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 September 30, 1998
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 - 2,787,634 shares as of November 13, 1998
Voting - 264,096 shares as of November 13, 1998
<PAGE>
PEOPLES BANK CORPORATION OF INDIANAPOLIS
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at September 30, 1998
and December 31, 1997........................................ 2
Consolidated Statements of Income for the three and
nine months ended September 30, 1998 and 1997................ 3
Consolidated Statements of Comprehensive Income for the
three and nine months ended September 30, 1998 and 1997...... 4
Consolidated Statements of Changes in Shareholders'
Equity....................................................... 5
Consolidated Statements of Cash Flows for
the nine months ended
September 30, 1998 and 1997.................................. 6
Notes to Consolidated Financial
Statements................................................... 7
Item 2. Management's Discussion and Analysis of
Results of Operations
and Financial Condition......................................8-16
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders...... 17
Item 6. Exhibits and Reports on Form 8-K......................... 17
Signatures ...................................................... 18
<PAGE>
PEOPLES BANK CORPORATION OF INDIANAPOLIS
CONSOLIDATED BALANCE SHEETS
================================================================================
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------------ -----------------
Assets
<S> <C> <C>
Cash and due from banks $ 19,908 $ 25,462
Federal funds sold 0 0
------------------ -----------------
Total cash and equivalents 19,908 25,462
Available-for-sale securities 144,699 153,870
Loans held for sale 373 561
Total loans 453,599 406,893
Allowance for loan losses (7,075) (5,516)
------------------ -----------------
Loans, net 446,524 401,377
Premises and equipment, net 7,914 7,482
Accrued income and other assets 13,100 9,724
------------------ -----------------
Total assets 632,518 598,476
================== =================
Liabilities
Non interest-bearing deposits 80,045 82,132
Interest-bearing deposits 457,960 426,179
------------------ -----------------
Total deposits 538,005 508,311
Short-term borrowings 34,853 34,380
Accrued expenses and other liabilities 8,614 6,968
------------------ -----------------
Total liabilities 581,472 549,659
Shareholders' equity
Common shares, no par value:
Authorized:
Voting - 300,000 shares
Nonvoting - 4,000,000 shares
Issued:
Voting - 264,096 shares 896 897
Nonvoting - 2,787,634 shares (1998)
- 2,812,634 shares 12,280 13,085
(1997)
Retained earnings 36,914 34,220
Net unrealized gain/(loss) on available-for-sale securities 956 615
------------------ -----------------
Total shareholders' equity 51,046 48,817
------------------ -----------------
Total liabilities and shareholders' equity $ 632,518 $ 598,476
================== =================
</TABLE>
See accompanying notes.
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
================================================================================
<TABLE>
<CAPTION>
(Dollar amounts in thousands, except per share data)
Three months ended Nine months ended
September 30, September 30,
1998 1997 1998 1997
-------------------------------------------------------------------
Interest income
<S> <C> <C> <C> <C>
Interest and fees on loans $9,666 $8,264 $28,034 $23,107
Interest on federal funds sold 255 132 486 650
Interest on investments 2,271 2,096 7,041 4,969
----------------------------------------------------------
Total interest income 12,192 10,492 35,561 28,726
Interest expense
Interest on deposits 5,823 4,783 16,510 12,471
Interest on short-term borrowings 193 136 568 388
----------------------------------------------------------
Total interest expense 6,016 4,919 17,078 12,859
----------------------------------------------------------
Net interest income 6,176 5,573 18,483 15,867
Provision for loan losses 0 500 3,500 1,400
----------------------------------------------------------
Net interest income after
provision for loan losses 6,176 5,073 14,983 14,467
Other operating income
Trust and Investment Management fees 638 449 1,771 1,222
Service charge income 795 791 2,181 2,245
Mortgage banking revenue 114 89 471 325
Net gain (loss)
on
investments 40 (7) 47 (46)
Other operating income 260 213 694 635
----------------------------------------------------------
Total other operating income 1,847 1,535 5,164 4,381
Other operating expenses
Salaries and employee benefits 2,744 2,294 8,034 6,608
Occupancy expense (net) 394 380 1,144 1,215
Equipment expense 368 253 1,026 778
Advertising Expense 85 124 312 397
Other operating expense 1,457 1,054 3,984 3,018
----------------------------------------------------------
Total other operating expenses 5,048 4,105 14,500 12,016
Income before income taxes 2,975 2,503 5,647 6,832
Income Taxes 973 845 1,753 2,203
Net income $2,002 $1,658 $3,894 $4,629
==========================================================
Net income per share (Note 3)
==========================================================
Basic $0.65 $0.53 $1.27 $1.48
==========================================================
Diluted $0.63 $0.53 $1.24 $1.47
==========================================================
</TABLE>
See accompanying notes.
