<PAGE>
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _____________________ to ________________
Commission file number 0-13653
_____________________________________________________
THE PEOPLES BANCTRUST COMPANY, INC.
___________________________________
(Exact name of registrant as specified in its charter)
Alabama 63-0896239
_______________________________ _______________________________
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) or No.)
310 Broad Street, Selma, Alabama 36701
__________________________________ _____________________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (334) 875-1000.
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.10 per share
______________________________________
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The registrant's voting stock is traded on the NASDAQ SmallCap Market. The
aggregate market value of the voting stock held by non-affiliates of the
registrant, computed by reference to the price ($16.25 per share) at which the
stock was sold on March 23, 1995, was approximately $15,089,230. For purposes
of this calculation, the term "affiliate" refers to all executive officers and
directors of the registrant and all stockholders beneficially owning more than
10% of the registrant's Common Stock.
As of the close of business on March 23, 1995, 1,743,838 shares of the
registrant's Common Stock were outstanding.
Documents Incorporated By Reference
Part II:
Annual Report to Stockholders for the year ended December 31, 1994.
Part III:
Portions of the definitive proxy statement for the Annual Meeting of the
Shareholders to be held on April 11, 1995.
<PAGE>
PART I
ITEM 1. BUSINESS
THE PEOPLES BANCTRUST COMPANY, INC. AND THE PEOPLES BANK AND TRUST COMPANY
The Peoples BancTrust Company, Inc. ("BancTrust") is a bank holding company
incorporated under the laws of the State of Alabama in April 1984. BancTrust is
registered under the Bank Holding Company Act of 1956, as amended (the "Holding
Company Act"). BancTrust is the holding company for The Peoples Bank and Trust
Company ("Peoples Bank"), which was chartered by the State of Alabama in 1902
and acquired by BancTrust in April 1985.
BancTrust and Peoples Bank are headquartered in Selma, Alabama. Peoples
Bank conducts a general commercial and full-service retail banking business in
Dallas and Butler counties and surrounding areas of Alabama. In addition,
Peoples Bank offers trust and financial management services. Peoples Bank
provides banking services to individuals, corporations and others. Peoples
Bank's services also include the sale of traveler's checks, the rental of safe
deposit facilities, collection of domestic and foreign items, issuance of
cashier's checks and money orders, 24-hour Automated Teller Machine ("ATM")
service, bank by mail and night depository and other customary banking services.
Peoples Bank makes commercial, personal, construction and real estate loans and
accepts both demand and time deposits. Peoples Bank offers a wide variety of
other financial products through its brokerage department and insurance agency.
Peoples Bank is a member of the Federal Deposit Insurance Corporation
("FDIC"), and its deposit accounts are insured by the Bank Insurance Fund
("BIF") to a maximum of $100,000 for each insured depositor. Peoples Bank is
subject to supervision and regulation by the Board of Governors of the Federal
Reserve System (the "FRB") and the State Banking Department of the State of
Alabama (the "Banking Department"). There are also various requirements and
restrictions under the laws of the United States of America and the State of
Alabama which affect the operations of Peoples Bank. These laws include usury
requirements, restrictions relating to investments and other requirements. See
"Regulation, Supervision and Governmental Policy."
BancTrust's executive offices and the main office of Peoples Bank are
located at 310 Broad Street, Selma, Alabama 36701. Peoples Bank also operates
four branches in Selma, three branches in Prattville, two branches in Greenville
and one branch in each of Plantersville, Georgiana and McKenzie, Alabama.
BancTrust's telephone number is (334) 875-1000.
LENDING ACTIVITIES
LOAN COMPOSITION. The following table sets forth, in dollar amounts and in
percentages, a five-year comparison of major categories of BancTrust's loans.
<TABLE>
<CAPTION>
At December 31,
---------------------------------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
(In Thousands)
<S> <C> <C> <C> <C> <C>
Commercial and industrial. . . . . . . . . . . . . . . $ 48,829 $ 42,006 $ 37,039 $ 40,270 $ 43,475
Real estate - mortgage(1). . . . . . . . . . . . . . . 50,092 43,685 38,141 38,133 37,728
Personal . . . . . . . . . . . . . . . . . . . . . . . 66,170 51,299 38,465 38,827 38,494
Overdrafts and credit line . . . . . . . . . . . . . . 4,365 4,929 3,514 2,719 2,514
-------- -------- -------- -------- --------
Total loans. . . . . . . . . . . . . . . . . . . . . $169,456 $141,919 $117,159 $119,949 $122,211
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Less:
Unearned discount. . . . . . . . . . . . . . . . . . $ 6,478 $ 4,943 $ 3,907 $ 4,628 $ 5,011
Allowance for loan losses. . . . . . . . . . . . . . 2,039 2,205 1,898 1,264 1,290
-------- -------- -------- -------- --------
Total loans, net . . . . . . . . . . . . . . . . . $160,939 $134,771 $111,354 $114,057 $115,910
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
_______________________________
<FN>
(1) Includes real estate-construction loans.
</TABLE>
The above loans include agricultural loans totaling approximately $13.6
million, $7.9 million, $7.2 million, $8.7 million and $9.9 million at December
31, 1994, 1993, 1992, 1991 and 1990, respectively. See Note 7 of Notes
-2-
<PAGE>
to Consolidated Financial Statements in BancTrust's Annual Report to
Stockholders for the year ended December 31, 1994 (Exhibit No. 13) which is
incorporated herein by reference.
LOAN MATURITIES. The following table reflects at December 31, 1994 the
dollar amount of loans maturing or subject to rate adjustment based on their
contractual terms to maturity. Loans with fixed rates are reflected based upon
the contractual repayment schedule while loans with variable interest rates are
reflected based upon the contractual repayment schedule up to the contractual
rate adjustment date. Demand loans, loans having no stated schedule of
repayments and loans having no stated maturity are reported as due within three
months.
<TABLE>
<CAPTION>
One - After
0-3 Months 4-12 Months Five Years Five Years Total
---------- ----------- ---------- ---------- -----
(In Thousands)
<S> <C> <C> <C> <C> <C>
Commercial and industrial. . . . . . . . . . $37,533 $ 6,578 $ 4,460 $ 258 $ 48,829
Real estate-mortgage (1) . . . . . . . . . . 21,384 12,893 12,023 3,792 50,092
Personal, overdrafts and
credit lines . . . . . . . . . . . . . . . 16,323 19,040 35,099 73 70,535
------- ------- ------- ------ --------
$75,240 $38,511 $51,582 $4,123 $169,456
------- ------- ------- ------ --------
------- ------- ------- ------ --------
Loans with fixed interest
rates. . . . . . . . . . . . . . . . . . . $28,104 $24,030 $42,607 $3,910 $ 98,651
Loans with variable
interest rates . . . . . . . . . . . . . . 47,136 14,481 8,975 213 70,805
------- ------- ------- ------ --------
$75,240 $38,511 $51,582 $4,123 $169,456
------- ------- ------- ------ --------
------- ------- ------- ------ --------
<FN>
____________________________
(1) Includes real estate-construction loans of $2,456,000, all of which mature
within one year.
</TABLE>
Notes 1 and 7 of Notes to Consolidated Financial Statements in BancTrust's
Annual Report to Stockholders for the year ended December 31, 1994 (Exhibit No.
13) are incorporated herein by reference.
COMMERCIAL AND INDUSTRIAL LOANS. BancTrust's primary lending activity
consists of the origination of commercial and industrial loans. Such loans are
generally originated in BancTrust's primary lending area. BancTrust's
commercial and industrial loans are made for a variety of business purposes,
including working capital, inventory and equipment and capital expansion. At
December 31, 1994, commercial and industrial loans outstanding totaled $48.8
million, or 30.3% of BancTrust's total net loan portfolio. The terms for
commercial and industrial loans are generally less than one year. Commercial
and industrial loan applications must be supported by current financial
information on the borrower and, where appropriate, by adequate collateral.
Approval of the loans is subject to the borrower qualifying for the loan under
BancTrust's underwriting standards. These types of loans are generally
considered to be a higher credit risk than other loans originated by BancTrust.
REAL ESTATE MORTGAGE LOANS. BancTrust also originates one-to-four family,
owner-occupied residential mortgage loans secured by property located in
BancTrust's primary market area. The majority of BancTrust's residential
mortgage loans consists of loans secured by owner-occupied, single-family
residences. At December 31, 1994, BancTrust had $50.1 million, or 31.1% of its
total net loan portfolio, in real estate mortgage loans.
PERSONAL LOANS. At December 31, 1994, BancTrust's personal loan portfolio
totaled $66.2 million, or 41.1% of BancTrust's total net loan portfolio.
BancTrust's personal loan portfolio is comprised of automobile loans (including
automobile loans requested by dealers), home improvement loans, unsecured
personal notes, mobile home loans, boat loans, credit card loans, and loans
secured by savings deposits. Although personal loans tend to have a higher risk
of default than other loans, management believes that its loan loss experience
with its personal loan portfolio is favorable. However, the performance of such
loans will be affected by the local economy.
LENDING LIMITS. BancTrust's limit for unsecured loans to individual
customers is 10% of the capital accounts of BancTrust. The limit for unsecured
and secured loans combined to individual customers is 20% of the capital
accounts of BancTrust, subject to certain terms and conditions. For customers
desiring loans in excess of BancTrust's lending limits, BancTrust may loan on a
participation basis, with its correspondent banks taking the amount of the loan
in excess of BancTrust's lending limits. In other cases, BancTrust may refer
such borrowers to larger banks or other lending institutions.
-3-
<PAGE>
NONACCRUAL, PAST DUE, RESTRUCTURED AND POTENTIAL PROBLEM LOANS. BancTrust
classifies its problem loans into four categories: non-accrual loans, past-due
loans, restructured loans, and potential problem loans. At December 31, 1994,
there were no material amounts of potential problem loans which were not
included in the other three categories of problem loans.
When management determines that a loan no longer meets the criteria for
performing loans and that collection of interest appears doubtful, the loan is
placed on nonaccrual status. All loans which are 90 days past due are
considered nonaccrual, unless they are adequately secured and there is
reasonable assurance of full collection of principal and interest. Management
closely monitors all loans which are contractually 90 days past due,
restructured or on nonaccrual status. These loans are summarized as follows:
<TABLE>
<CAPTION>
At December 31,
----------------------------------------------
Description 1994 1993 1992 1991 1990
- ----------- ---- ---- ---- ---- ----
(In Thousands)
<S> <C> <C> <C> <C> <C>
Loans accounted for on a nonaccrual basis. . . . . . . . . . . . . . . . . $1,348 $2,055 $2,851 $3,616 $2,929
Accruing loans which are contractually past due
90 days or more as to interest or
principal payments . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 71 -- -- --
Accruing loans, the terms of which have been
restructured to provide a reduction
or deferral of interest or principal
because of a deterioration in the
financial position of the borrower . . . . . . . . . . . . . . . . . . . 275 295 338 441 773
The gross interest income that would
have been recorded in the period then
ended if the nonaccrual and restructured
loans had been current in accordance
with their original terms and had been
outstanding through the period or since
origination, if held for part of the
period.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 131 164 419 475
The amount of interest income on nonaccrual
and restructured loans that was included
in net income for the period . . . . . . . . . . . . . . . . . . . . . . 21 34 27 46 73
</TABLE>
Management of BancTrust has identified certain loans aggregating
approximately $6.5 million at December 31, 1994 (including loans identified in
the above table) which it has determined require special attention due to
potential weaknesses. The largest five loans aggregated approximately $2.3
million and ranged in size from $239,000 to $865,000. No other loan exceeded
$218,000. It is management's opinion that the allowance for loan losses (see
below) is adequate to absorb potential losses related to such loans.
Aggressive efforts continue to reduce principal, secure additional collateral
and improve the overall payment status of these loans.
The following table sets forth BancTrust's potential problem loans at
December 31, 1994 by loan category and the amount and type of collateral
securing such loans.
<TABLE>
<CAPTION>
Loan Category/Collateral Amount
- ------------------------ ------
(In Thousands)
<S> <C>
Commercial and Industrial:
Collateralized by Real Estate. . . . . . . . . . . . $2,370
Collateralized by Other (1). . . . . . . . . . . . . 1,769
Unsecured. . . . . . . . . . . . . . . . . . . . . . 286
------
4,425
------
Real Estate-Mortgage . . . . . . . . . . . . . . . . . 1,687
------
Personal:
Collateralized by Real Estate. . . . . . . . . . . . 307
Collateralized by Other. . . . . . . . . . . . . . . 32
Unsecured. . . . . . . . . . . . . . . . . . . . . . 49
------
388
------
Total. . . . . . . . . . . . . . . . . . . . . . . $6,500
------
------
<FN>
- -------------------
(1) Includes approximately $945,000 of loans collateralized by accounts
receivable, inventory, furniture and fixtures and automobile dealer floor
plans.
</TABLE>
-4-
<PAGE>
LOAN LOSS EXPERIENCE. Note 7 of Notes to Consolidated Financial Statements
contained in BancTrust's Annual Report to Stockholders for the year ended
December 31, 1994 (Exhibit No. 13) is incorporated herein by reference.
The allowance for possible loan losses at BancTrust is maintained at a
level which, in management's opinion, is adequate to absorb all potential losses
on loans then present in the loan portfolio. The amount of the allowance is
affected by: (1) loan charge-offs, which decrease the allowance; (2) recoveries
on loans previously charged-off, which increase the allowance; and (3) the
provision of possible loan losses charged to income, which increase the
allowance. In determining the provision for possible loan losses, it is
necessary for management to monitor fluctuations in the allowance resulting from
actual charge-offs and recoveries, and to periodically review the size and
composition of the loan portfolio in light of current and anticipated economic
conditions in an effort to evaluate portfolio risks. Ultimately, the amount of
the provision is that amount sufficient to maintain the allowance at a level
which reflects management's judgment of those risks.
The following is a summary of activity in the allowance for loan losses for
the periods:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Balance at beginning of year . . . . . . . . . . . $2,204,807 $1,897,695 $1,264,191 $ 1,290,323 $ 1,824,433
Charge-offs:
Commercial and industrial. . . . . . . . . . . . 184,455 440,911 558,946 727,251 500,930
Real estate-mortgage (1) . . . . . . . . . . . . 34,256 10,413 57,855 123,715 762,589
Personal . . . . . . . . . . . . . . . . . . . . 906,959 932,071 997,806 977,635 836,694
Overdraft and credit line. . . . . . . . . . . . 22,302 27,045 37,277 7,814 6,644
---------- ---------- --------- ---------- ----------
Total charge-offs. . . . . . . . . . . . . . . 1,147,972 1,410,440 1,651,884 1,836,415 2,106,857
Recoveries:
Commercial and industrial. . . . . . . . . . . . 113,259 395,319 1,002,883 263,197 57,771
Real estate-mortgage . . . . . . . . . . . . . . 21,747 105,989 124,874 166,920 115,327
Personal . . . . . . . . . . . . . . . . . . . . 495,000 529,529 421,811 431,478 373,100
Overdraft and credit line. . . . . . . . . . . . 4,737 15,023 10,988 1,688 546
---------- ---------- --------- ---------- ----------
Total recoveries . . . . . . . . . . . . . . . 634,743 1,045,860 1,560,556 863,283 546,744
Net charge-offs. . . . . . . . . . . . . . . . . . (513,229) (364,580) (91,328) (973,132) (1,560,113)
Additions charged to operations. . . . . . . . . . 348,000 483,605 724,832 947,000 1,026,003
Addition due to acquisition. . . . . . . . . . . . -- 188,087 -- -- --
---------- ---------- --------- ---------- ----------
Balance at end of year . . . . . . . . . . . . . . $2,039,578 $2,204,807 $1,897,695 $ 1,264,191 $ 1,290,323
---------- ---------- --------- ---------- ----------
---------- ---------- --------- ---------- ----------
Ratio of net charge-offs to average
loans outstanding, net of unearned
discount, during the period. . . . . . . . . . . .32% .28% .08% .79% 1.26%
---------- ---------- --------- ---------- ----------
---------- ---------- --------- ---------- ----------
<FN>
_______________________________
(1) Includes real estate-construction loans.
</TABLE>
The following table presents an allocation of BancTrust's allowance for
loan losses at the dates indicated:
<TABLE>
<CAPTION>
At December 31,
--------------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990
----- ---- ---- ---- ----
% Amount % Amount % Amount % Amount % Amount
--- ------ --- ------ --- ------ --- ------ --- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial and industrial 40% $ 816 42% $ 926 47% $ 892 48% $ 607 60% $ 774
Real estate-mortgage (1) 15% 307 31% 684 28% 532 15% 190 19% 245
Personal 43% 877 25% 551 23% 436 35% 442 20% 258
Overdraft and credit line 2% 40 2% 44 2% 38 2% 25 1% 13
--- ------ --- ------ --- ------ --- ------ --- ------
Total Allowance 100% $2,040 100% $2,205 100% $1,898 100% $1,264 100% $1,290
--- ------ --- ------ --- ------ --- ------ --- ------
--- ------ --- ------ --- ------ --- ------ --- ------
_________________________________
(1) Includes real estate-construction loans.
</TABLE>
-5-
<PAGE>
INVESTMENT ACTIVITIES
SECURITIES BY CATEGORY. The following table sets forth the amount of
securities by major categories held by BancTrust at December 31, 1994, 1993 and
1992.
<TABLE>
<CAPTION>
At December 31,
--------------------------------------
Investment Securities 1994 1993 1992
- --------------------- ---- ---- ----
(In Thousands)
<S> <C> <C> <C>
U.S. Treasury, U.S. Agencies and corporations. . . . . $23,949 $11,642 $52,930
Obligations of states and political
subdivisions . . . . . . . . . . . . . . . . . . . . 2,151 3,735 1,611
Corporate and other securities . . . . . . . . . . . . 1,087 -- 1,131
------- ------- -------
$27,187 $15,377 $55,672
------- ------- -------
------- ------- -------
</TABLE>
<TABLE>
<CAPTION>
At December 31,
-------------------
Securities Available for Sale 1994 1993
- ----------------------------- ------- -------
(In Thousands)
<S> <C> <C>
U.S. Treasury, U.S. Agencies and corporations $60,882 $78,974
Obligations of states and political
subdivisions . . . . . . . . . . . . . . . . . . . . . 1,680 2,862
Corporate and other securities . . . . . . . . . . . . . 13,246 15,111
------- -------
$75,808 $96,947
------- -------
------- -------
</TABLE>
Corporate and other securities as of December 31, 1994, were comprised of
the following:
<TABLE>
<CAPTION>
Securities
Investment Available
Securities For Sale
---------- ---------
(In Thousands)
<S> <C> <C>
Corporate notes . . . . . . . . . . . . . . . . . . $1,000 $ 9,620
Collateralized mortgage obligations . . . . . . . . -- 709
Mutual funds. . . . . . . . . . . . . . . . . . . . -- 1,981
Common stock. . . . . . . . . . . . . . . . . . . . 87 936
------ -------
$1,087 $13,246
------ -------
------ -------
</TABLE>
All rated corporate notes are in the A1 to AAA range. One non-rated
security, an in-state general obligation bond, was issued by a public utility
company. All collateralized mortgage obligations are either guaranteed by the
Federal National Mortgage Association or the Federal Home Loan Mortgage
Corporation or have AAA ratings. Common stock holdings include investments in
the Federal Reserve Bank, Federal Home Loan Bank and another local bank, which
is closely monitored by management.
