<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ FOR QUARTERLY REPORTS PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______ TO _______
Commission file number 0-7449
------
PEOPLE'S BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-3272233
- ------------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
545 PLEASANT STREET
NEW BEDFORD, MASSACHUSETTS 02740
- -------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (508) 991-2601
--------------
-----------------------------
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 .
--- ---
The number of shares of Registrant's Common Stock, $0.10 par value, outstanding
as of June 30, 1996 was 3,367,395.
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PEOPLE'S BANCSHARES, INC.
FORM 10-Q
QUARTERLY REPORT
--------------------
<TABLE>
TABLE OF CONTENTS
<S> <C>
Facing Page 1
Table of Contents 2
PART I. FINANCIAL INFORMATION (*)
Item 1. Financial Statements:
Consolidated Balance Sheets 3
Consolidated Statements of Income 4
Consolidated Statements of Changes in Stockholders' Equity 5
Consolidated Statements of Cash Flows 6
Notes to Unaudited Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial Condition
Results of Operations 9
PART II OTHER INFORMATION 14
SIGNATURES 15
EXHIBITS 16
<FN>
(*) The financial information at December 31, 1995 has been derived from the
audited financial statements at that date and should be read in conjunction
therewith. All other financial statements are unaudited.
</TABLE>
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<PAGE> 3
PEOPLE'S BANCSHARES, INC. AND SUBSIDIARY
----------------------------------------
<TABLE>
CONSOLIDATED BALANCE SHEETS
---------------------------
(Dollars in thousands)
(Unaudited)
<CAPTION>
June 30, December 31,
1996 1995
---- ----
ASSETS
------
<S> <C> <C>
Cash and due from banks $ 21,465 $ 11,277
Short-term investments 5,031 26
-------- --------
Total cash and cash equivalents 26,496 11,303
-------- --------
Investment securities, available for sale 223,118 166,709
Loans held for sale 11,539 5,272
Loans 250,244 133,591
Less allowance for loan losses (4,922) (3,813)
-------- --------
Loans, net 245,322 129,778
Other real estate owned, net 335 571
Banking premises and equipment, net 8,898 3,578
Accrued interest receivable 3,683 2,104
Deferred income taxes 1,775 1,826
Intangible assets 1,409 1,508
Due from broker 613 938
Other assets 1,255 853
-------- --------
Total assets $524,443 $324,440
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Deposits $330,399 $174,583
Borrowed funds 161,570 126,245
Mortgagors' escrow accounts 1,001 494
Accrued interest payable 1,262 843
Accrued expenses 1,460 1,653
Other liabilities 979 945
-------- --------
Total liabilities 496,671 304,763
-------- --------
Stockholders' equity:
Serial preferred stock - par value $0.10 per share; authorized
10,000,000 shares, none issued -- --
Common stock - par value $0.10 per share; 20,000,000 shares authorized;
issued and outstanding 3,367,395 and 2,324,007 shares 337 232
Additional paid-in capital 21,868 14,015
Retained earnings 7,175 5,870
-------- --------
29,380 20,117
Net unrealized loss on securities available
for sale, after tax effects (1,608) (440)
-------- --------
Total stockholders' equity 27,772 19,677
-------- --------
Total liabilities and stockholders' equity $524,443 $324,440
======== ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
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<PAGE> 4
PEOPLE'S BANCSHARES, INC. AND SUBSIDIARY
----------------------------------------
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(Dollars and shares in thousands, except per share data)
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest and dividend income:
Interest and fees on loans $5,135 $2,792 $ 8,809 $5,328
Interest on short-term investments 32 91 64 107
Interest and dividends on investment securities 3,489 1,834 6,391 3,414
------ ------ ------- ------
Total interest and dividend income 8,656 4,717 15,264 8,849
------ ------ ------- ------
Interest expense:
Interest on deposits 2,779 1,361 4,531 2,427
Interest on borrowed funds 2,153 1,326 4,056 2,474
------ ------ ------- ------
Total interest expense 4,932 2,687 8,587 4,901
------ ------ ------- ------
Net interest income 3,724 2,030 6,677 3,948
Provision for loan losses -- 150 75 300
------ ------ ------- ------
Net interest income, after provision for loan losses 3,724 1,880 6,602 3,648
------ ------ ------- ------
Other income:
Customer service fees 440 224 717 435
Losses on sales of securities, net -- (5) (24) (10)
Gains on sales of loans, net 647 80 1,106 82
Gains on sale of banking premises and equipment 99 -- 162 --