<PAGE>
PEOPLES BANK CORPORATION OF INDIANAPOLIS
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
================================================================================
<TABLE>
<CAPTION>
(Dollar amounts)
Three months ended Nine months ended
September 30, September 30,
1998 1997 1998 1997
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Net income $2,002 $1,658 $3,894 $4,629
Other comprehensive income, net of tax:
Change in unrealized gains/losses on securities 346 83 341 177
===========================================================
Comprehensive income $2,348 $1,741 $4,235 $4,806
============================================================
</TABLE>
<PAGE>
PEOPLES BANK CORPORATION OF INDIANAPOLIS
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
================================================================================
(Dollar amounts in thousands)
1998 1997
-------- -------
Balance at January 1 $48,817 $45,349
Net Income 3,894 4,629
Cash dividends (1,198) (1,026)
Proceeds from exercise of stock option 3 0
Repurchase of common stock (811) (1,734)
Change in unrealized gains (losses)
on securities: 341 177
----------- --------
Balance at September 30 $51,046 $47,395
=========== ========
<PAGE>
PEOPLES BANK CORPORATION OF INDIANAPOLIS
CONSOLIDATED STATEMENTS OF CASH FLOWS
================================================================================
<TABLE>
<CAPTION>
(Dollar amounts in thousands)
Nine months ended
September 30,
1998 1997
--------- ---------
Cash flows from operating activities
<S> <C> <C>
Net Income $ 3,894 $ 4,629
Adjustments to reconcile net income to net cash
from operating activities
Depreciation and amortization 902 820
Provision for loan losses 3,500 1,400
Net (gain)/loss on investment securities (47) 46
Net amortization/(accretion) on investments (89) 177
Net gain on the sale of loans (323) (152)
Change in interest payable and other liabilities 1,648 2,133
Change in interest receivable and other assets (4,468) (3,302)
Loans originated for sale, net of sales proceeds 509 436
--------- ---------
Net cash from operating activities 5,526 6,187
--------- ---------
Cash flows from investing activities
Proceeds from sales of available-for-sale securities 5,068 16,707
Proceeds from maturities of available-for-sale securities 46,069 17,645
Purchase of available-for-sale securities (40,462) (87,373)
Loans made to customers, net of principal
collection thereon (48,647) (56,655)
Property and equipment expenditures (1,270) (301)
--------- ---------
Net cash from investing activities (39,242) (109,977)
--------- ---------
Cash flows from financing activities
Net change in deposits 29,693 95,163
Net change in short-term borrowings 472 5
Proceeds from exercise of stock option 3 0
Dividends paid (1,195) (1,026)
Purchase of common stock (811) (1,734)
--------- ---------
Net cash from financing activities 28,162 92,408
--------- ---------
Net change in cash and cash equivalents (5,554) (11,382)
Cash and cash equivalents at beginning of year 25,462 32,252
--------- ---------
Cash and cash equivalents at September 30 $ 19,908 $ 20,870
========= =========
</TABLE>
<PAGE>
Peoples Bank Corporation of Indianapolis
Notes to Consolidated Financial Statements
September 30, 1998
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
------------------
The following table presents share data used to compute earnings per share:
<TABLE>
<CAPTION>
Year-to-date
At September 30,
1998 1997
--------- ---------
<S> <C> <C>
Weighted average shares outstanding 3,071,429 3,124,222
Dilutive effect of potential shares 86,696 32,721
--------- ---------
Shares used to compute diluted earnings per share 3,158,125 3,156,943
Three Months ended
September 30,
1998 1997
--------- ---------
Weighted average shares outstanding 3,061,738 3,100,239
Dilutive effect of potential shares 77,286 57,020
--------- ---------
Shares used to compute diluted earnings per share 3,139,024 3,157,259
</TABLE>
3. Accounting Changes
------------------
Financial Accounting Statement No. 131, Disclosures About Segments of
an Enterprise and Related Information, is effective for reported periods
included in year-end financial statements for fiscal years beginning after
December 15, 1997 and for all reported periods in interim financial statements
for reporting periods following the first required full fiscal year disclosure.