Management considers all of the above securities to have a relatively low
level of risk.
For information regarding the amortized cost and approximate market value
of securities at December 31, 1994 and 1993, see Note 6 of Notes to Consolidated
Financial Statements contained in BancTrust's Annual Report to Stockholders for
the year ended December 31, 1994 (Exhibit No. 13) which is incorporated herein
by reference.
-6-
<PAGE>
MATURITY DISTRIBUTIONS OF SECURITIES. The following table sets forth the
distributions of maturities of securities as of December 31, 1994.
<TABLE>
<CAPTION>
Maturity (in years)
-----------------------------------------------------------
No Specific
0-3 Months 4-12 Months Over 1 to 5 Over 5 to 10 Over 10 Due Date
---------- ----------- ----------- ------------ ------- -----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury, U.S.
agencies and corps.. . . . . . . . . . . . . . . $3,046 $7,293 $54,598 $4,094 $15,800 $ --
Obligations of states and
political subdivisions . . . . . . . . . . . . . 190 669 1,831 310 831 --
Corporate and other
securities . . . . . . . . . . . . . . . . . . . -- 198 10,119 -- 1,000 3,016
Total. . . . . . . . . . . . . . . . . . . . . . . $3,236 $8,160 $66,548 $4,404 $17,631 $3,016
------ ------ ------- ------ ------- ------
------ ------ ------- ------ ------- ------
Weighted Average
Yield (%)(1) . . . . . . . . . . . . . . . . . . 3.76% 4.90% 5.58% 6.70% 6.26% 6.54%
------ ------ ------- ------ ------- ------
------ ------ ------- ------ ------- ------
<FN>
__________________
(1) Yields on tax-exempt obligations have been computed on a tax-equivalent
basis using an incremental rate of 34%.
</TABLE>
Expected maturities may differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without call
or prepayment penalties. For information regarding the amortized cost and
approximate market value of securities at December 31, 1994, by contractual
maturity, see Note 6 of Notes to Consolidated Financial Statements contained in
BancTrust's Annual Report to Stockholders for the year ended December 31, 1994
(Exhibit No. 13) which is incorporated herein by reference.
On January 1, 1994, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" (SFAS 115). SFAS 115 modifies accounting principles
for accounting and reporting for investments in equity securities that have
readily determinable fair values and for all investments in debt securities.
SFAS 115 requires that those investments be classified as either held-to-
maturity, trading or available-for-sale securities. Debt securities that
BancTrust has the positive intent and ability to hold to maturity are classified
as held-to-maturity securities and reported at amortized cost. Debt and equity
securities that are bought and held principally for the purpose of selling them
in the near term are classified as trading securities and reported at fair
value, with unrealized gains and losses included in earnings. Debt and equity
securities not classified as either held-to-maturity or trading securities are
classified as available-for-sale securities and reported at fair value, with
unrealized gains and losses excluded from earnings and reported in a separate
component of stockholders' equity. At December 31, 1994, securities available-
for-sale had a net unrealized loss of $2,627,000 (net of tax benefits of
$1,072,000).
DEPOSITS
Deposits are the primary source of funds for BancTrust. BancTrust's
deposits consist of checking accounts, regular savings deposits, NOW accounts,
Money Market Accounts, market rate Certificates of Deposit and Jumbo
Certificates of Deposit. Deposits are attracted from individuals, partnerships
and corporations in BancTrust's market area. In addition, BancTrust obtains
deposits from state and local entities and, to a lesser extent, U.S. Government
and other depository institutions. BancTrust does not accept brokered deposits.
As of December 31, 1994, BancTrust's total deposits were $263.6 million.
The following table indicates the amount of BancTrust's certificates of
deposit and other time deposits of $100,000 or more by time remaining until
maturity as of December 31, 1994.
<TABLE>
<CAPTION>
Certificates Other Time
Maturity Period of Deposit Deposits
- --------------- ------------ ----------
(In Thousands)
<S> <C> <C>
Three months or less. . . . . . . . . . . . . . $ 1,007 $ 9,994
Over three through six months . . . . . . . . . 3,015 127
Over six through twelve months. . . . . . . . . 509 3,213
Over twelve months. . . . . . . . . . . . . . . 6,025 135
------- -------
Total . . . . . . . . . . . . . . . . . . . $10,556 $13,469
------- -------
------- -------
</TABLE>
-7-
<PAGE>
The following table sets forth the average balances and average interest
rates based on daily balances for deposits for the periods indicated.
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------------------------
1994 1993 1992
------------------- ----------------- -----------------
Average Average Average Average Average Average
Balance Rate Balance Rate Balance Rate
------- ------- ------- ------- ------- --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Non-interest bearing
demand deposits . . . . . . . . . . . . . . . . . $ 40,637 -- % $ 33,751 -- % $ 26,782 -- %
Interest bearing
demand deposits . . . . . . . . . . . . . . . . . 65,951 3.50 45,397 3.32 26,850 3.09
Savings deposits . . . . . . . . . . . . . . . . . 31,393 2.86 26,602 3.10 22,588 3.52
Time deposits. . . . . . . . . . . . . . . . . . . 112,984 4.29 107,407 3.83 115,321 4.74
-------- -------- --------
Total deposits . . . . . . . . . . . . . . . . . $250,965 3.83 $213,157 3.59 $191,541 4.31
-------- -------- --------
-------- -------- --------
</TABLE>
COMPETITION
In order to compete effectively, BancTrust relies substantially on local
commercial activity; personal contacts by its directors, officers, other
employees and shareholders; personalized services; and its reputation in the
communities it serves.
BancTrust is presently competing in its market area with four Alabama
holding companies. It also competes with four independent banks, several credit
unions, and various other nonbank financial companies.
The banking business in Alabama generally, and BancTrust's primary service
areas specifically, are highly competitive with respect to both loans and
deposits. BancTrust competes with many larger banks and other financial
institutions which have offices over a wide geographic area. These larger
institutions have certain inherent advantages, such as the ability to finance
wide ranging advertising campaigns and promotions and to allocate their
investment assets to regions offering the highest yield and demand. They also
offer services such as international banking, which are not offered directly by
BancTrust (but could be offered indirectly through correspondent institutions);
and by virtue of their larger total capitalization (legal lending limits to an
individual consumer or corporation are limited to a percentage of BancTrust's
total capital accounts), such banks have substantially higher lending limits
than does BancTrust. Other entities, both governmental and in private industry,
raise capital through the issuance and sale of debt and equity securities and
thereby indirectly compete with BancTrust in the acquisition of deposits.
In addition to competing with other commercial banks and thrift
institutions, commercial banks such as BancTrust compete with nonbank financial
institutions for funds. For instance, yields on corporate and government debt
securities and other commercial paper affect the ability of commercial banks to
attract and hold deposits. Commercial banks also compete for available funds
with money market instruments, which are not subject to interest rate ceilings.
Such money market funds have provided substantial competition to banks for
deposits, and it is anticipated they may continue to do so in the future.
Under current state and federal law, Alabama banks and thrift institutions,
and their holding companies, may be acquired by regional banks and thrift
institutions, or their holding companies, and Alabama banks and thrift
institutions, and their holding companies, may acquire banks and thrift
institutions in 15 designated jurisdictions in the Southeast, if such
jurisdictions have enacted reciprocal statutes. At least 12 of such 15
jurisdictions have enacted legislation authorizing interstate transactions in
one form or another.
The federal Bank Holding Company Act of 1956, as amended (the "Holding
Company Act") was recently amended by the Riegle-Neal Interstate Banking and
Branching Efficiency Act of 1994 (the "Riegle-Neal Act"), which significantly
eased applicable restrictions on interstate banking. The Riegle Neal Act
permits the FRB, effective September 29, 1995, to approve an application of an
adequately capitalized and adequately managed bank holding
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<PAGE>
company to acquire control of, or acquire all or substantially all of the assets
of, a bank located in a state other than such holding company's home state,
without regard to whether the transaction is prohibited by the laws of any
state. The FRB may not approve the acquisition of bank that has not been in
existence for the minimum time period (not exceeding five years) specified by
the statutory law of the host state. The Riegle-Neal Act also prohibits the FRB
from approving an application if the applicant (and its depository institution
affiliates) controls or would control more than 10% of the insured deposits in
the United States or 30% or more of the deposits in the target bank's home state
or in any state in which the target bank maintains a branch. The Riegle-Neal
Act does not affect the authority of states to limit the percentage of total
insured deposits in the state which may be held or controlled by a bank or bank
holding company to the extent such limitation does not discriminate against out-
of-state banks or bank holding companies. The effect of the Riegle-Neal Act may
be to increase competition within the State of Alabama among banking and thrift
institutions located in Alabama and from banking companies located anywhere in
the country.
The Riegle-Neal Act also authorizes the federal banking agencies, effective
June 1, 1997, to approve interstate merger transactions without regard to
whether such transactions are prohibited by the law of any state, unless the
home state of one of the banks opts out of the Riegle-Neal Act by adopting a law
after the date of enactment of such Act and prior to June 1, 1997 that applies
equally to all out-of-state banks and expressly prohibits merger transactions
involving out-of-state banks.
EMPLOYEES
As of December 31, 1994, BancTrust employed 216 persons, including
executive officers, loan officers, bookkeepers, tellers and others. None of
BancTrust's employees are presently represented by a union or covered under a
collective bargaining agreement. Management of BancTrust considers that their
employee relations are excellent.
RETURN ON EQUITY AND ASSETS
The following table shows the percentage return on equity and assets of
BancTrust for the years ended December 31, 1994, 1993 and 1992.
<TABLE>
<CAPTION>
Ratios Year Ended December 31,
- ------ ------------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Return on assets:
Net income/average total assets. . . . . . . . . . . . . . .82% .89% 1.06%
Return on equity:
Net income/average equity. . . . . . . . . . . . . . . . . 8.30% 8.32% 9.61%
Dividend payout ratio:
Dividends declared per share/net income
per share. . . . . . . . . . . . . . . . . . . . . . . . 36.36% 33.21% 28.27%
Equity to assets ratio:
Average equity/average total assets. . . . . . . . . . . . 9.88% 10.66% 11.08%
</TABLE>
LIQUIDITY AND RATE SENSITIVITY
The following table sets forth the maturity distribution of BancTrust's
interest-earning assets and interest-bearing liabilities as of December 31,
1994, BancTrust's interest rate sensitivity gap (i.e., interest rate sensitive
assets less interest rate sensitive liabilities), BancTrust's cumulative
interest rate sensitivity gap, the ratio of interest-earning assets to interest-
bearing liabilities, and BancTrust's cumulative interest rate sensitivity gap
ratio. For purposes of the table, except for fixed-rate installment loans and
savings deposits, an asset or liability is considered rate sensitive within a
specified period when it matures or could be repriced within such period in
accordance with its contractual
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<PAGE>
terms. Regular savings and NOW accounts are considered core deposits and are
included in the "Over One Year" category, based upon run off rates determined by
the percentage of original deposits remaining.
<TABLE>
<CAPTION>
0-3 4-12 Over One
Months Months Year Total
------- ------- -------- --------
(Dollars in Thousands)
Interest-Earning Assets:
<S> <C> <C> <C> <C>
Loans. . . . . . . . . . . . . . $75,240 $38,511 $ 55,705 $169,456
Securities . . . . . . . . . . . 3,236 8,160 91,599 102,995
Other assets . . . . . . . . . . 3,134 -- -- 3,134
Total. . . . . . . . . . . . . $81,610 $46,671 $147,304 $275,585
------- ------- -------- --------
------- ------- -------- --------
Interest-Bearing Liabilities:
Deposits . . . . . . . . . . . . $65,522 $43,204 $107,161 $215,887
Borrowings . . . . . . . . . . . 6,855 -- 438 7,293
Total: . . . . . . . . . . . . $72,377 $43,204 $107,599 $223,180
------- ------- -------- --------
------- ------- -------- --------
Interest Sensitivity Gap . . . . . $ 9,233 $ 3,467 $ 39,705 $ 52,405
------- ------- -------- --------
------- ------- -------- --------
Cumulative Interest Sensitivity
Gap. . . . . . . . . . . . . . . $ 9,233 $12,700 $ 52,405 $ 52,405
------- ------- -------- --------
------- ------- -------- --------
Ratio of Interest-Earning Assets to
Interest-Bearing Liabilities . . 112.8% 108.0% 136.9% 123.5%
------- ------- -------- --------
------- ------- -------- --------
Ratio of Cumulative Gap to
Total Assets . . . . . . . . . . 3.1% 4.2% 17.4% 17.4%
------- ------- -------- --------
------- ------- -------- --------
</TABLE>
At December 31, 1994, BancTrust had a positive cumulative interest rate
sensitivity gap of $12,700,000 at 12 months. As a result, at December 31, 1994,
rising interest rates would increase the net interest margin in earnings over
the following 12 months. Falling rates would decrease the net interest margin
and earnings over the same period.
The foregoing table does not necessarily indicate the impact of general
interest rate movements on BancTrust's net interest yield because the repricing
of various categories of assets and liabilities is discretionary and is subject
to competition and other pressures. As a result, various assets and liabilities
indicated as repricing within the same period may in fact reprice at different
times and at different levels.
REGULATION, SUPERVISION AND GOVERNMENTAL POLICY
The following is a brief summary of certain statutes, rules and regulations
affecting BancTrust and Peoples Bank. A number of other statutes and
regulations have an impact on their operations. The following summary of
applicable statutes and regulations does not purport to be complete and is
qualified in its entirety by reference to such statutes and regulations.
BANK HOLDING COMPANY REGULATION. BancTrust is registered as a bank holding
company under the Holding Company Act and, as such, subject to supervision and
regulation by the FRB. A bank holding company is required to furnish to the FRB
an annual report of its operations at the end of each fiscal year and to furnish
such additional information as the FRB may require pursuant to the Holding
Company Act. BancTrust is also subject to regular examination by the FRB.
Under the Holding Company Act, a bank holding company must obtain the prior
approval of the FRB before (i) acquiring direct or indirect ownership or control
of any voting shares of any bank or bank holding company if, after such
acquisition, the bank holding company would directly or indirectly own or
control more than 5% of such shares; (2) acquiring all or substantially all of
the assets of another bank or bank holding company; or (3) merging or
consolidating with another bank holding company.
The Holding Company Act currently prohibits the FRB from approving an
application by a bank holding company to acquire voting shares of a bank located
outside the state in which the operations of the holding company's bank
subsidiaries are principally conducted, unless such an acquisition is
specifically authorized by state
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<PAGE>
law. Alabama law provides, subject to certain terms and conditions, that an
out-of-state bank holding company located in one of 14 southeastern states or
the District of Columbia may acquire a bank located in Alabama. The Riegle-Neal
Act, however, generally permits the FRB, effective September 29, 1995, to
approve interstate bank acquisitions by bank holding companies without regard to
any prohibitions of state law. See "Competition".
Under the Holding Company Act, any company must obtain approval of the FRB
prior to acquiring control of the BancTrust or Peoples Bank. For purposes of
the Holding Company Act, "control" is defined as ownership of more than 25% of
any class of voting securities of BancTrust or Peoples Bank, the ability to
control the election of a majority of the directors, or the exercise of a
controlling influence over management or policies of the BancTrust or Peoples
Bank.
The Change in Bank Control Act and the regulations of the FRB thereunder
require any person or persons acting in concert (except for companies required
to make application under the Holding Company Act), to file a written notice
with the FRB before such person or persons may acquire control of the BancTrust
or Peoples Bank. The Change in Bank Control Act defines "control" as the power,
directly or indirectly, to vote 25% or more of any voting securities or to
direct the management or policies of a bank holding company or an insured bank.
The Holding Company Act also prohibits, with certain exceptions, a bank
holding company from acquiring direct or indirect ownership or control of more
than 5% of the voting shares of a company that is not a bank or a bank holding
company, or from engaging directly or indirectly in activities other than those
of banking, managing or controlling banks, or providing services for its
subsidiaries. The principal exceptions to these prohibitions involve certain
non-bank activities which, by statute or by FRB regulation or order, have been
identified as activities closely related to the business of banking or managing
or controlling banks. The activities of BancTrust and of its non-bank
subsidiaries are subject to these legal and regulatory limitations under the
Holding Company Act and the FRB's regulations thereunder. Notwithstanding the
FRB's prior approval of specific nonbanking activities, the FRB has the power to
order a holding company or its subsidiaries to terminate any activity, or to
terminate its ownership or control of any subsidiary, when it has reasonable
cause to believe that the continuation of such activity or such ownership or
control constitutes a serious risk to the financial safety, soundness or
stability of any bank subsidiary of that holding company.
The FRB has adopted guidelines regarding the capital adequacy of bank
holding companies, which require bank holding companies to maintain specified
minimum ratios of capital to total assets and capital to risk-weighted assets.
See "Capital Requirements."
The FRB has the power to prohibit dividends by bank holding companies if
their actions constitute unsafe or unsound practices. The FRB has issued a
policy statement on the payment of cash dividends by bank holding companies,
which expresses the FRB's view that a bank holding company should pay cash
dividends only to the extent that the company's net income for the past year is
sufficient to cover both the cash dividends and a rate of earning retention that
is consistent with the company's capital needs, asset quality, and overall
financial condition.
As a bank holding company, BancTrust is required to give the FRB notice of
any purchase or redemption of its outstanding equity securities if the gross
consideration for the purchase or redemption, when combined with the net
consideration paid for all such purchases or redemptions during the preceding 12
months, is equal to 10% or more of BancTrust's consolidated net worth. The FRB
may disapprove such a purchase or redemption if it determines that the proposal
would violate any law, regulation, FRB order, directive, or any condition
imposed by, or written agreement with, the FRB.
BANK REGULATION. As an Alabama banking institution, Peoples Bank is
subject to regulation, supervision and regular examination by the Banking
Department. Peoples Bank is a member of the Federal Reserve System and thus is
subject to supervision and regular examination by the FRB under the applicable
provisions of the Federal Reserve Act and the FRB's regulations. The deposits
of Peoples Bank are insured by the FDIC to the maximum
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<PAGE>
extent provided by law (a maximum of $100,000 for each insured depositor).
Alabama and federal banking laws and regulations control, among other things,
Peoples Bank's required reserves, investments, loans, mergers and
consolidations, issuance of securities, payment of dividends, and establishment
of branches and other aspects of Peoples Bank's operations.
The FRB has adopted guidelines regarding the capital adequacy of state-
chartered banks that are members of the Federal Reserve System ("state member
banks"), which require such banks to maintain specified minimum ratios of
capital to total assets and capital to risk-weighted assets. See "Capital
Requirements."
