FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
June 30, 1996 Commission
File Number 000-18991
PEOPLES BANCORP
212 WEST SEVENTH STREET
AUBURN, IN 46706
Indiana 35-1811284
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
Registrant's telephone number,
including are code: (219)925-2500
Indicate by a 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 shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No ______
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date:
Common stock, par value $1 per share 2,345,512 shares
(Title of class) (Outstanding at July 16, 1996)
PEOPLES BANCORP
AND SUBSIDIARY
Page
Number
Part I Financial Information:
Item 1. Consolidated Financial Statements
Consolidated Statement of Financial Condition
as of June 30, 1996 and September 30, 1995......3
Consolidated Statement of Operations for the three
and nine months ended June 30, 1996 and 1995....4
Consolidated Statement of Changes in Stockholders'
Equity for the nine months ended June 30, 1996..5
Consolidated Statement of Cash Flows for the
nine months ended June 30, 1996 and 1995......6-7
Notes to Consolidated Financial Statements....8-9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.......10-15
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K............16
Signatures...............................................17
2
PART I. FINANCIAL INFORMATION
PEOPLES BANCORP
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
ASSETS JUNE 30, SEPTEMBER 30,
1996 1995
------------ -------------
Cash $ 3,781,398 $ 4,160,756
Short-term interest-bearing deposits 6,364,691 7,800,686
------------ -------------
Total cash and cash equivalents 10,146,089 11,961,442
Interest-bearing deposits - 390,256
Securities available for sale 24,868,589 11,069,862
Securities held to maturity
(approximate market value
$15,111,398 and $27,794,859) 15,323,299 28,146,227
Mortgage-backed securities 667,217 794,328
Loans:
Loans 222,034,083 219,576,196
Less: Allowance for loan losses 893,829 912,268
------------ -------------
Net loans 221,140,254 218,663,928
Premises and equipment 1,489,068 1,606,509
Federal Home Loan Bank of Indianapolis
stock, at cost 2,004,400 1,941,100
Other assets 2,319,551 2,034,119
------------ -------------
Total assets $277,958,467 $276,607,771
LIABILITIES ============ =============
NOW and savings deposits $ 69,039,288 $ 71,286,904
Certificates of deposit 164,377,193 161,460,114
Reverse repurchase agreements 8,289 -
Advances from FHLB of Indianapolis - 1,000,000
Advances by borrowers for taxes and
insurance 2,999 80,053
Other liabilities 1,233,026 1,156,674
------------ -------------
Total liabilities 234,660,795 234,983,745
STOCKHOLDERS EQUITY
Preferred stock, par value $1;
Authorized and unissued-5,000,000 shares - -
Common stock, par value $1;
Authorized-7,000,000 shares
Issued and outstanding-2,345,512 and
2,362,898 shares 2,345,512 2,362,898
Additional paid-in capital 8,061,705 8,423,385
Retained earnings-substantially rest. 33,030,073 30,865,260
Net unrealized loss on securities
available for sale (139,618) (27,517)
------------- -------------
Total stockholders' equity 43,297,672 41,624,026
------------- -------------
Total liabilities & equity $277,958,467 $276,607,771
============= =============
See notes to consolidated financial statements.
