UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the 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 0-23134
PEOPLES BANK CORPORATION OF INDIANAPOLIS
(Exact name of registrant as specified in its charter)
Indiana 35-1681096
- --------------------------------------------------------------------------------
(State of other jurisdiction (I.R.S. Employer
of incorporation or organization) identification no.)
130 East Market Street Indianapolis, Indiana 46204
- --------------------------------------------------------------------------------
(Address of principal (Zip Code)
executive offices)
(317) 237-8121
(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 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. X Yes _ No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date.
Common Shares, without par value
Nonvoting - 1,449,992 shares as of August 12, 1996
Voting - 140,000 shares as of August 12, 1996
<PAGE>
PEOPLES BANK CORPORATION OF INDIANAPOLIS
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at June 30, 1996
and December 31, 1995 ..............................................2
Consolidated Statements of Income for three and
six months ended June 30, 1996 and 1995 ............................3
Consolidated Statements of Changes in
Shareholders' Equity ...............................................4
Consolidated Statements of Cash Flows for
six months ended June 30, 1996 and 1995 ............................5
Notes to Consolidated Financial Statements .........................6
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition ..................7-14
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote
of Security Holders.................................................15
Item 6. Exhibits and Reports on Form 8-K ...................................15
Signatures .................................................................16
<PAGE>
PEOPLES BANK CORPORATION OF INDIANAPOLIS
CONSOLIDATED BALANCE SHEETS
================================================================================
(Dollar amounts in thousands)
June 30, December 31,
1996 1995
--------- ------------
Assets
Cash and due from banks $27,690 $23,377
Federal funds sold 23,700 0
-------- --------
Total cash and equivalents 51,390 23,377
Available-for-sale securities 85,367 107,745
Loans held for sale 2,005 2,557
Total loans 293,381 271,093
Allowance for loan losses (3,695) (3,290)
-------- --------
Loans, net 289,686 267,803
Premises and equipment, net 8,331 8,744
Accrued income and other assets 7,558 6,793
-------- --------
Total assets $444,337 $417,019
======== ========
Liabilities
Non interest-bearing deposits $73,798 $67,966
Interest-bearing deposits 311,855 283,796
-------- --------
Total deposits 385,653 351,762
Short-term borrowings 11,857 20,056
Accrued expenses and other liabilities 3,382 3,565
-------- --------
Total liabilities 400,892 375,383
Shareholders' equity
Common shares, no par value:
Authorized:
Voting - 300,000 shares
Nonvoting - 4,000,000 shares
Issued:
Voting - 140,000 shares 950 950
Nonvoting - 1,449,992 shares (1996)
- 1,449,992 shares (1995) 15,334 15,334
Retained earnings 27,189 25,114
Net unrealized loss on
available-for-sale securities (28) 238
-------- --------
Total shareholders' equity 43,445 41,636
-------- --------
Total liabilities and shareholders' equity $444,337 $417,019
======== ========
See accompanying notes.