Under applicable law and regulations, each year an Alabama bank is required
to transfer to surplus at least 10% of its net earnings until its surplus equals
at least 20% of its capital, and no cash dividends may be declared or paid in
excess of 90% of the net earnings of such bank until the bank's surplus equals
at least 20% of its capital. Thereafter, the prior written approval of the
Banking Department is required if the total of all dividends declared by the
bank in any calendar year exceeds the total of its net earnings of that year
combined with its retained net earnings of the preceding two years, less any
required transfers to surplus. No dividends, withdrawals or transfers may be
made from an Alabama bank's surplus without the prior written approval of the
Banking Department. Peoples Bank obtained regulatory approval of the Banking
Department for the payment of dividends in 1994 and must obtain such approval
prior to paying dividends in 1995. See Note 14 of Notes to Consolidated
Financial Statements contained in BancTrust's Annual Report to Stockholders for
the year ended December 31, 1994 (Exhibit 13) which is incorporated herein by
reference.
In addition to the Alabama statutory dividend restrictions, the approval of
the FRB is required if the total of all the dividends declared by Peoples Bank
in any calendar year exceeds Peoples Bank's net profits (as defined in the FRB's
regulations) for that year combined with its retained net profits for the
preceding two calendar years, less any required transfers to surplus. Peoples
Bank obtained regulatory approval of the FRB for the payment of dividends in
1994 and must obtain such approval prior to paying dividends in 1995. In
addition, Peoples Bank is prohibited by federal statute from paying dividends or
making any other capital distribution that would cause it to fail to meet its
minimum capital requirements. Furthermore, the FRB is authorized to prohibit
state member banks and bank holding companies from paying dividends that would
constitute an unsafe and unsound banking practice. See Note 14 of Notes to
Consolidated Financial Statements contained in BancTrust's Annual Report to
Stockholders for the year ended December 31, 1994 (Exhibit 13) which is
incorporated herein by reference.
Peoples Bank is subject to restrictions imposed by federal law on
extensions of credit to, and certain other transactions with, BancTrust and
other affiliates, and on investments in the stock or other securities thereof.
Such restrictions prevent BancTrust and such other affiliates from borrowing
from Peoples Bank unless the loans are secured by specified collateral, and
require such transactions to have terms comparable to terms of arms-length
transactions with third persons. Further, such secured loans and other
transactions and investments by Peoples Bank are generally limited in amount as
to BancTrust and as to any other affiliate to 10% of Peoples Bank's capital and
surplus and as to BancTrust and all other affiliates to an aggregate of 20% of
Peoples Bank's capital and surplus. These regulations and restrictions may
limit BancTrust's ability to obtain funds from Peoples Bank for its cash needs,
including funds for acquisitions and for payment of dividends, interest and
operating expenses.
Under joint regulations of the federal banking agencies, including the FRB
and FDIC, state member banks must adopt and maintain written policies that
establish appropriate limits and standards for extensions of credit that are
secured by liens or interests in real estate or are made for the purpose of
financing permanent improvements to real estate. These policies must establish
loan portfolio diversification standards, prudent underwriting standards,
including loan-to-value limits, that are clear and measurable, loan
administration procedures and documentation, approval and reporting
requirements. A bank's real estate lending policy must reflect consideration of
the Interagency Guidelines for Real Estate Lending Policies (the "Interagency
Guidelines") that have been adopted by the federal bank regulators. The
Interagency Guidelines, among other things, call upon depository institutions to
establish internal loan-to-value limits for real estate loans that are not in
excess of the loan-to-value limits specified in the Guidelines for the various
types of real estate loans. The Interagency Guidelines state that it may be
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<PAGE>
appropriate in individual cases to originate or purchase loans with loan-to-
value ratios in excess of the supervisory loan-to-value limits. The aggregate
amount of loans in excess of the supervisory loan-to-value limits, however,
should not exceed 100% of total capital and the total of such loans secured by
commercial, agricultural, multifamily and other non-one-to-four family
residential properties should not exceed 30% of total capital.
The FDIC has established a risk-based deposit insurance premium assessment
system for insured depository institutions. Under the system, the assessment
rate for an insured depository institution depends on the assessment risk
classification assigned to the institution by the FDIC, which is determined by
the institution's capital level and supervisory evaluations. Institutions are
assigned to one of three capital groups -- well-capitalized, adequately
capitalized or undercapitalized -- based on the data reported to regulators for
date closest to the last day of the seventh month preceding the semi-annual
assessment period. Well-capitalized institutions are institutions satisfying
the following capital ratio standards: (i) total risk-based capital ratio of
10.0% or greater; (ii) Tier 1 risk-based capital ratio of 6.0% or greater; and
(iii) Tier 1 leverage ratio of 5.0% or greater. Adequately capitalized
institutions are institutions that do not meet the standards for well-
capitalized institutions but that satisfy the following capital ratio standards:
(i) total risk-based capital ratio of 8.0% or greater; (ii) Tier 1 risk-based
capital ratio of 4.0% or greater; and (iii) Tier 1 leverage ratio of 4.0% or
greater. Undercapitalized institutions consist of institutions that do not
qualify as either well-capitalized or adequately capitalized institutions.
Within each capital group, institutions are assigned to one of three subgroups
on the basis of supervisory evaluations by the institution's primary supervisory
authority and such other information as the FDIC determines to be relevant to
the institution's financial condition and the risk posed to the deposit
insurance fund. Subgroup A consists of financially sound institutions with only
a few minor weaknesses. Subgroup B consists of institutions that demonstrate
weaknesses that, if not corrected, could result in significant deterioration of
the institution and increased risk of loss to the deposit insurance fund.
Subgroup C consists of institutions that pose a substantial probability of loss
to the deposit insurance fund unless effective corrective action is taken. The
assessment rates range from 0.23% of deposits for well capitalized institutions
in Subgroup A to 0.31% of deposits for undercapitalized institutions in Subgroup
C. Peoples Bank is a well capitalized institution.
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") required the federal bank regulatory agencies to prescribe, by
regulation, non-capital safety and soundness standards for all insured
depository institutions and depository institution holding companies. The
federal banking agencies, including the FRB and the FDIC, have proposed
standards covering internal controls, information systems and internal audit
systems, loan documentation, credit underwriting, interest rate exposure, asset
growth, compensation, fees and benefits, and standards for asset quality and
earnings sufficiency. An institution that fails to meet those standards would
be required to develop a plan acceptable to its primary federal regulator,
specifying the steps that the institution will take to meet the standards.
Failure to submit or implement such a plan may subject the institution to
regulatory sanctions. In addition, under the proposed regulations of the FRB, a
bank holding company would be required to ensure that its subsidiary bank will
return to compliance with the safety and soundness standards if a deficiency is
detected.
Supervision, regulation and examination of BancTrust and Peoples Bank by
the bank regulatory agencies are intended primarily for the protection of
depositors rather than for holders of BancTrust stock or of BancTrust as the
holder of the stock of Peoples Bank.
CAPITAL REQUIREMENTS. The FRB has established guidelines with respect to
the maintenance of appropriate levels of capital by registered bank holding
companies and state member banks. The regulations of the FRB impose two sets of
capital adequacy requirements: minimum leverage rules, which require bank
holding companies and banks to maintain a specified minimum ratio of capital to
total assets, and risk-based capital rules, which require the maintenance of
specified minimum ratios of capital to "risk-weighted" assets.
The regulations of the FRB require bank holding companies and state member
banks to maintain a minimum leverage ratio of "Tier 1 capital" (as defined in
the risk-based capital guidelines discussed in the following paragraphs) to
total assets of 3.0%. Although setting a minimum 3.0% leverage ratio, the
regulations state that only
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<PAGE>
the strongest bank holding companies and banks, with composite examination
ratings of 1 under the rating system used by the federal bank regulators, would
be permitted to operate at or near such minimum level of capital. All other
bank holding companies and banks are expected to maintain a leverage ratio of at
least 1% to 2% above the minimum ratio, depending on the assessment of an
individual organization's capital adequacy by its primary regulator. Any bank
or bank holding company experiencing or anticipating significant growth would be
expected to maintain capital well above the minimum levels. In addition, the
FRB has indicated that whenever appropriate, and in particular when a bank
holding company is undertaking expansion, seeking to engage in new activities or
otherwise facing unusual or abnormal risks, it will consider, on a case-by-case
basis, the level of an organization's ratio of tangible Tier 1 capital (after
deducting all intangibles) to total assets in making an overall assessment of
capital.
The risk-based capital rules of the FRB require bank holding companies and
state member banks to maintain minimum regulatory capital levels based upon a
weighing of their assets and off-balance sheet obligations according to risk.
The risk-based capital rules have two basic components: a core capital (Tier 1)
requirement and a supplementary capital (Tier 2) requirement. Core capital
consists primarily of common stockholders' equity, certain perpetual preferred
stock (which must be noncumulative with respect to banks), and minority
interests in the equity accounts of consolidated subsidiaries; less intangible
assets, primarily goodwill. Supplementary capital elements include, subject to
certain limitations, the allowance for losses on loans and leases; perpetual
preferred stock that does not qualify for Tier 1 and long-term preferred stock
with an original maturity of at least 20 years from issuance; hybrid capital
instruments, including perpetual debt and mandatory convertible securities; and
subordinated debt and intermediate-term preferred stock.
The risk-based capital regulations assign balance sheet assets and credit
equivalent amounts of off-balance sheet obligations to one of four broad risk
categories based principally on the degree of credit risk associated with the
obligor. The assets and off-balance sheet items in the four risk categories are
weighted at 0%, 20%, 50% and 100%. These computations result in the total risk-
weighted assets.
The risk-based capital regulations require all banks and bank holding
companies to maintain a minimum ratio of total capital to total risk-weighted
assets of 8%, with at least 4% as core capital. For the purpose of calculating
these ratios: (i) supplementary capital will be limited to no more than 100% of
core capital; and (ii) the aggregate amount of certain types of supplementary
capital will be limited. In addition, the risk-based capital regulations limit
the allowance for loan losses includable as capital to 1.25% of total risk-
weighted assets.
The federal bank regulatory agencies, including the FRB and the FDIC, have
proposed to revise their risk-based capital requirements to ensure that such
requirements provide for explicit consideration by commercial banks of interest
rate risk. Under the proposed rule, a bank's interest rate risk exposure would
be quantified using either the measurement system set forth in the proposal or
the bank's internal model for measuring such exposure, if such model is
determined to be adequate by the bank's examiner. If the dollar amount of a
bank's interest rate risk exposure, as measured under either measurement system,
exceeds 1% of the bank's total assets, the bank would be required under the
proposed rule to hold additional capital equal to the dollar amount of the
excess. The management of Peoples Bank has not determined what effect, if any,
the proposed interest rate risk component would have on the capital of Peoples
Bank if adopted as proposed. The proposed interest rate risk component rule
would not apply to bank holding companies on a consolidated basis.
The FRB has issued final regulations that classify insured depository
institutions by capital levels and provide that the applicable agency will take
various prompt corrective actions to resolve the problems of any institution
that fails to satisfy the capital standards. Under such regulations, a "well-
capitalized" bank is one that is not subject to any regulatory order or
directive to meet any specific capital level and that has or exceeds the
following capital levels: a total risk-based capital ratio of 10%, a Tier 1
risk-based capital ratio of 6%, and a leverage ratio of 5%. An "adequately
capitalized" bank is one that does not qualify as "well capitalized" but meets
or exceeds the following capital requirements: a total risk-based capital of 8%,
a Tier 1 risk-based capital ratio of 4%, and a leverage ratio of either (i) 4%
or (ii) 3% if the bank has the highest composite examination rating. A bank not
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<PAGE>
meeting these criteria is treated as "undercapitalized," "significantly
undercapitalized," or "critically undercapitalized" depending on the extent to
which the bank's capital levels are below these standards. A bank that fails
within any of the three "undercapitalized" categories will be subject to certain
severe regulatory sanctions required by FDICIA and the regulations of the FRB.
As of December 31, 1994, Peoples Bank was "well-capitalized" as defined by the
regulations.
See Item 7. "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and Note 14 of Notes to Consolidated Financial
Statements contained in BancTrust's Annual Report to Stockholders for the year
ended December 31, 1994 (Exhibit No. 13) which is incorporated herein by
reference.
EFFECTS OF GOVERNMENTAL POLICY. The earnings and business of BancTrust and
Peoples Bank have been and will be affected by the policies of various
regulatory authorities of the United States, particularly the FRB. Important
functions of the FRB, in addition to those enumerated above, include the
regulation of the supply of money in light of general economic conditions within
the United States. The instruments of monetary policy employed by the FRB for
these purposes influence in various ways the overall level of investments,
loans, other extensions of credit and deposits, and the interest rates paid on
liabilities and received on interest-earning assets.
Banking is a business which depends on interest rate differentials. In
general, the difference between the interest paid by Peoples Bank on its
deposits and its other borrowings and the interest received by Peoples Bank on
loans extended to customers and securities held in its investment portfolios
comprises the major portion of Peoples Bank's earnings. The earnings and gross
income of Peoples Bank thus have been and will be subject to the influence of
economic conditions generally, both domestic and foreign, and also to monetary
and fiscal policies of the United States and its agencies, particularly the FRB.
The nature and timing of any future changes in such policies and their impact on
Peoples Bank are not predictable.
ITEM 2. PROPERTIES
The following is a brief description of each of BancTrust's facilities.
THE MAIN BANK BUILDING, located at 310 Broad Street in Selma, is a masonry
and brick two-story building consisting of 40,000 square feet. The building was
renovated and enlarged in 1978. At that time, seven drive-up windows and two
walk-up windows were built. The property includes parking from Broad Street
through to Washington Street and around the building. Peoples Bank owns the
building. In December 1987, Peoples Bank acquired a brick building adjoining
the parking lot for future expansion. In addition to office space utilized by
Peoples Bank, portions of this building are currently being leased to non-bank
tenants. In May 1989, Peoples Bank acquired a frame building adjacent to the
parking lot for future expansion. This structure has been converted to use as a
warehouse for supplies and equipment.
THE SELMA MALL BRANCH, located at 1383 Highland Avenue in Selma, is a
masonry and brick one-story building consisting of 2,200 square feet. The
branch has four paying and receiving windows, three drive-up windows and two
walk-up windows. The land is leased. The lease expiration date is December 31,
1996.
THE SELMA MARKETPLACE BRANCH is located within the Winn Dixie facility in
the Winn Dixie Marketplace Shopping Center, 1330 Highland Avenue, Selma,
Alabama. This office, consisting of approximately 425 square feet, is located
adjacent to the main entrance of the Winn Dixie store and provides three teller
windows, new accounts/reception, and a Branch Manager. These quarters have been
leased for an initial five-year period expiring April 12, 1996 with an option
for two additional five-year periods.
THE SATTERFIELD PLAZA BRANCH, located on the West Dallas side of the
Satterfield Plaza parking lot in Selma, is a frame, one-story building with two
drive-up windows. The space consists of 308 square feet, and the land is
leased. The lease expiration date is December 1998. The lease may be extended
for seven successive terms of five years each.
-15-
<PAGE>
THE POST OFFICE BRANCH, located at 801 Alabama Avenue in Selma, was
purchased by Peoples Bank from the Resolution Trust Corporation in July of 1994.
The branch, which was formerly the Selma Branch of Altus Federal Savings Bank,
is a masonry and brick two-story building consisting of approximately 7,000
square feet. The branch has two paying and receiving windows and one drive-up
window. Portions of the building are currently being leased to nonbank tenants.
THE PLANTERSVILLE BRANCH, located at the intersection of Highway 22 North
and Oak Street in Plantersville, is a frame one-story building consisting of two
paying and receiving windows and one drive-up window. The building consists of
approximately 1,300 square feet and is owned by Peoples Bank.
THE GREENVILLE BANK BRANCH, located at 300 East Commerce Street in
Greenville, is a masonry and brick one-story building situated on an entire city
block and consists of approximately 6,400 square feet. The site consists of
drive-up teller lanes and parking. This branch has five paying and receiving
windows and three drive-up windows. Peoples Bank owns the building which was
renovated in 1987 and 1993.
THE BUTLER SQUARE BRANCH, located at Butler Square Mall in Greenville, is a
masonry and brick one-story building with a partial basement located on the
street side of the Butler Square Shopping Mall. This branch has five paying and
receiving windows and three drive-up windows. The space consists of 4,600
square feet. Peoples Bank owns the building.
THE GEORGIANA BRANCH, located at 132 North Miranda in Georgiana, is a
masonry and brick one-story building with a wraparound parking lot. This branch
has three paying and receiving windows and two drive-up windows. The space
consists of 2,800 square feet. Peoples Bank leases the building. The
termination date of the lease is March 1997.
THE MCKENZIE BRANCH, located in the corner property of U.S. Highway 31 and
a state road in McKenzie, is a masonry and brick one-story building. This
branch has three paying and receiving windows and one drive-up window. The
space consists of 2,700 square feet and is owned by Peoples Bank.
THE PRATTMONT BRANCH, located at 801 South Memorial Drive in Prattville, is
a masonry one-story building consisting of approximately 2,200 square feet. The
branch has five paying and receiving windows and two drive-up windows. The
building and land are owned by Peoples Bank.
THE PRATTVILLE EAST BRANCH, located at 1805 East Main Street in Prattville,
is a masonry and brick one-story building consisting of approximately 2,500
square feet. The branch has five paying and receiving windows and two drive-up
windows. Peoples Bank owns the land and building.
THE PRATTVILLE DOWNTOWN BRANCH, located at 148 East Main Street in
Prattville, is a masonry and brick one-story building consisting of
approximately 9,600 square feet. Peoples Bank owns the building which was
constructed in 1972, the 44,430 square foot lot on which the building is located
and an adjacent vacant lot. The site has two drive-up windows and eight paying
and receiving windows.
ITEM 3. LEGAL PROCEEDINGS.
Management currently is not aware of any material legal proceedings to
which BancTrust or Peoples Bank is a party or to which any of their property is
subject, except as follows:
A suit styled BETTY LOU TICE v. H. HOUGHTON SMITH, ET AL, Circuit Court of
Montgomery County, Alabama, Civil Action No. CV-94-892. This suit was filed on
the 2nd day of May, 1994, against Peoples Bank, Gary M. Pierson as its Trust
Officer, and numerous other parties. The complaint alleges generally that the
defendants sold property to the plaintiff, or financed property purchased by the
plaintiff, and that the defendants at the time of such actions had knowledge
that there was environmental contamination on an adjacent site. The allegations
against
-16-
<PAGE>
Peoples Bank and Gary Pierson appear to be in their capacity as Trustee for two
trusts. The Trusts owned property in Montgomery County, Alabama, which was sold
to a developer, who in turn sold one of the lots in the development to the
plaintiff. The plaintiff avers that Peoples Bank and Gary Pierson, presumably
in their capacity as Trustee, knew that adjacent properties had environmental
contamination problems and failed to advise the plaintiff of this fact. Various
legal theories for recovery are presented, and compensatory and punitive damages
in unspecified amounts are claimed. Peoples Bank and Gary Pierson deny all
allegations of this complaint and will vigorously defend it. The deposition of
the plaintiff was taken, which the defendants contend reveals no facts to
support any claim. Consequently, the defendants will move for summary judgment.
A suit styled JOHN D. SWANSON v. THE PEOPLES BANK AND TRUST OF SELMA,
United States District Court for the Middle District of Alabama, Northern
Division, Civil Action No. CV-95-A-78-N. This case was filed in the United
States District Court for the Middle District of Alabama on January 30, 1995.