3
<TABLE>
PEOPLES BANCORP
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
<CAPTION>
Three months ended Nine months ended
June 30, June 30,
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Interest income:
Loans $4,587,754 $4,517,030 $14,050,990 $13,264,917
Securities 526,617 537,551 1,411,249 1,661,887
Mortgage-backed
securities 15,890 19,458 50,381 60,950
Other 298,367 149,282 853,984 384,696
----------- ---------- ------------ -----------
5,428,628 5,223,321 16,366,604 15,372,450
----------- ---------- ------------ -----------
Interest expense:
NOW and savings 458,265 454,522 1,387,741 1,422,974
Certificates of deposit 2,296,285 2,295,534 6,994,249 6,465,519
Short-term borrowings 539 - 539 -
FHLB advances 13,681 1,438 42,911 1,438
----------- ---------- ----------- -----------
2,768,770 2,751,494 8,425,440 7,889,931
----------- ----------- ----------- -----------
Net Interest Income 2,659,858 2,471,827 7,941,164 7,482,519
Provision for losses
on loans 17,925 (118,912) 16,162 (133,329)
Net Interest Income after ----------- ----------- ----------- -----------
Provision for losses
on loans 2,641,933 2,590,739 7,925,002 7,615,848
----------- ----------- ----------- -----------
Other Income:
Trust income 13,860 23,120 50,090 46,921
Fees & Service Charges 107,874 104,292 331,354 301,533
Other income 30,921 28,126 98,489 94,716
----------- ------------ ----------- -----------
152,655 155,538 479,933 443,170
Other Expense:
Salaries & benefits 593,971 608,799 1,735,293 1,701,308
Net Occupancy Expense 53,639 65,092 185,007 189,418
Equipment Expenses 33,928 35,431 111,119 113,278
Data Processing Expense 74,951 75,332 228,987 221,336
Deposit Insurance 133,545 130,004 397,016 385,996
Other expenses 194,246 278,276 693,978 705,944
----------- ----------- ----------- -----------
1,084,280 1,192,934 3,351,400 3,317,280
----------- ----------- ----------- -----------
Income Before Taxes 1,710,308 1,553,343 5,053,535 4,741,738
Income tax expense 683,150 556,100 1,923,350 1,743,921
----------- ----------- ----------- -----------
Net Income $1,027,158 $ 997,243 $3,130,185 $2,997,817
Net Income per Common Share $0.44 $0.42 $1.33 $1.27
Average Common Shares 2,348,071 2,362,228 2,358,792 2,362,904
See notes to consolidated financial statements.
</TABLE>
4
<TABLE>
PEOPLES BANCORP
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
<CAPTION>
Retained Net Unrealized
Common Stock Additional Earnings Gain (Loss) on
Number Paid-In (Substantially Securities
of Shares Amount Capital Restricted) Available for Sale Total
--------- ------ ---------- -------------- ------------------ -----
<S> <C> <C> <C> <C> <C> <C>
Balances, Sept 30, 1995 2,362,898 $2,362,898 $8,423,385 $30,865,260 $ (27,517) $41,624,026
Cash dividends
($.41 per share) - - - (965,372) (965,372)
Net change in unrealized
loss on securities
available for sale - - - - (112,101) (112,101)
Exercise of stock options 3,400 3,400 13,600 - - 17,000
Repurchase of stock (20,786) (20,786) (375,280) - - (396,066)
Net income for the nine
months ended June 30, 1996 - - - 3,130,185 - 3,130,185
---------- ---------- ---------- ------------- ------------------ -----------
Balances June 30, 1996 2,345,512 $2,345,512 $8,061,705 $33,030,073 $(139,618) $43,297,672
=========== =========== =========== ============= ================== ===========
See notes to consolidated financial statements.