2
<PAGE>
PEOPLES BANK CORPORATION OF INDIANAPOLIS
CONSOLIDATED STATEMENTS OF INCOME
================================================================================
(Dollar amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1996 1995 1996 1995
-------------------- ----------------------
Interest income
<S> <C> <C> <C> <C>
Interest and fees on loans $6,326 $5,539 $12,511 $10,41
Interest on federal funds sold 300 52 398 103
Interest on available-for-sale securities 1,264 2,074 2,633 4,327
------ ----- ------ ------
Total interest income 7,890 7,665 15,542 14,848
Interest expense
Interest on deposits 3,253 3,026 6,414 5,927
Interest on short-term borrowings 150 634 329 1,168
------ ----- ------ ------
Total interest expense 3,403 3,660 6,743 7,095
------ ----- ------ ------
Net interest income 4,487 4,005 8,799 7,753
Provision for loan losses 300 177 450 353
------ ----- ------ ------
Net interest income after
provision for loan losses 4,187 3,828 8,349 7,400
Other operating income
Trust fees 354 349 707 698
Service charge income 563 496 1,093 964
Mortgage banking revenue 191 149 366 608
Net gain (loss) on
investments (1) (31) (28) (39)
Other operating income 265 123 496 301
------ ----- ------ ------
Total other operating income 1,372 1,086 2,634 2,532
Other operating expenses
Salaries and employee benefits 2,003 2,121 3,944 4,275
Occupancy expense (net) 376 373 766 735
Equipment expense 255 301 516 606
FDIC insurance expense 1 185 1 370
Advertising Expense 135 199 270 414
Other operating expense 893 872 1,714 1,628
------ ----- ------ ------
Total other operating expenses 3,663 4,051 7,211 8,028
Income before income taxes 1,896 863 3,772 1,904
Income Taxes 560 119 1,125 383
Net income $1,336 $744 $2,647 $1,521
====== ===== ====== ======
Net income per share (Note 2) $ 0.84 $0.47 $ 1.66 $ 0.95
====== ===== ====== ======
</TABLE>
See accompanying notes.
3
<PAGE>
PEOPLES BANK CORPORATION OF INDIANAPOLIS
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
================================================================================
(Dollar amounts in thousands)
1996 1995
--------- ---------
Balance at January 1 $ 41,636 $ 38,477
Net Income 2,647 1,521
Cash dividends (572) (541)
Repurchase of common stock 0 (835)
Change in net unrealized loss on
available-for-sale securities (266) 911
-------- --------
Balance at June 30 $ 43,445 $ 39,533
======== ========
4
<PAGE>
EOPLES BANK CORPORATION OF INDIANAPOLIS
CONSOLIDATED STATEMENTS OF CASH FLOWS
================================================================================
(Dollar amounts in thousands)
Six months ended
June 30,
----------------------
1996 1995
--------- ----------
Cash flows from operating activities
Net Income $ 2,647 $ 1,521
Adjustments to reconcile net income to net cash
from operating activities
Depreciation and amortization 525 648
Provision for loan losses 450 353
Net loss on investment securities 28 39
Net amortization/(accretion) on investments 150 474
Net gain on the sale of loans (267) (125)
Change in interest payable and other liabilities (356) 1,004
Change in interest receivable and other assets (650) (1,348)
Loans originated for sale, net of sales proceeds 560 (12,119)
-------- --------
Net cash from operating activities 3,087 (9,553)
-------- --------
Cash flows from investing activities
Proceeds from maturities and principal
reductions of investment securities 0 20,893
Proceeds from sales of
available-for-sale securities 2,972 19,985
Proceeds from maturities of
available-for-sale securities 30,760 3,206
Purchase of available-for-sale securities (11,891) 0
Purchase of investment securities 0 (1,000)
Loans made to customers, net of principal
collection thereon (21,926) (25,661)
Property and equipment expenditures (111) (908)
-------- --------
Net cash from investing activities (196) 16,515
-------- --------
Cash flows from financing activities
Net change in deposits 33,892 2,213
Net change in short-term borrowings (8,198) (5,692)
Dividends paid (572) (541)
Purchase of common stock 0 (835)
-------- --------
Net cash from financing activities 25,122 (4,855)
-------- --------
Net change in cash and cash equivalents 28,013 2,107
Cash and cash equivalents at beginning of year 23,377 27,725
-------- --------
Cash and cash equivalents at end of year $ 51,390 $ 29,832
======== ========
5
<PAGE>
Peoples Bank Corporation of Indianapolis
Notes to Consolidated Financial Statements
June 30, 1996
1. Accounting Policies
Except as noted in Note 3, the significant accounting policies followed
by Peoples Bank Corporation of Indianapolis ("the Corporation") for interim
financial reporting are consistent with the accounting policies followed for
annual financial reporting. The consolidated interim financial statements have
been prepared in accordance with instructions to Form 10-Q and may not include
all information and footnotes normally shown for full annual financial
statements. All adjustments which are, in the opinion of management, necessary
for a fair presentation of the results for the periods reported have been
included in the accompanying unaudited consolidated financial statements and all
such adjustments are of a normal recurring nature.