The plaintiff alleges that he was subject to harassment by his supervisors and
forced to resign from his job. The suit claims damages in unspecified amounts
for alleged violations of the Age Discrimination of Employment Act, alleged
intentional and/or reckless conduct causing emotional distress, and alleged
intent to deny plaintiff the opportunity to fully vest in the pension/retirement
program of Peoples Bank resulting in a violation of the Employment Retirement
Income Security Act. Peoples Bank denies each and every allegation and intends
to vigorously defend this case. The case is only recently filed, and no
discovery has taken place. Peoples Bank has moved for a change of venue to the
Southern District of Alabama, where the main office of Peoples Bank is located,
and where the plaintiff resides.
See Note 18 of Notes to Consolidated Financial Statements contained in
BancTrust's Annual Report to Stockholders for the year ended December 31, 1994
(Exhibit 13) which is incorporated herein by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted during the fourth quarter of the fiscal year
covered by this report to a vote of security holders of BancTrust through a
solicitation of proxies or otherwise.
EXECUTIVE OFFICERS OF THE REGISTRANT
RICHARD P. MORTHLAND, 53, is currently Chairman of the Board and Chief
Executive Officer and a Director of Peoples Bank, and President, Chief Executive
Officer and a Director of BancTrust. Mr. Morthland has been an officer of
Peoples Bank since 1965 and a Director since February 1977.
ELAM P. HOLLEY, JR., 44, is currently President, Chief Administrative
Officer and a Director of Peoples Bank, and Secretary and a Director of
BancTrust. Mr. Holley has been an officer of Peoples Bank since November 1975
and a Director since January, 1988.
ANDREW C. BEARDEN, JR., 48, is currently Senior Vice President --
Retail/Operations Division of Peoples Bank. Mr. Bearden assumed this position
in September 1991. Prior to his current assignment, Mr. Bearden served as Vice
President and Trust Officer of Peoples Bank. Mr. Bearden was in private
practice as a certified public accountant prior to his employment with Peoples
Bank in 1985.
JOHN G. CHISOLM, 46, is currently Senior Vice President - Commercial
Division of Peoples Bank. Mr. Chisolm assumed this position in December 1992.
He has been employed by Peoples Bank since 1979, primarily in the commercial
lending area. Prior to his employment by Peoples Bank, Mr. Chisolm was employed
by American National Bank and Trust Company, Chattanooga, Tennessee for seven
years in its commercial lending division.
M. SCOTT PATTERSON, 52, is currently Senior Vice President-Financial
Services Division, Secretary and Investment Officer of Peoples Bank and
Assistant Secretary of BancTrust. Mr. Patterson has been in these positions
since November 1985. Prior to coming to Peoples Bank in October 1983, Mr.
Patterson served for 20 years in the United States Air Force, retiring as a
Lieutenant Colonel.
-17-
<PAGE>
VIRGINIA L. SELLERS, 61, is currently Vice President and Treasurer of
Peoples Bank and Treasurer of BancTrust. Mrs. Sellers has been an officer of
Peoples Bank since 1985. Prior to her employment by Peoples Bank in 1985, Mrs.
Sellers was Accounting Officer of SouthTrust Bank, Selma, Alabama for 20 years.
THOMAS J. GAY, 52, is currently Regional President of the Autauga County
Division of Peoples Bank, a title he assumed upon the merger of The Citizens
Bank, Prattville, Alabama into Peoples Bank in 1994. Mr. Gay had been employed
by The Citizens Bank since 1962.
WILLIAM S. JOHNSON, 45, is currently Regional President of the Butler
County Division of Peoples Bank. Prior to his coming to Peoples Bank in June
1993, Mr. Johnson was President of The Fort Deposit Bank in Fort Deposit,
Alabama for eight years.
Richard P. Morthland and M. Scott Patterson are brothers-in-law.
All officers serve at the discretion of the boards of directors of
BancTrust or Peoples Bank. There are no known arrangements or understandings
between any office and any other person pursuant to which he or she was or is to
be selected as an officer.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
For information concerning holders of common stock, high and low sales
prices and frequency and amount of dividends on BancTrust's Common Stock, see
"Stock Dividend and Price Information" incorporated herein by reference to
BancTrust's Annual Report to Stockholders for the year ended December 31, 1994
(Exhibit No. 13) which is incorporated herein by reference.
Although BancTrust has no established policy regarding dividends, BancTrust
and Peoples Bank, prior to its acquisition by BancTrust in April 1985, have paid
regular dividends in recent years. There can be no assurance, however, as to
whether or in what amounts dividends might be declared by BancTrust in the
future or whether such dividends, once declared, will continue. Future
dividends are subject to the discretion of the Board of Directors and depend on
a number of factors, including future earnings, financial condition, and capital
requirements, along with economic and market conditions.
The primary source of BancTrust's revenues (including funds to pay
dividends) is dividends from the Bank. Alabama law imposes certain restrictions
on the ability of BancTrust and Peoples Bank to pay dividends. See Item 1.
"Business--Regulation, Supervision and Governmental Policy" and Note 14 of Notes
to Consolidated Financial Statements contained in Banc Trust's Annual Report to
Stockholders for the year ended December 31, 1994 (Exhibit 13) which is
incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The information set forth under the caption "Five Year Comparison of
Selected Financial Data" in BancTrust's Annual Report to Stockholders for the
year ended December 31, 1994 (Exhibit No. 13) which is incorporated herein by
reference.
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<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information set forth under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in BancTrust's Annual
Report to Stockholders for the year ended December 31, 1994 (Exhibit No. 13)
which is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
BancTrust's Consolidated Financial Statements together with the related
notes and the report of Coopers & Lybrand L.L.P., independent public
accountants, all as set forth in BancTrust's Annual Report to Stockholders for
the year ended December 31, 1994 (Exhibit No. 13) which are incorporated herein
by reference.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding directors of BancTrust is omitted from this Report as
BancTrust has filed a definitive proxy statement dated March 20, 1995, and the
information included therein under "Election of Directors-Directors" is
incorporated herein by reference. Information regarding the executive officers
of BancTrust is included under separate caption in Part I of this Form 10-K.
Item 405 of Regulation S-K disclosure is omitted from this Report as BancTrust
has filed a definitive proxy statement dated March 20, 1995, and the Item 405
disclosure therein under "Principal Holders of Common Stock" which is
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information regarding executive compensation is omitted from this Report as
BancTrust has filed a definitive proxy statement dated March 20, 1995, and the
information included therein under "Election of Directors" which is incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by this Item is omitted from this Report as BancTrust
has filed a definitive proxy statement dated March 20, 1995, and the information
included therein under "Stock Ownership of Management" and "Principal Holders of
Common Stock" which is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this Item is omitted from this Report as BancTrust
has filed a definitive proxy statement dated March 20, 1995, and the information
included therein under "Election of Directors--Certain Transactions" which is
incorporated herein by reference.
-19-
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) The following consolidated financial statements of BancTrust
included in the Annual Report to Stockholders for the year ended December 31,
1994, are incorporated herein by reference in Item 8 of this Report. The
remaining information appearing in the Annual Report to Stockholders is not
deemed to be filed as part of this Report, except as expressly provided herein.
1. Report of Independent Accountants.
2. Consolidated Balance Sheets - December 31, 1994 and 1993.
3. Consolidated Statements of Income for the Years Ended
December 31, 1994, 1993 and 1992.
4. Consolidated Statements of Changes in Stockholders' Equity
for the Years Ended December 31, 1994, 1993 and 1992.
5. Consolidated Statements of Cash Flows for the Years Ended
December 31, 1994, 1993 and 1992.
6. Notes to Consolidated Financial Statements.
(a)(2) All schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission
are not required under the related instructions or are
inapplicable and therefore have been omitted.
(a)(3) The following exhibits either are filed as part of this Report or
are incorporated herein by reference:
Exhibit No. 3. ARTICLES OF INCORPORATION AND BYLAWS
(i) Articles of Incorporation - incorporated herein by reference
to Exhibit 3(i) to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1992.
(ii) Bylaws - incorporated herein by reference to Exhibit No. 3.2
to the Registrant's Registration Statement on Form S-14
(File No. 2-95573).
Exhibit No. 10(i). 1992 STOCK OPTION PLAN
Incorporated herein by reference to Exhibit 10 to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1992.
Exhibit No. 13. ANNUAL REPORT TO STOCKHOLDERS
Except for those portions of the Annual Report to
Stockholders for the year ended December 31, 1994, which are
expressly incorporated herein by reference, such Annual
Report is furnished for the information of the Commission
and is not to be deemed "filed" as part of this Report.
-20-
<PAGE>
Exhibit No. 21. SUBSIDIARIES OF THE REGISTRANT
A list of subsidiaries of the Registrant is included as an
exhibit to this Report.
Exhibit No. 27. Financial Data Schedule
(b) Not applicable.
(c) Exhibits to this Form 10-K are attached or incorporated by reference
as stated above.
(d) None.
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<PAGE>
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
behalf by the undersigned, thereunto duly authorized.
THE PEOPLES BANCTRUST COMPANY,
INC. (Registrant)
Date: March 21, 1995 By:/s/ Richard P. Morthland
-------------------------
Richard P. Morthland
Director, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated and on the dates indicated.
DATE: SIGNATURE AND TITLE:
/s/ Richard P. Morthland March 21, 1995
- ------------------------------
Richard P. Morthland
Director, President and Chief
Executive Officer
(Principal Executive Officer)
/s/ Virginia L. Sellers March 21, 1995
- ------------------------------
Virginia L. Sellers
Treasurer
(Principal Financial and
Accounting Officer)
/s/ Julius R. Brown March 21, 1995
- ------------------------------
Julius R. Brown
Director
/s/ Wallace A. Buchanan March 21, 1995
- ------------------------------
Wallace A. Buchanan
Director
/s/ Clyde B. Cox, Jr. March 21, 1995
- ------------------------------
Clyde B. Cox, Jr.
Director
<PAGE>
/s/ Harry W. Gamble, Jr. March 21, 1995
- ------------------------------
Harry W. Gamble, Jr.
Director
/s/ Ted M. Henry March 21, 1995
- ------------------------------
Ted M. Henry
Director
/s/ Elam P. Holley, Jr. March 21, 1995
- ------------------------------
Elam P. Holley, Jr.
Director
/s/ A.D. Lovelady March 21, 1995
- ------------------------------
A.D. Lovelady
Director
/s/ James A. Minter, III March 21, 1995
- ------------------------------
James A. Minter, III
Director
/s/ Richard P. Morthland March 21, 1995
- ------------------------------
Richard P. Morthland
Director
/s/ C. Ernest Smith March 21, 1995
- ------------------------------
C. Ernest Smith
Director
/s/ Julius E. Talton March 21, 1995
- ------------------------------
Julius E.Talton
Director
/s/ Clinton S. Wilkinson, Jr. March 21, 1995
- ------------------------------
Clinton S. Wilkinson, Jr.
Director
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Identity of Exhibit Page
- ------ -------------------- ----
3(i) Articles of Incorporation Incorporated by reference
3(ii) Bylaws Incorporated by reference
10(i) 1992 Stock Option Plan Incorporated by reference
13 Sections of Annual Report to Stockholders
21 Subsidiaries
27 Financial Data Schedule
<PAGE>
EXHIBIT 13
<PAGE>
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
STOCK DIVIDEND AND PRICE INFORMATION
Since June 1994, the common stock of the Company has been quoted on the NASDAQ
SmallCap Market under the symbol, "PBTC." Prior to that time, there was not an
established public trading market for the Company's common stock. Two brokerage
firms, Morgan Keegan & Company, Inc. and Sterne Agee & Leach, Inc., make a
market in the common stock of the Company. Price of the stock is quoted in
local newspapers and, prior to being listed on NASDAQ, was quoted in the
National Daily Quotation Services "Pink Sheets"-TM-.
The following is the known range of high and low sales prices for the common
stock for each full quarterly period within the two most recent fiscal years,
and the dividends declared.
<TABLE>
<CAPTION>
Dividends Declared
1994 High Low (per common share)
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Jan-Mar 32.00 28.00 .24
Apr-June 32.00 28.25 .24
July-Sept 31.00 28.00 .24
Oct-Dec 29.50 27.00 .24
Dividends Declared
1993 High Low (per common share)
- -----------------------------------------------------------------------------------
Jan-Mar 26.00 22.25 .22
Apr-June 27.50 24.00 .22
July-Sept 30.00 26.00 .22
Oct-Dec 31.50 28.00 .22
</TABLE>
As of February 6, 1995, The Peoples BancTrust Company, Inc. had 787 stockholders
of record and 871,919 shares of common stock outstanding. See Note 14 of Notes
to Consolidated Financial Statements which discusses certain restrictions on the
payment of dividends by the Bank.
SUBSEQUENT EVENT
On January 28, 1995, the Board of Directors declared a two-for-one stock split
which was effected in the form of a one hundred percent stock dividend to all
shareholders of record as of February 25, 1995, the ex-dividend date, with the
stock dividend to be distributed on March 15, 1995. The financial information
included in this report does not reflect the effect of this stock dividend.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
FIVE-YEAR COMPARISON OF SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1994 1993* 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net interest income $ 11,344,017 $ 10,322,801 $ 8,807,342 $ 8,643,303 $ 8,621,386
Provision for loan losses 348,000 483,605 724,832 947,000 1,026,003
Income before income taxes 3,320,018 3,057,315 3,461,485 2,129,708 2,749,269
Provision for income taxes 961,853 807,643 1,122,000 120,691 849,000
Net income 2,354,602 2,173,194 2,339,485 2,009,017 1,900,269
Net income per share 2.64 2.65 2.83 2.43 2.30**
Cash dividends declared per share 0.96 0.88 0.80 0.70 0.63**
Total assets, December 31 $301,686,116 $281,870,570 $218,334,856 $221,221,649 $216,442,847
<FN>
* Reflects acquisition of control of CeeBee Corporation.
** Restated to give retroactive recognition to stock split effected in the form of a dividend declared October 23, 1990.
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
The purpose of this discussion is to focus on information about the financial
condition and results of operations of The Peoples BancTrust Company, Inc.,
("the Company"), which is not otherwise apparent from the consolidated financial
statements included in this annual report. Reference should be made to those
statements and the selected financial data presented elsewhere in this report
for an understanding of the following discussion and analysis.
ACQUISITIONS
At December 31, 1993, the Company owned 29,209 shares, or 96.36% of the
outstanding common stock of CeeBee Corporation, ("CeeBee"), the bank holding
company for The Citizens Bank, Prattville, Alabama, ("Citizens Bank"). On
February 18, 1994, CeeBee repurchased the remaining 3.64% of the outstanding
common stock as treasury stock resulting in 100% ownership of CeeBee by the
Company. On February 25, 1994, the net assets of CeeBee were transferred to the
Company, CeeBee was dissolved and Citizens Bank was merged into the Company's
subsidiary bank, The Peoples Bank and Trust Company, ("the Bank"). See Notes 4
and 5 of Notes to Consolidated Financial Statements for additional details of
the CeeBee acquisition.
On May 20, 1994, the Bank acquired the Selma Branch deposits of Altus Federal
Savings Bank, ("Altus"), a federal savings association which had been operating
under the management of the Resolution Trust Corporation, ("RTC"), the Federal
Government agency which oversees troubled thrift institutions. The Bank paid to
the RTC a franchise premium of $518,000 to acquire approximately $9,900,000 in
deposits.
BALANCE SHEET SUMMARY
As of December 31, 1994, the total consolidated assets of the Company were
$301,686,000 compared to total assets at December 31, 1993 of $281,871,000. The
growth in total assets was partially attributable to the acquisition of the
Selma deposits of Altus which provided an additional $9,900,000 of funds
available to invest. Significant growth in the volume of loans outstanding also
contributed to the increase in total assets.
At December 31, 1994, interest earning assets, consisting primarily of
investment securities and loans, totaled $267,068,000 compared to $260,800,000
at December 31, 1993. Earning assets represented 88.9% of total assets at year
end 1994 compared to 92.5% of total assets at year end 1993.
LOANS
Loans are the Company's largest earning asset category and generate the highest
yield for the Company. Therefore, most other assets and liabilities are managed
to accommodate the fluctuations in the loan portfolio.
During 1994, the average volume of net loans totaled $144,876,000. This
represented a growth of $20,807,000, or 16.8%, over the 1993 average of
$124,069,000. The acquisitions of CeeBee in 1993 and the Selma Branch deposits
of Altus in 1994 resulted in a drop in the Company's loan to deposit ratio.
Prior to acquiring the majority interest in CeeBee on June 28, 1993, the
Company's loan to deposit ratio was 64.2%. At December 31, 1993, the
consolidation of CeeBee, which had few loans by comparison to its volume of
deposits, caused the Company's loan to deposit ratio to fall to 55.8%.
Primarily due to an emphasis on promoting loans through advertising and special
promotions, loans, net of unearned interest, grew from $136,975,000 at December
31, 1993 to $162,978,000 at December 31, 1994. As a result, the Company's loan
to deposit ratio at December 31, 1994 had risen to 61.1%.
Personal loans reflected the largest growth during the year, increasing from
$46,355,000 at December 31, 1993 to $59,751,000 at December 31, 1994. Of this
$13,396,000 growth, approximately $9,400,000 was due to an increase in new and
used car purchases. Commercial loans grew $6,771,000 to $48,777,000 during 1994
while the volume
<PAGE>
of real estate loans increased $6,400,000 to $50,085,000 at year end 1994.
Credit lines and overdrafts decreased $564,000 from the December 31, 1993 total
of $4,929,000 to $4,365,000 at December 31, 1994.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses represents the amount of estimated, uncollectible
loans within the Company's loan portfolio. The allowance for loan losses is
charged when management determines that the prospects of payment of the
principal of a loan have significantly diminished. Subsequent recoveries, if
any, are credited to the allowance. The allowance for loan losses is maintained
at a level determined by management to be adequate to provide for possible
future loan losses. This determination is based on periodic reviews of the loan
portfolio quality by the Company's personnel, but also includes an analysis of
such factors as current and expected economic conditions, historical loss
experience, levels of non-accruing loans and loan delinquencies. Although
management believes it uses the best information available to make
determinations with respect to the allowance for loan losses, because the
allowance is based on assumptions and subjective judgment, it is not necessarily
indicative of the actual charge-offs which may ultimately occur.
The amount of loans determined by management that require special attention due
to potential weaknesses increased from $5,500,000 at December 31, 1993 to
$6,500,000 at December 31, 1994. Non-accruing loans decreased 34.4%, however,
from $2,055,000 at December 31, 1993 to $1,348,000 at December 31, 1994. At
December 31, 1994, the Company's allowance for loan losses totaled $2,040,000
compared to $2,205,000 at December 31, 1993. The resulting ratio of allowance
to total loans was 1.25% and 1.61% for 1994 and 1993, respectively. At its
current level, the allowance for loan losses exceeds the minimum required by
regulatory authorities. Management therefore believes that, although problem
loans increased between December 31, 1993 and December 31, 1994, the current
allowance for loan losses remains adequate to absorb potential losses in the
Company's loan portfolio.
