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 March 31, 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 - 2,812,834 shares as of May 12, 1998
Voting - 264,096 shares as of May 12, 1998
<PAGE>
PEOPLES BANK CORPORATION OF INDIANAPOLIS
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at March 31, 1998
and December 31, 1997.................................................2
Consolidated Statements of Income for the three months ended
March 31, 1998 and 1997 ..............................................3
Consolidated Statements of Comprehensive Income for the
three months ended March 31, 1998 and 1997............................4
Consolidated Statements of Changes in Shareholders'
Equity................................................................5
Consolidated Statements of Cash Flows for the three months ended
March 31, 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)
March 31, December 31,
1998 1997
--------- ---------
Assets
Cash and due from banks $ 20,550 $ 25,462
Federal funds sold 0 0
--------- ---------
Total cash and equivalents 20,550 25,462
Available-for-sale securities 154,336 153,870
Loans held for sale 2,099 561
Total loans 418,445 406,893
Allowance for loan losses (6,333) (5,516)
--------- ---------
Loans, net 412,112 401,377
Premises and equipment, net 7,527 7,482
Accrued income and other assets 12,292 9,724
--------- ---------
Total assets 608,916 598,476
========= =========
Liabilities
Non interest-bearing deposits $ 86,733 $ 82,132
Interest-bearing deposits 444,151 426,179
--------- ---------
Total deposits 530,884 508,311
Short-term borrowings 21,730 34,380
Accrued expenses and other liabilities 7,804 6,968
--------- ---------
Total liabilities 560,418 549,659
Shareholders' equity
Common shares, no par value:
Authorized:
Voting - 300,000shares
Nonvoting - 4,000,000shares
Issued:
Voting - 264,096 shares 896 897
Nonvoting - 2,812,834shares(1998)
- 2,812,634shares(1997) 13,086 13,085
Retained earnings 33,888 34,220
Net unrealized gain/(loss) on
available-for-sale securities 628 615
--------- ---------
Total shareholders' equity 48,498 48,817
--------- ---------
Total liabilities and
shareholders' equity $ 608,916 $ 598,476
========= =========
See accompanying notes.
<PAGE>
PEOPLES BANK CORPORATION OF INDIANAPOLIS
CONSOLIDATED STATEMENTS OF INCOME
================================================================================
(Dollar amounts in thousands, except per share data)
Three months ended
March 31,
1998 1997
-------- --------
Interest income
Interest and fees on loans $ 9,008 $ 7,176
Interest on federal funds sold 105 220
Interest on investments 2,388 1,336
-------- --------
Total interest income 11,501 8,732
Interest expense
Interest on deposits 5,225 3,632
Interest on short-term borrowings 162 120
-------- --------
Total interest expense 5,387 3,752
-------- --------
Net interest income 6,114 4,980
Provision for loan losses 3,000 400
-------- --------
Net interest income after
provision for loan losses 3,114 4,580
Other operating income
Trust fees 480 371
Service charge income 658 705
Mortgage banking revenue 179 127
Net gain (loss) on
investments 6 (1)
Other operating income 237 201
-------- --------
Total other operating income 1,560 1,403
Other operating expenses
Salaries and employee benefits 2,617 2,173
Occupancy expense (net) 372 434
Equipment expense 312 263
Advertising Expense 112 124
Other operating expense 1,274 859
-------- --------
Total other operating expenses 4,687 3,853
Income before income taxes (13) 2,130
Income Taxes (68) 677
Net income $ 55 $ 1,453
======== ========
Net income per share (Note 3)
======== ========
Basic $ 0.02 $ 0.46
======== ========
Diluted $ 0.02 $ 0.46
======== ========
See accompanying notes.