The Standard establishes new guidance for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information about
reportable operating segments in interim financial reports issued to
shareholders. It supercedes the "industry approach" to segment disclosures,
previously required by Financial Accounting Statement No. 14, Financial
Reporting for Segments of a Business Enterprise, replacing it with a method of
segment reporting which is based on the structure of an enterprise's internal
organization reporting. The Standard also establishes guidelines for related
disclosures about products and services, geographic areas and major customers.
Management expects implementation of this Standard to result in the
identification of other reportable business segments.
<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 11 branch locations, a twelve story office in downtown
Indianapolis, and an operations center. 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 200,000 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. At September 30, 1998, a total of 128,454 shares had
been repurchased at an average price of $24.23.
The book value per share of Peoples nonvoting common shares at September 30,
1998, was $16.73. For the third quarter, the low trading price per share was
$27.625, and the high trading price per share was $36.00.
On September 17, 1998, Peoples declared a cash dividend in the amount of $.135
per share, payable October 16, 1998, to shareholders of record September 30,
1998. This dividend represents a 4.00% increase over the second quarter 1998
dividend and is the ninth consecutive quarter in which Peoples has declared an
increase in dividends.
Selected ratios and summary data.
At or for the Nine Months Ended
September 30,
1998 1997
--------- ---------
Assets $632,518 $570,824
Loans (includes loans held for sale) 453,972 389,564
Deposits 538,005 506,968
Shareholders Equity 51,046 47,395
Book value per share 16.73 15.40
Earnings per share (basic) $1.27 $1.48
Earnings per share (diluted) $1.24 $1.47
Dividends per share $0.39 $0.33
Net Interest Margin (FTE) 4.29% 4.53%
Return on Average Assets 0.83% 1.20%
Return on Average Equity 10.73% 13.29%
Average Shares Outstanding
- Basic 3,071,429 3,124,222
- Diluted 3,158,125 3,156,943
Total Shares Outstanding 3,051,730 3,077,090
Net Income
- - ----------
Net income for the third quarter of 1998 was $2,002 compared to $1,658 for the
third quarter of 1997, an increase of 20.75% or $344. Net income for the first
nine months of 1998 was $3,894 compared to $4,629 for the same period in 1997, a
decrease of 15.88% or $735. Basic net income per share for the third quarter of
1998 was $0.65, an increase of $0.12 or 22.64% from $0.53 for the third quarter
of 1997. Basic net income per share for the first nine months of 1998 was $1.27,
a decrease of $0.21 or 14.19% from $1.48 for the same period in 1997. The
decrease in net income for the year to date is attributable to management's and
the board of directors' election to recognize losses on impaired loans and to
write down a low-income housing tax credit investment during the first quarter
of 1998. Additionally, loan loss reserves were strengthened in response to
increased levels of criticized and nonperforming loans.
