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, 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 - 2,798,134 shares as of August 12, 1998
Voting - 264,096 shares as of August 12, 1998
<PAGE>
PEOPLES BANK CORPORATION OF INDIANAPOLIS
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at June 30, 1998
and December 31, 1997......................................... 2
Consolidated Statements of Income for the three and
six months ended June 30, 1998 and 1997....................... 3
Consolidated Statements of Comprehensive Income for the
three and six months ended June 30, 1998 and 1997............. 4
Consolidated Statements of Changes in Shareholders' Equity.... 5
Consolidated Statements of Cash Flows for the
six months ended June 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. Exhibitis and Reports on Form 8-K......................... 17
Signatures ....................................................... 18
<PAGE>
PEOPLES BANK CORPORATION OF INDIANAPOLIS
CONSOLIDATED BALANCE SHEETS
================================================================================
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------------------ -----------------
Assets
<S> <C> <C>
Cash and due from banks $ 23,337 $ 25,462
Federal funds sold 27,200 0
----------- -----------
Total cash and equivalents 50,537 25,462
Available-for-sale securities 149,317 153,870
Loans held for sale 463 561
Total loans 438,899 406,893
Allowance for loan losses (7,258) (5,516)
----------- -----------
Loans, net 431,641 401,377
Premises and equipment, net 7,764 7,482
Accrued income and other assets 13,731 9,724
----------- -----------
Total assets 653,453 598,476
=========== ===========
Liabilities
Non interest-bearing deposits $ 86,801 $ 82,132
Interest-bearing deposits 481,438 426,179
----------- -----------
Total deposits 568,239 508,311
Short-term borrowings 27,183 34,380
Accrued expenses and other liabilities 8,414 6,968
----------- -----------
Total liabilities 603,836 549,659
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 -- 2,803,834 shares (1998)
-- 2,812,634 shares (1997) 12,785 13,085
Retained earnings 35,326 34,220
Net unrealized gain/(loss) on available-for-sale securities 610 615
----------- -----------
Total shareholders' equity 49,617 48,817
----------- -----------
Total liabilities and shareholders' equity $ 653,453 $ 598,476
=========== ===========
</TABLE>
See accompanying notes.
<PAGE>
PEOPLES BANK CORPORATION OF
INDIANAPOLIS
CONSOLIDATED STATEMENTS OF INCOME
================================================================================
(Dollar amounts in thousands, except
per share data)
<TABLE>
<CAPTION>
Three Six
months ended months ended
June 30, June 30,
1998 1997 1998 1997
------------------------------------------------
Interest income
<S> <C> <C> <C> <C>
Interest and fees on loans $ 9,360 $ 7,667 $ 18,368 $ 14,843
Interest on federal funds sold 126 298 231 518
Interest on investments 2,382 1,537 4,770 2,873
------------------------------------------------
Total interest income 11,868 9,502 23,369 18,234
Interest expense
Interest on deposits 5,462 4,056 10,687 7,688
Interest on short-term borrowings 213 132 375 252
------------------------------------------------
Total interest expense 5,675 4,188 11,062 7,940
------------------------------------------------
Net interest income 6,193 5,314 12,307 10,294
Provision for loan losses 500 500 3,500 900
------------------------------------------------
Net interest income after
provision for loan losses 5,693 4,814 8,807 9,394
Other operating income
Trust fees 485 370 965 741
Service charge income 728 749 1,386 1,454
Mortgage banking revenue 178 109 357 236
Net gain (loss) on investments 1 (38) 7 (39)
Other operating income 365 253 602 454
------------------------------------------------
Total other operating income 1,757 1,443 3,317 2,846
Other operating expenses
Salaries and employee benefits 2,673 2,184 5,290 4,314
Occupancy expense (net) 378 401 750 835
Equipment expense 346 262 658 525
Advertising expense 115 149 227 273
Other operating expense 1,253 1,062 2,527 1,964
------------------------------------------------
Total other operating expenses 4,765 4,058 9,452 7,911
Income before income taxes 2,685 2,199 2,672 4,329
Income Taxes 848 681 780 1,358
Net income $ 1,837 $ 1,518 $ 1,892 $ 2,971
================================================
Net income per share (Note 3)
================================================
Basic $ 0.60 $ 0.49 $ 0.62 $ 0.95
================================================
Diluted $ 0.58 $ 0.48 $ 0.60 $ 0.94
================================================
</TABLE>
See accompanying notes.
