<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Quarter Ended.......................................... September 30, 1996
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
incorporation or organization) Identification No.)
310 Broad Street (Address of principal executive offices)
Selma, Alabama
36701
(334) 875-1000
(Registrant's telephone number, including area code)
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 such shorter time 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
------------ -------
As of the close of business on September 30, 1996, 1,693,694 shares of
registrant's Common Stock, par value $.10 per share, were outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
THE PEOPLES BANCTRUST COMPANY, INC. SELMA, ALABAMA
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
In Thousands
<S> <C> <C>
9/30/96 12/31/95
(Unaudited)
ASSETS:
Cash and due from banks $ 16,388 $ 14,414
Federal funds sold and securities 3,709 4,187
purchased under agreement to sell -------- -------
Total cash and cash equivalents 20,097 18,601
Securities available for sale 79,650 97,587
Loans, net of unearned income 203,998 191,132
Allowance for loan losses (2,359) (2,005)
-------- --------
Net loans 201,639 189,127
Premises and equipment 5,771 5,962
Other assets 7,498 7,034
-------- --------
Total assets $314,655 $318,311
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Noninterest-bearing deposits $ 42,490 $ 43,757
Interest-bearing deposits 225,307 229,025
-------- --------
Total deposits 267,797 272,782
Federal funds purchased and securities 4,676 5,019
sold under agreement to repurchase
Other borrowed funds 6,439 6,216
Other liabilities 2,802 2,780
-------- --------
Total liabilities 281,714 286,797
Common stock 178 178
Additional paid-in capital 7,059 7,059
Treasury stock (1,287) (1,287)
Retained earnings 27,740 25,786
Net unrealized loss on securities (749) (222)
available for sale -------- --------
Total stockholders' equity 32,941 31,514
-------- --------
Total liabilities and stockholders' $314,655 $318,311
equity ======== ========
</TABLE>
See Notes to the Unaudited Consolidated Financial Statements.
2
<PAGE>
THE PEOPLES BANCTRUST COMPANY, INC., SELMA, ALABAMA
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
In thousands except share In thousands except share
and per share data and per share data
(Unaudited) (Unaudited)
THREE MONTHS ENDED SEPTEMBER 30 NINE MONTHS ENDED SEPTEMBER 30
-------------------------------- -----------------------------------
<S> <C> <C> <C> <C>
1996 1995 1996 1995
Interest and fees on loans $ 5,032 $ 4,893 $ 14,904 $ 13,371
Interest and dividends on
Investment securities 1,268 1,277 4,011 4,142
Other interest income 82 121 309 244
---------- ---------- ---------- ----------
Total interest income 6,382 6,291 19,224 17,757
---------- ---------- ---------- ----------
Interest on deposits 2,549 2,713 7,910 7,941
Interest on borrowed funds 284 55 522 140
---------- ---------- ---------- ----------
Total interest expense 2,833 2,768 8,432 8,081
---------- ---------- ---------- ----------
Net interest income 3,549 3,523 10,792 9,676
Provision for loan losses 368 345 1,417 653
---------- ---------- ---------- ----------
Net interest income after
provision for loan losses 3,181 3,178 9,375 9,023
Net securities gains 21 5 42 27
Other income 829 805 2,722 2,433
Other expense 2,829 2,660 8,316 8,154
---------- ---------- ---------- ----------
Income before income taxes 1,202 1,328 3,823 3,329
Provision for income taxes 320 505 1,209 1,044
---------- ---------- ---------- ----------
Net income $ 882 $ 823 $ 2,614 $ 2,285
========== ========== ========== ==========
Weighted average number of shares 1,693,694 1,719,560 1,693,694 1,735,656
outstanding ========== ========== ========== ==========
Net income per share $ 0.52 $ 0.48 $ 1.54 $ 1.32
========== ========== ========== ==========
Dividends per share $ 0.13 $ 0.13 $ 0.39 $ 0.37
========== ========== ========== ==========
</TABLE>
See Notes to the Unaudited Condensed Consolidated Financial Statements
3
<PAGE>
THE PEOPLES BANCTRUST COMPANY, INC. SELMA, ALABAMA
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
In Thousands
------------
Nine months ended September 30,
1996 1995
---- ----
(UNAUDITED)
<S> <C> <C>
Net cash provided by operating activities $ 4,315 $ 3,918
-------- --------
Cash flows from investing activities:
Proceeds from sales of investment securities 0 197
Proceeds from maturities and calls
of investment securities 0 11,808
Proceeds from sales of securities available for sale 16,348 4,526
Proceeds from maturities and calls
of securities available for sale 25,897 3,315
Purchases of investment securities 0 (5,999)
Purchases of securities available for sale (25,137) (1,014)
Net increase in loans (13,575) (25,863)
Purchases of bank premises and equipment (604) (718)
Proceeds from sale of equipment 17 0
-------- --------
Net cash provided by (used in) investing activities 2,946 (13,748)
Cash flows from financing activities:
Net increase (decrease) in deposits (4,985) 5,445
Purchases of treasury stock 0 (807)
Net increase (decrease) in borrowed funds (120) 2,435
Dividends paid (660) (645)
-------- --------
Net cash provided by (used in) financing activities (5,765) 6,428
-------- --------
Net increase (decrease) in cash and cash equivalents 1,496 (3,402)
Cash and cash equivalents at beginning of period 18,601 23,182
-------- --------
Cash and cash equivalents at September 30 $ 20,097 $ 19,780
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 8,432 $ 7,419
Taxes 1,625 510
</TABLE>
See Notes to the Unaudited Consolidated Financial Statements.