Miscellaneous 98 24 218 59
------ ------ ------- ------
Total other income 1,284 323 2,179 566
------ ------ ------- ------
Operating expenses:
Salaries and employee benefits 1,981 776 3,496 1,454
Occupancy and equipment 382 178 688 322
Data processing 176 51 315 115
Professional fees 170 107 222 192
Other real estate owned, net 9 66 27 33
Other general and administrative 759 392 1,409 893
------ ------ ------- ------
Total operating expenses 3,477 1,570 6,157 3,009
------ ------ ------- ------
Income before income taxes 1,531 633 2,624 1,205
Provision for income taxes 564 159 970 307
------ ------ ------- ------
Net income $ 967 $ 474 $ 1,654 $ 898
====== ====== ======= ======
Income per share (primary and fully diluted) $ 0.28 $ 0.20 $ 0.53 $ 0.38
====== ====== ======= ======
Weighted average shares outstanding
(primary and fully diluted) 3,498 2 ,374 3,119 2,370
====== ====== ======= ======
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
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<PAGE> 5
PEOPLE'S BANCSHARES, INC. AND SUBSIDIARY
<TABLE>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
----------------------------------------------------------
Six Months Ended June 30, 1996 and 1995
---------------------------------------
(Dollars in thousands)
(Unaudited)
<CAPTION>
Net Unrealized
Loss on
Additional Securities
Common Paid-in Retained Available
Stock Capital Earnings for Sale Total
----- ------- -------- -------- -----
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995 $232 $14,015 $5,870 $ (440) $19,677
Net income - - 1,654 - 1,654
Cash dividends paid - - (349) - (349)
Exercise of stock warrants 7 353 - - 360
Exercise of stock options 1 12 - - 13
Issuance of common stock 97 7,488 - - 7,585
Change in net unrealized loss on securities
available for sale, after tax effects - - - (1,168) (1,168)
---- ------- ------ ------- -------
Balance at June 30, 1996 $337 $21,868 $7,175 $(1,608) $27,772
==== ======= ====== ======= =======
Balance at December 31, 1994 $230 $13,904 $3,769 $ (928) $16,975
Net income - - 898 - 898
Exercise of stock warrants 1 44 - - 45
Exercise of stock options - 12 - - 12
Change in net unrealized loss on securities
available for sale, after tax effects - - - 727 727
---- ------- ------ ------- -------
Balance at June 30, 1995 $231 $13,960 $4,667 $ (201) $18,657
==== ======= ====== ======= =======
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
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<PAGE> 6
PEOPLE'S BANCSHARES, INC. AND SUBSIDIARY
----------------------------------------
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(Dollars in thousands)
(unaudited)
<CAPTION>
Six Months Ended
June 30,
---------------------
1996 1995
--------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,654 $ 898
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Provision for loan losses 75 300
Depreciation and amortization 597 118
Gain on sale of banking premises and equipment (162) -
Losses on sales of securities, net 24 10
Loans originated for sale (110,166) (974)
Principal balance of loans sold 103,899 974
Write-downs, provisions, and gain or loss on sales of other real estate owned (73) (146)
Deferred tax expense 784 183
Increase in other assets, net of other liabilities (1,435) (216)
--------- --------
Net cash provided (used) by operating activities (4,803) 1,147
--------- --------
Cash flows from investing activities:
Cash and cash equivalents received through acquisition 20,664 2,487
Proceeds from sales of investment securities available for sale 11,102 19,601
Proceeds from maturities of investment securities available for sale 2,000 -
Proceeds from amortization of mortgage-backed securities
available for sale 23,167 2,375
Proceeds from amortization of mortgage-backed securities held to maturity - 3,776
Purchase of securities available for sale (94,739) (48,009)
Purchase of securities held to maturity - (411)
Loan (originations and purchases) amortization and payoffs, net 3,940 (1,635)
Proceeds from sales of other real estate owned 479 829
Disbursements for other real estate owned - (6)
Proceeds from sale of banking premises and equipment 424 -
Additions to banking premises and equipment (1,146) (218)
--------- --------
Net cash used in investing activities (34,109) (21,211)
--------- --------
Cash flows from financing activities:
Net increase in deposits 11,113 4,329
Net decrease in borrowings with maturities of 3 months or less (23,995) (2,803)
Proceeds from issuance of borrowings with maturities in excess of 3 months 68,920 23,000
Repayment of borrowings with maturities in excess of 3 months (9,600) (3,000)