INVESTMENTS
The Company uses its investment securities portfolio for generating interest
income and for maintaining adequate liquidity during periods of fluctuation in
loan demand and deposit structure. Management seeks to minimize risk in its
securities portfolio while maximizing return on its investments.
At December 31, 1994, the Company's investment securities portfolio totaled
$102,995,000, a drop of $9,329,000 from the total portfolio at December 31, 1993
of $112,324,000. This decrease was largely due to a shift in funds to the
higher yielding loan portfolio. The decrease, however, was partially the result
of the Company's adoption during the first quarter of 1994 of the Financial
Accounting Standards Board's Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity Securities," ("SFAS
115").
SFAS 115 modifies accounting principles for accounting and reporting for
investments in equity securities that have readily determinable fair values and
for all investments in debt securities and requires that these investments be
classified as either held-to-maturity, trading or available-for-sale. Debt
securities that the Company has the positive intent and ability to hold to
maturity are classified as held-to-maturity securities and reported at amortized
cost. Debt and equity securities that are purchased and held principally for
the purpose of selling in the near term are classified as trading securities and
reported at fair value, with unrealized gains and losses included in earnings.
All other debt and equity securities are classified as available-for-sale
securities and reported at fair value. Unrealized gains and losses are excluded
from earnings and reported in a separate component of stockholders' equity. At
December 31, 1994, securities available-for-sale had a net unrealized loss of
$2,627,000 (net of tax benefits of $1,072,000). See Notes 1, 6 and 19 of Notes
to Consolidated Financial Statements for additional discussion on SFAS 115.
<PAGE>
SHORT TERM INVESTMENTS
The Company's short-term investments consist primarily of federal funds sold,
which are overnight investments of excess funds, and securities purchased under
agreement to resell. These investments are a valuable tool in the management of
the Company's liquidity position and moreover, earn interest on funds which
would not otherwise be invested. Management monitors closely the balances of
short-term investments and seeks alternative uses of these funds.
At December 31, 1994, the volume of short-term investments was $3,134,000, a
$9,588,000 decline from the balance at December 31, 1993 of $12,722,000.
Stronger loan demand in 1994 necessitated a shift of funds from short-term
investments to the higher yielding loan portfolio.
DEPOSITS
In the normal course of business, the Company relies primarily on its internal
deposit base, rather than on borrowed funds, to fund loans and other investment
activities. Deposits totaled $263,622,000 at December 31, 1994 compared to
$241,502,000 at December 31, 1993, an increase of $22,120,000. Although the
growth in deposits was partially due to the acquisition of the Selma Branch
deposits of Altus, the Company's existing deposit base continued to show strong
growth and was primarily responsible for approximately $12,000,000 of the
increase in deposits.
The largest increase in total deposits was in the non-interest bearing demand
deposit category which grew from $39,345,000 at December 31, 1993 to $47,734,000
at December 31, 1994. Management believes this increase reflects a more
positive business climate in 1994 than in 1993 as the revenues of local
businesses increased and the collection of accounts receivable accelerated.
After a period of historically low interest rates, during 1994 rates began to
rise slightly. As interest rates slowly rose, the volume of interest bearing
deposits also increased. Time deposits grew from $110,164,000 at year end 1993
to $115,581,000 at year end 1994. The volume of deposits in interest bearing
demand accounts increased $4,684,000 during 1994 to $68,648,000 at year end. In
addition, savings accounts grew from $28,028,000 at December 31, 1993 to
$31,658,000 at December 31, 1994.
LIQUIDITY
Liquidity refers to the ability of the Company to meet its cash flow
requirements, to provide funds for operating expenses and to meet the borrowing
needs and withdrawal demands of customers on a timely basis. The Company
achieves its desired liquidity objectives from management of both assets and
liabilities.
In the ordinary course of its business, the Company's primary sources of cash
are interest and fee income, in addition to loan repayments and the maturity or
sales of other earning assets. Maturing investment securities also provide a
continuing flow of funds which is available for cash needs or for reinvestment
to maintain a desired liquidity position. Approximately 11% of the total
securities portfolio matures within one year. In addition, the Company's
securities portfolio at December 31, 1994 included readily marketable, high
quality securities identified as available-for-sale. These securities, having a
market value of approximately $76,000,000 at December 31, 1994, are available to
provide additional funds during periods of heavy cash needs. At December 31,
1994, liquid assets, consisting primarily of cash on hand and federal funds
sold, totaled $23,183,000 compared to $24,696,000 at year end 1993.
In addition, the liability base provides additional sources of liquidity through
deposit growth, the rollover of maturing deposits and accessibility to external
sources of funds. Although the Company is typically a seller of federal funds,
it may during occasional peaks in loan demand or short-term fluctuations in
liquidity factors, purchase federal funds or borrow from the Federal Reserve
Bank or Federal Home Loan Bank to meet its temporary cash needs. At December
31, 1994, borrowed funds to meet these short term liquidity needs totaled
$3,500,000 compared to $5,000,000 at December 31, 1993. Management considers
the Company's liquidity sources to be adequate to meet its current and projected
needs.
<PAGE>
STOCKHOLDERS' EQUITY
The Company continues to exhibit a strong capital position while paying
consistent dividends to its stockholders. The Company's strong capital base
allows it to take advantage of business opportunities while ensuring that
resources are available to absorb the risks inherent in the business.
Total stockholders' equity at December 31, 1994 was $27,630,000 compared to
$28,788,000 at December 31, 1993. The Company's net income for 1994 was
$2,355,000 and dividends aggregating $837,000 were paid to stockholders during
the year. The decline in stockholder's equity was primarily the result of the
adoption of SFAS 115. The tax-effected difference between fair value and
amortized cost of the securities available-for-sale, which was recorded as a
decrease to stockholders' equity, totaled $2,627,000. See Notes 1, 6 and 19 of
Notes to Consolidated Financial Statements for additional discussion about SFAS
115 and its effect on the Company's financial statements.
Risk-based capital regulations adopted by the Federal Reserve Board require all
bank holding companies and banks to achieve and maintain specified ratios of
capital to risk-weighted assets. The risk-based capital rules weigh assets and
off-balance sheet obligations at 0%, 20%, 50% or 100%, depending upon the risk
classification of the asset or obligation. All bank holding companies and banks
must maintain a minimum total capital to total risk-weighted assets ratio of
8.00%, at least half of which must be in the form of core, or Tier 1 capital
(consisting of stockholders' equity, less goodwill). The following table,
"Risk-Based Capital Ratios and Leverage Ratios," indicates that the Company's
core capital ratio and total capital ratio at December 31, 1994 were 14.27% and
15.33%, respectively. The Company's leverage ratio of core capital to total
assets at December 31, 1994 was 9.61% compared to the minimum regulatory
requirement of 3.00% required of the strongest companies and banks. All other
companies and banks are expected to maintain a ratio of 1% to 2% above the
stated minimum of 3.00%. In addition, the table indicates that the ratios of
the Bank also exceed the requirements of the regulation.
<PAGE>
RISK-BASED CAPITAL RATIOS & LEVERAGE RATIOS
AT DECEMBER 31, 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
RISK-BASED CAPITAL RATIOS The Company The Bank
<S> <C> <C> <C> <C>
Tier 1 Capital -
Stockholders' equity less goodwill $27,569 14.27% $28,835 15.37%
Minimum Required 7,727 4.00% 7,502 4.00%
Excess $19,842 10.27% $21,333 11.37%
Total Capital -
Tier 1 capital plus allowance for loan losses $29,609 15.33% $30,875 16.46%
Minimum Required 15,454 8.00% 15,005 8.00%
Excess $14,155 7.33% $15,870 8.46%
<CAPTION>
LEVERAGE RATIOS The Company The Bank
<S> <C> <C> <C> <C>
Tier 1 Capital $27,569 9.61% $28,835 10.09%
Minimum Leverage Requirement 8,609 3.00% 8,573 3.00%
Excess $18,960 6.61% $20,262 7.09%
</TABLE>
INCOME SUMMARY
The Company's net income for the year ended December 31, 1994 was $2,355,000.
By comparison, net income for the years ended December 31, 1993 and 1992 was
$2,173,000 and $2,339,000, respectively. Net income per weighted average common
share was $2.64 for 1994, $2.65 for 1993 and $2.83 for 1992.
NET INTEREST INCOME
Net interest income is the difference between the revenue from earning assets,
primarily interest income on loans and investments, and interest expense related
to interest-bearing liabilities. Net interest income is the Company's largest
source of income. Factors influencing net interest income include fluctuations
in interest rates and changes in the volume and mix of earning assets and
interest-bearing liabilities.
For the years indicated, the table, "Analysis of Changes in Interest Income and
Expense," shows the changes in each component of net interest income and
illustrates the degree to which these components were influenced by fluctuations
in volume and interest rates. The table, "Average Balance Sheets and Analysis
of Net Interest Income," details the Company's distribution of average assets,
liabilities and stockholders' equity and the interest rate differentials for
each of the past three years.
<PAGE>
ANALYSIS OF CHANGES IN INTEREST INCOME AND EXPENSE
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(IN THOUSANDS)
<TABLE>
<CAPTION>
1994 Compared to 1993 1993 Compared to 1992
--------------------- ---------------------
Changes Changes Changes Changes
Total in Volume in Rates Total in Volume in Rates
----- --------- -------- ----- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Interest income on:
Loans $2,048 $1,926 $122 $715 $1,133 ($418)
Bankers' acceptances, commercial
paper, and term federal funds (4) (2) (2) (200) (170) (30)
Taxable investment securities 650 1,015 (365) 620 1,259 (639)
Nontaxable investment securities 120 113 7 18 59 (41)
Federal funds sold and securities
purchased under agreement to resell (93) (229) 136 23 48 (25)
Interest bearing deposits in banks (38) (19) (19) (282) (431) 149
------ ------ ----- ----- ------ -------
Total interest income 2,683 2,804 (121) 894 1,898 (1,004)
Interest expense on:
Interest bearing demand deposits 798 715 83 680 612 68
Savings deposits 74 141 (67) 29 131 (102)
Time deposits 728 221 507 (1,357) (356) (1,001)
Securities sold under agreement to
repurchase 50 47 3 (6) 2 (8)
Other borrowed funds 12 25 (13) 32 32 0
------ ------ ----- ----- ------ -------
Total interest expense 1,662 1,149 513 (622) 421 (1,043)
Net change in net interest income before
loan losses $1,021 $1,655 ($634) $1,516 $1,477 $ 39
------ ------ ----- ----- ------ -------
------ ------ ----- ----- ------ -------
</TABLE>
The table describes the extent to which changes in interest rates and changes in
volume of interest-earning assets and interest-bearing liabilities have affected
the Company's interest income and expense during the periods indicated. For
each category of interest-earning assets and interest-bearing liabilities,
information is provided on changes attributable to: (1) changes in volume
(change in volume multiplied by old rate); (2) changes in rates (change in rate
multiplied by old volume); and (3) change in rate volume (change in rate
multiplied by the change in volume, allocated between volume change and rate
change at the ratio that the absolute value of each of these components bears to
the absolute value of its total).
<PAGE>
AVERAGE BALANCE SHEETS AND ANALYSIS OF NET INTEREST INCOME
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
Average Yield/ Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate Balance Interest Rate
------- -------- ---- ------- -------- ---- ------- -------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest Earning Assets:
Loans, Net* $144,876 $13,420 9.26% $124,069 $11,372 9.17% $111,836 $10,657 9.53%
Bankers' acceptances,
commercial paper, and
term federal funds 115 4 3.48 4,804 204 4.25
Taxable investment 108,623 5,684 5.23 89,573 5,034 5.62 68,144 4,414 6.48
securities
Nontaxable investment 3,873 222 5.73 1,887 102 5.41 962 84 8.73
securities
Federal funds sold and
securities purchased
under agreement to resell 3,738 193 5.16 9,450 286 3.03 7,919 263 3.32
Interest bearing deposits . 547 38 6.95 8,460 320 3.78
-------- ------ -- --- ------- ------- ---- -------- ------- ----
Total interest earning
assets 261,110 $19,519 7.48% 225,641 $16,836 7.46% 202,125 $15,942 7.89%
Non-Interest Earning Assets:
Cash and due from banks 14,165 11,291 9,945
Bank premises and
equipment (net) 5,179 3,748 3,399
Other assets 6,578 4,382 4,211
-------- -------- --------
Total non-interest
earning assets 25,922 19,421 17,555
-------- -------- --------
Total assets $287,032 $245,062 $219,680
-------- -------- --------
-------- -------- --------
LIABILITIES
Interest Bearing Liabilities:
Interest bearing demand
deposits $ 65,951 $ 2,307 3.50% $ 45,397 $ 1,509 3.32% $ 26,850 $ 829 3.09%
Savings deposits 31,393 899 2.86 26,602 825 3.10 22,588 796 3.52
Time deposits 112,984 4,842 4.29 107,407 4,114 3.83 115,321 5,471 4.74
Securities sold under
agreement to repurchase 3,762 82 2.18 1,586 32 2.02 1,493 38 2.55
Other borrowed funds 1,173 45 3.84 587 33 5.62 15 1 6.67
-------- ------- ---- -------- ------- ---- -------- ------- ----
Total interest bearing
liabilities 215,263 $ 8,175 3.80% 181,579 $ 6,513 3.59% 166,267 $ 7,135 4.29%
Non-interest bearing
demand deposits 40,637 33,751 26,782
Other liabilities 2,759 3,048 2,288
-------- -------- --------
Minority interest 555
Total non-interest
bearing liabilities 43,396 37,354 29,070
-------- -------- --------
Total liabilities 258,659 218,933 195,337
Stockholders' equity 28,373 26,129 24,343
-------- -------- --------
Total liabilities and
stockholders' equity $287,032 $245,062 $219,680
-------- -------- --------
-------- -------- --------
Net interest income $11,344 $10,323 $ 8,807
Net yield on interest
earning assets 4.34% 4.57% 4.36%
<FN>
* Average balances include non-accruing loans; interest earned includes fee
income of approximately $444,000, $269,000, and $216,000 in 1994, 1993 and
1992, respectively.
</TABLE>
<PAGE>
1994 VERSUS 1993
The Company's interest income for 1994 totaled $19,519,000 compared to
$16,836,000 for 1993. The increased income was due primarily to an increase in
the average volume of interest earning assets during 1994. The average volume
of earning assets increased from $225,641,000 for the year ended December 31,
1993 to $261,110,000 for the year ended December 31, 1994. Although interest
rates rose slightly during 1994, the average yields on earning assets increased
only from 7.46% in 1993 to 7.48% in 1994.
Interest and fee income on loans is the Company's largest source of total
interest income. In 1994, interest income on loans totaled $13,420,000, an
increase of $2,048,000 from $11,372,000 for the year ended December 31, 1993.
Growth in the average volume of loans from $124,069,000 in 1993 to $144,876,000
in 1994 was responsible for $1,926,000 of the increase in income. A higher
average yield on loans also added to interest income in 1994. The average yield
on loans increased from 9.17% in 1993 to 9.26% in 1994.
Interest income from the investment securities portfolio increased from
$5,286,000 in 1993 to $5,906,000 in 1994 due primarily to a $21,036,000, or
23.0% increase in the average volume of securities. Growth in the average
volume of investment securities in 1994 was offset by a decline in the average
yield on securities from 5.61% in 1993 to 5.25% in 1994. This decrease in
yields was attributable to the amortization of the purchase premium paid for the
CeeBee securities portfolio.
Interest earned on federal funds sold and securities purchased under agreement
to resell totaled $193,000 in 1994, a decrease of $93,000 from the 1993 total of
$286,000. Although the average yield on these short term investments was higher
in 1994, the average volume dropped from $9,450,000 in 1993 to $3,738,000 in
1994.
Interest expense on deposits and other interest bearing liabilities, is the
Company's largest expense item. For the year ended December 31, 1994, interest
expense totaled $8,175,000, an increase of $1,662,000 over the interest expense
for 1993 of $6,513,000. Although the average cost of these funds rose slightly
from 3.59% in 1993 to 3.80% in 1994, the increased interest expense was due
primarily to a growth in the average volume of interest bearing liabilities.
Average interest bearing liabilities totaled $215,263,000 for 1994 compared to
$181,579,000 for 1993, an increase of $33,684,000. Growth in the average volume
of interest bearing deposits, due to internal growth and to the acquisition of
the Selma Altus deposits, accounted for $30,922,000 of the total increase in
average interest bearing liabilities. Securities sold under agreements to
repurchase and other borrowed funds increased $2,762,000 to $4,935,000 in
average volume in 1994. Interest bearing demand deposits, consisting of NOW
accounts and insured money market demand accounts, increased in average volume
from $45,397,000 in 1993 to $65,951,000 in 1994. The average volume of time
deposits increased $5,577,000 in 1994 to $112,984,000 as rates increased 46
basis points to 4.29%. Average savings deposits grew from $26,602,000 in 1993
to $31,393,000 in 1994. This $4,791,000 growth occurred despite a decline in
average rates on savings accounts from 3.10% in 1993 to 2.86% in 1994.
Net interest income for 1994 totaled $11,344,000, an increase of $1,021,000 over
the net interest income for 1993 of $10,323,000.
1993 VERSUS 1992
Interest income for 1993 totaled $16,836,000, a 5.6% increase from the 1992
interest income of $15,942,000. This growth was primarily due to the
consolidation of CeeBee, which added $1,765,000 to interest income in 1993.
Excluding CeeBee, interest income decreased $871,000 due primarily to a decline
in average yields on earning assets from 7.89% in 1992 to 7.46% in 1993.
Interest expense decreased 8.7% in 1993 to $6,513,000. This decrease of
$622,000 occurred although the consolidation of CeeBee added $859,000 to
interest expense in 1993. Excluding CeeBee, the Company's interest expense
dropped from $7,135,000 in 1992 to $5,654,000 in 1993. A decline in the average
rate on interest bearing deposits from 4.31% in 1992 to 3.53% in 1993, coupled
with a $4,810,000 drop in the average volume of deposits, resulted in the
decrease in interest expense for 1993. The resulting net interest income for
1993 was $10,323,000, a 17.2% increase over the 1992 net interest income of
$8,807,000.
<PAGE>
PROVISION FOR LOAN LOSSES
The provision for loan losses is an expense to earnings which replaces
reductions to the allowance for loan losses caused by actual charge-offs and
establishes adequate reserves for the growth of the loan portfolio. The total
provision for loan losses in 1994 totaled $348,000. In 1993, the provision for
loan losses was $484,000, including $27,000 attributable to the consolidation of
CeeBee and in 1992 the provision was $725,000. Large recoveries in 1992 from
the settlement of a lawsuit over collateral rights associated with a
participation loan increased the allowance for loan losses and resulted in
management's decision to lower the provision in 1993 and 1994.
NON-INTEREST INCOME
The Company offers a wide variety of financial services which generate
additional fee income. In recent years, the importance of non-interest income
to the Company's overall profitability has elevated. In light of the pressures
on net interest income in the recent past, management recognizes the importance
of expanding the Company's present fee generating services and developing new
services to create additional non-interest income. The Company's primary
sources of non-interest income are fee-based fiduciary (trust) activities,
deposit service charges, credit life commissions, brokerage income, fee income
from accounts receivable financing, commission income from the Company's
insurance subsidiary and net gains on the sale of investment securities.