4
<PAGE>
THE PEOPLES BANCTRUST COMPANY, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements (Unaudited)
Accounting Policies:
The accompanying unaudited consolidated financial statements of The Peoples
BancTrust Company, Inc. (the "Company") and its subsidiary, The Peoples Bank and
Trust Company, have been prepared in accordance with generally accepted
accounting principles for interim information and with the instructions to Form
10-Q and Article 10 of regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. All interim amounts are subject to year-
end audit, and the results of operations for the interim periods herein are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1996. For further information refer to the consolidated financial
statements and footnotes thereto included in the Company's Annual Report on Form
10-K for the year ended December 31, 1995.
Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities:
In June 1996, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities". This
statement requires an entity to recognize the financial and servicing assets it
controls and the liabilities it has incurred, derecognize financial assets when
control has been surrendered, and derecognize liabilities when extinguished.
This statement distinguishes between transfers that are sales and those that are
secured borrowings.
SFAS No. 125 also provides implementation guidance for assessing isolation of
transferred assets and for accounting for transfers of partial interests,
servicing of financial assets, securitizations, transfers of sales-type and
direct financing lease receivables, securities lending transactions, repurchase
agreements, loan syndications and participations, risk participations in
banker's acceptances, factoring arrangements, transfers of receivables with
recourse, and extinguishments of liabilities.
This statement is effective for transfers and servicing of financial assets and
extinguishments of liabilities occurring after December 31, 1996 and is to be
applied prospectively. Management does not believe that the adoption of SFAS
No. 125 will have a material impact on the Company's financial statements.
5
<PAGE>
Accounting for Long-Lived Assets:
In March 1995, the Financial Standards Board issued SFAS No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of." SFAS No. 121 requires that long-lived assets and certain identifiable
intangibles to be held and used by the entity be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. If the future undiscounted cash flows expected
to result from the use of the asset and its eventual disposition are less than
the carrying amount of the asset, an impairment loss is recognized. This
statement also requires that long-lived assets and certain intangibles to be
disposed of be reported at the lower of carrying amount or fair value less cost
to sell. The Company adopted SFAS No. 121 as of January 1, 1996. The adoption
of SFAS No. 121 did not have a material impact on the Company's financial
statements.
Accounting for Stock-Based Compensation:
The Financial Accounting Standards Board issued SFAS No. 123, "Accounting for
Stock-Based Compensation", in October 1995. SFAS No. 123 defines a fair value
based method of accounting for an employee stock option or similar equity
instrument. However, SFAS No. 123 allows an entity to continue to measure
compensation costs for those plans using the intrinsic value based method of
accounting prescribed by APB Opinion No. 25, "Accounting for Stock Issued to
Employees". Entities electing to remain with the accounting in Opinion No. 25
must make proforma disclosures of net income and earnings per share as if the
fair value based method of accounting defined in SFAS No. 123 had been applied.
Under the fair value based method, compensation cost is measured at the grant
date based on the value of the award and is recognized over the service period,
which is usually the vesting period. Under the intrinsic value based method,
compensation cost is the excess, if any, of the quoted market price of the stock
at the grant date or other measurement date over the amount an employee must pay
to acquire the stock. Most fixed stock option plans have no intrinsic value at
grant date, and under APB Opinion No. 25, no compensation cost is recognized for
them.
