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 June 30, 2000
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OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ____________ to _______________
Commission File Number: 333-93047
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PEOPLES COMMUNITY BANCORP, INC.
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(Exact name of small business issuer as specified in its charter)
Delaware 31-1686242
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
11 South Broadway, Lebanon, Ohio 45036
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(Address of principal executive offices)
(513) 932-3876
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(Issuer's telephone number)
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(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: 1,977,760 common shares outstanding
as of August 11, 2000
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
Page 1 of 14 pages
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Peoples Community Bancorp, Inc.
INDEX
Page
PART I - FINANCIAL INFORMATION
Consolidated Statements of Financial Condition 3
Consolidated Statements of Earnings 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
<PAGE>
Peoples Community Bancorp, Inc.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In thousands, except share data)
June 30, September 30,
ASSETS 2000 1999
(Restated)
<S> <C> <C>
Cash and due from banks $ 2,162 $ 171
Federal funds sold - 700
Interest-bearing deposits in other financial institutions 3,874 4,312
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Cash and cash equivalents 6,036 5,183
Investment securities designated as available for sale - at market 7,887 3,650
Mortgage-backed securities designated as available for sale -
at market 98,149 1,191
Loans receivable - net 180,458 94,551
Office premises and equipment - at depreciated cost 2,917 1,062
Federal Home Loan Bank stock - at cost 6,504 1,021
Accrued interest receivable on loans 813 413
Accrued interest receivable on mortgage-backed securities 530 20
Accrued interest receivable on investments and
interest-bearing deposits 142 22
Prepaid expenses and other assets 810 206
Goodwill, net of accumulated amortization 4,816 -
Deferred federal income taxes 751 7
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Total assets $309,813 $107,326
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $147,110 $ 91,018
Advances from the Federal Home Loan Bank 128,150 -
Accrued interest payable 735 2
Other liabilities 1,622 937
Accrued federal income taxes 1,147 692
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Total liabilities 278,764 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 18,578 -
Retained earnings - restricted 12,015 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 1,210 1,251
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Total stockholders' equity 31,049 14,677
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Total liabilities and stockholders' equity $309,813 $107,326
======= =======
</TABLE>
3
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Peoples Community Bancorp, Inc.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except share data)
Nine months ended Three months ended
June 30, June 30,
2000 1999 2000 1999
(Restated) (Restated)
<S> <C> <C> <C> <C>
Interest income
Loans $7,285 $5,418 $3,336 $1,788
Mortgage-backed securities 1,931 69 1,677 22
Investment securities 271 170 186 57
Interest-bearing deposits and other 238 260 94 60
----- ----- ----- -----
Total interest income 9,725 5,917 5,293 1,927
Interest expense
Deposits 4,055 3,441 1,762 1,106
Borrowings 1,985 39 1,721 -
----- ----- ----- -----
Total interest expense 6,040 3,480 3,483 1,106
----- ----- ----- -----
Net interest income 3,685 2,437 1,810 821
Provision for losses on loans 111 35 45 15
----- ----- ----- -----
Net interest income after provision
for losses on loans 3,574 2,402 1,765 806
Other operating income 120 39 107 32
General, administrative and other expense
Employee compensation and benefits 1,387 920 671 306
Occupancy and equipment 144 77 83 29
Federal deposit insurance premiums 16 12 8 4
Franchise taxes 139 98 73 33
Data processing 116 85 58 29
Other operating 259 206 138 51
Goodwill amortization 123 - 123 -
Merger-related expenses 1,010 - - -
----- ----- ----- -----
Total general, administrative and other expense 3,194 1,398 1,154 452
----- ----- ----- -----
Earnings before income taxes 500 1,043 718 386
Federal income taxes
Current 555 354 286
131
Deferred (309) (24) (7) (1)
----- ----- ----- -----
Total federal income taxes 246 330 279 130
----- ----- ----- -----
NET EARNINGS $ 254 $ 713 $ 439 $ 256
===== ===== ===== =====
EARNINGS PER SHARE
Basic N/A N/A $.23 N/A
=== === === ===
Diluted N/A N/A $.23 N/A
=== === === ===
</TABLE>
4
<PAGE>
Peoples Community Bancorp, Inc.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
For the nine months For the three months
ended June 30, ended June 30,
2000 1999 2000 1999
(Restated) (Restated)
<S> <C> <C> <C> <C>
Net earnings $ 254 $ 713 $ 439 $ 256
Other comprehensive income (loss), net of tax:
Unrealized holding gains (losses) on securities during
the period, net of tax effects of $(21), $1, $98 and
$(96) for the respective periods (28) 2 204 (187)
Reclassification adjustment for realized gains included
in earnings, net of tax of $6 for the respective periods (13) - (13) -
----- ----- ----- -----
Comprehensive income $ 213 $ 715 $ 630 $ 69
===== ===== ===== =====