<PAGE>
PEOPLES BANK CORPORATION OF INDIANAPOLIS
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
================================================================================
(Dollar amounts)
Three months ended
March 31,
1998 1997
------- -------
Net income $ 55 $ 1,453
Other comprehensive income, net of tax:
Change in unrealized gains/losses on securities 13 (229)
======= =======
Comprehensive income $ 68 $ 1,224
======= =======
<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 55 1,453
Cash dividends (385) (329)
Proceeds from exercise of stock option 3 0
Repurchase of common stock (5) (85)
Change in unrealized gains (losses)
on securities: 13 (229)
-------- --------
Balance at March 31 $ 48,498 $ 46,159
======== ========
<PAGE>
PEOPLES BANK CORPORATION OF INDIANAPOLIS
CONSOLIDATED STATEMENTS OF CASH FLOWS
================================================================================
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
Three months ended
March 31,
1998 1997
-------- --------
Cash flows from operating activities
<S> <C> <C>
Net Income $ 55 $ 1,453
Adjustments to reconcile net income to net cash
from operating activities
Depreciation and amortization 300 298
Provision for loan losses 3,000 400
Net (gain)/loss on investment securities (6) 1
Net amortization/(accretion) on investments 20 43
Net gain on the sale of loans (128) (66)
Change in interest payable and other liabilities 836 0
Change in interest receivable and other assets (3,357) (140)
Loans originated for sale, net of sales proceeds (1,410) 148
-------- --------
Net cash from operating activities (690) 2,137
-------- --------
Cash flows from investing activities
Proceeds from sales of available-for-sale securities 0 0
Proceeds from maturities of available-for-sale securities 13,038 11,072
Purchase of available-for-sale securities (12,692) (8,082)
Loans made to customers, net of principal
collection thereon (13,735) (11,550)
Property and equipment expenditures (369) 60
-------- --------
Net cash from investing activities (13,758) (8,500)
-------- --------
Cash flows from financing activities
Net change in deposits 22,573 15,055
Net change in short-term borrowings (12,650) 1,037
Proceeds from exercise of stock option 3 0
Dividends paid (385) (329)
Purchase of common stock (5) (85)
-------- --------
Net cash from financing activities 9,536 15,678
-------- --------
Net change in cash and cash equivalents (4,912) 9,315
Cash and cash equivalents at beginning of year 25,462 32,252
-------- --------
Cash and cash equivalents at March 31 $ 20,550 $ 41,567
======== ========
</TABLE>
<PAGE>
Peoples Bank Corporation of Indianapolis
Notes to Consolidated Financial Statements
March 31, 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:
At March 31,
1998 1997
--------- ---------
Weighted average shares outstanding 3,076,867 3,143,674
Dilutive effect of potential shares 84,444 32,619
--------- ---------
Shares used to compute diluted earnings per share 3,161,311 3,176,293
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
distinguishing 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 March 31, 1998, a total of 103,254 shares had been
repurchased at an average price of $22.34.
The book value per share of Peoples nonvoting common shares at March 31, 1998,
was $15.76. For the first quarter, the low trading price per share was $ 35.25,
and the high trading price per share was $40.75.
On March 19,1998, Peoples declared a cash dividend in the amount of $.125 per
share, payable April 17, 1998, to shareholders of record March 31, 1998. This
dividend represents a 4.16% increase over the fourth quarter 1997 dividend and
is the seventh consecutive quarter in which Peoples has declared an increase in
dividends.
Selected ratios and summary data.
At or for the Three Months Ended
March 31,
1998 1997
-------------- --------------
Assets $ 608,916 $ 488,380
Loans (includes loans held for sale) 420,544 345,055
Deposits 530,884 426,860
Shareholders Equity 48,498 46,159
Book value per share 15.76 14.69
Earnings per share (basic) $ 0.02 $ 0.46
Earnings per share (diluted) $ 0.02 $ 0.46
Dividends per share $ 0.125 $ 0.105
Net Interest Margin (FTE) 4.44% 4.70%
Return on Average Assets 0.04% 1.31%
Return on Average Equity 0.46% 13.36%
Average Shares Outstanding
- --Basic 3,076,867 3,143,674
- --Diluted 3,161,311 3,176,293
Total Shares Outstanding 3,076,930 3,141,924
Net Income
Net income for the first quarter of 1998 was $55 compared to $1,453 for the
first quarter of 1997, a decrease of 96.21% or $1,398. Basic net income per
share for the first quarter 1998 decreased $0.44 or 95.65% from $0.46 for the
first quarter of 1997. The decrease in net income is attributable to an increase
in the provision for loan losses to $3,000 for the first quarter of 1998 as
compared to $400 for the first quarter of 1997. The decision to dramatically
increase provision expense is more fully discussed below. In other areas, the
Company had strong performance. Net interest income was up 22.77% during the
first quarter of 1998 as compared with the first quarter of 1998. Other
operating income was up 11.19% during the first quarter. Other operating
expenses were up $834 or 21.65%. However, $280 of the increase in other
operating expenses was associated with the write-down of an investment in a
troubled low-income housing project undertaken by the bank to generate tax
credits. Absent the increase associated with the housing project, other
operating expenses would have been up 14.4%, primarily on increases in salary
and benefit expense.