<PAGE>
Net Interest Income
- - -------------------
Net interest income is the principal component of 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 three months
ended September 30, net interest income was $6,176 and $5,573 for 1998 and 1997,
respectively. This reflects an increase of $603, or 10.82%. For the nine months
ended September 30, net interest income was $18,483 and $15,867, for 1998 and
1997, respectively. This reflects an increase of $2,616 or 16.49%.
Interest income for the three months ended September 30 was $12,192 and $10,492
for 1998 and 1997, respectively, an increase of $1,700, or 16.20%. Interest
income for the nine months ended September 30 was $35,561 and $28,726 for 1998
and 1997, respectively, an increase of $6,835, or 23.79%. Total interest expense
was $6,016 and $4,919 for the three months ended September 30, 1998, and 1997,
respectively, an increase of $1,097, or 22.30%. Total interest expense was
$17,078 and $12,859 for the nine months ended September 30, 1998, and 1997,
respectively, an increase of $4,219, or 32.81%. This increase in interest income
is primarily attributable to loan growth of 16.53%.
Interest and fees on loans increased from $ 8,264 for the third quarter of 1997
to $9,666 for that period in 1998, an increase of $1,402 or 16.97%. Interest and
fees on loans increased from $23,107 for the first nine months of 1997 to
$28,034 for that period in 1998, an increase of $4,927 or 21.32%. These
increases are attributable to an increase in loans outstanding. Total loans were
$453,872 at September 30, 1998, compared to $389,564 at September 30, 1997, an
increase of $64,408 or 16.53%.
The Company's net interest margin, or margin on earning assets, decreased from
4.36% for the third quarter of 1997 to 4.18% for the third quarter of 1998. On a
tax equivalent basis, the Company's net interest margin decreased from 4.53% for
the third quarter of 1997 to 4.29% for the third quarter of 1998. The primary
reason for this decrease in the net interest margin in 1998 was growth in loans
outstanding funded by growth in higher-priced certificates of deposit, resulting
in a thinner net interest margin on new business.
Provision & Allowance for Loan Losses
- - -------------------------------------
The provision for loan losses was $3,500 for the first nine months of 1998 as
compared to $1,400 for the first nine months of 1997, an increase of $2,100 or
150.00%. The allowance for loan losses at September 30, 1998, was $7,075 or
1.56% of total loans compared to $5,516 or 1.36% of total loans at December 31,
1997. Gross charge-offs during the first nine months of 1998 were $2,543 and
recoveries were $602.
<PAGE>
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. During the first quarter, provision
expense of $3,000 was necessitated by net charge-offs of $2,183. Management
expects additional recoveries against these loans during the remainder of 1998.
Management believes that the allowance for loan losses should be maintained a
strong level given the mature status of the economy. Therefore, management
anticipated maintaining the allowance for loan losses in the range of 1.50% to
1.75%. Management's analysis indicated that the allowance for loan losses at
September 30, 1998, was 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 $1,840 for the third quarter of 1998, compared to
$1,535 for that period of 1997, an increase of $305 or 19.87%. Non-interest
income totaled $5,157 for the first nine months of 1998, compared to $4,381 for
that period in 1997, an increase of $776 or 17.71%.
Trust and Investment Management fees were $638 and $449 for the third quarter of
1998 and 1997, respectively, an increase of $189 or 42.09%. For the first nine
months of 1998 and 1997, trust fees were $1,771 and $1,222, an increase of $549
or 44.93%. During the second quarter of 1997, the Company began to offer
additional products--debt and equities securities, mutual funds, and
annuities--through Peoples Investment Services, Inc., a subsidiary of the
Company, which are serviced through a third-party vendor, Invest Financial
Corporation. This area of business has grown and the Company has increased
staffing to meet the growth. The increase in Trust and Investment Management
fees is primarily associated with income of $402 for the first nine months of
1998 from the sale of products through Peoples Investment Services, Inc.