Accumulated comprehensive income $1,210 $1,406 $1,210 $1,406
===== ===== ===== =====
</TABLE>
5
<PAGE>
Peoples Community Bancorp, Inc.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended June 30,
(In thousands)
2000 1999
(Restated)
<S> <C> <C>
Cash flows provided by (used in) operating activities:
Net earnings for the period $ 254 $ 713
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Amortization of deferred loan origination fees (204) (144)
Depreciation and amortization 175 39
Provision for losses on loans 111 35
Federal Home Loan Bank stock dividends (114) (53)
Gain on sale of mortgage-backed securities (19) -
Increase (decrease) in cash, net of acquisition of Harvest Home
Financial Corporation, due to changes in:
Accrued interest receivable on loans (117) (60)
Accrued interest receivable on mortgage-backed securities (294) (2)
Accrued interest receivable on investments and interest-
bearing deposits (31) 30
Prepaid expenses and other assets (316) 45
Accrued interest payable 490 27
Other liabilities (2,056) 374
Federal income taxes
Current (305) 279
Deferred 134 301
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Net cash provided by (used in) operating activities (2,292) 1,584
Cash flows provided by (used in) investing activities:
Proceeds from maturity of investment securities - 500
Purchase of mortgage-backed securities (58,583) -
Principal repayments on mortgage-backed securities 4,001 282
Proceeds from sale of mortgage-backed securities 2,201 -
Principal repayments on loans 20,083 18,733
Loan disbursements (43,683) (25,795)
Purchase of office equipment (784) -
Purchase of Federal Home Loan Bank stock (3,139) -
Acquisition of Harvest Home Financial Corporation common
stock - net (4,285) -
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Net cash used in investing activities (84,189) (6,280)
Cash flows provided by (used in) financing activities:
Net increase (decrease) in deposit accounts (7,166) 3,157
Proceeds from Federal Home Loan Bank advances 84,200 -
Proceeds from stock issuance - net 10,300 -
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Net cash provided by financing activities 87,334 3,157
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Net increase (decrease) in cash and cash equivalents 853 (1,539)
Cash and cash equivalents at beginning of period 5,183 7,748
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Cash and cash equivalents at end of period $ 6,036 $ 6,209
====== ======
</TABLE>
6
<PAGE>
Peoples Community Bancorp, Inc.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
For the nine months ended June 30,
(In thousands)
2000 1999
(Restated)
<S> <C> <C>
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Federal income taxes $ 250 $ 375
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Interest on deposits and borrowings $ 5,307 $3,555
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Supplemental disclosure of noncash investing activities:
Unrealized gains (losses) on securities designated as available
for sale, net of related tax effects $ (41) $ 2
======= =====
Liabilities assumed and consideration paid in acquisition of
Harvest Home Financial Corporation $122,965 $ -
Less: fair value of assets received 118,026 -
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Amount assigned to goodwill $ 4,939 $ -
======= =====
</TABLE>
7
<PAGE>
Peoples Community Bancorp, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the nine and three month periods ended June 30, 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 nine month periods
ended June 30, 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 its wholly-owned subsidiary,
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 nine and three month periods ended June 30, 2000 and 1999
4. Earnings Per Share
Basic earnings per share is computed based upon the weighted-average common
shares outstanding during the period less shares in the ESOP that are
unallocated and not committed to be released. Weighted-average common shares
deemed outstanding, which gives effect to 95,200 unallocated ESOP shares,
totaled 1,882,560 for the three month period ended June 30, 2000.
The provisions of SFAS No. 128, "Earnings Per Share," are not applicable for the
nine month periods ended June 30, 2000 and 1999, and the three month period
ended June 30, 1999, as the Company was not a stock entity until March 29, 2000.
The Company has no dilutive or potentially dilutive securities.
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 Company'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 June 30,
2000
At June 30, 2000, the Company's total assets amounted to $309.8 million, as
compared to $107.3 million at September 30, 1999. The increase of $202.5
million, or 188.7%, was primarily due to an increase of $85.9 million in loans
receivable and an increase of $97.0 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 $23.6 million net increase from new loan
originations. The increase in mortgage-backed securities was comprised of a
$44.6 million increase from the Harvest Home acquisition and a $52.4 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 $853,000, or 16.5%, to $6.0 million at
June 30, 2000. During the nine months ended June 30, 2000, investment securities
increased $4.2 million, or 116.1%, 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 $5.5 million, or 537%,
increase in Federal Home Loan Bank stock was primarily attributable to purchase
requirements by the Federal Home Loan Bank to secure advances and, to a lesser
extent, the Harvest Home acquisition.