<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 March 31, net interest income was $6,114 and $4,980 for 1998 and 1997,
respectively. This reflects an increase of $1,134 or 22.77%.
Interest income for the three months ended March 31 was $11,501 and $8,732 for
1998 and 1997, respectively. This increase in interest income is attributable to
loan growth of 21.88% and growth in investment balances of 69.27%. Total
interest expense was $5,387 and $3,752 for the three months ended March 31,
1998, and 1997, respectively.
Interest and fees on loans increased from $7,176 for the first three months of
1997 to $9,008 for that period in 1998, an increase of $1,832 or 25.53%. These
increases are attributable to an increase in loans outstanding. Total loans were
$420,544 at March 31, 1998, compared to $345,055 at March 31, 1997, an increase
of $75,489 or 21.88%.
The Company's net interest margin, or margin on earning assets, decreased 0.19%
to 4.33% for the first three months of 1998 from 4.52% for the first three
months of 1997. On a tax equivalent basis, the Company's net interest margin was
4.44% and 4.70%, respectively, for those periods, a decrease of 0.26%. 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 $3,000 for the first three months of 1998 as
compared to $400 for the first three months of 1997, an increase of $2,600 or
650.00%. The allowance for loan losses at March 31, 1998, was $6,333 or 1.51% of
total loans compared to $5,516 or 1.36 % of total loans at December 31, 1997.
Gross charge-offs during the first three months of 1998 were $2,262 and
recoveries were $79.
Charge-offs during the first quarter of 1998 included a $2,000 charge-off on a
single commercial loan. That loan had been placed on non-accrual status at
December 31, 1997, based on weakening financial condition indicated by the
customer's interim financial statements. Audited financial statements provided
to management near the end of the first quarter showed substantial deteriation
in the customer's condition, and demonstrated that interim financial statements
provided during 1997 were grossly erroneous. Management concluded that there was
little chance of recovery for the customer and that collateral was unlikely to
prevent considerable loss to the Company. Therefore, management determined to
charge-off all portions of the loan believed to be uncollectible. Charge-offs do
not impact net income, since they are charged against the allowance for loan
losses. However, the increase in the provision for loan losses in the first
quarter of 1998 was considered necessary by management to maintain the allowance
at desirable levels. 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 forecast economic conditions. During the first
quarter, several additional commercial loan relationships were placed on
non-accrual status, resulting in an increase in non-performing loans as
discussed below. Further, management believes that the allowance for loan losses
should be maintained at a strong level given the economy's mature status.
Therefore, management elected to increase the loan loss provision to $3,000
during the first quarter of 1998, and anticipates maintaining the allowance for
loan losses at approximately 1.50% or more 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 March 31, 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 $1,560 for the first three months of 1998, compared
to $1,403 for that period of 1997, an increase of $157 or 11.19%. Trust fees
were $480 and $371 for the first three months of 1998 and 1997, respectively, an
increase of $109 or 29.38%.