Service charges on deposit accounts, which comprise the largest component of
non-interest income, were up slightly for the third quarter of 1998 compared
with the same periods of 1997. For the three month periods ending September 30,
1998, and 1997, service charge income was $795 and $791 respectively, an
increase of $4 or 0.51%. For the nine month periods ending September 30, 1998,
and 1997, service charge income was $2,181 and $2,245 respectively, a decrease
of $64 or 2.85%. The decrease in service charge income can be traced to
unusually high fees received in 1997 for nonsufficient funds (NSF).
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
third quarter of 1998 was $114, reflecting an increase of $25 or 28.09%,
compared to $89 for the same period in 1997. Mortgage banking revenue for the
first nine months of 1998 was $471, reflecting an increase of $146 or 44.92%,
compared to $325 for the same period in 1997. The increase in mortgage banking
revenue can be associated with stronger activity in the first nine months of
1998 due to an increase in refinancing activities associated with lower
long-term interest rates.
<PAGE>
Other operating income increased during the third quarter of 1998 to $260 from
$213 for the same period in 1997, an increase of $47 or 22.07%. Other operating
income increased during the first nine months of 1998 to $694 from $635 for the
same period in 1997, an increase of $59 or 9.29%. This increase was primarily
associated with an increase in commissions and fees received for the servicing
of merchant credit card business.
Other Operating Expenses
- - ------------------------
Total other operating expenses were $5,041 for the three months ended September
30, 1998, compared with $4,105 for that period in 1997. This represents an
increase of $936, or 22.80%. For the first nine months of 1998, total other
operating expenses were $14,493, compared with $12,016 for that period in 1997,
an increase of $2,477, or 20.61%. Salary and employee benefit expense was $2,744
for the three months ended September 30,1998, an increase of $450 or 19.62% from
$2,294 for the same period of 1997. Salary and employee benefit expense was
$8,034 for the first nine months of 1998, an increase of $1,426 or 21.58% from
$6,608 for the same period in 1997. This increase was primarily associated with
salary and wage rate increases, and increases in staff.
Occupancy expense was $394 for the third quarter of 1998, an increase of $14, or
3.68% from $380 for the third quarter of 1997. For the first nine months of
1998, occupancy expense was $1,144, a decrease of $71 or 5.84% from $1,215 for
the same period in 1997. Equipment expenses were $368 and $253, respectively,
for the third quarter of 1998 and 1997, an increase of $115 or 45.45%. The
reduction in occupancy expense is primarily associated with reductions in
operating and maintenance expenses in the first nine months of 1998. The
increase in equipment expense is primarily the result of investments in new
technology including a bank-wide network, platform automation for the branch
system, and new office equipment.
Advertising expenses were $85 and $124, for the third quarter of 1998 and 1997,
respectively, a decrease of $39 or 31.45%. For the first nine months of 1998 and
1997, advertising expenses were $312 and $397, respectively, a decrease of $85
or 21.41%. Other operating expenses were $1,450 and $1,054 for the third quarter
of 1998 and 1997, respectively, an increase of $396 or 37.57%. For the first
nine months of 1998 and 1997, other operating expenses were $3,977 and $3,018,
respectively, an increase of $959 or 31.78%. The principal reason for this
increase was management's decision to recognize a loss of $530 on a low-income
housing investment through the third quarter.
Income Taxes
- - ------------
Income taxes were $973 for the first nine months of 1998 and $845 for the first
nine months of 1997. The increase in taxes can be primarily attributed to
increased income recognized during the third quarter.