</TABLE>
5
PEOPLES BANCORP
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Nine months ended
June 30,
1996 1995
---------- ----------
Operating Activities:
Net income $3,130,185 $2,997,817
Adjustments to reconcile net
income to net cash provided
by operating activities:
Provision for loan losses 16,162 (133,329)
Depreciation and amortization 147,024 163,659
Amortization of premiums and
discounts on investment
securities 5,336 30,369
Amortization of deferred loan
fees (301,020) (306,531)
Change in:
Interest receivable (213,549) (268,392)
Interest payable (6,416) 92,511
Other adjustments: 97,327 234,133
----------- ----------
Net cash provided by
operating activities 2,875,049 2,810,237
----------- ----------
Investing Activities:
Purchases of interest-bearing
deposits - (373,826)
Purchases of investment
securities (18,205,537) (362,678)
Proceeds from maturities of
investment securities 17,436,429 3,092,750
Payments on mortgage-backed
securities 129,316 133,596
Net change in loans (2,262,050) (8,816,370)
Purchases of premises and
equipment (29,583) (103,423)
Proceeds from sales of real
estate owned 42,499 161,528
Purchase of Federal Home Loan
Bank stock (63,300) (69,900)
------------ ------------
Net cash used by investing
activities (2,952,226) (6,338,323)
6
PEOPLES BANCORP
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Continued)
Nine months ended
June 30,
1996 1995
----------- -----------
Financing Activities:
Net change in:
NOW and savings accounts (2,247,994) (6,799,551)
Certificates of deposit 2,903,695 10,052,029
Short-term borrowings 8,289 1,000,000
Payments on advances from
Federal Home Loan Bank (1,000,000) -
Net change in advances by
borrowers for taxes
and insurance (77,054) (21,930)
Cash dividends (946,046) (779,530)
Exercise of stock options 17,000 -
Repurchase of common stock (396,066) (53,464)
----------- -----------
Net cash provided by
financing activities (1,738,176) 3,397,554
----------- -----------
Net change in Cash and
Cash Equivalents (1,815,353) (130,532)
Cash and Cash Equivalents,
Beginning of Period 11,961,442 6,991,818
----------- -----------
Cash and Cash Equivalents,
End of Period $10,146,089 $6,861,286
============ ===========
Additional Cash Flows and Supplementary Information:
Interest paid $ 8,429,585 $7,830,545
Income tax paid 1,508,800 1,382,521
See notes to consolidated financial statements.
7
PEOPLES BANCORP
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information with respect to the nine months ended June 30, 1996
and 1995, and at June 30, 1996 and 1995, is unaudited.)
1. BASIS OF PRESENTATION
The significant accounting policies followed by Peoples Bancorp
(the Company) and its wholly-owned subsidiary, Peoples Federal
Savings Bank of DeKalb County, (the Bank), for interim financial
reporting are consistent with the accounting policies followed
for annual financial reporting. All adjustments which are, in
the opinion of management, necessary for a fair presentation of
the results for the periods reported, consisting only of normal
recurring adjustments, have been included in the accompanying
unaudited consolidated condensed financial statements. The
results of operations for the nine months ended June 30, 1996,
are not necessarily indicative of those expected for the
remainder of the year.
2. CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
The Consolidated Statement of Financial Condition at September
30, 1995, has been taken from the audited consolidated financial
statements at that date.
3. CASH DIVIDEND
A cash dividend of $.14 per common share was declared on June 13,
1996, payable on July 22, 1996, to stockholders of record as of
July 1, 1996.
4. EARNINGS PER COMMON SHARE
Earnings per share have been computed based on the average common
shares outstanding during, and the earnings for, the periods
presented. The dilutive effect on earnings per share from
unissued stock option shares is not material.
8
PEOPLES BANCORP
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information with respect to the nine months ended June 30, 1996
and 1995, and at June 30, 1996 and 1995, is unaudited.)
5. COMMITMENTS TO FUND LOANS
Commitments to fund mortgage loans are as follows:
June 30, 1996 September 30, 1995
Amount Rate Amount Rate
------ ---- ------ ----
Adjustable rate $ 607,700 $1,524,850
Fixed rate 4,092,300 8.05% 4,104,500 8.16%
---------- ===== --------- =====
$4,700,000 $5,629,350
========== ==========
6. STOCK REPURCHASE PLAN
In 1995, the Company's board of directors approved the repurchase
of up to 100,000 of the Company's outstanding shares of common
stock (1995 plan). Such purchases will be made subject to
market conditions in the open market or block transactions. At
June 30, 1996, the Company has repurchased 24,952 shares of its
outstanding stock under the 1995 plan.
7. RECLASSIFICATIONS
Certain amounts in the 1995 consolidated financial statements
have been reclassified to conform to the 1996 presentation.
9
PEOPLES BANCORP
AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
Total assets at June 30, 1996, were $277,958,467, an increase of
$1,350,696 from September 30, 1995. The increase is attributable
primarily to net loans which increased $2,476,326 to
$221,140,254. This increase was partially offset by a decrease
in cash and cash equivalents of $1,815,353.