2. Earnings Per Share
Earnings per share is computed based upon the weighted average number
of shares outstanding during the period which were 1,589,992 for the three and
six months ending June 30, 1996, and 1,589,992 and 1,600,741 for the three and
six months ending June 30, 1995.
3. Accounting Changes
Effective January 1, 1995, Peoples adopted Financial Accounting
Standard No. 114, "Accounting by Creditors for the Impairment of a Loan" as
amended by FAS No. 118. Pursuant to this standard, loans considered to be
impaired are reduced to the present value of expected future cash flows, or to
the fair value of collateral, by allocating a portion of the allowance for loan
losses to such loans. Loans are deemed impaired when management concludes that
it is probable that the customer will be unable to comply with the contractual
terms of their loan, with respect to the timing and amount of required payments.
Management evaluates loans for impairment in conjunction with the quarterly
evaluation of the allowance for loan losses. Generally, such evaluation is
limited to large commercial and commercial real estate loans. Consumer loans and
mortgage loans secured by 1 to 4 family residential property are generally not
evaluated for impairment. Application of this Standard on January 1, 1995, did
not have a significant effect on Peoples financial condition or results of
operations.
Effective January 1, 1996, Peoples adopted Financial Accounting Standard No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of." Management does not believe Peoples has any material
assets subject to this new Standard.
Effective January 1, 1996, Peoples adopted Financial Accounting Standard No.
122, "Accounting for Mortgage Servicing Rights." This Standard requires the
basis of mortgage loans originated and sold, with servicing retained, to be
allocated between the mortgage loan and the mortgage servicing right, based upon
the relative fair value of such assets. The effect of this Standard will be to
increase the gain, or reduce the loss, recognized upon the sale of the mortgage
loan, and to reduce future servicing fee income. During the second quarter of
1996, application of this Standard resulted in approximately $57 thousand of
additional income upon the sale of approximately $6.4 million of mortgage loans.
Effective January 1, 1996, Peoples adopted Financial Accounting Standard No.
123, "Accounting for Stock Based Compensation." This Standard encourages, but
does not require, entities to use a fair value based method to account for
stock-based compensation plans. If fair value accounting is not adopted,
entities must disclose the pro-forma effect on net income and earnings per
share, had fair value accounting been adopted. Stock options issued by Peoples
in 1996 are subject to the requirements of this Standard. Peoples has not
accounted for those options using a fair value based method and intends to
disclose the pro-forma effect on net income and earnings per share in its 1996
annual report. At the end of the second quarter, shares issued under the plan
were non-dilutive.
6
<PAGE>
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis
(Dollar amounts in thousands, except per share data)
General
The business of Peoples Bank Corporation of Indianapolis ("the Company")
consists of holding and administering its interest in Peoples Bank & Trust
Company ("Peoples"). The principal business of Peoples consists of attracting
deposits from consumer and commercial customers and making loans to individuals
and businesses. Peoples offers various products for depositors including
checking and savings accounts, certificates of deposit and safe deposit boxes.
Loans consist principally of loans to individuals secured by mortgage liens on
residential properties, consumer loans generally secured by personal property
and loans to businesses generally secured by liens on business assets. Peoples
also offers trust services to individuals, businesses and institutions.
The Company operates 12 branch locations, a twelve story office in downtown
Indianapolis, an operations center (which includes one of the 12 branches) and
two mortgage origination facilities.
Peoples occupies five floors of the downtown office building and leases six
floors to tenants. The top floor houses the board room and a training area.
Leased tenant space at the downtown office remains at near capacity.