Service charges on deposit accounts, which comprise the largest component of
non-interest income, were down for the first three months of 1998 compared with
the same periods of 1997. For the three month periods ending March 31, 1998, and
1997, service charge income was $658 and $705 respectively, a decrease of $47 or
6.67%. The decrease in service charge income can be traced to a decrease in fees
for nonsufficient funds (NSF). NSF fees were $224 and $268 respectively for the
three months ending March 31, 1998, and 1997, respectively, a decrease of $44 or
16.42%
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 three months of 1998 was $179, reflecting an increase of $52 or 40.94%,
compared to $127 for the same period in 1997. The increase in mortgage banking
revenue can be associated with stronger activity in the first quarter of 1998
due to an increase in refinancing activities associated with lower long-term
interest rates. During the first quarter of 1998, the bank originated $8.84
million in loans sold into the secondary market and $12.44 million in adjustable
rate mortgages retained by the bank compared to $2.36 million in loans sold and
$9.35 million in adjustable rate mortgages retained in the first quarter of 1997
. 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
Other operating income increased during the first three months of 1998 to $237
from $201 for the same period in 1997, an increase of $36 or 17.91%.
Other Operating Expenses
Total other operating expenses were $4,687 for the three months ended March 31,
1998, compared with $3,853 for that period in 1997. This represents an increase
of $834, or 21.65%. Salary and employee benefit expense was $2,617 for the first
three months of 1998, an increase of $444 or 20.43% from $2,173 for the first
three months of 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 $372 for the first three months of 1998, a decrease of
$62, or 14.29% from $434 for the first three months of 1997. Equipment expenses
were $312 and $263, respectively, for the first three months of 1998 and 1997,
an increase of $49 or 18.63%. The reduction in occupancy expense is primarily
associated with reductions in operating and maintenance expenses in the first
quarter 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 $112 and $124, for the first three months of 1998 and
1997, respectively, a decrease of $12 or 9.68%. Other operating expenses were
$1,274 and $859 for the first three months of 1998 and 1997, respectively, an
increase of $415 or 48.31%. The principal reason for this increase was
management's decision to recognize a loss of $280 on a low-income housing
investment. Early in 1997, Peoples purchased a 99% limited partnership interest
in a low-income housing project located in Indianapolis for $648. This
investment was intended to provide tax credits in addition to cash flow
sheltered by depreciation, and was expected to help the bank meet its
obligations with respect to the Community Reinvestment Act. The project has
failed to meet expectations during its first year, with net losses substantially
in excess of the project's initial projections. Audited financial statements
indicate that the value of the bank's limited partnership interest, as accounted
for using generally accepted accounting principles, declined by $259 during its
first year on net loss of $261. The write-down taken during the first quarter of
1998 brought the investment's book value in line with its value as stated on the
books of the partnership. Peoples anticipates taking a charge to earnings of
approximately $25 per month until the book value of the asset is depleted. So
long as the project remains solvent, Peoples will continue to benefit from the
tax credits in forthcoming years as originally projected. However, the project
provided no tax credits during 1997, so there are no potential tax credit
recapture issues to date.
Income Taxes
Income taxes were ($68) for the first three months of 1998 and $677 for the
first three months of 1997. The decrease in taxes can be primarily attributed to
decreased income recognized during the quarter.
Balance sheet
Total assets were $608,916 at March 31, 1998, and $598,476 at December 31, 1997,
an increase of $10,440. The portfolio of available-for-sale securities increased
from $153,870 at December 31, 1997, to $154,336 at March 31, 1998, an increase
of $466 or 0.30%. Total loans, excluding loans held for sale, increased during
the first three months of 1998 from $406,893 at December 31, 1997, to $418,445
at March 31, 1998. This reflects an increase of $11,552 or 2.84%. Commercial
loans increased $3,442 or 1.86% from $185,089 at December 31, 1997, to $188,531
at March 31, 1998. Real estate loans, which consist of construction loans and
permanent residential and commercial mortgages, increased $10,030 or 8.38% from
$119,640 at December 31, 1997, to $129,670 at March 31, 1998. Consumer loans
increased $194 or 0.19% from $100,139 at December 31, 1997, to $100,333 at March
31, 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 $2,099 at March 31, 1998. The amount
of loans outstanding (excluding loans held for sale) are reflected in the
following table.