Total deposits were $233,416,481 at June 30, 1996, an increase of
$669,463 since September 30, 1995.
LIQUIDITY
As calculated for regulatory purposes, liquidity was 20.02% at
June 30, 1996 as compared to 18.27% at September 30, 1995.
Liquidity and loan repayments should be adequate to meet loan
fundings and other obligations and expenditures.
CAPITAL RESOURCES
The following table presents Peoples Federal Savings Bank's
current estimates of its regulatory capital position as a dollar
amount and as a percentage of assets as of June 30, 1996.
At June 30, 1996
Tangible Capital Core Capital Risk-Based Capital
Amount % Amount % Amount % (1)
---------- ---- -------- --- --------- ----
Capital Position $36,643 13.5% $36,643 13.5% $37,511 28.3%
Regulatory
Requirement 4,085 1.5% 8,171 3.0% 10,596 8.0%
Excess Capital
over Regulatory
Requirement $32,558 12.0% $28,472 10.5% $26,915 20.3%
(1) Risk-based capital as a percentage of risk-weighted assets.
9
PEOPLES BANCORP AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Summary of Results of Operations
Peoples Bancorp and subsidiary had net income of $1,027,158 or
$.44 per share for the three months, and $3,130,185 or $1.33 per
share for the nine months ended June 30, 1996, as compared to
$997,243 and $2,997,817 for the same periods ended 1995. The
increase was primarily due to higher net interest income.
Net Interest Income
Net interest income was $2,641,933 for the three months and
$7,925,002 for the nine months ended June 30, 1996 as compared to
$2,590,739 and $7,615,848 for the same period ended 1995.
Interest income increased $205,307 and $994,154 to $5,428,628 and
$16,366,604 for the three and nine month periods due to increased
loan volume and higher interest rates on loans. The increase in
income was partially offset by an increase in interest expense of
$17,276 to $2,768,770 for the three month period and $535,509 to
$8,425,440 for the nine month period due to higher prevailing
interest rates on deposit accounts, and higher volumes of
certificates of deposit, as well as higher interest expense on
Federal Home Loan Bank advances which were taken out in June,
1995. Provision for loan loss increased $149,491 to $16,162 for
the nine months ended June 30, 1996, reflecting management's
continued review of the loan portfolio.
The following table presents average balances and associated
rates earned and paid for all interest earning assets and
interest bearing liabilities for the nine months ended June 30,
1996 and 1995. (dollars in thousands)
1996 1995
Average Interest Effective Average Interest Effective
Balance Yield Rate Balance Yield Rate
------- -------- --------- ------- -------- ---------
Loans $222,871 $14,051 8.41% $217,451 $13,265 8.13%
Securities 34,893 1,411 5.39% 42,846 1,662 5.17%
Mortgage-backed
securities 740 50 9.01% 897 61 9.07%
Other 18,396 854 6.19% 7,144 384 7.17%
-------- ------- -------- -------
Combined 276,900 16,366 7.88% 268,338 15,372 7.64%
NOW and
savings accounts 70,431 1,388 2.63% 73,044 1,423 2.60%
CD's 163,423 6,994 5.71% 155,920 6,466 5.53%
FHLB advances 964 43 5.95% 1,991 1 5.83%
-------- ------- -------- -------
Combined 234,818 8,425 4.78% 230,955 7,890 4.55%
Net interest income/
Interest rate spread $7,941 3.10% $7,482 3.09%
======= ===== ======= =====
11
PEOPLES BANCORP AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
The following table illustrates the change in net interest income
due to changes in rates and average volumes. (dollars in
thousands)
Nine months ended June 30, 1996 vs. 1995
Rate Volume Total
--------------------------------------
Loans $456 $330 $786
Securities 68 (319) (251)
Mortgage-backed
securities - (11) (11)
Other (60) 530 470
----- ----- -----
Total 464 530 994
----- ----- -----
NOW and savings deposits 16 (51) (35)
Certificates of deposit 213 315 528
Advances from FHLB - 42 42
----- ----- -----
Total 229 306 535
----- ----- -----
Net interest income $235 $224 $459
===== ===== =====
Non-Performing Assets and Summary of Loan Loss Experience
Non-performing assets at June 30, 1996 and September 30, 1995 are
as follows: (dollars in thousands)
June 30 Sept 30
-------- -------
Non-accruing loans $605 $765
Loans contractually past due 90
days or more other than
nonaccruing 95 99
Real estate owned 75 47
-------- --------
$775 $911
======== ========
12
PEOPLES BANCORP AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Non-Performing Assets and Summary of Loan Loss Experience
(cont'd)
The following table analyzes the allowance for loan and REO
losses for the nine months ended June 30, 1996 and 1995.