The Company adopted SFAS No. 123 as of January 1, 1996. In connection
therewith, the Company has elected to continue to measure compensation cost for
its stock option plan under the provisions in APB Opinion No. 25. The adoption
of SFAS No. 123 did not have a material impact on the Company's financial
statements.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
General:
The following analysis focuses on the financial condition of The Peoples
BancTrust Company, Inc. (the "Company"), and should be read in conjunction with
the consolidated financial statements included in this report.
Financial Condition:
Total consolidated assets of the Company and its subsidiary, The Peoples Bank
and Trust Company (the "Bank"), totaled $314,655,000 at September 30, 1996, a
decrease of $3,656,000 from the December 31, 1995 total of $318,311,000.
Earning assets decreased $5,903,000 during the first three quarters of 1996,
from $290,901,000 to $284,998,000.
Investments:
The Company's total securities portfolio decreased during the first three
quarters of 1996 from $97,587,000 at December 31, 1995 to $79,650,000 at
September 30, 1996. This decline was needed to fund a rise in loan demand and a
decrease in deposits.
At year end 1995 and at September 30, 1996, the entire securities portfolio was
classified as "available for sale" resulting in the portfolio being marked- to-
market. At December 31, 1995, the portfolio had a net unrealized loss of
$222,000, as compared to a net unrealized loss of $749,000 at September 30,
1996.
The yield curve steepened considerably during the first nine months of this
year, with short term (1-5 years) interest rates increasing over 100 basis
points. The net unrealized loss increase of $527,000 within the securities
portfolio was primarily due to such increase in rates.
Short Term Investments:
Short-term investments (primarily federal funds and securities purchased under
agreement to resell) decreased $478,000. Management constantly monitors these
funds seeking alternative uses to enhance interest income.
Loans:
Loans, net of unearned income, increased $12,866,000 from year-end to the third
quarter end. An increase of $3,760,000 in business loans is attributable to
active solicitation of commercial borrowings in all three lending areas. Two
large commercial loan requests were approved since December 1985 and are secured
by highly liquid assets. Real estate loans increased $7,996,000 with
concentrations in both single and multi-family first mortgages and commercial
real estate. Three substantial commercial
7
<PAGE>
requests were granted for the purpose of both real estate acquisition and land
development ventures.
Consumer loans remained relatively flat. Growth may continue to be restricted
as the Bank tightens its credit standards in response to the increasing consumer
loan losses and personal bankruptcies that the entire financial industry is
currently experiencing.
Allowance for Loan Losses:
In making loans, the Company recognizes the fact that credit losses will be
experienced and that the risk of loss will vary with, among other things, the
type of loan being made and the creditworthiness of the borrower and the
collateral of the security for the loan. The allowance for loan losses is
maintained at a level believed adequate by management to absorb potential losses
in the Company's portfolio.
Management's determination of the adequacy of the allowance is based, among
other things, on estimates of the historical loan loss experience, evaluation of
economic conditions in general and in various sectors of the Company's customer
base, and periodic reviews of loan portfolio quality by the Company's personnel,
and other relevant factors. Generally reserves will be provided for loans where
the ultimate collection is considered questionable by management after
reviewing the current status of loans which are contractually past due,
structurally deficient or economically depreciating, and considering the net
realizable value of the security of the loan or guarantees, if applicable.
Management will continue to monitor the Company's asset quality and will charge
off loans against the allowance for loan losses when appropriate or provide
specific loss reserves when necessary. Because the allowance is based on
assumptions and subjective judgement, it is not necessarily indicative of the
actual charge-offs which may ultimately occur.
The Company's allowance for loan losses totaled $2,359,000 at September 30,
1996, as compared to $2,005,000 at December 31, 1995. The resulting ratios of
allowance to total loans net of unearned interest were 1.16% and 1.05% as of
September 30, 1996 and December 31, 1995, respectively. The amount of loans
determined by management that require special attention due to potential
weaknesses increased from $6,700,000 at year end 1995 to $11,808,000 at
September 30, 1996. Much of this increase is concentrated in agricultural loans
and is attributable to a disastrous cotton production year in 1995. The Bank
expects an improvement in these loans' status due to improved production in
1996. Following a national trend, the past due level of consumer loans
increased slightly to 3.3% of the outstanding balance at September 30, 1996, and
the majority of loan losses experienced this year have resulted from consumer
loans. Non-accruing loans, expressed as a percentage of total loans net of
unearned interest, increased from .79% at year end 1995 to .93% at September
30, 1996. Management believes that the current allowance is adequate to absorb
potential losses in the Company's loan portfolio.