The Company's allowance for loan losses amounted to $721,000 at June 30, 2000,
compared to $415,000 at September 30, 1999. Nonperforming loans totaled $1.3
million and $1.0 million at June 30, 2000 and September 30, 1999, respectively,
representing .72% and 1.1% of the total loan portfolio at those respective
dates. Although management believes that the allowance for loan losses is
adequate based upon the available facts and circumstances, there can be no
assurance that additions to such allowance will not be necessary in future
periods, which could adversely affect People's results of operations.
Deposits increased by $56.1 million, or 61.6%, 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 $128.2 million, at June 30,
2000, comprised of $44.0 million recorded in the Harvest Home acquisition and
$84.2 million in new borrowings used to fund securities purchases and loan
originations.
Stockholders' equity increased by $16.4 million, or 111.5%, to $31.0 million at
June 30, 2000, reflecting the successful completion of the Conversion on March
29, 2000.
Comparison of Operating Results for the Three and Nine Month Periods Ended June
30, 2000 and 1999
General
The inclusion of the accounts of Harvest Home, which the Company acquired in
March 2000 in a transaction accounted for using the purchase method of
accounting, significantly contributed to the increases in the level of income
and expenses during the nine months ended June 30, 2000, compared to the nine
months ended June 30, 1999. The statements of earnings for the nine and three
month periods ended June 30, 1999, were not restated for the acquisition.
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 Nine Month Periods Ended June
30, 2000 and 1999 (continued)
General (continued)
The Company recorded net earnings of $439,000 and $254,000 for the three and
nine months ended June 30, 2000, respectively. Net earnings for the nine month
period ended June 30, 2000, 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 $920,000 for the nine months ended
June 30, 2000.
Net Interest Income
Net interest income for the three months ended June 30, 2000, compared to the
three months ended June 30, 1999, increased $989,000, or 120.5%, from $821,000
to $1.8 million. A $4.4 million increase in interest income was partially offset
by a $3.4 million increase in interest expense.
Net interest income for the nine months ended June 30, 2000, compared to the
same period in 1999, increased $1.2 million, or 51.2%, from $2.4 million to $3.7
million. A $3.8 million increase in interest income was partially offset by a
$2.6 million increase in interest expense.
For both the three and nine 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 increases
in various categories of earning assets, in particular mortgage-backed
securities. The average balance of interest earning assets also increased 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 income on loans, mortgage-backed securities and investment securities
increased when comparing both the three and nine month periods in 2000 versus
the same periods in 1999, while interest income from interest bearing deposits
remained relatively stable.
Excluding the effects of the Harvest Home acquisition, interest expense on
deposits was relatively stable for both the nine month and three month periods
of 2000 versus 1999 as rising interest rates were offset by lower average
balances. Interest expense on borrowings increased due to an increase in the
average balance of Federal Home Loan Bank advances outstanding year to year.
11
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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 Nine Month Periods Ended June
30, 2000 and 1999 (continued)
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 $111,000 and $35,000 for the nine months ended June 30, 2000 and 1999,
respectively, and $45,000 and $15,000 for the three months ended June 30, 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 recorded in the three and nine month periods ended
June 30, 2000, were due primarily to increased loan originations, as well as
increased delinquencies.
General, Administrative and Other Expense
General, administrative and other expenses increased by $702,000 and $1.8
million for the three and nine months ended June 30, 2000, as compared to the
same periods in 1999. The increase for the three month period ended June 30,
2000, was primarily due to $123,000 of goodwill amortization and $365,000 of
increased employee compensation and benefits. The increase for the nine month
period ended June 30, 2000, was primarily due to one time merger related charges
of $1.0 million combined with $123,000 of goodwill amortization and $467,000 of
increased employee compensation and benefits.
Federal Income Taxes
The Company recorded tax provisions totaling $279,000 and $246,000 for the three
and nine months ended June 30, 2000, respectively, as compared to provisions of
$130,000 and $330,000 for the same periods in 1999. The effective tax rates
amounted to 38.9% and 49.2% for the three and nine month periods ended June 30,
2000, respectively, and 33.7% and 31.6% for the three and nine month periods
ended June 30, 1999, respectively. The increase in the effective tax rates in
the 2000 periods was due primarily to the effects of nondeductible goodwill
amortization and merger-related expenses.
12
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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
eports on Form 8-K: None.
xhibits:
27.1 Financial Data Schedule for the nine month
period ended June 30, 2000.
27.2 Restated Financial Data Schedule for the
nine month period ended June 30, 1999.
13
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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: August 14, 2000 By: /s/Jerry D. Williams
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Jerry D. Williams
President
Date: August 14, 2000 By: /s/Thomas J. Noe
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Thomas J. Noe
Chief Financial Officer
14