Increase (decrease) in mortgagors' escrow accounts 58 (35)
Proceeds from exercise of stock warrants 360 45
Proceeds from issuance of common stock 7,585 -
Proceeds from exercise of stock options 13 12
Cash dividends (349) -
--------- --------
Net cash provided by financing activities 54,105 21,548
--------- --------
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
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<PAGE> 7
<TABLE>
<S> <C> <C>
Net increase in cash and cash equivalents 15,193 1,484
Cash and cash equivalents at beginning of period 11,303 7,552
-------- -------
Cash and cash equivalents at end of period $ 26,496 $ 9,036
======== =======
Supplementary information:
Interest paid on deposit accounts $ 4,369 $ 2,369
Interest paid on borrowed funds 3,796 2,495
Transfer from loans to other real estate owned, net 170 944
Transfers from other real estate owned to banking premises and equipment - 150
Income taxes paid 11 23
Decrease in due from brokers, net 325 -
Assets acquired in acquisition of branches 124,845 15,315
Liabilities assumed in acquisition of branches 145,509 17,802
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
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<PAGE> 8
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
- ----------------------------------------------------
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ------------------------------------------
(1) The Consolidated Balance Sheet as of June 30, 1996, and the Consolidated
Statements of Income, Consolidated Statements of Changes in Stockholders'
Equity, and Consolidated Statements of Cash Flows for the periods ended
June 30, 1996 and 1995 of People's Bancshares, Inc. and Subsidiary (the
"Company") furnished in this report are unaudited; however, these interim
consolidated financial statements reflect all adjustments that are, in the
opinion of management, necessary for a fair statement of the results for
the interim periods presented. Interim results are not necessarily
indicative of results to be expected for the year.
People's Bancshares, Inc. (the "Company") is a Massachusetts business
corporation formed at the direction of People's Savings Bank of Brockton
(the "Bank") to serve as the holding company for the Bank. On February 8,
1996, the Company and the Bank completed a reorganization (the
"Reorganization") in which the Bank became a wholly owned subsidiary of the
Company, and each issued and outstanding share of common stock of the Bank
was converted into and exchanged for one share of common stock of the
Company. As a result of the Reorganization, the Bank became a wholly owned
subsidiary of the Company. The Company is a unitary bank holding company
subject to the Bank Holding Company Act of 1956, as amended (the "BHC
Act"), the principal business of which consists of the business of the
Bank. The only significant asset of the Company is the common stock of the
Bank. Although the Company is a legal entity separate from the Bank, the
Company itself is not engaged in any business activities.
The unaudited consolidated interim financial statements furnished in this
report are intended to be read in conjunction with the consolidated
financial statements of the Company presented in its Annual Report for the
year ended December 31, 1995.
(2) EARNINGS PER SHARE
------------------
Earnings per share is computed using the weighted average number of shares
and common stock equivalents outstanding during each period. Earnings per
share computations include common stock equivalents attributable to
outstanding stock options and warrants. Weighted average shares and
equivalent shares outstanding for the quarters ended June 30, 1996 and 1995
were approximately 3,498,000 and 2,374,000, respectively.
8
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
unaudited consolidated financial statements and related notes included in this
report.
Assets
- ------
The Company's total assets at June 30, 1996 were $524.4 million, an increase of
$200.0 million from December 31, 1995. The increase in assets, liabilities, and
stockholders' equity primarily reflects the consummation on March 8, 1996 of the
acquisition of five branches from subsidiaries of Fleet Financial Group, Inc.
with approximately $145.5 million in assets (the "Branch Acquisition"), the
issuance of common stock in a rights offering completed in March 1996 (the
"Offering") and an increase of $56.4 million in investment securities consisting
primarily of mortgage-backed securities.
Loans
- -----
<TABLE>
Total loans and loans held for sale increased $122.9 million primarily as a
result of the purchase of $113.7 million in loans from the Branch Acquisition.