8
<PAGE>
Deposits:
Total deposits of the Company decreased $4,985,000 from December 31, 1995 to
$267,797,000 at the end of the third quarter. Interest bearing accounts
decreased a net of $3,571,000, while demand deposits decreased $1,141,000 during
the first nine months of 1996. Management has analyzed the deposit decrease and
is of the opinion that it represents normal cyclical fluctuations with no real
growth recorded for the first nine months.
Liquidity:
Due to an increase in loan demand and a decrease in deposits, there was
periodically a need for short term borrowing.
Stockholders' Equity:
Total stockholders' equity at September 30, 1996 was $32,941,000 compared to
$31,514,000 at year end. The increase is attributable to earnings for the
period offset by dividends of $660,000 and the change in the unrealized loss on
available for sale securities ($527,000).
Risk-based capital regulations require all bank holding companies and banks to
achieve and 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 Tier 1, or core capital
(consisting of stockholders' equity less goodwill). The following table
indicates the Company's Tier 1 capital ratio and total capital ratio at
September 30, 1996 were 15.73% and 16.81%, respectively. The Company
maintained, at September 30, 1996, a leverage ratio of Tier 1 capital to total
assets of 10.79% compared to the minimum regulatory requirement of 3.00%
required of the strongest companies and banks. In addition, the table indicates
that the ratios of the Bank also well exceed the minimum requirements of the
regulation.
9
<PAGE>
RISK BASED CAPITAL RATIOS & LEVERAGE RATIOS AS OF SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
RISK-BASED CAPITAL RATIOS
- -------------------------
The Company The Bank
----------- --------
<S> <C> <C> <C> <C>
Tier 1 Capital........................ $34,244 15.73% $32,910 15.13%
Tier 1 Capital - Minimum Required..... 8,710 4.00% 8,701 4.00%
------- ----- ------- -----
Excess................................ $25,534 11.73% $24,209 11.13%
======= ===== ======= =====
Total Capital......................... $36,603 16.81% $35,269 16.21%
Total Capital - Minimum Required...... 17,420 8.00% 17,402 8.00%
------- ----- ------- -----
Excess................................ $19,183 8.81% $17,867 8.21%
======= ===== ======= =====
Total Risk Based Assets $217,748 $217,528
======== ========
LEVERAGE RATIOS
The Company The Bank
----------- --------
Total Tier 1 Capital.................. $34,244 10.79% $32,910 10.38%
Minimum Leverage Requirement.......... 9,517 3.00% 9,510 3.00%
------- ----- ------- -----
Excess................................ $24,727 7.79% $23,400 7.38%
======= ===== ======= =====
Average Total Assets, $317,236 $317,016
net of all goodwill................... ======== ========
</TABLE>
10
<PAGE>
Results of Operations:
Three Months Ended September 30, 1996 Compared to Three Months Ended
September 30, 1995
The Company's profitability, like that of many financial institutions, is
dependent to a large extent upon its net interest income, which is the
difference between its interest income on interest-earning assets, such as loans
and investments, and its interest expense on interest-bearing liabilities, such
as deposits and borrowings. Interest sensitivity is one measure of the
vulnerability of earnings to changes in the general level of interest rates.
Whenever interest-earning assets reprice to market interest rates at a different
pace than interest-bearing liabilities, interest income performance will be
affected favorably or unfavorably during periods of changes in general interest
rates. Management is unable to predict future changes in market rates and their
impact on the Company's profitability. Management believes, however, that the
Company's current rate sensitivity position is well matched, indicating the
assumption of minimal interest rate risk.
Interest income for the third quarter of 1996 was $6,382,000 compared to
$6,291,000 for the same quarter of 1995. Average earning assets grew to
$290,763,000 for the third quarter of 1996 from $277,713,000 for the third
quarter of 1995.
The average volume of the Company's securities portfolio decreased to
$85,313,000 at September 30, 1996, from $92,208,000 at September 30, 1995
resulting in a decline of investment income only partially offset by higher
return rates. Funds from maturing investments were reinvested primarily in
higher yielding loans.