<PAGE>
Balance sheet
- - -------------
Total assets were $632,518 at September 30, 1998, and $598,476 at December 31,
1997, an increase of $34,072, or 5.69%. The portfolio of available-for-sale
securities decreased from $153,870 at December 31, 1997, to $144,699 at
September 30, 1998, a decrease of $9,171 or 5.96 %. Total loans, excluding loans
held for sale, increased during the first nine months of 1998 from $406,893 at
December 31, 1997, to $453,599 at September 30, 1998. This reflects an increase
of $46,706 or 11.48%. Commercial loans increased $26,783 or 14.47% from $185,089
at December 31, 1997, to $211,872 at September 30, 1998. Real estate loans,
which consist of construction loans and permanent residential and commercial
mortgages, increased $12,795 or 10.69% from $119,640 at December 31, 1997, to
$132,435 at September 30, 1998. Consumer loans increased $7,193 or 7.18% from
$100,139 at December 31, 1997, to $107,332 at September 30, 1998. Loans held for
sale consist of conforming fixed rate mortgage loans that Peoples sells in the
secondary market (having retained servicing rights with respect to such loans)
and that are pending funding. Loans held for sale were $561 at December 31,
1997, compared to $373 at September 30, 1998. The amount of loans outstanding
(excluding loans held for sale) are reflected in the following table.
September 30, December 31, September 30,
1998 1997 1997
------------- ------------ -------------
Real Estate $132,435 $119,640 $126,267
Commercial 211,872 185,089 165,037
Consumer 107,332 100,139 96,064
Tax exempt 1,960 2,025 2,059
-------- -------- --------
Total Loans 453,599 406,893 389,427
Less: Allowance for Loan Losses 7,075 5,516 5,119
======== ======== ========
$446,524 $401,377 $384,308
======== ======== ========
Deposits represent the primary source of funds for the Company. Total deposits
increased $29,694 or 5.84%, from $508,311 at December 31,1997, to $538,005 at
September 30, 1998. Non-interest-bearing deposits decreased $2,087, or 2.54%,
from $82,132 at December 31, 1997, to $80,045 at September 30, 1998. The
Company's deposit balances are reflected in the following table.
<PAGE>
September 30, December 31, September 30,
1998 1997 1997
------------- ------------ -------------
Deposits:
Non-interest-bearing $ 80,045 $ 82,132 $ 83,919
Interest-bearing 457,960 426,179 423,049
-------- -------- --------
Total deposits $538,005 $508,311 $506,968
-------- -------- --------
Total deposits/total assets 85.05% 84.93% 88.81%
Short-term borrowings in the form of Federal funds, Federal Home Loan advances,
and repurchase agreements are acquired, as needed, to satisfy temporary
liquidity needs. Overnight repurchase agreements continue to be a source of
funds for Peoples. Many of the funds are from businesses with large cash
balances. Short-term borrowings were $34,853 at September 30, 1998, as compared
to $34,380 at December 31, 1997. This represents an increase of $473 or 1.38%.
At September 30, 1998, the bank had $11,541 in overnight repurchase agreements,
$9,000 in federal funds purchased, $6,000 in Federal Home Loan Bank advances,
and $8,312 in borrowings through the Treasury Tax and Loan Note Option program.
Total shareholders' equity increased $2,229 or 4.57% for the nine months ended
September 30, 1998, to $51,046, from $48,817 at December 31, 1997. The increase
in shareholders' equity was the result of net income of $3,894, less dividends
paid of $1,197, plus the adoption of FAS No. 115 resulted in a $340 increase in
equity, less the repurchase of $811 of common stock, plus the issue of $3 of
common stock due to the exercise of stock options.
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 loan is designated as a nonperforming
loan, management, as a result of delinquent status or significant concern about
the ultimate collectibility of the loan, typically ceases to recognize interest
income with respect to such loan and places it on nonaccrual status.
At September 30, 1998, Management designated $1,562 in loans as "impaired" for
the purpose of FAS No. 114. Management has further determined that all
commercial non-accrual loans will be considered as impaired.
<PAGE>
The following table shows the composition of nonperforming loans.