Of the $113.7 million in acquired loans, $82.4 million represented 1-4 family
residential mortgages, $20.8 million represented commercial and commercial real
estate, and $10.5 million represented consumer loans. All acquired loans were
performing loans at the time of acquisition. At June 30, 1996, the Company's
loans and loans held for sale were as follows:
<CAPTION>
(in millions)
<S> <C>
Residential mortgage loans $152.9
Commercial, commercial real estate
and construction loans 88.1
Consumer loans, including home
equity loans 20.8
------
Total $261.8
======
</TABLE>
Deposits
- --------
Total deposits increased $155.8 million to $330.4 million at June 30, 1996 from
$174.6 million at December 31, 1995 primarily as a result of the Branch
Acquisition. This deposit growth includes a $62.0 million increase in IRAs and
time certificates of deposit and a $93.8 million increase in core deposits.
Non-performing Assets and Allowance for Loan Losses
- ---------------------------------------------------
The allowance for loan losses has been established to absorb foreseeable losses
inherent in the loan portfolio. The provision for loan losses and the level of
the allowance are evaluated periodically by management and the Board of
Directors. These provisions are the results of the Company's internal loan
review, historical loan loss experience, trends in delinquent and non-
9
<PAGE> 10
accrual loans, known and inherent risks in the nature and volume of the loan
portfolio, adverse situations that may affect the borrower's ability to repay,
collateral values, an estimate of potential loss exposure on significant
credits, concentrations of credit, and present and prospective economic
conditions based on facts then known.
Periodically, management reviews the portfolio, classifying each loan into
categories by assessing the degree of risk involved. Considering this review,
the Company establishes the adequacy of its allowance and necessary additions
are charged to operations through the provision for loan losses. Loan losses are
charged against the allowance when management believes the collectibility of the
loan balance is unlikely.
The allowance is an estimate. Ultimate losses may vary from current estimates
and future additions to the allowance may become necessary. In addition,
regulatory agencies, as an integral part of their examination process, review
the Company's allowance and may require the Company to provide additions to the
allowance based on their assessment, which may differ from management's.
At June 30, 1996, the Company's allowance for loan losses totaled $4.9 million
or 1.88% of total loans and loans held for sale and 102.3% of non-performing
loans compared to $3.8 million or 2.75% of total loans and loans held for sale
and 79.8% of non-performing loans at December 31, 1995, and compared to $4.2
million or 3.18% of total loans and loans held for sale and 84.3% of
non-performing loans at June 30, 1995. Management recorded no provision for loan
losses for the three month period ended June 30, 1996 and $75,000 for the six
month period ended June 30, 1996, compared to $150,000 and $300,000 for the same
periods in 1995. The Company recorded a $1.7 million loan loss allowance in
connection with the Branch Acquisition. Net charge-offs were $244,000 and
$618,000 for the three and six month periods ended June 30, 1996 compared to net
charge-offs of $64,000 and $477,000 for the same periods in 1995.
Non-performing assets decreased to $5.1 million or 0.98% of total assets at June
30, 1996 from $5.3 million or 1.65% of total assets at December 31, 1995 and
$6.1 million or 2.24% of total assets at June 30, 1995.
Equity
- ------
The Company completed the Offering of approximately 968,000 shares of its common
stock in March 1996 in which it raised $7.6 million of net proceeds. At June 30,
1996, the Company had approximately 3,367,000 shares of common stock outstanding
and approximately 146,000 of common stock equivalents.
RESULTS OF OPERATIONS
- ---------------------
Overview
- --------
Comparisons of year to year operating results have been significantly affected
by four purchase transactions during the 15 months prior to June 30, 1996 that
have resulted in the Company increasing its asset size from $243.3 million at
March 31, 1995 to $524.4 million at June 30, 1996. Operating results have also
been significantly affected by the formation of People's Mortgage Corporation in
the spring of 1995 which is reflected in gains on sales of loans of $1.1 million
in the first half of 1996 compared to $82,000 in the corresponding period of
1995. Quarterly comparisons have also been significantly affected by the Company
increasing its investment portfolio (primarily mortgage-backed securities) by
$95.7 million since June 30, 1995
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<PAGE> 11
funded by an increase of $66.8 million in borrowed funds with the remainder
funded by cash received from the Branch Acquisition and the Offering. Finally,
results have also been significantly affected by an increase in the Company's
effective tax rate to 37% in the first half of 1996 compared to 25% in the first
half of 1995 as a result of the Company utilizing all remaining tax carryforward
benefits in 1995. Net income amounted to $967,000 and $1.7 million or $0.28 and
$0.53 per share (primary and fully diluted) for the three and six months ended
June 30, 1996 compared to net income of $474,000 and $898,000 or $0.20 and $0.38
per share (primary and fully diluted) for the same periods in 1995.