1994 VERSUS 1993
In 1994, non-interest income totaled $3,192,000 compared to $2,659,000 for 1993,
an increase of $533,000 which was primarily attributable to an increased level
of service charges on deposit accounts. The increase in the volume of deposits
resulted in a corresponding increase in deposit service charges. For the year
ended December 31, 1994, deposit service charges were $2,042,000, a $303,000
increase over the 1993 total of $1,739,000. Net gains on the sale of investment
securities for 1994 was $125,000 compared to $14,000 for 1993. During the last
half of 1993, the Company initiated a new accounts receivable financing program
which generated approximately $7,000 in income in 1993. In 1994, the first full
year that this service was offered, net fee income totaled $107,000.
1993 VERSUS 1992
The Company's non-interest income for 1993 was $2,659,000, of which $247,000
was attributable to the acquisition of CeeBee. Excluding the CeeBee income, the
Company's non-interest income dropped $1,518,000 from the 1992 total of
$3,930,000. Two events in 1992 significantly increased non-interest income for
the year. First, the Company recorded a gain of $1,311,000 from the settlement
of the lawsuit mentioned earlier. Secondly, favorable market conditions in 1992
motivated management to sell approximately $23,500,000 of its securities
portfolio which boosted net gains on securities for the year to $401,000. By
comparison, net securities gains for 1993, including a $75,000 loss on the sale
of CeeBee's securities, totaled only $14,000. These income items in 1992 were
primarily responsible for the comparative decrease in non-interest income in
1993.
NON-INTEREST EXPENSE
1994 VERSUS 1993
The Company's non-interest expense for the year ended December 31, 1994 was
$10,868,000 compared to $9,441,000 in 1993. Salaries and employee benefits
increased from $4,954,000 in 1993 to $5,449,000 in 1994. Regular salary
increases, coupled with higher overtime expense due to the acquisition and
conversion of CeeBee and the installation of new automation equipment, were the
primary causes of the increased expense in 1994. Primarily as the result of
merging CeeBee into the Company, the establishment of local and wide area
computer networks and the installation of state-of-the-art image technology,
automation expense, stationery and supplies expense and the expense of premises
and fixed assets increased in 1994. Renovations to the former CeeBee buildings
and the purchase and renovation of the Selma branch Altus building also
contributed to a $147,000, or 11.5%, increase in the expense of premises and
fixed assets. The growth in the volume of deposits caused FDIC insurance
premiums to increase $123,000 in 1994 to $541,000.
<PAGE>
1993 VERSUS 1992
Non-interest expense for 1993 totaled $9,441,000 compared to $8,551,000 for the
previous year. The Company's non-interest expense, excluding those of CeeBee
totaling $755,000, was $8,686,000, an increase of $135,000 over 1992.
Salaries and employee benefits, the largest category of non-interest expense,
increased $191,000 in 1993 to $4,542,000. The greater expense in 1993 was due
to normal salary increases and higher pension fund and employee insurance
expense. In 1992, the Company received reimbursements of legal fees totaling
approximately $150,000 from a participating bank on a bankrupt line of credit
and from the lawsuit settlement mentioned earlier. Excluding these
reimbursements, legal fees for 1992 were $81,000 compared to $53,000 in 1993.
In 1993, a decrease in charge-offs, other than loans, partially offset the
increases in non-interest expense. In 1992, the Company recorded a $225,000
charge to non-interest expense to write down the value of a piece of property
held in other real estate owned due to uninsurable vandalism which lowered the
appraised value of the property. During 1993, charges to this expense, net of
recoveries, totaled $132,000, resulting in a comparative decrease of $126,000
from the total expense in 1992 of $258,000.
PROVISION FOR INCOME TAX
1994 VERSUS 1993
Income before taxes for 1994 totaled $3,320,000, a $263,000 increase from the
1993 income before taxes of $3,057,000. The provision for income taxes for 1994
totaled $962,000 compared to $808,000 in 1993. The resulting income tax
provision expressed as a percent of income before taxes was 29.0% for 1994 and
26.4% for 1993.
1993 VERSUS 1992
The 1993 income before taxes of $3,057,000 represented an 11.7% decrease from
the 1992 income before taxes of $3,461,000. The income tax provision for 1993
was $807,000 and $1,122,000 in 1992. Expressed as a percent of income before
taxes, the provision for 1993 was 26.4% and 32.4% for 1992. The lower income in
1993, coupled with an increase in tax-exempt income due to the consolidation of
CeeBee, were primarily responsible for the decreased tax provision in 1993.
Also in 1993, the Company adopted SFAS 109, "Accounting for Income Taxes", which
required the establishment of deferred tax liabilities and assets, as measured
by enacted tax rates, for all temporary differences caused when the tax basis of
an asset or liability differs from that reported in the financial statements.
As a result, the Company recognized a decrease in 1993 income of $31,000 from
the cumulative effect of a change in accounting principle. Prior year's
financial statements were not restated to apply the provisions of SFAS 109.
IMPACT OF INFLATION AND CHANGING PRICES
The financial statements and related data presented herein have been prepared in
accordance with generally accepted accounting principles which require the
measurement of financial position and operating results in terms of historical
dollars, without considering changes in the relative purchasing power of money
over time due to inflation.
The majority of assets and liabilities of a financial institution are monetary
in nature and therefore differ greatly from most commercial and industrial
companies that have significant investments in fixed assets or inventories.
However, inflation does have an important impact on the growth of total assets
and creates the need to generate more equity capital in order to maintain an
appropriate equity to assets ratio. Another significant effect of inflation is
on non-interest expenses, which tend to rise during periods of inflation.
The Company's profitability, like that of most financial institutions, is
dependent to a large extent upon its net interest income. Management believes,
therefore, that changes in interest rates have a more significant impact on a
financial institution's performance than the effects of general levels of
inflation. Interest rates do not necessarily move in the same direction or in
the same magnitude as the price of goods and services, since such prices are
affected by inflation. Whenever interest-earning assets reprice to market
interest rates at a different pace than
<PAGE>
interest- bearing liabilities, net interest income performance will be affected
favorably or unfavorably during periods of changes in general interest rates.
In a volatile interest rate environment, liquidity and the maturity structure of
the Company's assets and liabilities are critical to the maintenance of
acceptable performance levels. The Company is unable to predict future changes
in market rates of interest and their impact on the Company's profitability.
Management, however, attempts to maintain an essentially balanced position
between rate sensitive assets and liabilities in order to protect against wide
interest rate fluctuations and believes that its current rate sensitivity
position is well matched, indicating the assumption of minimal interest rate
risk.
NEW ACCOUNTING STANDARDS
The Financial Accounting Standards Board ("FASB") issued Financial Accounting
Standards No. 118, "Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosures", ("SFAS 118") which amends FASB Statement No. 114,
"Accounting by Creditors for Impairment of a Loan", to allow a creditor to use
existing methods for recognizing interest income on an impaired loan. Prior to
the issuance of Statement 118, Statement 114 provided for two alternative income
recognition methods to be used to account for changes in the net carrying amount
of an impaired loan subsequent to the initial measure of impairment. Under the
first income recognition method, a creditor would accrue interest on the net
carrying amount of the impaired loan and report other changes in the net
carrying amount of the loan as an adjustment to bad debt expense. Under the
second income recognition method, a creditor would recognize all changes in the
net carrying amount of the loan as an adjustment to bad debt expense. While
those income methods are no longer required, Statement 118 does not preclude a
creditor from using either of those methods. SFAS 118 is effective for fiscal
years beginning after December 15, 1994, and will be adopted by the Company at
its due date. In addition, the adoption of SFAS 118 is expected to have an
immaterial effect on the financial statements of the Company.
On January 1, 1994, the Company adopted the provisions of SFAS 115 which was
discussed earlier. For additional discussion on SFAS 115, see Notes 1, 6 and 19
of Notes to Consolidated Financial Statements.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
THE PEOPLES BANCTRUST COMPANY, INC.
AND SUBSIDIARY
Consolidated Financial Statements
for the years ended December 31, 1994 and 1993
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
The Peoples BancTrust Company, Inc.
We have audited the accompanying consolidated balance sheets of The Peoples
BancTrust Company, Inc. and subsidiary as of December 31, 1994 and 1993, and the
related consolidated statements of income, changes in stockholders' equity, and
cash flows for each of the three years in the period ended December 31, 1994.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of The Peoples
BancTrust Company, Inc. and subsidiary as of December 31, 1994 and 1993, and the
consolidated results of their operations and their consolidated cash flows for
each of the three years in the period ended December 31, 1994, in conformity
with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
- ----------------------------
Birmingham, Alabama
January 27, 1995
<PAGE>
THE PEOPLES BANCTRUST COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
December 31, 1994 and 1993
____________
<TABLE>
<CAPTION>
1994 1993
---- ----
ASSETS
<S> <C> <C>
Cash and due from banks $ 20,048,270 $ 10,990,234
Federal funds sold and securities purchased under
agreement to resell 3,134,206 12,721,903
Interest-bearing deposits in banks 984,000
----------- -----------
Cash and cash equivalents 23,182,476 24,696,137
Investment securities: held-to-maturity 27,186,478
Investment securities: available-for-sale 75,808,336
Investment securities 15,376,872
Securities available for sale 96,946,915
Loans, net of unearned discount 162,978,447 136,975,436
Allowance for loan losses (2,039,578) (2,204,807)
----------- -----------
Loans, net 160,938,869 134,770,629
Bank premises and equipment, net 5,718,419 4,709,659
Other real estate, net 392,214 540,842
Interest receivable 2,600,954 2,341,625
Intangible assets acquired, net of accumulated
amortization of $2,274,441 and $2,084,403,
respectively 1,303,218 1,094,881
Deferred income taxes 1,732,506 444,969
Income taxes receivable 480,036
Other assets 2,342,610 948,041
----------- -----------
$301,686,116 $281,870,570
------------ ------------
------------ ------------
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Liabilities:
Deposits:
Demand - noninterest bearing $ 47,734,367 $ 39,345,492
Demand - interest bearing 68,648,226 63,964,437
Savings 31,657,778 28,028,435
Time 115,581,251 110,163,963
------------ ------------
Total deposits 263,621,622 241,502,327
Securities sold under agreements to repurchase 6,855,135 2,665,771
Other borrowed funds 437,868 5,495,891
Deferred income taxes 1,139,620 851,761
Interest payable 820,058 623,392
Dividends payable 11,435 8,437
Income taxes payable 294,746
Other liabilities 1,170,407 1,405,132
Commitments and contingent liabilities
(Notes 11 and 17)
Minority interest in consolidated subsidiary 232,928
Minority interest - preferred stock in the bank,
par value $1 per share; 2,600 shares authorized;
2,000 shares issued and outstanding 2,000
------------ ------------
Total liabilities 274,056,145 253,082,385
------------ ------------
Stockholders' equity:
Common stock, $.10 par value; 4,000,000 shares
authorized; 890,726 shares issued at December
31, 1994 and 1993, respectively (Note 3) 89,073 89,073
Additional paid-in capital 7,148,664 7,196,933
Net unrealized loss on investments (net of
tax benefits of $1,071,644) (2,627,504)
Retained earnings 23,500,041 21,982,482
Treasury stock, 18,807 shares at cost (480,303) (480,303)
------------- ------------
Total stockholders' equity 27,629,971 28,788,185
------------- -------------
$301,686,116 $281,870,570
------------- -------------
------------- -------------
</TABLE>
See notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
for the years ended December 31, 1994, 1993, and 1992
____________
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Interest income:
Interest and fees on loans and bankers
acceptances $13,420,370 $11,263,148 $10,692,278
Interest on investment securities:
U. S. Treasury securities 1,189,861 987,124 706,699
Obligations of other U. S. Government
agencies and corporations 3,534,990 2,582,418 2,438,127
Obligations of state and political
subdivisions and industrial
development bonds:
Nontaxable 221,502 214,835 253,638
Taxable 102,807 83,657 36,643
Other securities and interest-bearing
deposits 856,442 1,417,905 1,552,145
Interest on federal funds sold and
securities purchased under agreement
to resell 192,711 286,444 262,801
----------- ----------- -----------
Total interest income 19,518,683 16,835,531 15,942,331
Interest expense:
Deposits 8,048,365 6,447,361 7,095,474
Federal funds purchased, securities
sold under agreements to repurchase,
and other borrowed funds 126,301 65,369 39,515
----------- ----------- -----------
Total interest expense 8,174,666 6,512,730 7,134,989
----------- ----------- -----------
Net interest income 11,344,017 10,322,801 8,807,342
Provision for loan losses 348,000 483,605 724,832
----------- ----------- -----------
Net interest income after
provision for loan losses 10,996,017 9,839,196 8,082,510
Other income:
Trust department income 272,347 256,563 236,306
Service charges on deposit accounts 2,041,821 1,738,691 1,518,923
Net securities gains 125,019 14,045 400,612
Credit life insurance commissions 120,286 102,215 112,934
Gain on settlement of lawsuit 1,311,196
Other 632,723 547,588 350,162
----------- ---------- ----------
Total other income 3,192,196 2,659,102 3,930,133
Other expenses:
Salaries and wages 4,281,683 3,909,659 3,439,092
Pensions and other employee benefits 1,167,154 1,044,244 911,616
Occupancy and furniture and equipment
expenses 1,423,554 1,277,262 1,173,923
Other operating expenses 3,995,804 3,209,818 3,026,527
----------- ---------- ----------
Total other expenses 10,868,195 9,440,983 8,551,158
----------- ---------- ----------
Income before income taxes,
minority interest and cumulative
effect of change in accounting
principle 3,320,018 3,057,315 3,461,485
Provision for income taxes:
Current 971,179 1,142,194 1,429,000
Deferred (9,326) (334,551) (307,000)
----------- ----------- ----------
Total income taxes 961,853 807,643 1,122,000
----------- ----------- ----------
Income before minority interest
and cumulative effect of change
in accounting principle 2,358,165 2,249,672 2,339,485
Minority interest in earnings 3,563 45,478
----------- ----------- ----------
Income before cumulative effect of
change in accounting principle 2,354,602 2,204,194 2,339,485
Cumulative effect of change in accounting
principle (31,000)
----------- ----------- -----------
Net income $ 2,354,602 $ 2,173,194 $ 2,339,485
----------- ----------- ----------
----------- ----------- ----------
Weighted average number of shares
outstanding (Note 3) 891,361 818,220 825,878
------- ------- -------
------- ------- -------
Earnings per weighted average common
share (Note 3):
Income before cumulative effect of
change in accounting principle $2.64 $2.69 $2.83
Cumulative effect of change in
accounting principle (.04)
----- ----- -----
Net income per share (Note 3) $2.64 $2.65 $2.83
----- ----- -----
----- ----- -----
</TABLE>
See notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
for the years ended December 31, 1994, 1993, and 1992
____________
<TABLE>
<CAPTION>
Additional Unrealized
Common Treasury Paid-In Gains Retained
Stock Stock Capital (Losses) Earnings Total
----- -------- ---------- ---------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1991 $ 825,878 $4,377,859 $18,859,130 $24,062,867
Net income 2,339,485 2,339,485
Cash dividends declared
($.80 per share) (660,702) (660,702)
Change in par value from
$1 to $.10 per share (743,290) 743,290
--------- ---------- ----------- ------------ ----------- -----------
Balance, December 31, 1992 82,588 5,121,149 20,537,913 25,741,650
Net income 2,173,194 2,173,194
Cash dividends declared
($.88 per share) (728,625) (728,625)
Treasury stock purchased
(22,996 shares) $(591,335) (591,335)
Treasury stock issued to
Employee Stock Ownership
Plan (4,189 shares) 111,032 111,032
Common stock issued due to
acquisition (64,848 shares) 6,485 2,075,784 2,082,269
--------- ---------- ----------- ------------ ----------- -----------
Balance, December 31, 1993 89,073 (480,303) 7,196,933 21,982,482 28,788,185
Adjustment to beginning
balance for change in
accounting principle,
net of income taxes of
$108,090 $ (264,633) (264,633)
Change in unrealized gains
(losses), net of income
taxes of $963,554 (2,362,871) (2,362,871)
Net income 2,354,602 2,354,602
Cash dividends declared
($.96 per share) (837,043) (837,043)
Treasury stock purchased
(1,500 shares) (43,500) (43,500)
Treasury stock issued
to Employee Stock
Ownership Plan
(1,500 shares) 43,500 43,500
Other (48,269) (48,269)
--------- --------- ---------- ------------ ----------- -----------
Balance, December 31, 1994 $ 89,073 $(480,303) $7,148,664 $(2,627,504) $23,500,041 $27,629,971
--------- --------- ---------- ------------ ----------- -----------
--------- --------- ---------- ------------ ----------- -----------
</TABLE>
See notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended December 31, 1994, 1993, and 1992
____________
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Operating activities:
Net income $ 2,354,602 $ 2,173,194 $ 2,339,485
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 348,000 483,605 724,832
Depreciation, amortization, and accretion 1,260,083 1,102,511 845,804
Gain on settlement of lawsuit (1,311,196)
Increase (decrease) in unearned discount 1,530,051 1,036,104 (720,079)
Provision (benefit) for deferred income taxes, net 71,965 397,823 (209,055)
Purchases of trading securities (36,913,782)
Proceeds from sales of trading securities 36,914,378
Gain on sale of securities (125,019) (164,704) (400,611)
Net (gain) loss on sale of other assets (41,412) 30,675 32,429
Write down of other real estate 74,292 132,896 255,930
Decrease (increase) in assets, net of acquisition:
Interest receivable (259,329) (230,550) 343,645
Other assets (1,841,213) 3,490,705 (78,499)
(Increase) decrease in liabilities, net of acquisition:
Interest payable 196,666 (35,907) (461,731)
Income taxes payable (774,782) (465,574) 299,576
Other liabilities (5,294,747) 3,764,198 43,371
Minority interest in consolidated subsidiary (232,928) 232,928
Minority interest - preferred stock in the Bank 2,000
----------- ---------- -----------
Net cash provided by (used in) operating activities (2,733,175) 11,949,904 1,703,901
Investing activities:
Proceeds from sales of investment securities 12,666,198 32,579,346
Proceeds from sales of investment securities: held-to-
maturity 1,203,060
Proceeds from maturities and calls of investment
securities 36,445,716 23,180,388
Purchases of investment securities, net of acquisitions (52,107,820) (63,845,587)
Proceeds from maturities and calls of investment
securities: held-to-maturity 9,830,000
Purchases of investment securities: held-to-maturity (21,336,585)
Proceeds from sales of investment securities: available-
for-sale 22,716,645
Proceeds from maturities and calls of investment
securities: available-for-sale 9,232,505
Purchases of investment securities: available-for-sale (16,400,285)
Net (increase) decrease in loans, net of acquisitions (28,060,223) (13,631,242) 1,705,050
Purchases of bank premises and equipment, net of
acquisitions (1,569,897) (541,284) (217,330)
Proceeds from sale of other real estate and equipment 129,680 330,326 701,628
Net decrease in banker's acceptances 1,984,790 4,006,057
Payment for purchase of Cee Bee, net of cash acquired (482,000)
------------ ------------ -----------
Net cash used in investing activities (24,255,100) (15,335,316) (1,890,448)
Financing activities:
Net increase (decrease) in deposits 22,119,295 8,588,735 (4,409,250)
Increase (decrease) in short-term borrowings 4,189,364 1,354,319 (332,263)
Increase in other borrowed funds 502,000
Dividends paid (834,045) (739,034) (658,926)
Purchase of treasury stock (480,303)
------------ ------------ ------------
Net cash provided by (used in)
financing activities 25,474,614 8,723,717 (4,898,439)
Increase (decrease) in cash and cash equivalents (1,513,661) 5,338,305 (5,084,986)
Cash and cash equivalents, beginning of year 24,696,137 19,357,832 24,442,818
------------ ------------ ------------
Cash and cash equivalents, end of year $ 23,182,476 $ 24,696,137 $ 19,357,832
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
See notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued
for the years ended December 31, 1994, 1993, and 1992
____________
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Supplemental disclosures of cash flow
information:
Cash paid during the year for:
Interest $ 7,980,599 $ 7,456,233 $ 7,599,061
------------ ------------- -------------
------------ ------------- -------------
Income taxes $ 1,655,000 $ 1,596,877 $ 1,031,479
------------ ------------- -------------
------------ ------------- -------------
Supplemental disclosure of noncash
financing activities:
The Company decreased the par value
of its common stock from $1.00 to
$.10 per share. $ 743,290
-------------
-------------
</TABLE>
See notes to consolidated financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
____________
1. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF CONSOLIDATION - The consolidated financial statements included
herein are those of The Peoples BancTrust Company, Inc. (the Company) and
its wholly owned subsidiary, The Peoples Bank and Trust Company (the Bank).