<PAGE>
PEOPLES BANK CORPORATION OF
INDIANAPOLIS
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
================================================================================
(Dollar amounts)
<TABLE>
<CAPTION>
Three Six
months ended months ended
June 30, June 30,
1998 1997 1998 1997
---------------------------------------------
<S> <C> <C> <C> <C>
Net income $ 1,837 $ 1,518 $ 1,892 $ 2,971
Other comprehensive income, net of tax:
Change in unrealized gains/losses on securities (18) 321 (5) 94
---------------------------------------------
Comprehensive income $ 1,819 $ 1,839 $ 1,887 $ 3,065
=============================================
</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 1,892 2,971
Cash dividends (784) (673)
Proceeds from exercise of stock option 3 0
Repurchase of common stock (306) (724)
Change in unrealized
gains (losses) on securities: (5) 94
-------- --------
Balance at June 30 $ 49,617 $ 47,017
======== ========
<PAGE>
PEOPLES BANK CORPORATION OF INDIANAPOLIS
CONSOLIDATED STATEMENTS OF
CASH FLOWS
================================================================================
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
Six months
ended
June 30,
1998 1997
-------- --------
Cash flows from operating
activities
<S> <C> <C>
Net Income $ 1,892 $ 2,971
Adjustments to reconcile net income to net cash
from operating activities
Depreciation and amortization 546 588
Provision for loan losses 3,500 0
Net (gain)/loss on investment securities (7) 39
Net amortization/(accretion) on investments (33) 119
Net gain on the sale of loans (257) (119)
Change in interest payable and other liabilities 1,446 228
Change in interest receivable and other assets (5,461) (1,970)
Loans originated for sale, net of sales proceeds 355 (62)
-------- --------
Net cash from operating activities 1,981 1,794
-------- --------
Cash flows from investing activities
Proceeds from sales of available-for-sale securities 0 14,218
Proceeds from maturities of available-for-sale securities 32,614 18,200
Purchase of available-for-sale securities (26,281) (54,471)
Loans made to customers, net of principal
collection thereon (33,764) (33,648)
Property and equipment expenditures (1,119) (50)
-------- --------
Net cash from investing activities (28,550) (55,751)
-------- --------
Cash flows from financing activities
Net change in deposits 59,928 55,059
Net change in short-term borrowings (7,197) (241)
Proceeds from exercise of stock option 3 0
Dividends paid (784) (673)
Purchase of common stock (306) (724)
-------- --------
Net cash from financing activities 51,644 53,421
-------- --------
Net change in cash and cash equivalents 25,075 (536)
Cash and cash equivalents at beginning of year 25,462 32,252
-------- --------
Cash and cash equivalents at June 30 $ 50,537 $ 31,716
======== ========
</TABLE>
<PAGE>
Peoples Bank Corporation of Indianapolis
Notes to Consolidated Financial Statements
June 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:
Year-to-date
At June 30,
1998 1997
---- ----
Weighted average shares outstanding 3,076,354 3,136,413
Dilutive effect of potential shares 85,365 31,121
--------- ---------
Shares used to compute diluted earnings per share 3,161,719 3,167,534
Three Month ended
June 30,
1998 1997
---- ----
Weighted average shares outstanding 3,075,848 3,129,231
Dilutive effect of potential shares 81,968 39,762
--------- ---------
Shares used to compute diluted earnings per share 3,157,816 3,168,993
3. Accounting Changes
Financial Accounting Standard No. 125, Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities, was issued by
the Financial Accounting Standards Board in 1997. It revises the accounting for
transfers of financial assets, such as loans and securities, and for
distinquishing between sales and secured borrowings. It is effective for some
transactions in 1997 and others in 1998. Management does not expect adoption of
this Standard to have a significant effect on the Company's financial position
or results of operations.