The Board of Directors of the Company approved on July 18, 1996 the repurchase,
from time to time, of 100,000 nonvoting common shares on the open market. The
Board believed that the shares had been at times undervalued in the market and
that it was in the best interest of the shareholders and the Company to effect
such share repurchases.
The book value per share of Peoples nonvoting common shares at June 30, 1996 was
$27.32. For the second quarter, the low trading price per share was $24.75, and
the high trading price per share was $30.25.
7
<PAGE>
Selected ratios and summary data.
At or for the Six Months Ended
June 30,
---------------------------------
1996 1995
------------- -------------
Assets $ 444,337 $ 423,656
Loans (includes loans held for sale) 295,386 253,172
Deposits 385,653 348,790
Shareholders Equity 43,445 39,533
Book value per share 27.32 24.86
Earnings per share $ 1.66 $ 0.95
Dividends per share $ 0.36 $ 0.34
Net Interest Margin (FTE) 4.64% 4.25%
Return on Average Assets 1.25% 0.73%
Return on Average Equity 12.38% 7.85%
Average Shares Outstanding 1,589,992 1,600,741
Total Shares Outstanding 1,589,992 1,589,992
Net Income
Net income for the second quarter of 1996 was $1,336 compared to $744 for the
second quarter of 1995. Net income for the six months ended June 30, 1996 was
$2,647 which represents an increase of 74.03% or $1,126 from net income of
$1,521 for the six months ended June 30, 1995. Net income per share for the
second quarter 1996 increased $0.37 or 78.72% to $0.84 from $0.47 for the second
quarter of 1995. Net income per share for the first half of 1996 was $1.66
compared to $0.95 for the first half of 1995. The increase is primarily
attributable to increased loan volume and fee income and decreased operating
expenses.
Net Interest Income
Net interest income is the principal component of the net income for the Company
and represents the difference between interest earned on loans and investments
and the interest cost of deposits and other borrowed funds. For the six months
ended June 30, net interest income was $8,799 and $7,753 for 1996 and 1995,
respectively. This reflects an increase of $1,046 or 13.49%. For the second
quarter of 1996 and 1995, respectively, net interest income was $4,487 and
$4,005, an increase of $482 or 12.03%.
Interest income for the six months ended June 30, was $15,542 and $14,848 for
1996 and 1995, respectively. Interest income for the second quarter of 1996 and
1995, respectively, was $7,890 and $7,665, an increase of $225 or 2.94%. Total
interest expense was $6,743 and $7,095 for the six months ended June 30, 1996
and 1995, respectively. For the second quarter of 1996 and 1995, respectively,
total interest expense was $3,403 and $3,660, a decrease of $257 or 7.02%.
Interest and fees on loans increased from $10,418 for the first half of 1995 to
$12,511 for that period in 1996, an increase of $2,093 or 20.09%. For the second
quarter of 1996 and 1995, respectively, interest and fees on loans were $6,326
and $5,539, an increase of $787 or 14.21%. These increases are attributable to
an increase in interest on loans outstanding. Total loans were $253,172 at June
30, 1995, compared to $295,386 at June 30, 1996.
8
<PAGE>
The Company's net interest margin, or margin on earning assets, increased 0.37%
from 4.04% for the first six months of 1995 to 4.41% for the first six months of
1996. On a tax equivalent basis, the Company's net interest margin was 4.25% and
4.64%, respectively, for those periods. For the second quarter, the net interest
margin increased 0.25% from 4.13% in 1995 to 4.38% in 1996. On a tax equivalent
basis, the Company's net interest margin was 4.38% and 4.61% for the second
quarters of 1995 and 1996, respectively.
Provision & Allowance for Loan Losses
The provision for loan losses was $450 for the first six months of 1996 as
compared to $353 for the first six months of 1995, an increase of $97 or 27.48%.
The loan loss provision for the second quarter of 1996 was $300 versus $177 for
the second quarter of 1995. The allowance for loan losses at June 30, 1996 was
$3,695 or 1.25% of total loans compared to $3,290 or 1.20% of total loans at
December 31, 1995. Gross charge-offs during the first six months of 1996 were
$96 and recoveries were $50.
