terms of the
Agreement, each share of Harvest Home's common stock was exchanged for a
combination of $9.00 per share in cash plus new common shares of the Company
with a value of $9.00. The acquisition was accounted for using the purchase
method of accounting, consequently prior period amounts are not restated.
8
<PAGE>
Peoples Community Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the six and three month periods ended March 31, 2000 and 1999
4. Earnings (Loss) Per Share
Earnings (loss) per share is not applicable for any of the periods presented as
the Company was not a stock entity until March 29, 2000.
5. Effects of Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities," which requires entities to
recognize all derivatives in their financial statements as either assets or
liabilities measured at fair value. SFAS No. 133 also specifies new methods of
accounting for hedging transactions, prescribes the items and transactions that
may be hedged, and specifies detailed criteria to be met to qualify for hedge
accounting.
The definition of a derivative financial instrument is complex, but in general,
it is an instrument with one or more underlyings, such as an interest rate or
foreign exchange rate, that is applied to a notional amount, such as an amount
of currency, to determine the settlement amount(s). It generally requires no
significant initial investment and can be settled net or by delivery of an asset
that is readily convertible to cash. SFAS No. 133 applies to derivatives
embedded in other contracts, unless the underlying of the embedded derivative is
clearly and closely related to the host contract.
SFAS No. 133, as amended by SFAS No. 137, is effective for fiscal years
beginning after June 15, 2000. On adoption, entities are permitted to transfer
held-to-maturity debt securities to the available-for-sale or trading category
without calling into question their intent to hold other debt securities to
maturity in the future. SFAS No. 133 is not expected to have a material impact
on the Corporation's financial statements.
9
<PAGE>
Peoples Community Bancorp, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Discussion of Financial Condition Changes from September 30, 1999 to March 31,
2000
At March 31, 2000, the Company's total assets amounted to $281.2 million, as
compared to $107.3 million at September 30, 1999. The increase of $173.9
million, or 162.1%, was primarily due to an increase of $72.4 million in loans
receivable and an increase of $79.1 million in mortgage-backed securities. The
increase in loans receivable was comprised of a $62.3 million increase from the
Harvest Home acquisition and a $10.1 million net increase in originations. The
increase in mortgage-backed securities was comprised of a $44.6 million increase
from the Harvest Home acquisition and a $34.5 million net increase in purchases
as the Company began to implement a capital leveraging plan. Such increases were
funded primarily by Federal Home Loan Bank advances and to a lesser extent by
the proceeds of the Conversion.
Cash and cash equivalents increased by $5.6 million, or 109.0%, from $5.2
million to $10.8 million during the six months ended March 31, 2000. During this
period, investment securities increased $4.8 million, or 132.0%, while goodwill
of $4.9 million was recognized from the Harvest Home acquisition. These
increases were all primarily attributable to the Harvest Home acquisition. The
$3.4 million, or 334.7%, increase in Federal Home Loan Bank stock was primarily
attributable to the Harvest Home acquisition and to a lesser extent, purchase
requirements by the Federal Home Loan Bank to secure advances.
Deposits increased by $60.4 million, or 66.3%, which was primarily due to the
Harvest Home acquisition, partially offset by withdrawals from deposit accounts
to fund stock purchases in the conversion.
Advances from the Federal Home Loan Bank totaled $87.8 million, at March 31,
2000, comprised of $44.0 million recorded in the Harvest Home acquisition and
$43.8 million in new borrowings used to fund securities purchases and loan
originations.
Other liabilities increased by $9.6 million, or 1,023.7%, primarily due to
payments in transit associated with the Conversion and Merger.
Stockholders' equity increased by $15.8 million, or 107.4%, to $30.4 million
reflecting the successful completion of the Conversion on March 29, 2000.
Comparison of Operating Results for the Three and Six Month Periods Ended March
31, 2000
General
The Company experienced net losses of $432,000 and $185,000 for the three and
six months ended March 31, 2000, respectively. Such losses primarily reflect the
effect of the recognition of one time charges totaling $1.0 million related to
the merger. Excluding these charges, the Company's net earnings would have been
$281,000 and $523,000 for the three and six months ended March 31, 2000.
10
<PAGE>
Peoples Community Bancorp, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Comparison of Operating Results for the Three and Six Month Periods Ended March
31, 2000 (continued)
Net Interest Income
Net interest income for the three months ended March 31, 2000, compared to the
three months ended March 31, 1999, increased $148,000, or 18.0%, from $823,000
to $971,000. A $399,000 increase in interest income was partially offset by a
$251,000 increase in interest expense.
Net interest income for the six months ended March 31, 2000, compared to the
same period in 1999, increased $259,000, or 16.0%, from $1.6 million to $1.9
million. A $442,000 increase in interest income was partially offset by a
$183,000 increase in interest expense.