Net Interest Income
- -------------------
Net interest income increased $1.7 million and $2.7 million for the three and
six months ended June 30, 1996 compared to the same period in 1995. These
changes resulted mostly from increased average earning assets. For the first six
months of 1996, average earning assets increased 78.6% compared to the same
period in 1995.
Interest and dividend income increased to $8.7 million and $15.3 million for the
three and six months ended June 30, 1996 from $4.7 million and $8.8 million for
the same period in 1995. The yield on average earning assets decreased to 7.39%
and 7.35% for the three and six months ended June 30, 1996 from 7.82% and 7.61%
for the same periods in 1995. Yields on loans decreased to 8.19% and 8.25% for
the three and six months ended June 30, 1996 compared to 9.18% and 8.94% for the
same periods in 1995. Yields on investments increased to 6.50% and 6.39% for the
three and six months ended June 30, 1996 compared to 6.44% and 6.21% for the
same periods in 1995.
Interest expense increased to $4.9 million and $8.6 million for the three and
six months ended June 30, 1996 from $2.7 million and $4.9 million for the same
periods in 1995. This increase was due to a $827,000 and $1.6 million increase
in interest expense on borrowed funds and a $1.4 million and $2.1 million
increase in interest expense on deposits for the three and six months ended in
June 30, 1996 compared to the same periods in 1995.
During the first half of 1996, average borrowed funds amounted to $146.1 million
compared to $84.9 million during the first six months of 1995. The Company has
increased its use of borrowed funds, primarily FHLB advances, to fund purchases
of mortgage-backed securities. Rates paid on average borrowed funds were 5.59%
and 5.55%, for the three and six months ended June 30, 1996 compared to 6.08%
and 5.83% for the same periods in 1995.
The increase in deposit interest expense was due to an increase in the average
cost of deposits to 3.82% for the six month period ended June 30, 1996 from
3.75% for the same period in 1995. The three month average cost of deposits for
the periods ended June 30, 1996 and 1995 was 4.02%. Deposit expense also
increased due to an increase of average deposits to $236.9 million for the six
months ended June 30, 1996 compared to $129.5 million for the same period in
1995.
Provision for Loan Losses
- -------------------------
Management determined that no additional provision for loan losses was necessary
for the three months ended June 30, 1996. The provision for loan losses amounted
to $75,000 for the six months ended June 30, 1996 compared to $150,000 and
$300,000 for the three and six month periods in 1995. The prior periods'
provisions for loan losses were deemed necessary due to the continued weakness
of the local economy and real estate market. If the local economy and real
11
<PAGE> 12
estate market deteriorate, it may be necessary for the Company to make
additional provisions for loan losses.
Other Income
- ------------
Other income was $1.3 million and $2.2 million for the three and six months
ended June 30, 1996 compared to $323,000 and $566,000 for the same periods in
1995. The quarterly increase is primarily attributable to a $567,000 increase in
gains from sales of loans, a $216,000 increase in customer service fees, and
$99,000 in gains on banking premises and equipment. The increase in loan sale
gains reflects the formation and growth of People's Mortgage Corporation since
March 31, 1995 while the increase in customer service fees reflects the
Company's increased depositor base.
Operating Expenses
- ------------------
Total operating expenses amounted to $3.5 million and $6.2 million for the three
and six months ended June 30, 1996 compared to $1.6 million and $3.0 million for
the same periods in 1995. Operating expenses include an estimated $293,000 in
non-recurring expenses related to the Branch Acquisition of which $70,000 was
incurred in the second quarter of 1996.
Salaries and benefits expense increased $1.2 million and $2.0 million for the
three and six months ended June 30, 1996 compared to the same periods in 1995.