The adequacy of the allowance for loan loss is evaluated at least quarterly by a
credit review officer and management based upon the review of identified loans
with more than a normal degree of risk, historical loan loss percentages, and
present and forecasted economic conditions. Management's analysis indicates that
the allowance for loan losses at June 30, 1996, is adequate to cover potential
losses on identified loans with credit problems and potential losses on the
remaining loan portfolio based on historical percentages.
Other Operating Income
Non-interest income totaled $2,634 for the first six months of 1996, compared to
$2,532 for that period of 1995, an increase of $102 or 4.03%. Non-interest
income was $1,372 and $1,086 for the second quarters of 1996 and 1995,
respectively, an increase of $268 or 26.34%. Trust fees, which continue to be a
consistent source of income for the Company, were $707 and $698 for the first
six months of 1996 and 1995, respectively, an increase of $9, or 1.29%.
Service charges on deposit accounts, which comprise the largest component of
non-interest income, were up for the first six months of 1996 and up for the
second quarter of 1996 when compared with the same periods of 1995. Service
charge income was $1,093 for the six months ended June 30, 1996, an increase of
$129 or 13.38%, from $964 for the same period in 1995. For the three month
periods ending June 30, 1996 and 1995, service charge income was $563 and $496
respectively, an increase of $67 or 13.51%. One significant factor in fee income
has been the merchant credit card business, from which Peoples derives fee
income from merchant customers who accept credit cards in the course of retail
operations and who have payment in respect of such cards remitted directly to
their accounts at Peoples. Peoples' Product and Pricing Committee continually
monitors service charge fees and makes necessary adjustments to ensure that
Peoples remains competitively priced with other local banking institutions.
9
<PAGE>
Mortgage banking revenue includes net gains and losses realized when mortgage
loans are sold into the secondary market and service fee revenue earned from
servicing those loans after they are sold. Mortgage banking revenue for the
first six months of 1996 was $366, reflecting a decrease of $242, or 39.80%,
compared to $608 for the same period in 1995. Mortgage banking revenue for the
second quarter of 1996 and 1995, respectively, was $191 and $149, an increase of
$42 or 28.19%. A gain of $380 was recognized during the first quarter of 1995 on
the sale of $34 million in mortgage servicing rights. Implementation of
Financial Accounting Standard No. 122, "Accounting for Mortgage Servicing
Rights" accounted for $114 additional recorded income during the first six
months of 1996.
Other Operating Expenses
Total other operating expenses were $7,211 for the six months ended June 30,
1996, compared with $8,028 for that period in 1995. This represents a decrease
of $817, or 10.18%. Total other operating expenses for the second quarter of
1996 and 1995, respectively, were $3,663 and $4,051, a decrease of $388 or
9.58%. During the third quarter of 1995, the bank examined its expense structure
and recommended steps to decrease overall non-interest expense. As a result of
these recommendations, salaries and employee benefits expenses decreased $331,
or 7.74%, to $3,944 for the first six months of 1996 from $4,275 for the first
six months of 1995. These expenses decreased $118, or 5.56%, to $2,003 for the
second quarter of 1996, compared to $2,121 for the same period in 1995. The
Company continues to evaluate operating processes and procedures to reduce
operating expenses, and will continue to evaluate the need for personnel in all
areas of the Company in relation to increases in non-interest income, peer group
comparisons, and interest income generated.
Occupancy expense was $766 for the first six months of 1996, an increase of $31
or 4.22% from $735 for the first six months of 1995. Occupancy expense was $376
for the second quarter of 1996, an increase of $3 or 0.80% from $373 for the
same period in 1995. Equipment expenses were $516 and $606, for the first six
months of 1996 and 1995, respectively, a decrease of $90 or 14.85%. Equipment
expenses were $255 and $301 for the second quarter of 1996 and 1995,
respectively, a decrease of $46 or 15.28%.