Financial Accounting Standard No. 130, Reporting Comprehensive Income,
is effective for both interim and year-end financial statements for fiscal years
beginning after December 15, 1997, and establishes standards for reporting and
display of comprehensive income and its components (revenues, expenses, gains
and losses) in a full set of general-purpose financial statements. Comprehensive
income is defined as all changes in equity other than those resulting from
investments by owners or distributions to owners. Net income, therefore is a
component of comprehensive income. Implementation of this Standard will require
additional disclosures in future financial reports but will not otherwise affect
the Company.
<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 June 30, 1998, a total of 112,254 shares had been
repurchased at an average price of $23.23.
The book value per share of Peoples nonvoting common shares at June 30, 1998,
was $16.17. For the second quarter, the low trading price per share was $32.00,
and the high trading price per share was $38.375.
On June 18, 1998, Peoples declared a cash dividend in the amount of $.13 per
share, payable July 17, 1998, to shareholders of record June 30, 1998. This
dividend represents a 4.00% increase over the first quarter 1998 dividend and is
the eighth consecutive quarter in which Peoples has declared an increase in
dividends.
<PAGE>
Selected ratios and summary data.
At or for the Six Months Ended
June 30,
1998 1997
-------- --------
Assets $653,453 $528,192
Loans (includes loans held for sale) 439,362 368,181
Deposits 568,239 466,864
Shareholders Equity 49,617 47,017
Book value per share 16.17 15.10
Earnings per share (basic) $0.62 $0.95
Earnings per share (diluted) $0.60 $0.94
Dividends per share $0.255 $0.215
Net Interest Margin (FTE) 4.37% 4.65%
Return on Average Assets 0.62% 1.20%
Return on Average Equity 7.91% 12.87%
Average Shares Outstanding
- Basic 3,076,354 3,136,413
- Diluted 85,365 31,121
Total Shares Outstanding 3,161,719 3,167,534
Net Income
Net income for the second quarter of 1998 was $1,837 compared to $1,518 for the
second quarter of 1997, an increase of 21.01% or $319. Net income for the first
six months of 1998 was $1,892 compared to $2,971 for the same period in 1997, a
decrease of 36.32% or $1,079. Basic net income per share for the second quarter
of 1998 was $0.60, an increase of $0.11 or 22.44% from $0.49 for the second
quarter of 1997. Basic net income per share for the first six months of 1998 was
$0.62, a decrease of $33 or 34.74% from $0.95 for the same period in 1997. The
decrease in net income 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. 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 June 30, net interest income was $6,193 and $5,314 for 1998 and 1997,
respectively. This reflects an increase $879 or 16.54%. For the six months ended
June 30, net interest income was $12,307 and $10,294. This reflects an increase
of $2,013 or 19.56%. Interest income for the three months ended June 30 was
$11,868 and $9,502 for 1998 and 1997, respectively, an increase of $2,366, or
24.90%. Interest income for the six months ended June 30 was $23,369 and $18,234
for 1998 and 1997, respectively, an increase of $5,135, or 28.16%. Total
interest expense was $5,675 and $4,188 for the three months ended June 30, 1998,
and 1997, respectively, an increase of $1,487, or 35.51%. Total interest expense
was $11,062 and $7,940 for the six months ended June 30, 1998, and 1997,
respectively, an increase of $3,122, or 39.32%. This increase in interest income
is attributable to loan growth of 19.33% and growth in investments of 28.10%.
Interest and fees on loans increased from $7,667 for the second quarter of 1997
to $9,360 for that period in 1998, an increase of $1,693 or 22.08%. Interest and
fees on loans increased from $14,843 for the first six months of 1997 to $18,368
for that period in 1998, an increase of $3,525 or 23.75%. These increases are
attributable to an increase in loans outstanding. Total loans were $439,362 at
June 30, 1998, compared to $368,181 at June 30, 1997, an increase of $71,181 or
19.33%.