<PAGE>
March 31, December 31, March 31,
1998 1997 1997
-------- -------- --------
Real Estate $129,670 $119,640 $104,676
Commercial 188,531 185,089 151,231
Consumer 100,333 100,139 81,038
Tax exempt 2,010 2,025 2,110
Loans to Depository Institutions 0 0 6,000
-------- -------- --------
Total Loans 420,544 406,893 345,055
Less: Allowance for Loan Losses 6,333 5,516 4,514
-------- -------- --------
Net Loans $414,211 $401,377 $340,541
======== ======== ========
Deposits represent the primary source of funds for the Company. Total deposits
increased $22,573 or 4.44%, from $508,311 at December 31,1997, to $530,884 at
March 31, 1998. Non-interest-bearing deposits increased $4,601, or 5.60%, from
$82,132 at December 31, 1997, to $86,733 at March 31, 1998. The Company's
deposit balances are reflected in the following table.
March 31, December 31, March 31,
1998 1997 1997
Deposits:
Non-interest-bearing $ 86,733 $ 82,132 $ 75,560
Interest-bearing 444,151 426,179 351,300
-------- -------- --------
Total deposits $530,884 $508,311 $426,860
======== ======== ========
Total deposits/total assets 87.19% 84.93% 87.40%
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. Short-term borrowings were $21,730 at March 31, 1998, as
compared to $34,380 at December 31, 1997. This represents a decrease of $12,650
or 36.79%. At March 31, 1998, Peoples had $13,730 in overnight repurchase
agreements, $2,000 in federal funds purchased, and $6,000 in Federal Home Loan
Bank advances. Overnight repurchase agreements continue to be a source of funds
for Peoples. Many of the funds are from businesses with large cash balances.
Total shareholders' equity decreased $319 or 0.65% for the three months ended
March 31, 1998, to $48,498, from $48,817 at December 31, 1997. The decrease in
shareholders' equity was primarily the result of net income of $55, less
dividends paid of $385. The adoption of FAS No. 115 resulted in a $13 increase
in equity.
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 March 31, 1998, Management designated $3,289 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.
The following table shows the composition of nonperforming loans.
March 31, December 31, March 31,
1998 1997 1997
Nonperforming loans:
Total nonaccrual loans $2,496 $3,626 $ 220
Loans past due more than 346 16 407
90 days and still accruing -- -- --
------ ------ ------
Total $2,842 $3,642 $ 627
====== ====== ======
At March 31, 1998, nonperforming loans were comprised of $2,074 of commercial
loans, $766 of real estate loans and $2 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 March 31, 1997, nonperforming loans
consisted of $478 of commercial loans, $148 of real estate loans and $1 of
consumer loans. Asset quality continues to be an important area of focus for the
Company. Nonperforming loans as a percent of assets were 0.47% at March 31,
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. It should be noted that despite the charge-off of $2,262 during the
first quarter, non-accrual loans decreased by only $1,130 because additional
loans were placed on non-accrual status during the first quarter of 1998.
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 March 31, 1998, the Company's Tier I and total risk-based capital ratios
were 10.92% and 12.18%, respectively. The Company's leverage ratio was 7.91% at
March 31, 1998. As of March 31, 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
March 31, 1998. The following table provides the capital ratios for the
entities.
At March 31, 1998
Consolidated
Bank Only Company
Total assets $603,751 $608,916
Risked-based assets 433,719 437,870
Tier I capital 42,121 47,837
Total risk-based capital 47,554 53,321
Leverage ratio 7.04% 7.91%
Tier I risk-based capital ratio 9.71% 10.92%
Total risk-based capital 10.96% 12.18%
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. Shareholders represented in person or by proxy and voting at the
meeting comprised 80% percent of the outstanding voting shares.
Against or Broker
Nominee For Withheld Abstain Non-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 voting shareholders also ratified the 1998 Stock Option Plan with 183,065
shares voting in favor of the plan, 26,440 shares voting against, and 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 March 31, 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: May 14, 1998
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS
</LEGEND>
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<NAME> Peoples Bank Corp of Indianapolis
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