FDIC insurance expense was $1 and $185 for the second quarter of 1996 and 1995,
respectively. The FDIC determined that the Bank Insurance Fund was adequately
capitalized as of May 31, 1995. As a result, insurance premiums were reduced
from $0.23 of $100 of insured deposits on an annual basis to a flat fee of $500
per quarter.
Advertising expenses were $270 and $414, for the first six months of 1996 and
1995, respectively, a decrease of $144 or 34.78%. For the second quarter of
1996, advertising expenses were $135, a decrease of $64, or 32.16% over the same
period in 1995. Other operating expenses were $1,714 and $1,628 for the first
six months of 1996 and 1995, respectively, an increase of $86 or 5.28%. For the
second quarter of 1996 and 1995, respectively, other operating expenses were
$893 and $872.
10
<PAGE>
Income Taxes
Income taxes were $1,125 for the first six months of 1996 and $383 for the first
six months of 1995. On a quarterly comparison, income taxes were $560 for the
second quarter of 1996 and $119 for the second quarter of 1995. The increase in
taxes can be primarily attributed to increased profitability.
Balance sheet
Total assets were $444,337 at June 30, 1996, and $417,019 at December 31, 1995,
an increase of $27,318. The portfolio of available-for-sale securities decreased
from $107,745 at December 31, 1995, to $85,367 at June 30, 1996, a decrease of
$22,378 or 20.77%. The decline in the portfolio was attributable to the return
of principal from available-for-sale securities in the form of amortization,
calls, maturities and sales. Total loans, excluding loans held for sale,
increased during the first six months of 1996 from $271,093 at December 31,
1995, to $293,381 at June 30, 1996. This reflects an increase of $22,288, or
8.22%. Commercial loans increased $11,073 or 11.31% from $97,914 at December 31,
1995, to $108,987 at June 30, 1996. Real estate loans, which consist of
construction loans and permanent mortgages, increased $10,186 or 9.72% from
$104,817 at December 31, 1995, to $115,003 at June 30, 1996. Consumer loans
increased $1,093 or 1.65% from $66,132 at December 31, 1995 to $67,225 at June
30, 1996. Loans held for sale consist of conforming fixed rate mortgage loans
that Peoples has sold in the secondary market (having retained servicing rights
with respect to such loans) and that are pending funding. Loans held for sale
were $2,557 at December 31, 1995, compared to $2,005 at June 30, 1996. The
amount of loans outstanding (excluding loans held for sale) are reflected in the
following table.
June 30, December 31, June 30,
1996 1995 1995
--------- ------------ ---------
Real Estate $115,003 $104,817 $ 77,092
Commercial 108,987 97,914 93,744
Consumer 67,225 66,132 66,775
Tax exempt 2,166 2,230 2,556
-------- -------- --------
Total Loans 293,381 271,093 240,167
Less: Allowance for Loan Losses 3,695 3,290 3,173
-------- -------- --------
Net Loans $289,686 $267,803 $236,994
======== ======== ========
Deposits represent the primary source of funds for the Company. Total deposits
increased $33,891 or 9.63%, from $351,762 at December 31,1995 to $385,653 at
June 30, 1996. Non-interest-bearing deposits increased $5,832, or 8.58%, from
$67,966 at December 31, 1995 to $73,798 at June 30, 1996. Interest-bearing
deposits increased $28,059, or 9.89%, from $283,796 at December 31, 1995 to
$311,855 and June 30, 1996. The growth is attributable in part to a large CD
11
<PAGE>
campaign in June, 1996, which raised approximately $12 million. The Company's
deposit balances are reflected in the following table.