At December 31, 1993, the Company owned 96.36% of the outstanding common
stock of Cee Bee Corporation (Cee Bee), the bank holding company for The
Citizens Bank, Prattville, Alabama (Citizens Bank). On February 18, 1994,
Cee Bee repurchased the remaining 3.64% of its outstanding common stock,
resulting in 100% ownership of Cee Bee by the Company. On February 25,
1994, the net assets of Cee Bee were transferred to the Company, Cee Bee
was dissolved, and Citizens Bank was merged into the bank. All significant
intercompany balances and transactions have been eliminated.
TRADING SECURITIES - Trading securities are stated at market value.
Purchases and sales are recorded on the trade date, with related gains and
losses recognized currently in other income. There were no trading
securities on hand at December 31, 1994 or 1993.
INVESTMENT SECURITIES AND SECURITIES AVAILABLE FOR SALE - Investment
securities are securities for which management has the ability and intent
to hold on a long-term basis or until maturity. These securities are
carried at amortized cost, adjusted for amortization of premiums, and
accretion of discount to the earlier of the maturity or call date. Gains
or losses on disposition of investment securities are based on the specific
identification method.
Securities available for sale represent those securities intended to be
held for an indefinite period of time, including securities that management
intends to use as part of its asset/liability strategy, or that may be sold
in response to changes in interest rates, changes in prepayment risk, the
need to increase regulatory capital, or other similar factors. Securities
available for sale are recorded at the lower of aggregate amortized cost,
as defined above, or market value.
INVESTMENT SECURITIES: HELD-TO-MATURITY AND AVAILABLE-FOR-SALE - On January
1, 1994, the Company adopted the provisions of Statement of Financial
Accounting Standards No. 115, ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT
AND EQUITY SECURITIES (SFAS No. 115). In accordance with SFAS No. 115,
prior period financial statements have not been restated to reflect the
change in accounting principle. For purposes of adopting SFAS 115, the
Company has classified all of its investments as either held-to-maturity,
trading, or available-for-sale securities. Debt securities that the
Company has the positive intent and ability to hold to maturity are
classified as held-to-maturity securities and reported at amortized cost.
Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings. Debt and equity securities not classified as either
held-to-maturity securities or trading securities are classified as
available-for-sale securities and reported at fair value, with unrealized
gains and losses excluded from earnings and reported in a separate
component of shareholders' equity. The opening balance of shareholders'
equity decreased by $265,000 (net of $108,000 in deferred income taxes) to
reflect the net unrealized losses on securities classified as available-
for-sale that were previously classified as investment securities and
securities available for sale,
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
--------------------
and carried at amortized cost and lower of aggregate amortized cost or
market value, respectively.
LOANS - Loans are stated at face value, net of unearned discount, and the
allowance for loan losses. Unearned discount on installment loans is
recognized as income over the terms of the loans by the sum-of-the-months-
digits method, which approximates the interest method. Interest on other
loans is credited to operations based on the principal amount outstanding.
Nonrefundable fees and costs associated with originating or acquiring loans
are recognized by the interest method as a yield adjustment over the life
of the corresponding loan.
ALLOWANCE FOR LOAN LOSSES - The allowance for loan losses is established
through a provision for loan losses charged to expenses. The allowance
represents an amount which, in management's judgement, will be adequate to
absorb probable losses on existing loans that may become uncollectible.
Management's judgement in determining the adequacy of the allowance is
based on evaluations of the collectibility of loans. These evaluations
take into consideration such factors as changes in the nature and volume of
the loan portfolio, current economic conditions that may affect the
borrowers' ability to pay, overall portfolio quality, and review of
specific problem loans.
Loans are placed on nonaccrual status when management believes that the
borrowers' financial condition, after giving consideration to economic and
business conditions and collection efforts, is such that collection of
interest is doubtful. After being placed on nonaccrual status, interest
will be included in income to the extent received only if complete
principal recovery is reasonably assured.
BANK PREMISES AND EQUIPMENT - Office equipment and buildings are stated at
cost less accumulated depreciation computed on the straight-line,
declining-balance and other accelerated methods over the estimated useful
lives of the assets. Gains or losses on disposition are recorded in other
operating income on the date of disposition, based upon the difference
between the net proceeds and the adjusted carrying value of the assets sold
or retired. Maintenance and repairs are charged to expense as incurred,
while renewals and betterments are capitalized.
OTHER REAL ESTATE - Other real estate is stated at the lower of the
appraised value or outstanding loan balance at the time of foreclosure.
Any subsequent write-downs are charged against operating expenses.
Operating expenses of such properties, net of related income, and gains and
losses on their disposition are included in other expenses.
INTANGIBLE ASSETS ACQUIRED - Intangible assets acquired are stated at
original cost less accumulated amortization to date. Core deposits are
amortized using the straight-line method over a period of ten years;
goodwill is amortized using the straight-line method over a period of
twenty to twenty-five years.
INCOME TAXES - The Company, the Bank, and Cee Bee file a consolidated
federal income tax return. Deferred income taxes are recorded to reflect
the tax consequences on future years of differences between the tax basis
of assets and liabilities and their financial reporting amounts.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
--------------------
During 1993, the Company adopted Statement of Financial Accounting
Standards No. 109, ACCOUNTING FOR INCOME TAXES, and recognized a decrease
in income of $31,000 from the cumulative effect of a change in accounting
principle. Prior years' financial statements have not been restated to
apply the principles of SFAS No. 109.
SFAS No. 109 requires the establishment of deferred tax liabilities and
assets, as measured by enacted tax rates, for all temporary differences
caused when the tax basis of an asset or liability differs from that
reported in the financial statements.
EARNINGS PER SHARE - Earnings per share are calculated by dividing net
income by the weighted average number of shares outstanding during the
period.
CASH AND CASH EQUIVALENTS - For purposes of reporting cash flows, cash and
cash equivalents include cash and due from banks, federal funds sold,
securities purchased under agreement to resell, and interest-bearing
deposits in banks.
2. RESTRICTED CASH BALANCES
Aggregate reserves in the form of deposits with the Federal Reserve Bank
of $3,000,000 were maintained to satisfy federal regulatory requirements
at December 31, 1994.
3. SUBSEQUENT EVENT
On January 28, 1995, the Board of Directors declared a two-for-one stock
split which was effected in the form of a 100 percent stock dividend to
all shareholders of record as of February 25, 1995, the ex-dividend date,
with the stock dividend to be distributed on March 15, 1995. Summarized
below are the earnings per share calculations on an unaudited pro forma
basis applied retroactively for each year presented as if the transaction
had occurred prior to the release of the Company's consolidated financial
statements.
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Weighted average number of shares
outstanding 1,782,722 1,636,440 1,651,756
--------- --------- ---------
--------- --------- ---------
Earnings per weighted average
common share:
Income before cumulative effect
of change in accounting
principle $1.32 $1.35 $1.42
Cumulative effect of change in
accounting principle (.02)
----- ----- -----
Net income $1.32 $1.33 $1.42
----- ----- -----
----- ----- -----
</TABLE>
4. ACQUISITIONS
The Company acquired 65.8% and 30.56% of the stock of Cee Bee on June 30,
1993 and November 16, 1993, respectively, for net consideration of
approximately $2,562,000 consisting of $482,000 cash and
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
--------------------
$2,082,000 of the Company's common stock (64,848 shares). The purchase
price was allocated to noncash assets acquired and liabilities assumed as
follows:
<TABLE>
<S> <C>
Assets acquired:
Securities $32,809,000
Loans, net 11,799,000
Premises and equipment 1,535,000
Other assets 606,000
-------------
46,749,000
-------------
Liabilities assumed:
Noninterest bearing deposits 5,966,000
Interest bearing deposits 28,192,000
Savings and time deposits 10,088,000
Other liabilities 178,000
Deferred tax liability 545,000
44,969,000
-------------
Net assets acquired 1,780,000
Net consideration 2,562,000
-------------
Excess purchase price over net assets acquired $ 782,000
-------------
-------------
</TABLE>
The acquisition has been accounted for as a purchase with costs allocated
to assets acquired and liabilities assumed based on estimated fair market
values for Cee Bee. Results of operations since the date of acquisition
are included in the consolidated financial statements.
5. CONSOLIDATED PRO FORMA RESULTS (UNAUDITED)
Summarized below are the consolidated results of operations on an unaudited
pro forma basis as if the acquisitions had occurred as of the beginning of
the years presented. The pro forma information gives effect to certain pro
forma adjustments and is based on the Company's and Cee Bee's historical
consolidated results of operations for the periods presented.
The pro forma financial information does not purport to be indicative of
results of operations that would have occurred had the transactions
occurred on the basis assumed above, nor are they indicative of the results
of future operations of the combined enterprises.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
--------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, December 31,
1993 1992
------------ -----------
<S> <C> <C>
Total interest income $18,470,000 $19,109,445
Income before cumulative effect of change in
accounting principle 2,247,000 2,419,473
Net income 2,216,000 2,419,473
Earnings per weighted average common share:
Income before cumulative effect of change in
accounting principle $2.57 $2.72
Cumulative effect of change in accounting principle (.04)
----- -----
Net income $2.53 $2.72
----- -----
----- -----
</TABLE>
6. SECURITIES
The amortized cost and approximate market values of investment securities:
held-to-maturity and investment securities: available-for-sale at December 31,
1994 and investment securities and securities available for sale at
December 31, 1993 are as follows:
<TABLE>
<CAPTION>
Investment securities: held-to-maturity 1994
----
Gross Gross
Amortized Unrealized Unrealized Approximate
Type Cost Gains Losses Market Value
---- ----------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
U. S. Treasury securities $ 9,401,748 $ (175,628) $ 9,226,120
Obligations of other U. S.
Government agencies and corporations 14,547,199 (719,973) 13,827,226
Obligations of state and political
subdivisions 2,150,891 $ 3,958 (184,666) 1,970,183
Corporate and other securities 1,086,640 37,905 (5,000) 1,119,545
----------- ------- ----------- -----------
$27,186,478 $41,863 $(1,085,267) $26,143,074
----------- ------- ----------- -----------
----------- ------- ----------- -----------
<CAPTION>
Investment securities 1993
----
Gross Gross
Amortized Unrealized Unrealized Approximate
Type Cost Gains Losses Market Value
---- ----------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
U. S. Treasury securities $ 6,033,057 $129,753 $6,162,810
Obligations of other U. S.
Government agencies and corporations 5,608,435 59,404 5,667,839
Obligations of state and political
subdivisions 3,735,380 17,810 $(3,790) 3,749,400
----------- -------- ---------- -----------
$15,376,872 $206,967 $(3,790) $15,580,049
----------- -------- ---------- -----------
----------- -------- ---------- -----------
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
--------------------
<TABLE>
<CAPTION>
Investment securities: available-for-sale 1994
----
Gross Gross
Amortized Unrealized Unrealized Approximate
Type Cost Gains Losses Market Value
---- ----------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
U. S. Treasury securities $12,935,758 $ (623,335) $12,312,423
Obligations of other U. S.
Government agencies and corporations 50,875,603 $6,951 (2,312,757) 48,569,797
Obligations of state and political
subdivisions 1,767,857 1,163 (88,690) 1,680,330
Corporate and other securities 13,928,265 (682,479) 13,245,786
----------- ------- ---------- -----------
$79,507,483 $8,114 $(3,707,261) $75,808,336
----------- ------- ---------- -----------
----------- ------- ---------- -----------
<CAPTION>
Securities available for sale: 1993
----
Gross Gross
Amortized Unrealized Unrealized Approximate
Type Cost Gains Losses Market Value
---- ----------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
U. S. Treasury securities $16,879,020 $193,630 $ (25,767) $17,046,883
Obligations of other U. S.
Government agencies and corporations 62,094,504 317,423 (151,969) 62,259,958
Obligations of state and political
subdivisions 2,862,143 56,882 2,919,025
Corporate and other securities 15,111,248 150,177 (2,055) 15,259,370
----------- -------- --------- -----------
$96,946,915 $718,112 $(179,791) $97,485,236
----------- -------- --------- -----------
----------- -------- --------- -----------
</TABLE>
The amortized cost and approximate market value of investment securities and
securities available for sale at December 31, 1994, by contractual maturity,
are shown below. Expected maturities will differ from contractual maturities
because borrowers may have the right to call or prepay obligations with or
without call or prepayment penalties.
<TABLE>
<CAPTION>
Investment Securities Securities Available For Sale
--------------------------- ------------------------------
Amortized Approximate Amortized Market
Cost Market Value Cost Value
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Due in one year or less $ 1,314,819 $ 1,310,616 $10,223,735 $10,081,436
Due after one year through
five years 22,928,574 22,032,667 45,931,838 43,619,033
Due after five years through
ten years 1,171,445 1,112,586 3,403,810 3,232,663
Due after ten years 1,685,000 1,562,660 16,746,267 15,946,093
----------- ------------ ----------- -----------
Total debt securities 27,099,838 26,018,529 76,305,650 72,879,225
Equity securities having no
specified due date 86,640 124,545 3,201,833 2,929,111
----------- ------------ ----------- -----------
$27,186,478 $26,143,074 $79,507,483 $75,808,336
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------
</TABLE>
Proceeds from sales of debt securities during 1994, 1993, and 1992 were
$24,004,225, $12,666,198, and $32,579,346, respectively. Gross gains of
$196,900, $210,166, and $440,903 and gross losses of $72,477, $45,462, and
$40,292 were realized on those sales.
Securities with a par value of $40,170,775 and $33,438,632 were pledged as
collateral for public funds deposits and repurchase agreements at December 31,
1994 and 1993, respectively.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
--------------------
7. LOANS
The major categories of loans at December 31, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Commercial and industrial $ 48,829,092 $ 42,005,982
Real estate mortgage 50,091,866 43,685,031
Personal 66,170,001 51,299,403
Overdrafts and credit line 4,365,468 4,928,629
------------ ------------
169,456,427 141,919,045
Less:
Unearned discount 6,477,980 4,943,609
Allowance for loan losses 2,039,578 2,204,807
------------ ------------
$160,938,869 $134,770,629
------------ ------------
------------ ------------
</TABLE>
The Bank's lending is concentrated throughout Dallas, Autauga, and Butler
counties in Alabama and repayment of these loans is, in part, dependent
upon the economic conditions in this region of the state. Management does
not believe the loan portfolio contains concentrations of credits either
geographically or by borrower, which would expose the Bank to unacceptable
amounts of risk. The above loans include agricultural loans totaling
approximately $13,573,879 and $7,896,489 for 1994 and 1993, respectively.
Management continually evaluates the potential risk in these segments of
the portfolio in determining the adequacy of the allowance for possible loan
losses.
The Bank evaluates each customer's credit worthiness on a case-by-case basis.
The amount of collateral obtained if deemed necessary by the Bank upon
extension of credit is based on management's credit evaluation of the
customer. Collateral held varies, but may include accounts receivable,
inventory, property, plant and equipment, residential real estate, and
income-producing commercial properties. No additional credit risk exposure
relating to outstanding loan balances exists beyond the amounts shown in the
consolidated balance sheets as of December 31, 1994.
Loans on which the accrual of interest has been discontinued or reduced
amounted to approximately $1,347,551 and $2,055,000 for 1994 and 1993,
respectively. If these loans had been current throughout their terms,
interest income would have increased approximately $72,000, $131,000, and
$164,000 in 1994, 1993, and 1992, respectively.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
--------------------
Changes in the allowance for possible loan losses were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
Balance, beginning of year $ 2,204,807 $ 1,897,695 $ 1,264,191
Provision charged to operations 348,000 483,605 724,832
Loans charged off (1,147,972) (1,410,440) (1,651,884)
Recoveries (see Note 18) 634,743 1,045,860 1,560,556
Addition due to acquisition 188,087
----------- ----------- -----------
Balance, end of year $ 2,039,578 $ 2,204,807 $ 1,897,695
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
8. BANK PREMISES AND EQUIPMENT
Bank premises and equipment and accumulated depreciation at December 31,
1994 and 1993 are summarized as follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Buildings $ 5,645,331 $ 5,099,948
Furniture and equipment 6,376,826 5,411,112
Land improvements 236,985 222,685
----------- -----------
12,259,142 10,733,745
Less accumulated depreciation 7,344,892 6,783,755
----------- -----------
4,914,250 3,949,990
Land 804,169 759,669
----------- -----------
$ 5,718,419 $ 4,709,659
----------- -----------
----------- -----------
</TABLE>
9. INCOME TAXES
The provision (benefit) for income taxes is as follows:
<TABLE>
<CAPTION>
Federal State Total
---------- --------- ----------
<S> <C> <C> <C>
1994:
Current $ 933,902 $ 37,277 $ 971,179
Deferred (26,020) 16,694 (9,326)
---------- --------- ----------
$ 907,882 $ 53,971 $ 961,853
---------- --------- ----------
---------- --------- ----------
1993:
Current $ 897,868 $244,326 $1,142,194
Deferred (294,920) (39,631) (334,551)
---------- --------- ----------
$ 602,948 $204,695 $ 807,643
---------- --------- ----------
---------- --------- ----------
1992:
Current $1,381,000 $ 48,000 $1,429,000
Deferred (377,000) 70,000 (307,000)
---------- --------- ----------
$1,004,000 $118,000 $1,122,000
---------- --------- ----------
---------- --------- ----------
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
--------------------
As discussed in the income tax policy, the Company adopted SFAS No. 109 with
the cumulative effect of this change reported in the 1993 consolidated
statements of income. Prior years' financial statements have not been
restated to apply the provisions of SFAS No. 109.