Interest income from business loans was $1,493,000 for the third quarter of
1996 compared to $1,636,000 for the prior year's quarter. This decrease was
mainly due to a decrease in volume during the quarter.
Personal loan interest income increased to $1,811,000 for the three months
ended September 30, 1996 from $1,757,000 for the same period of 1995 due to the
growth in the average volume of personal loans.
An increase in the average volume of real estate loans to $64,067,000 at
September 30, 1996, from $54,060,000 at September 30,1995, coupled with a slight
increase in yields during the same period, caused interest income on real estate
loans to grow to $1,569,000 from $1,364,000.
Interest expense on deposits for the third quarter of 1996 was $2,628,000
compared to $2,768,000 for the same period in 1995. The average volume of
interest bearing deposits increased $1,456,000, while the overall cost of funds
decreased as certificates of deposit with higher rates rolled off.
The resulting net interest income for the quarter ended September 30, 1996 was
$3,549,000 compared to $3,523,000 for the same quarter in 1995.
11
<PAGE>
The provision for loan losses replaces reductions to the allowance for loan
losses caused by actual charge-offs and to establish adequate reserves for
growth in the loan portfolio. The Company's provision for loan losses for the
third quarter of 1996 was $368,000 compared to $345,000 for the same quarter in
1995.
Non-interest income for the third quarter of 1996 totaled $829,000 as compared
to $805,000 in 1995. The increase primarily resulted from increases in income
from deposit service charges and brokerage fee income.
Non-interest expenses increased $169,000 to $2,829,000 for the third quarter of
1996 from $2,660,000 for the third quarter of 1995. The increase related
primarily to general office and employee related expenses combined with a
special charge resulting from new legislation. See "-- Recent Legislation"
below.
Income before taxes for the quarter ended September 30, 1996 was $1,202,000
compared to $1,328,000 for the third quarter in 1995. The income tax provision
decreased between the quarters to $320,000 in 1996 from $505,000 in 1995. The
resulting third quarter net income for 1996 was $882,000 compared to $823,000
for the same period in 1995. Earnings per share for the third quarter 1996 was
$.52, compared to $.48 for the third quarter 1995.
Nine Months Ended September 30, 1996 Compared to Nine Months Ended
September 30, 1995
Interest income for the first nine months of 1996 totaled $19,224,000, compared
to $17,757,000 for the first nine months of 1995. The increase of $1,467,000
was due to increased loan volume, which was funded primarily through a decrease
in investment securities.
Interest income and dividends on the Company's investment securities for the
nine months ended September 30, 1996 were $4,011,000, compared to $4,142,000 for
the same nine month period in 1995. Average yields on investment securities
increased to 5.84% at September 30, 1996 from 5.65% at September 30, 1995 but
were offset by a decline in volume in investment securities.
Interest income on the Company's loans grew to $14,904,000 for the first nine
months in 1996 from $13,371,000 for the first nine months of 1995. Through
September 30, 1996, the average volume of loans was $195,453,000 as compared to
$179,782,000 through September 30, 1995. The average yield on loans decreased
to 10.17% at September 30, 1996 from 10.38% at September 30, 1995.
Interest expense on deposits through September 30, 1996 totaled $7,910,000,
compared to $7,941,000 through September 30, 1995. The average volume of
interest-bearing deposits increased to $228,674,000 for the nine months ended
September 30, 1996 from
12
<PAGE>
$222,903,000 for the nine months ended September 30, 1995. The average cost of
the Company's deposits decreased to 4.61% through September 30, 1996 from 4.80%
through September 30, 1995 .
The resulting net interest income for the nine months ended September 30, 1996
was $10,792,000, compared to $9,676,000 in 1995.
For the nine months ended September 30, 1996, the provision for loan losses
totaled $1,417,000, compared to $653,000 for the same period in 1995. The
majority of the losses in 1996 was attributable to consumer loans. Consistent
with the industry, the Bank has experienced a higher than normal number of
personal bankruptcies and repossession losses.
For the first nine months of 1996, non-interest income, excluding gains on the
sale of securities, increased $289,000 to $2,722,000 for the nine months ended
September 30, 1996 from $2,433,000 for the nine months ended September 30, 1995.
An increase of $224,000 was noted in deposit service charges along with
increases in brokerage department fees of $88,000.