June 30, December 31, June 30,
1996 1995 1995
-------- -------- --------
Deposits:
Non-interest-bearing $ 73,798 $ 67,966 $ 72,718
Interest-bearing 311,855 283,796 276,072
-------- -------- --------
Total deposits $385,653 $351,762 $348,790
======== ======== ========
Total deposits/total assets 86.79% 84.35% 82.33%
Short-term borrowings in the form of Federal funds and repurchase agreements are
acquired, as needed, to satisfy temporary liquidity needs. Many of the funds are
from businesses with large cash balances. Though short-term in nature,
repurchase agreements have been and continue to be a stable source of funds for
Peoples. Short-term borrowings were $11,857 at June 30, 1996, as compared to
$20,056 at December 31, 1995. This represents a decrease of $8,199, or 40.88%.
At June 30, 1996, all short-term borrowings were in the form of repurchase
agreements.
Total shareholders' equity increased $1,809 or 4.34% for the six months ended
June 30, 1996, to $43,445, from $41,636 at December 31, 1995. The increase in
shareholders' equity was the result of net income of $2,647, less dividends paid
of $572. The adoption of FAS No. 115 resulted in a $266 decrease in equity,
which was attributable to the net unrealized loss on available-for-sale
securities.
Credit Quality
Nonaccrual loans are loans on which the Company no longer accrues interest.
Management places a loan on nonaccrual status when the collection of additional
interest is unlikely and the loan is not considered to be well secured and in
the process of collection. Nonperforming loans consist of loans that are on
nonaccrual status, that are 90 days or more past due as to principal or
interest, or that are restructured. If a loans is designated as a nonperforming
loan, management, as a result of the loan's delinquent status or significant
concern about its ultimate collectibility, typically ceases to recognize
interest income with repect to such loan and places it on nonaccrual status.
At June 30, 1996, Management designated $1,177 in loans as "impaired" for the
purpose of FAS No. 114. Management has further determined that all commercial
nonaccrual loans will be considered as impaired.
12
<PAGE>
The following table shows the composition of nonperforming loans.
June 30, December 31, June 30,
1996 1995 1995
--------- ------------ ----------
Nonperforming loans:
Total nonaccrual loans $ 365 $ 838 $ 697
Loans past due more than 164 445 459
90 days and still accruing -- -- --
Total $ 529 $1,283 $1,156
====== ====== ======
Historically, commercial loans have constituted the majority of total
nonperforming loans at Peoples. At June 30, 1996, nonperforming loans were
comprised of $188 of commercial loans, $308 of real estate loans and $33 of
consumer loans. Nonperforming loans were comprised of $533 of commercial loans,
$749 of real estate loans and $0 of consumer loans at December 31, 1995. At June
30, 1995, nonperforming loans consisted of $733 of commercial loans, $324 of
real estate loans and $99 of consumer loans.
Asset quality continues to be an important area of focus for the Company.
Nonperforming loans as a percent of assets were 0.12% at June 30, 1996, and
0.31% at December 31, 1995. The Company maintains asset quality through the use
of well-defined policies, underwriting criteria and review processes. The
Company is focused on increasing loans in relation to deposits, but wants to
maintain profitable growth both now and in future years.
Capital
The Company and Peoples are required to comply with capital requirements
promulgated by their primary regulators that affect their ability to pay
dividends and that can affect their operations. Those regulations require the
maintenance of specified levels of capital to total assets (leverage ratio) and
to risk weighted assets (the risk-based capital ratios). These regulations
require the maintenance of a leverage ratio of at least 3.00% and a total
risk-based capital ratio of at least 8.00%. A financial institution's deposit
insurance assessment and, in certain circumstances, operations will be affected
by its capital level. Institutions with leverage ratios of 5.00% or more and
total risk-based capital ratios of 10.00% or more are deemed to be "well
capitalized," and accordingly, pay the lowest deposit insurance assessment and
are not subject to operational restrictions as outlined within the regulation.