The increase in salaries and benefits reflects general salary increases, added
lending and mortgage banking staffing, the acquisition or opening of four
branches in 1995, operations of the five branches acquired in the Branch
Acquisition in 1996, and non-recurring expenses associated with the Branch
Acquisition.
Occupancy and equipment expense increased $204,000 and $366,000 for the three
and six months ended June 30, 1996 compared to the same period in 1995 primarily
due to additional costs associated with acquired branches and People's Mortgage
Corporation. Data processing expense increased $125,000 and $200,000 for the
three and six months ended June 30, 1996 compared to the same period in 1995.
Professional fees expense increased $63,000 and $30,000 for the three and six
months ended June 30, 1996 compared to the same periods in 1995. Other real
estate owned expenses decreased $57,000 and $6,000 for the three and six months
ended June 30, 1996 compared to the same period in 1995. Other general and
administrative expenses increased $367,000 and $516,000 for the three and six
months ended June 30, 1996 compared to the same period in 1995.
Provision for Income Taxes
- --------------------------
The Company recognized income tax expense of $564,000 and $970,000 in the three
and six months ended June 30, 1996 compared to income tax expense of $159,000
and $307,000 for the same periods in 1995. In 1995, the remainder of tax loss
carryforward benefits were utilized to reduce the Company's income tax expense.
Liquidity and Capital Resources
- -------------------------------
The Company's liquidity management focuses upon the Company's ability to provide
the cash reserves and cash equivalents necessary to honor contractual
liabilities and commitments, meet depositors' withdrawal demands, fund
operations and provide customers with adequate available credit. The Company's
primary sources of liquidity are customer deposits, principal and interest
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<PAGE> 13
payments on loans, interest and dividends on investments and proceeds from the
maturity or sale of investments. The Company also has the ability to borrow from
the Federal Home Loan Bank of Boston on a collateralized basis. The Company
believes that it has adequate liquidity to meet its needs.
At June 30, 1996, the Company's capital exceeded all regulatory requirements.
The Company's Tier 1 leverage capital ratio at June 30, 1996 was 5.60%, compared
to 6.04% at December 31, 1995. The Company's book value per share was $8.25 at
June 30, 1996, $8.47 at December 31, 1995, and $8.07 at June 30, 1995. The
decrease in book value per share from December 31, 1995 was primarily
attributable to the decrease in the equity valuation account for net unrealized
loss on securities available for sale, after tax effects, resulting from the
effect of increases in market interest rates on the Company's mortgage-backed
securities portfolio.
Other Information
- -----------------
On May 10, 1995, the Company acquired the Bank of Taunton, a Co-operative Bank
("Taunton"). The acquisition was effected pursuant to an agreement with Taunton
dated January 24, 1995 in which Taunton converted from a mutual to stock form
bank in a supervisory conversion under regulations of the Massachusetts
Commissioner of Banks, the Company acquired all of the capital stock of Taunton
in the conversion, and Taunton was then merged with and into the Company.
Taunton's assets amounted to approximately $17.8 million at acquisition.
On November 29, 1994, the Company announced that it had entered into an
agreement with Haymarket Cooperative Bank to acquire the deposits from
Haymarket's Brockton branch. The Company completed the acquisition of $9.7
million in deposits from Haymarket on July 22, 1995.
On May 22, 1995, the Company announced that it had entered into an agreement
with the Bank of Boston to acquire the Bank of Boston's Mansfield, Massachusetts
branch. The Company completed the branch acquisition from the Bank of Boston on
September 23, 1995 receiving $13.0 million in deposits.
On September 30, 1995, the Company entered into an agreement with Fleet Bank of
Massachusetts, N.A. and Shawmut Bank of Massachusetts, N.A. to acquire certain
assets and liabilities of five branches that were required to be divested in
connection with the merger of Shawmut National Corporation with and into Fleet
Financial Group, Inc.
On March 8, 1996 the Company completed an offering of its common stock in order
to maintain its status as a "well-capitalized" institution as defined by the
FDIC upon the completion of the branch acquisition. The Company raised net
proceeds of $7.6 million upon completion of the offering.
On May 14, 1996, the Company held its Annual Meeting. During the meeting four
directors were reelected and Wolf & Company, P.C. was reappointed as the
independent certified public accountant of the Company. Both proposals carried
over 99% of voting shares. Additionally, the Company's 1996 Stock Option and
Incentive Plan was approved with 86% of the shares voted.