Non-interest expense through September 30, 1996 totaled $8,316,000, an increase
of $162,000 from last year. The increased expense was spread over numerous
accounts with legal fees and depreciation representing the largest individual
elements. While non-interest expense has increased for the nine months ended
September 30, 1996 as compared to September 30, 1995, the efficiency ratio has
decreased from 67.34% at September 30, 1995 to 61.54% at September 30, 1996.
Income before taxes for the nine months ended September 30, 1996 totaled
$3,823,000, compared to $3,329,000 for the same period in 1995. The 1996 income
tax provision was $1,209,000, compared to $1,044,000 in 1995. The resulting net
income through September 30, 1996 of $2,614,000 was $329,000 more than the nine
months ended September 30, 1995 net income of $2,285,000. Income per share
increased to $1.54 from $1.32.
Recent Legislation
On September 30, 1996, an omnibus appropriations bill was signed into law to
fund a number of government agencies in the 1997 fiscal year, which began
October 1, 1996. The legislation included significant regulatory relief for
banks and bank holding companies, as well as provisions recapitalizing the
Savings Association Insurance Fund ("SAIF") by imposing a one-time special
assessment on SAIF deposits to bring the fund's reserve ratio to the statutorily
required minimum level of 1.25% of deposits. While most of the Bank's deposits
are insured by the Bank Insurance Fund ("BIF"), a portion (approximately 2.81%)
are insured by SAIF. The special assessment rate for the Bank's SAIF deposits
was 65.7 basis points and applied to 80% of the Bank's SAIF deposits as of March
31, 1995. At September 30, 1996, the Bank recorded an accrual of $40,000 to
reflect this special assessment.
13
<PAGE>
The legislation also provides that, no later than January 1, 2000, the
obligation to pay interest on the Financing Corporation ("FICO") bonds will be
shared pro rata among BIF and SAIF members. From 1997 through 1999, partial
sharing will occur, with SAIF deposits assessed 6.44 basis points and BIF
deposits assessed 1.29 basis points. The assessment related to the FICO
obligation will have a negative impact on future earnings of the Bank, which is
a BIF member. However, the increased assessment on the Bank's BIF deposits will
be partially offset by a reduction in the SAIF assessment, applicable to a
portion of the Bank's deposits, from 23 basis points to 6.44 basis points. The
new assessment rate for institutions with SAIF deposits represents a reduction
from the existing rate of 23 basis points for the Bank, which will have a
positive impact on future earnings.
In addition, under the legislation, the BIF and SAIF will merge to form the
Deposit Insurance Fund on January 1, 1999, if there are no savings associations
(not including state savings banks) in existence on that date.
Recent Development
In the second quarter, 1996, Loan Express, Inc. ("Loan Express") was formed as
a Bank subsidiary. For funding purposes, the Bank established a line of credit
to Loan Express in the amount of $2,000,000. Loan Express makes consumer loans
which are collateralized by consumer goods and real estate. As of September 30,
1996, Loan Express had $1,070,000 in outstanding consumer loans.
Subsequent Event
Subsequent to September 30, 1996, the Bank was presented with a proposed
settlement to a suit, entered on October 17, 1995 into the Circuit Court of
Autauga County, Alabama alleging violations of the Alabama Mini-Code and other
provisions of Alabama law. The Bank has denied all allegations. However, in
light of hazards of litigation and the related expense, the Bank has agreed to
the proposed settlement to pay the class members the sum of $205,000 and the
named plaintiffs the amount of $10,000. The Bank has recognized as an expense
in prior periods the amount it considers appropriate as the net cost of
settlement after recognition of insurance participation. See "Part II -- Other
Information. Item 1. Legal Proceedings."
14
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Management currently is not aware of any material legal proceedings to which
the Company or the Bank is a party or to which any of their property is subject,
except as follows:
1. Lelon Roy Godwin and Mark N. Godwin v. Peoples Bank and Trust Co., et al,
------------------------------------------------------------------------
Circuit Court of Autauga County, Alabama, Case No. CV-95-214-D. This case was
filed on October 17, 1995. The complaint is based on alleged violations of the
Alabama Mini-code and other provisions of Alabama law relating to collateral
protection insurance placed on the Plaintiffs' truck. The complaint included
counts for fraud, breach of fiduciary duty, as well as other counts. A jury
trial was demanded. The complaint seeks compensatory and punitive damages in an
unspecified amount. The complaint also seeks class action status for all
individuals against whom charges have been made for the purchase of collateral
protection insurance. The Bank denies the allegations of the complaint and
denies that class action certification is appropriate. However, in view of the
potential exposure and expense of litigating this case, the Bank has reached a
settlement agreement with Plaintiff's counsel on a class action basis, which
provides for the Bank to pay $205,000 as refunds to class members and $10,000 to
the representative plaintiffs. The Court preliminarily approved the settlement
agreement on October 25, 1996, and has authorized issuance of notice of the
proposed settlement to the class. A final hearing on the fairness and adequacy
of the settlement is set for February 3, 1997.