The Company's net interest margin, or margin on earning assets, decreased 3.75%
from 4.42% for the second quarter of 1997 to 4.26% for the second quarter of
1998. On a tax equivalent basis, the Company's net interest margin was 4.65% and
4.37%, respectively, for those periods, a decrease of 6.02%. The most
significant reason for the decrease in the net interest margin in 1998 was the
increase in security balances. While this strategy reduced interest rate risk,
enhanced net interest income, and resulted in significant unrealized gains, it
also reduced the net interest margin. Had the Company not significantly
increased investment security balances, the net interest margin would have been
up slightly. The stability of the net interest margin (absent investment
securities purchases) occurred at the same time that the balance sheet was
growing significantly, demonstrating that balance sheet growth was achieved
without sacrificing pricing.
Provision & Allowance for Loan Losses
The provision for loan losses was $3,500 for the first six months of 1998 as
compared to $900 for the first six months of 1997, an increase of $2,600 or
288.89%. The allowance for loan losses at June 30, 1998, was $7,258 or 1.65% of
total loans compared to $5,516 or 1.36% of total loans at December 31, 1997.
Gross charge-offs during the first six months of 1998 were $2,330 and recoveries
were $571.
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. Net recoveries
of $425 were recorded during the second quarter of 1998 (including recoveries
from loans charged off during the first quarter). 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 anticipates maintaining the
allowance for loan losses in the range of 1.50% to 1.75% so long as the level of
non-performing loans remains at its current level. Management's analysis
indicated that the allowance for loan losses at June 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 $1,757 for the second quarter of 1998, compared to
$1,443 for that period of 1997, an increase of $314 or 21.76%. Non-interest
income totaled $3,317 for the first six months of 1998, compared to $2,846 for
that period in 1997, an increase of $471 or 16.55%. Trust fees were $485 and
$370 for the second quarter of 1998 and 1997, respectively, an increase of $115
or 31.08%. For the first six months of 1998 and 1997, trust fees were $965 and
$741, an increase of $224 or 30.23%.
Service charges on deposit accounts, which comprise the largest component of
non-interest income, were down for the second quarter of 1998 compared with the
same periods of 1997. For the three month periods ending June 30, 1998, and
1997, service charge income was $728 and $749 respectively, a decrease of $21 or
2.80%. For the six month periods ending June 30, 1998, and 1997, service charge
income was $1,386 and $1,454 respectively, a decrease of $68 or 4.68%. The
decrease in service charge income can be traced to a decrease in fees 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
second quarter of 1998 was $178, reflecting an increase of $69 or 63.30%,
compared to $109 for the same period in 1997. Mortgage banking revenue for the
first six months of 1998 was $357, reflecting an increase of $121 or 51.27%,
compared to $236 for the same period in 1997. The increase in mortgage banking
revenue can be associated with stronger activity in the first six months of 1998
due to an increase in refinancing activities associated with lower long-term
interest rates. During 1997, the bank reduced staff in this area by more than
fifty percent and focused its origination efforts on adjustable rate mortgage
loans which would not be sold into the secondary market. During the second
quarter of 1998, the bank originated $5,952 in loans sold into the secondary
market and $17,536 in adjustable rate mortgages retained by the bank compared to
$3,530 in loans sold and $11,243 in adjustable rate mortgages retained in the
second quarter of 1997 .
Other operating income increased during the second quarter of 1998 to $365 from
$253 for the same period in 1997, an increase of $112 or 44.27%. Other operating
income increased during the first six months of 1998 to $602 from $454 for the
same period in 1997, an increase of $148 or 32.60%. During the second quarter of
1997, the Company began to offer additional products--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 other operating income is primarily
associated with income of $168 for the first six months of 1998 from the sale of
products through Peoples Investment Services, Inc.
Other Operating Expenses
Total other operating expenses were $4,765 for the three months ended June 30,
1998, compared with $4,058 for that period in 1997. This represents an increase
of $707, or 17.42%. For the first six months of 1998, total other operating
expenses were $9,452, compared with $7,911 for that period in 1997, an increase
of $1,541, or 19.48%. Salary and employee benefit expense was $2,673 for the
three months ended June 30,1998, an increase of $489 or 22.39% from $2,184 for
the same period of 1997. Salary and employee benefit expense was $5,290 for the
first six months of 1998, an increase of $976 or 22.62% from $4,314 for the same
period in 1997. This increase was primarily associated with salary and wage rate
increases, increases in staff, and an expense of $177 for stock appreciation
rights granted to the Company's Chief Operating Officer.