<TABLE>
<CAPTION>
September 30, December 31, September 30,
1998 1997 1997
------------- ------------ -------------
Nonperforming loans:
<S> <C> <C> <C>
Total nonaccrual loans $1,879 $3,626 $2,006
Loans past due more than
ninety days and still accruing 10 16 17
====== ====== ======
Total $1,889 $3,642 $2,023
====== ====== ======
</TABLE>
At September 30, 1998, nonperforming loans were comprised of $1,562 of
commercial loans, $327 of real estate loans and $0 of consumer loans.
Nonperforming loans were comprised of $2,694 of commercial loans, $944 of real
estate loans and $4 of consumer loans at December 31, 1997. At September 30,
1997, nonperforming loans consisted of $1,855 of commercial loans, $151 of real
estate loans and $17 of consumer loans. Asset quality continues to be an
important area of focus for the Company. Nonperforming loans as a percent of
assets were 0.30% at September 30, 1998, and 0.61% at December 31, 1997. The
Company maintains asset quality through the use of well-defined policies,
underwriting criteria, and review processes.
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.
As of September 30, 1998, the Company's Tier I and total risk-based capital
ratios were 10.45% and 11.70%, respectively. The Company's leverage ratio was
7.78% at September 30, 1998. As of September 30, 1998, 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
September 30, 1998.
<PAGE>
The following table provides the capital ratios for the entities.
At September 30, 1998
Consolidated
Bank Only Company
--------- -------
Total assets $629,384 $632,518
Risked-based assets 476,182 479,098
Tier I capital 45,079 50,049
Total risk-based capital 51,045 56,051
Leverage ratio 7.04% 7.78%
Tier I risk-based capital ratio 9.47% 10.45%
Total risk-based capital 10.72% 11.70%
Year 2000 Readiness
Peoples is engaged in an aggressive program to coordinate its Year 2000 efforts
with business partners, vendors, service providers and regulators. In 1997,
Peoples established a Year 2000 Project to address the challenges associated
with Year 2000 and to resolve Year 2000 risks to business operations. A risk
assessment system is in place which incorporates a vendor management program,
assessment of mission critical applications, and a comprehensive validation
process with specific time lines. Peoples has targeted December 31, 1998, as the
date when critical systems and applications will be Year 2000 compliant. The
Year 2000 Project has been reviewed by both Federal and State Examiners to
ensure its compliance with regulatory guidelines. Peoples currently estimates
costs of compliance with the Year 2000 issue at $100,000.
The foregoing statements regarding Management's estimation of Peoples' Year 2000
readiness are forward-looking and are subject to important factors that could
cause Management's expectations to be materially inaccurate. Such as the Year
2000 readiness of vendors or electricity suppliers or delays in the
implementation of compliant systems.
<PAGE>
PART II. OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
A. Exhibits -
27 Financial Data Schedule
B. Form 8-K - No reports on Form 8-K were filed during the quarter
ended September 30, 1998.
<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.
PEOPLES BANK CORPORATION
OF INDIANAPOLIS
By: /s/ William. E. McWhirter
----------------------------
William E. McWhirter
Chairman and Chief Executive Officer
By: /s/ Charles R. Hageboeck
----------------------------
Charles R. Hageboeck
Senior Vice President and Chief
Financial Officer
DATE: November 16, 1998
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1998 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-1-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1.000
<CASH> 19,908
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 144,699
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<LOANS> 453,972
<ALLOWANCE> 7,075
<TOTAL-ASSETS> 632,518
<DEPOSITS> 538,005
<SHORT-TERM> 34,853
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0
0
<OTHER-SE> 37,870
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<INCOME-PRETAX> 5,647
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<EXTRAORDINARY> 0
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<NET-INCOME> 3,894
<EPS-PRIMARY> 1.27
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<LOANS-NON> 1,879
<LOANS-PAST> 10
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<LOANS-PROBLEM> 30,695
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</TABLE>