On August 8, 1996 the Company declared a $0.07 dividend to be paid on September
15, 1996 to shareholders of record on August 31, 1996.
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<PAGE> 14
PART II - OTHER INFORMATION
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
- -----
Exhibit Description
- ------- -----------
(a) Exhibits
3.1 Restated Articles of Organization of the Company (Incorporated by
reference to the Company's Annual Report on Form 10-K filed with
the Commission on March 28, 1996, (the "Form 10-K")).
3.2 By-laws of the Company, as amended and restated (Incorporated by
reference to the Company's Form 8-K filed with the Commission on
February 8, 1996 (the "Form 8-K)).
4.1 Specimen certificate for shares of Common Stock of the Company
(Incorporated by reference to the Form 8-K).
4.2 Articles IV and VI(I)-(K) of Restated Articles of Organization of
the Company (see Exhibit 3.1).
4.3 Articles I and IV of By-laws of the Company (see Exhibit 3.2).
27 Financial Data Schedule (filed herewith).
14
<PAGE> 15
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.
PEOPLE'S BANCSHARES, INC.
8/12/96 By: /s/ John A. Williams
---------- -------------------------------------------------
Date John A. Williams
President, Chief Executive
Officer and Director
8/12/96 By: /s/ Colin C. Blair
---------- -----------------------------------------------------
Date Colin C. Blair
Vice President, Treasurer and Chief Financial Officer
(principal financial and accounting officer)
15
<PAGE> 16
EXHIBITS INDEX
Exhibit Description
- ------- -----------
(a) Exhibits
3.1 Restated Articles of Organization of the Company (Incorporated by
reference to the Company's Annual Report on Form 10-K filed with
the Commission on March 28, 1996, (the "Form 10-K")).
3.2 By-laws of the Company, as amended and restated (Incorporated by
reference to the Company's Form 8-K filed with the Commission on
February 8, 1996 (the "Form 8-K)).
4.1 Specimen certificate for shares of Common Stock of the Company
(Incorporated by reference to the Form 8-K).
4.2 Articles IV and VI(I)-(K) of Restated Articles of Organization of
the Company (see Exhibit 3.1).
4.3 Articles I and IV of By-laws of the Company (see Exhibit 3.2).
27 Financial Data Schedule (filed herewith).
16
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PEOPLE'S
BANCSHARES, INC. AND SUBSIDIARY QUARTERLY FINANCIAL STATEMENTS FOR THE SIX
MONTHS ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS CONTAINED IN SUCH FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 21,465
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 5,031
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 223,118
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 250,244
<ALLOWANCE> 4,922
<TOTAL-ASSETS> 524,443
<DEPOSITS> 330,399
<SHORT-TERM> 41,200
<LIABILITIES-OTHER> 979
<LONG-TERM> 120,370
<COMMON> 337
0
0
<OTHER-SE> 27,435
<TOTAL-LIABILITIES-AND-EQUITY> 524,443
<INTEREST-LOAN> 8,809
<INTEREST-INVEST> 6,391
<INTEREST-OTHER> 64
<INTEREST-TOTAL> 15,264
<INTEREST-DEPOSIT> 4,531
<INTEREST-EXPENSE> 8,587
<INTEREST-INCOME-NET> 6,677
<LOAN-LOSSES> 75
<SECURITIES-GAINS> (24)
<EXPENSE-OTHER> 6,157
<INCOME-PRETAX> 2,624
<INCOME-PRE-EXTRAORDINARY> 2,624
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,654
<EPS-PRIMARY> .53
<EPS-DILUTED> .53
<YIELD-ACTUAL> 2.87
<LOANS-NON> 4,811
<LOANS-PAST> 0
<LOANS-TROUBLED> 726
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,813
<CHARGE-OFFS> 740
<RECOVERIES> 122
<ALLOWANCE-CLOSE> 4,922
<ALLOWANCE-DOMESTIC> 3,634
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,288
<FN>
THE COMPANY RECORDED $1.7 MILLION IN LOAN LOSS ALLOWANCE FROM THE ACQUISITION
OF FIVE BRANCHES FROM SUBSIDIARIES OF FLEET FINANCIAL GROUP, INC. ON MARCH 8,
1996.
</TABLE>