13
<PAGE>
As of June 30, 1996, the Company's Tier I and total risk-based capital ratios
were 14.30% and 15.51%, respectively. The Company's leverage ratio was 9.79% at
June 30, 1996. As of June 30, 1996, Peoples was in excess of the minimum capital
and leverage requirements necessary to be considered a "well capitalized"
banking company as defined by Federal regulators. The Company and Peoples were
in full compliance with all regulatory capital requirements at June 30, 1996.
The following table provides the capital ratios for the entities.
At June 30, 1996
-----------------------------
Consolidated
Bank Only Company
---------- ------------
Total assets $438,596 $444,337
Risked-based assets 289,900 304,005
Tier I capital 35,764 43,462
Total capital 39,387 47,157
Leverage ratio 8.15% 9.79%
Tier I risk-based capital ratio 12.34% 14.30%
Total risk-based capital ratio 13.59% 15.51%
14
<PAGE>
PART II. OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Stockholders was held April 18, 1996. The
following members were elected to the Company's Board of Directors to hold
office for a period of one year or until their successors are duly chosen and
qualified. Proxy votes comprised 76 percent of the outstanding shares. No shares
were voted in person.
Against or Broker
Nominee For Withheld Abstain Non-votes
- ------------------ ------- ---------- ------- ---------
Felix T. McWhirter 106,420 0 0 0
Wm. E. McWhirter 106,420 0 0 0
Charles R. Farber 106,420 0 0 0
Elbert L. Bradshaw 106,420 0 0 0
Robert B. Hirschman 106,420 0 0 0
David W. Knall 106,420 0 0 0
Mary Ellen Rodgers 106,420 0 0 0
Henry C. Ryder 106,420 0 0 0
Stephen R. West 106,420 0 0 0
Gerald R. Francis 106,420 0 0 0
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits - Exhibit 27: Financial Data Schedule.
B. Form 8-K - None to be reported.
15
<PAGE>
SIGNATURES
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.
PEOPLES BANK CORPORATION
OF INDIANAPOLIS
By: /s/ William. E. McWhirter
-----------------------------------------
William E. McWhirter
President and Chief Executive Officer
By: /s/ Charles R. Hageboeck
-----------------------------------------
Charles R. Hageboeck
Senior Vice President and Chief
Financial Officer
DATE: August 5, 1996
16
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- ------------------------------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS
</LEGEND>
<CIK> 0000796322
<NAME> PEOPLES BANK CORP. OF INDIANAPOLIS
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-1-1996
<PERIOD-END> Jun-30-1996
<EXCHANGE-RATE> 1.000
<CASH> 27,690
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 23,700
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 85,367
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 295,386
<ALLOWANCE> 3,695
<TOTAL-ASSETS> 444,337
<DEPOSITS> 385,653
<SHORT-TERM> 11,857
<LIABILITIES-OTHER> 3,382
<LONG-TERM> 0
<COMMON> 16,284
0
0
<OTHER-SE> 27,161
<TOTAL-LIABILITIES-AND-EQUITY> 444,337
<INTEREST-LOAN> 12,511
<INTEREST-INVEST> 2,633
<INTEREST-OTHER> 398
<INTEREST-TOTAL> 15,542
<INTEREST-DEPOSIT> 6,414
<INTEREST-EXPENSE> 6,743
<INTEREST-INCOME-NET> 8,799
<LOAN-LOSSES> 450
<SECURITIES-GAINS> (28)
<EXPENSE-OTHER> 7,211
<INCOME-PRETAX> 3,772
<INCOME-PRE-EXTRAORDINARY> 2,647
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,647
<EPS-PRIMARY> 1.66
<EPS-DILUTED> 1.66
<YIELD-ACTUAL> 7.75
<LOANS-NON> 365
<LOANS-PAST> 164
<LOANS-TROUBLED> 635
<LOANS-PROBLEM> 7,402
<ALLOWANCE-OPEN> 3,418
<CHARGE-OFFS> 96
<RECOVERIES> 50
<ALLOWANCE-CLOSE> 3,695
<ALLOWANCE-DOMESTIC> 1,696
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,999
</TABLE>