Occupancy expense was $378 for the second quarter of 1998, a decrease of $23, or
5.74% from $401 for the second quarter of 1997. For the first six months of
1998, occupancy expense was $750, a decrease of $85 or 10.18% from $835 for the
same period in 1997. Equipment expenses were $346 and $262, respectively, for
the second quarter of 1998 and 1997, an increase of $84 or 32.06%. The reduction
in occupancy expense is primarily associated with reductions in operating and
maintenance expenses in the first six 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 $115 and $149, for the second quarter of 1998 and
1997, respectively, a decrease of $34 or 22.82%. For the first six months of
1998 and 1997, advertising expenses were $227 and $273, respectively, a decrease
of $46 or 16.85%. Other operating expenses were $1,253 and $1,062 for the second
quarter of 1998 and 1997, respectively, an increase of $191 or 17.98%. For the
first six months of 1998 and 1997, other operating expenses were $2,527 and
$1,964, respectively, an increase of $563 or 28.67%. The principal reason for
this increase was management's decision to recognize a loss of $355 on a
low-income housing investment through the second quarter.
Income Taxes
Income taxes were $780 for the first six months of 1998 and $1,358 for the first
six months of 1997. The decrease in taxes can be primarily attributed to
decreased income recognized during the first quarter.
Balance sheet
Total assets were $653,453 at June 30, 1998, and $598,476 at December 31, 1997,
an increase of $54,977, or 9.19%. The portfolio of available-for-sale securities
decreased from $153,870 at December 31, 1997, to $149,317 at June 30, 1998, a
decrease of $4,553 or 2.96%. Total loans, excluding loans held for sale,
increased during the first six months of 1998 from $406,893 at December 31,
1997, to $438,899 at June 30, 1998. This reflects an increase of $32,006 or
7.87%. Commercial loans increased $18,912 or 10.22% from $185,089 at December
31, 1997, to $204,001 at June 30, 1998. Real estate loans, which consist of
construction loans and permanent residential and commercial mortgages, increased
$8,444 or 7.05% from $119,640 at December 31, 1997, to $128,084 at June 30,
1998. Consumer loans increased $4,697 or 4.70% from $100,139 at December 31,
1997, to $104,836 at June 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 $463 at
June 30, 1998. The amount of loans outstanding (excluding loans held for sale)
are reflected in the following table.
<TABLE>
<CAPTION>
June 30, December 31, June 30,
1998 1997 1997
<S> <C> <C> <C>
Real Estate $128,084 $119,640 $117,750
Commercial 204,001 185,089 158,700
Consumer 104,836 100,139 89,053
Tax exempt 1,978 2,025 2,075
----------------- --------------- -------------
Total Loans 438,899 406,893 367,578
Less: Allowance for Loan Losses 7,258 5,516 4,877
================= =============== =============
$431,641 $401,377 $362,701
================= =============== =============
</TABLE>
Deposits represent the primary source of funds for the Company. Total deposits
increased $59,928 or 11.79%, from $508,311 at December 31,1997, to $568,239 at
June 30, 1998. Non-interest-bearing deposits increased $4,669, or 5.68%, from
$82,132 at December 31, 1997, to $86,801 at June 30, 1998. The Company's deposit
balances are reflected in the following table.
<PAGE>
<TABLE>
<CAPTION>
June 30, December 31, June 30,
1998 1997 1997
Deposits:
<S> <C> <C> <C>
Non-interest-bearing $ 86,801 $ 82,132 $ 70,932
Interest-bearing 481,438 426,179 395,932
-------------- ------------ -------------
Total deposits $ 568,239 $ 508,311 $ 466,864
-------------- ------------ -------------
Total deposits/total assets 86.96% 84.93% 88.39%
</TABLE>
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 $27,183 at June 30, 1998, as compared to
$34,380 at December 31, 1997. This represents a decrease of $7,197 or 20.93%. At
June 30, 1998, the bank had $11,183 in overnight repurchase agreements, $0 in
federal funds purchased, $6,000 in Federal Home Loan Bank advances, and $10,000
in borrowings through the Treasury Tax and Loan Note Option program.