2. William L. Ammons, d/b/a Ammons Construction Company v. Peoples Bank &
----------------------------------------------------------------------
Trust Co., Circuit Court of Dallas County, Alabama, Case No. CV-95-295. This
- ---------
case was filed on October 18, 1995. The Plaintiff, a contractor, was
constructing a house for a customer of the Bank who had borrowed construction
monies for that purpose. The Bank customer sued the contractor, alleging that he
failed to complete the construction. The contractor now brings this action
contending that the Bank owes funds for the construction to him as a third party
beneficiary. He further alleges misrepresentation by the Bank and seeks
unspecified compensatory and punitive damages. A jury trial is demanded. The
Bank denies the allegations of the complaint. The owner and contractor are in
separate litigation over the same issues, and this case has been put on
administrative hold pending the outcome of that case.
3. Edward Thomas v. The Peoples Bank and Trust Company, et al, Circuit Court
----------------------------------------------------------
of Mobile County, Alabama, Case No. CV-96-000193. This case was filed on January
16, 1996. The complaint was amended on March 9, 1996. The plaintiff alleges
various causes of action against the codefendants with respect to the
application for and purchase of a life insurance policy, including fraudulent
misrepresentation and breach of contract. The complaint claims various injuries
and damages in an unspecified amount. As to the Bank, the complaint alleges that
the Bank negligently or wantonly failed to honor a check for a life insurance
premium when it was presented for payment. The Bank denies that it wrongfully
returned the check or is otherwise liable to the plaintiff in any
15
<PAGE>
manner. The case has been transferred to Conecuh County, Alabama, and is being
defended by counsel for Chubb Insurance Company, the Bank's insurer. Discovery
is proceeding.
Item 5. Other information
On August 20, 1996 Edie Morthland Jones, Thomas E. Newton and David Y. Pearce
were elected to the Board of Directors of the Company.
Edie Morthland Jones, a life long resident of Selma, Alabama, currently serves
as film liaison for the Selma-Dallas County Chamber of Commerce. Mrs. Jones
served as Director of Tourism and Travel for the Selma-Dallas Chamber of
Commerce until 1995. She served as personnel chairman for the Selma City School
Board until 1991 and represented the seventh congressional district at the White
House Conference on tourism in 1995. Mrs. Jones received both her bachelor of
Arts Degree and Master of Arts Degree from the University of Alabama,
Birmingham.
Thomas E. Newton is a resident of Prattville, Alabama. Mr. Newton is a partner
in the Real Estate Firm of Newton, Oldacre, and McDonald, LLC. He has served on
the Peoples Bank Advisory Board for the past three years and prior to the
acquisition of the CeeBee Corporation by the Peoples BancTrust Company Inc., he
served on the Citizens Bank Board.
David Y. Pearce who makes his home in Browns, Alabama, is the owner of Pearce
Catfish Farms. Covering over 4,000 acres and eighty-five ponds the Pearce
Catfish Farm is the largest in the state of Alabama. Mr. Pearce is active in
numerous business and community organizations in Selma-Dallas County and
throughout the state. He currently serves on the Board of Directors for the
Dallas County Farmers Federation, the Alabama Farmers Market Authority, the
Alabama Agribusiness Council. He also serves as the Dallas County Natural
Resources and Conservation Supervisor as well as being on the Alabama Farmers
Catfish State Committee. He is also a past President of the American Catfish
Farmers Association. Mr. Peace is a graduate of Auburn University with a
Bachelor of Science Degree in Business.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
The Peoples BancTrust Company, Inc.
(Registrant)
/s/ Richard P. Morthland
---------------------------------------
Richard P. Morthland, President
/s/ Virginia L. Sellers
---------------------------------------
Virginia L. Sellers, Treasurer
17
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<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 16,388
<INT-BEARING-DEPOSITS> 0
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0
0
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<NET-INCOME> 2,614
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