For both the three and six month periods in 2000, the average balance of
interest earning assets increased substantially as compared to the 1999 periods,
reflecting the utilization of Federal Home Loan Bank advances to fund various
categories of earning assets, in particular mortgage-backed securities. The
average balance of interest earning assets also increased, though to a lesser
degree, as a result of the merger and conversion which was consummated on March
29, 2000. An increase in yields on interest-earning assets was partially offset
by an increase in the rates paid on interest-bearing liabilities, due to the
increase in the general level of market interest rates.
Interest on loans and mortgage-backed securities increased when comparing both
the three and six month periods in 2000 versus the same periods in 1999 which
were partially offset by decreases in interest income from investment securities
and interest bearing deposits.
Interest expense on deposits was relatively stable for both the six month and
three month periods of 2000 versus 1999 as rising interest rates were offset by
lower average balances. Interest expense on borrowings increased primarily due
to an increase in average balances.
Provision for Losses on Loans
It is the Bank's policy to provide valuation allowances for estimated losses on
loans based on past loan loss experience, changes in the composition of the loan
portfolio, trends in the level of delinquent and problem loans, adverse
situations that may affect the borrower's ability to repay, the estimated value
of any underlying collateral and current and anticipated economic conditions in
the primary lending area. The allowance for loan losses is increased by charges
to earnings and decreased by charge-offs (net of recoveries). After considering
the above guidelines, management decided to increase the allowance for losses on
loans by $66,000 and $33,000 for the six months ended March 31, 2000 and 1999,
respectively, and $20,000 and $10,000 for the three months ended March 31, 2000
and 1999, respectively. There can be no assurance that the allowance for losses
on loans of the Bank will be adequate to cover losses on nonperforming loans in
the future.
The provision for loan losses increased $23,000 and $46,000 for the three and
six months ended March 31, 2000, as compared to the same periods in 1999. These
increases are due to increased loan originations, as well as increased
delinquencies.
11
<PAGE>
Peoples Community Bancorp, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Comparison of Operating Results for the Three and Six Month Periods Ended March
31, 2000 and 1999 (continued)
General, Administrative and Other Expense
General, administrative and other expenses increased $1.1 million for the three
and six months ended March 31, 2000, as compared to the same periods in 1999,
primarily due to one time merger related charges of $1.0 million, and to a
lesser extent, increases of $56,000 and $102,000 in employee compensation and
benefits during the three and six months ended March 31, 2000, as compared to
the same periods in 1999.
Federal Income Taxes
The Company experienced tax benefits totaling $153,000 and $33,000 for the three
and six months ended March 31, 2000, respectively, as compared to provisions of
$108,000 and $200,000 for the same periods in 1999. The tax benefits reflect the
losses incurred in the 2000 periods due to the recognition of the nonrecurring
merger related expenses.
12
<PAGE>
Peoples Community Bancorp, Inc.
PART II
ITEM 1. Legal Proceedings
Not applicable
ITEM 2. Changes in Securities and Use of Proceeds
Not applicable
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
Reports on Form 8-K: None.
Exhibit 27: Financial Data Schedule for the six
month period ended March 31, 2000.
13
<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.
Date: May 15, 2000 By: /s/Jerry D. Williams
----------------------- --------------------
Jerry D. Williams
President
Date: May 15, 2000 By: /s/Thomas J. Noe
----------------------- ----------------
Thomas J. Noe
Chief Financial Officer
14
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> MAR-31-2000
<CASH> 1,931
<INT-BEARING-DEPOSITS> 7,702
<FED-FUNDS-SOLD> 1,200
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 88,772
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 80,304
<ALLOWANCE> 676
<TOTAL-ASSETS> 281,238
<DEPOSITS> 151,381
<SHORT-TERM> 0
<LIABILITIES-OTHER> 0
<LONG-TERM> 87,753
0
0
<COMMON> 198
<OTHER-SE> 30,240
<TOTAL-LIABILITIES-AND-EQUITY> 281,238
<INTEREST-LOAN> 3,949
<INTEREST-INVEST> 339
<INTEREST-OTHER> 144
<INTEREST-TOTAL> 4,432
<INTEREST-DEPOSIT> 2,293
<INTEREST-EXPENSE> 2,557
<INTEREST-INCOME-NET> 1,875
<LOAN-LOSSES> 66
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,040
<INCOME-PRETAX> (218)
<INCOME-PRE-EXTRAORDINARY> (218)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (185)
<EPS-BASIC> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 3.34
<LOANS-NON> 1,249
<LOANS-PAST> 76
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 415
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 676
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 676
</TABLE>