Total shareholders' equity increased $800 or 1.64% for the six months ended June
30, 1998, to $49,617, from $48,817 at December 31, 1997. The increase in
shareholders' equity was the result of net income of $1,892, less dividends paid
of $784, plus the adoption of FAS No. 115 resulted in a $5 decrease in equity,
less the repurchase of $306 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 June 30, 1998, Management designated $2,233 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>
June 30, December 31, June 30,
1998 1997 1997
Nonperforming loans:
<S> <C> <C> <C>
Total nonaccrual loans $ 1,770 $ 3,626 $ 784
Loans past due more than
ninety days and still accruing 127 16 4
=========== =========== ==========
Total $ 1,897 $ 3,642 $ 788
=========== =========== ==========
</TABLE>
At June 30, 1998, nonperforming loans were comprised of $1,778 of commercial
loans, $119 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 June 30, 1997, nonperforming loans
consisted of $322 of commercial loans, $460 of real estate loans and $6 of
consumer loans. Asset quality continues to be an important area of focus for the
Company. Nonperforming loans as a percent of assets were 0.29% at June 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 June 30, 1998, the Company's Tier I and total risk-based capital ratios
were 10.48% and 11.73%, respectively. The Company's leverage ratio was 7.92% at
June 30, 1998. As of June 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 June 30, 1998.
<PAGE>
The following table provides the capital ratios for the entities.
At June 30, 1998
Consolidated
Bank Only Company
Total assets $649,840 $653,453
Risked-based assets 464,191 467,187
Tier I capital 43,527 49,579
Total risk-based capital 49,347 55,436
Leverage ratio 7.09% 7.92%
Tier I risk-based capital ratio 9.38% 10.48%
Total risk-based capital 10.63% 11.73%
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.
<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 16, 1998. 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 voting shares.
No shares were voted in person.
Against or Broker Non-
Nominee For Withheld Abstain Votes
------- --- -------- ------- -----
William E. McWhirter 210,625 0 560 0
Gerald R. Francis 210,625 0 560 0
Charles R. Farber 210,625 0 560 0
Robert B. Hirschman 210,625 0 560 0
Ethan Jackson 210,625 0 560 0
David W. Knall 210,625 0 560 0
Mary Ellen Rodgers 210,625 0 560 0
Stephen R. West 210,625 0 560 0
Darell E. Zink, Jr. 210,625 0 560 0
The shareholders also ratified the Peoples Bank Corporation of Indianapolis 1998
Stock Option Plan with 183,065 shares voting in favor of the plan and 26,440
shares voting against, with 1,680 shares abstaining.
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 June 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: August 13, 1998
<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, 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-1-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1.000
<CASH> 23,337
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 27,200
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 149,317
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 439,362
<ALLOWANCE> 7,258
<TOTAL-ASSETS> 653,453
<DEPOSITS> 568,239
<SHORT-TERM> 27,183
<LIABILITIES-OTHER> 8,414
<LONG-TERM> 0
<COMMON> 13,681
0
0
<OTHER-SE> 35,936
<TOTAL-LIABILITIES-AND-EQUITY> 653,453
<INTEREST-LOAN> 18,368
<INTEREST-INVEST> 4,770
<INTEREST-OTHER> 231
<INTEREST-TOTAL> 23,369
<INTEREST-DEPOSIT> 10,687
<INTEREST-EXPENSE> 11,062
<INTEREST-INCOME-NET> 12,307
<LOAN-LOSSES> 3,500
<SECURITIES-GAINS> 7
<EXPENSE-OTHER> 9,452
<INCOME-PRETAX> 2,672
<INCOME-PRE-EXTRAORDINARY> 2,672
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,892
<EPS-PRIMARY> 0.62
<EPS-DILUTED> 0.60
<YIELD-ACTUAL> 8.05
<LOANS-NON> 1,770
<LOANS-PAST> 127
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 19,975
<ALLOWANCE-OPEN> 5,516
<CHARGE-OFFS> 2,330
<RECOVERIES> 571
<ALLOWANCE-CLOSE> 7,258
<ALLOWANCE-DOMESTIC> 3,519
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 3,739
</TABLE>