(dollars in thousands)
Loans REO
1996 1995 1996 1995
---- ---- ---- ----
Balance at 9/30 $912 $1,034 $ - $ 23
Provision adjustment
charged(credited)
to expense 16 (119) 11 121
Chargeoffs (50) (43) (11) (144)
Recoveries 16 16 - -
---- ---- ---- ----
Balance at 6/30 $894 $ 888 $ - $ -
It is the Bank's policy to carry REO at net realizable value.
After repossession, appraised value is reduced for estimated
repair and selling costs, and the net amount is the carrying
value of the property. Any changes in estimated realizable value
after the initial repossession, are charged to a specific loss
reserve account for REO. At present, all REO is carried at the
Bank's estimated realizable value.
Management continually reviews the mix and delinquency status of
its loan portfolio and classifies those loans which it deems
appropriate. As of June 30, 1996, asset balances and the
corresponding allocation of the provision for loan losses were as
follows: (dollars in thousands)
Asset Allocation of
Balance Reserve
--------- ---------------
Loss $ 26 $ 26
Doubtful - -
Substandard 588 118
Unclassified 277,344 750
--------- ---------------
$277,958 $894
========= ===============
13
PEOPLES BANCORP AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Non-Performing Assets and Summary of Loan Loss Experience
(cont'd)
The allowances for loan and real estate owned losses represent
amounts available to absorb future losses. Such allowances are
based on management's continuing review of the portfolios,
historical charge-offs, current economic conditions, and such
other factors, which in management's judgment deserve recognition
in estimating possible losses. In addition, various regulatory
agencies, as an integral part of their examination process,
periodically review the allowance for loan losses. Such agencies
may require additions to the allowances based on their judgment
about the information available to them at the time of their
examination. Provisions for losses are charged to earnings to
bring the allowances to levels considered necessary by
management. Losses are charged to the allowances when considered
probable, or in the case of REO, at the time of repossession.
Management believes that the allowances are adequate to absorb
known and inherent losses in the portfolio. No assurance can be
given, however, that economic conditions which may adversely
affect the Bank's markets or other circumstances will not result
in future losses in the portfolio.
The following table presents an allocation of the Bank's
allowance for loan losses at the dates indicated and the
percentage of loans in each category to total loans. (dollars in
thousands)
Balance at end of period June 30 June 30
applicable to: 1996 1995
-------- --------
Residential Mortgage Loans $ - 92.8% $ - 91.6%
Commercial Real Estate Loans - 2.1% - 2.7%
Commercial and Other Loans - - - -
Consumer Loans 26 5.1% 17 5.7%
Unallocated 868 871
---- ----- ---- -----
Total $894 100.0% $888 100.0%
==== ====== ==== ======
14
PEOPLES BANCORP AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Non-Interest Income
The Company's non-interest income was substantially the same at
$152,655 for the three months ended June 30, 1996 as compared to
1995. For the nine month period, non-interest income increased
$36,763 to $479,933 due primarily to increased fee income from
NOW and IRA accounts.
Non-Interest Expense
Total non-interest expense for the three and nine months ended
June 30, 1996 was $1,084,280 and $3,351,400 as compared to
$1,192,934 and $3,317,280 for 1995. Salaries and employee
benefits increased $33,985 for the period ended June 30, 1996 to