Temporary differences and carryforwards which give rise to a significant
portion of deferred tax assets and liabilities at December 31 are as follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Loans $ 245,418 $ 132,938
Other real estate 64,442 197,000
Other liabilities 96,671 100,019
Intangible assets (33,874) (88,164)
Bank premises and equipment (406,813) (452,169)
Investment securities 662,518 (311,428)
Other (35,476) (47,227)
--------- ---------
592,886 (469,031)
Minimum tax credit 62,239
--------- ---------
Deferred tax asset (liability), net $ 592,886 $(406,792)
--------- ---------
--------- ---------
</TABLE>
During 1992, deferred income taxes were provided for significant timing
differences in recognition of revenue and expenses between income tax and
financial statement reporting purposes. Those items consisted of the
following:
<TABLE>
<S> <C>
Provision for loan losses $(265,000)
Write down of OREO (102,000)
Adjustments to cash basis from accrual basis for
state tax reporting 135,000
Recognition of net loan origination costs for tax reporting 23,000
Accelerated amortization of intangible assets 21,000
Effect of alternative minimum tax
Gain on sale of securities (20,000)
Recognition of tax benefit for prior deductions of core
deposit amortization
Low income housing investment write down (60,000)
Other (39,000)
---------
$(307,000)
---------
---------
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
--------------------
The provision (benefit) for income taxes is different from the amount computed
by applying the federal income tax statutory rate to income before provision
for income taxes. The reasons for this difference, as a percentage of pre-tax
income, are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Federal income tax statutory rate 34% 34% 34%
Nontaxable income on obligations of state and
political subdivisions (2.9) (4.5) (1.9)
Amortization of intangible assets (.2) 2.1 2.0
State income taxes (.6) (1.2) 2.2
Other (1.3) (4.0) (3.9)
---- ---- ----
Effective tax rate 29.0% 26.4% 32.4%
---- ---- ----
---- ---- ----
</TABLE>
10. BENEFIT PLANS
The Company has a noncontributory defined benefit pension plan (the Plan)
covering substantially all of its employees. The Company's policy is to
contribute annually an amount that can be deducted for federal income tax
purposes using the projected unit credit method of actuarial computation.
Actuarial computations for financial reporting purposes are also based on
the projected unit credit method. Pension expense was $126,655, $117,190,
and $90,793 for 1994, 1993 and 1992, respectively.
The following schedule sets forth the Plan's funded status and amounts
recognized in the Company's financial statements as of December 31, 1994
and 1993:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested benefits
of $(3,362,187) and $(3,159,939), respectively $(3,377,510) $(3,142,131)
----------- -----------
----------- -----------
Projected benefit obligation for service rendered to date $(4,093,031) $(3,946,878)
Plan assets at fair value, primarily U.S. Treasury
securities and common stocks 3,634,376 3,938,020
----------- -----------
Projected benefit obligation in excess of plan assets (458,655) (8,858)
Unrecognized net gain from past experience different
from that assumed and effects of changes in assumptions 67,166 (307,701)
Prior service cost not yet recognized in net periodic
pension cost 278,687 314,258
Unrecognized net asset at date of initial application
(15.6 year life) (350,801) (410,014)
----------- -----------
Pension liability included in the consolidated balance
sheets $ (463,603) $ (412,315)
----------- -----------
----------- -----------
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
--------------------
Net pension cost for 1994, 1993, and 1992 includes the following components:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Service costs of benefits earned during
the period $ 158,396 $ 149,893 $ 163,439
Interest cost on projected benefit obligation 263,601 254,596 272,681
Actual return on plan assets 150,269 (286,316) (127,448)
Net amortization and deferral (445,611) (263) (217,879)
--------- --------- ---------
$ 126,655 $ 117,910 $ 90,793
--------- --------- ---------
--------- --------- ---------
</TABLE>
The weighted-average discount rate used in determining the actuarial present
value of the projected benefit obligation was 7% for 1994 and 1993 and 8.25%
for 1992. The rate of increase in future compensation levels used was 3.5%
for 1994 and 1993 and 6% for 1992. The expected long-term rate of return
was 7% for 1994 and 1993 and 8% for 1992.
During 1987, the Company established an Employee Stock Ownership Plan (ESOP),
a tax-qualified, defined contribution plan which covers substantially all
employees. Contributions are determined by the Board of Directors of the
Company. As of December 31, 1994, the ESOP holds 12,094 shares of common
stock in the Company, which is included in the computation of the weighted
average number of shares outstanding.
11. OPERATING LEASE COMMITMENTS
The Bank leases certain buildings, equipment and land under noncancelable
operating leases which require various minimum annual rentals.
The total minimum rental commitment at December 31, 1994 under the leases
is as follows:
<TABLE>
<S> <C>
1995 $ 59,790
1996 43,790
1997 14,440
1998 12,090
Thereafter -0-
--------
$130,110
--------
--------
</TABLE>
The total rental expense amounted to approximately $109,000, $88,000, and
$83,000 in 1994, 1993, and 1992, respectively.
12. RELATED PARTY TRANSACTIONS
Certain directors and officers of the Company and its subsidiary bank,
including their immediate families and companies in which they are principal
owners, were loan customers of the Bank in the ordinary course of business.
Such loans had outstanding balances of $5,213,993 and $4,868,309 at
December 31, 1994 and 1993, respectively. A summary of the loan activity
with these related parties during 1994 is shown below:
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
--------------------
<TABLE>
<S> <C>
Balance, beginning of year $4,868,309
Additions 7,983,126
Payments 7,637,442
----------
Balance, end of year $5,213,993
----------
----------
</TABLE>
During 1994, 1993, and 1992, the Company paid legal fees of approximately
$62,299, $108,000, and $110,000, respectively, to a law firm in which a
partner of the firm serves on the board of directors of the Company.
13. SEGMENT INFORMATION
The Company considers itself to operate in one business segment, banking.
Accordingly, all financial information is presented for that one industry
segment.
14. REGULATORY MATTERS
The Federal Reserve Board has specified guidelines for evaluating a bank's
capital adequacy. At least one half of the total risk-based capital ratio
must be obtained from the ratio of the Company's core (tier one) capital to
risk-adjusted assets. The Company's core capital consists of stockholders'
equity less goodwill. Risk weights assigned to the Company's assets are
based on credit risk as determined by the Federal Reserve Board. Banks must
maintain a minimum ratio of total capital to risk adjusted assets of 8.0%.
At December 31, 1994, the Company's risk-based total capital ratio is 15.33%.
The approval of regulatory authorities is required if the total of all the
dividends declared by the Bank in any calendar year exceeds the Bank's net
income as defined for that year combined with its retained net income for
the preceding two calendar years. The Bank obtained regulatory approval as
applicable for the payment of dividends in 1994 and 1993 and must obtain
regulatory approval prior to paying dividends in 1995.
15. PREFERRED STOCK
The Bank is authorized to issue 2,600 shares preferred stock, par value $1
per share, which have been designated as Non-cumulative Non-voting Directors'
Preferred Stock, Series A. At December 31, 1993, 2,000 of these shares were
outstanding. During 1994, the Bank redeemed and retired all 2,000 shares of
the preferred stock outstanding at a price of $1.00 per share.
16. DECREASE IN PAR VALUE OF COMMON STOCK
In April of 1992, the stockholders approved a recommendation from the Board
of Directors to increase the authorized stock to 5 million shares, of which
1 million shares are preferred stock, and 4 million shares are common stock.
Additionally, the par value of the common stock was decreased from $1 to
$.10 per share. This change in par value resulted in a reclassification of
$743,290 from common stock to paid-in capital.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
--------------------
17. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Bank is party to financial instruments with off-balance-sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit and standby
letters of credit. Those instruments involve, to varying degrees, elements
of credit and interest rate risk in excess of the amount recognized in the
consolidated statements of financial condition. The contract amount of those
instruments reflect the extent of involvement the Bank has in particular
classes of financial instruments.
The Bank's exposure to credit loss in the event of nonperformance by the
counterparty to the financial instrument for commitments to extend credit
and standby letters of credit is represented by the contractual amount of
those instruments. The Bank uses the same credit policies in making
commitments and conditional obligations as it does for on-balance-sheet
instruments.
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since many of the commitments are
expected to expire without being drawn upon, the total commitment amounts do
not necessarily represent future cash requirements. The Bank had
approximately $7,200,000 in commitments to extend credit at December 31,
1994. The Bank evaluates each customer's credit worthiness on a case-by-case
basis. The amount of collateral obtained if deemed necessary by the Bank
upon extension of credit is based on management's credit evaluation of the
customer. Collateral held varies, but may include accounts receivable,
inventory, property, plant and equipment, residential real estate and
income-producing commercial properties.
Standby letters of credit are conditional commitments issued by the Bank
to guarantee the performance of a customer to a third party. Those
guarantees are primarily issued to support public and private borrowing
arrangements, including commercial paper, bond financing and similar
transactions. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loan facilities to
customers. The collateral varies but may include accounts receivable,
inventory, property, plant and equipment and residential real estate for
those commitments for which collateral is deemed necessary. The Bank had
approximately $9,278,000 in irrevocable standby letters of credit at
December 31, 1994.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
--------------------
18. SETTLEMENT OF LAWSUIT
In December of 1992, the U.S. government awarded to the Bank $3,137,483 in
settlement of a lawsuit pertaining to collateral rights associated with a
participation loan. The settlement proceeds, received in January 1993, were
allocated between the Bank and a participating investor in the amounts of
$2,115,483 and $1,022,000, respectively. The Bank's net proceeds are
recorded as a receivable at December 31, 1992 with $804,287 recognized as a
recovery of previously charged-off loan amounts and $1,311,196 recognized as
gain on settlement.
19. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate
that value:
CASH AND CASH EQUIVALENTS - For those short-term
instruments, the carrying amount is a reasonable estimate
of fair value.
INVESTMENT SECURITIES AND SECURITIES AVAILABLE FOR SALE -
For debt securities and marketable equity securities held
for investment purposes, fair values are based on quoted
market prices or dealer quotes.
LOANS - The fair value of loans is estimated by
discounting the future cash flows using the current rates
at which similar loans would be made to borrowers with
similar credit ratings and for the same remaining
maturities.
DEPOSITS - The fair value of demand deposits, savings
accounts, and certain money market deposits is the amount
payable on demand at the reporting date. The fair value
of fixed-maturity certificates of deposit is estimated
using the rates currently offered for deposits of similar
remaining maturities.
COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTERS OF CREDIT
- The value of these unrecognized financial instruments is
estimated based on the fee income associated with the
commitments. Such fee income is not material to the
Company's financial statements at December 31, 1994 and,
therefore, the fair value of these commitments is not
presented.
The estimated fair values of the Bank's financial instruments at December 31,
1994 are as follows:
<TABLE>
<CAPTION>
Carrying Fair
Amount Value
------------ ------------
<S> <C> <C>
Financial assets:
Cash and cash equivalents $ 23,182,476 $ 23,182,476
Investment securities: held-to-maturity 27,186,478 26,143,074
Investment securities: available for sale 75,808,336 75,808,336
Loans 162,978,447
Less: allowance for loan losses (2,039,578)
------------ ------------
Loans, net 160,938,869 160,398,226
------------ ------------
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
--------------------
$287,116,159 $285,532,112
------------ ------------
------------ ------------
Financial liabilities:
Deposits $263,621,622 $263,999,026
Securities sold under agreements to repurchase 6,855,135 6,855,135
Other borrowed funds 437,868 437,868
------------ ------------
$270,914,625 $271,292,029
------------ ------------
------------ ------------
</TABLE>
20. FINANCIAL ACCOUNTING DEVELOPMENTS
The Financial Accounting Standards Board (FASB) issued Financial Accounting
Standards No. 118, ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN - INCOME
RECOGNITION AND DISCLOSURES, which amends FASB Statement No. 114, ACCOUNTING
BY CREDITORS FOR IMPAIRMENT OF A LOAN to allow a creditor to use existing
methods for recognizing interest income on an impaired loan. Prior to the
issuance of Statement 118, Statement 114 provided for two alternative income
recognition methods to be used to account for changes in the net carrying
amount of an impaired loan subsequent to the initial measure of impairment.
Under the first income recognition method, a creditor would accrue interest
on the net carrying amount of the impaired loan and report other changes in
the net carrying amount of the loan as an adjustment to bad debt expense.
Under the second income recognition method, a creditor would recognize all
changes in the net carrying amount of the loan as an adjustment to bad debt
expense. While those income methods are no longer required, Statement 118
does not preclude a creditor from using either of those methods. SFAS 118 is
effective for fiscal years beginning after December 15, 1994, and will be
adopted by the Company at its due date. In addition, the adoption of SFAS
118 is expected to have an immaterial effect on the financial statements of
the Company.
21. STOCK OPTION PLAN
The Company has a stock option plan under which 50,000 shares of common
stock have been reserved for issue to certain employees and officers through
incentive stock options as of December 31, 1994. Options granted under the
plan become exercisable after six months of continued employment from the
date of grant.
Transactions for 1994, 1993, and 1992 are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Options outstanding, beginning of year 8,975 4,875
Options granted 4,050 4,100 4,875
------ ------ ------
Options outstanding, December 31 13,025 8,975 4,875
------ ------ ------
Options outstanding by option price:
$25.54 4,875 4,875 4,875
30.00 8,150 4,100
------ ------ ------
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
--------------------
<TABLE>
<S> <C> <C> <C>
13,025 8,975 4,875
------ ------ ------
Options exercisable, December 31 13,025 8,975 4,875
------ ------ ------
------ ------ ------
Options available for grant,
December 31 36,975 41,025 45,125
------ ------ ------
------ ------ ------
</TABLE>
22. THE PEOPLES BANCTRUST COMPANY, INC. (PARENT COMPANY ONLY)
Presented on the following page are the financial statements of The Peoples
BancTrust Company, Inc.
<PAGE>
THE PEOPLES BANCTRUST COMPANY, INC.
PARENT COMPANY ONLY
BALANCE SHEETS
December 31, 1994 and 1993
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
ASSETS
Cash $ 107,900 $ 62,677
Investment in subsidiary bank, The Peoples Bank and Trust Company 30,244,181 20,628,785
Investment in subsidiary, Cee Bee Corporation 8,038,728
Other assets 226,252 504,018
----------- -----------
Total assets $30,578,333 $29,234,208
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Dividends payable $ 11,435 $ 8,437
Other liabilities 309,423 437,586
----------- -----------
320,858 446,023
Common stock, $.10 par value; 4,000,000 shares
authorized; 890,726 shares issued at December 31,
1994 and 1993, respectively 89,073 89,073
Additional paid-in capital 7,148,664 7,196,933
Retained earnings 23,500,041 21,982,482
Treasury stock, 18,807 shares at cost (480,303) (480,303)
----------- -----------
30,257,475 28,788,185
----------- -----------
Total liabilities and stockholders' equity $30,578,333 $29,234,208
----------- -----------
----------- -----------
</TABLE>
STATEMENTS OF INCOME AND RETAINED EARNINGS
for the years ended December 31, 1994, 1993, and 1992
<TABLE>
<CAPTION>
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
Cash dividends received or receivable from subsidiary $ 1,527,730 $ 7,475,591 $ 1,415,176
Equity in subsidiary's undistributed net income 1,616,297 (4,659,936) 1,712,068
Other expense (789,425) (642,459) (787,759)
----------- ----------- -----------
Net income 2,354,602 2,173,196 2,339,485
Retained earnings, beginning of period 21,982,482 20,537,913 18,859,130
Less:
Cash dividends declared 837,043 728,627 660,702
----------- ----------- -----------
Retained earnings, end of period $23,500,041 $21,982,482 $20,537,913
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
STATEMENTS OF CASH FLOWS
for the years ended December 31, 1994, 1993, and 1992
<TABLE>
<CAPTION>
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
Operating activities:
Net income $ 2,354,602 $ 2,173,196 $ 2,339,485
Adjustments to reconcile net income to net cash
provided by operating activities:
Undistributed earnings of subsidiary (1,616,297) 4,659,936 (1,712,068)
Decrease (increase) in other assets 277,766 (364,865) (17,406)
Increase (decrease) in other liabilities (136,803) 348,625 80,597
----------- ----------- -----------
Net cash provided by operating activities 879,268 6,816,892 690,608
Investing activities:
Increase in investment in subsidiary (5,761,208)
-----------
Net cash used by investing activities (5,761,208)
Financing activities:
Treasury stock purchased (480,303)
Dividends paid (834,045) (739,034) (658,926)
----------- ----------- -----------
Net cash used by financing activities (834,045) (1,219,337) (658,926)
----------- ----------- -----------
Increase (decrease) in cash and cash equivalents 45,223 (163,653) 31,682
Cash and cash equivalents, beginning of year 62,677 226,330 194,648
----------- ----------- -----------
Cash and cash equivalents, end of year $ 107,900 $ 62,677 $ 226,330
----------- ----------- -----------
----------- ----------- -----------
Supplemental disclosure of noncash financing activities:
The Company decreased the par value of its common stock from $1.00 to $.10 per share.
</TABLE>
<PAGE>
EXHIBIT 21
<PAGE>
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
Percentage State
Subsidiaries Owned (1) of Incorporation
- ------------ ---------- ----------------
<S> <C> <C>
The Peoples Bank and Trust Company 100% Alabama
The Peoples Agency, Inc. (2) 100% Alabama
<FN>
__________________
(1) At December 31, 1994.
(2) Second-tier subsidiary, 100% owned by The Peoples Bank and Trust Company.
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 20,048
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 3,134
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 75,808
<INVESTMENTS-CARRYING> 27,187
<INVESTMENTS-MARKET> 26,143
<LOANS> 162,978
<ALLOWANCE> 2,040
<TOTAL-ASSETS> 301,686
<DEPOSITS> 263,622
<SHORT-TERM> 6,855
<LIABILITIES-OTHER> 3,141
<LONG-TERM> 438
<COMMON> 89
0
0
<OTHER-SE> 27,541
<TOTAL-LIABILITIES-AND-EQUITY> 301,686
<INTEREST-LOAN> 13,420
<INTEREST-INVEST> 5,906
<INTEREST-OTHER> 193
<INTEREST-TOTAL> 19,519
<INTEREST-DEPOSIT> 8,048
<INTEREST-EXPENSE> 8,175
<INTEREST-INCOME-NET> 11,344
<LOAN-LOSSES> 348
<SECURITIES-GAINS> 125
<EXPENSE-OTHER> 10,868
<INCOME-PRETAX> 3,320
<INCOME-PRE-EXTRAORDINARY> 3,320
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,355
<EPS-PRIMARY> 2.64
<EPS-DILUTED> 2.64
<YIELD-ACTUAL> 4.34
<LOANS-NON> 1,348
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 6,500
<ALLOWANCE-OPEN> 2,205
<CHARGE-OFFS> 1,148
<RECOVERIES> 635
<ALLOWANCE-CLOSE> 2,040
<ALLOWANCE-DOMESTIC> 2,040
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
