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
December 31, 1997 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 area 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 3,381,484 shares
- ------------------------------------ ----------------
(Title of class) (Outstanding at January 19, 1998)
<PAGE>
PEOPLES BANCORP
AND SUBSIDIARY
Page
Number
Part I Financial Information:
Item 1. Consolidated Financial Statements
Consolidated Statement of Financial Condition
as of December 31, 1997 and September 30, 1997...................3
Consolidated Statement of Income for the three
months ended December 31, 1997 and 1996..........................4
Consolidated Statement of Changes in Stockholders'
Equity for the three months ended December 31, 1997 .............5
Consolidated Statement of Cash Flows for the
three months ended December 31, 1997 and 1996....................6
Notes to Consolidated Financial Statements.....................7-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................9-14
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K.................................15
Signatures....................................................................16
<PAGE>
PART I. FINANCIAL INFORMATION
PEOPLES BANCORP
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
ASSETS
December 31, September 30,
1997 1997
------------- -------------
Unaudited)
Cash $ 2,369,527 $ 2,993,154
Short-term interest-bearing deposits 3,977,613 7,738,990
------------ ------------
Total cash and cash equivalents 6,347,140 10,732,144
Interest-bearing deposits 2,696,000 976,000
Securities available for sale 28,356,294 28,467,800
Securities held to maturity
(approximate market value $8,974,827 and $8,740,052) 8,986,099 8,757,855
Mortgage-backed securities 465,681 498,823
Loans:
Loans 242,551,741 236,142,236
Less: Allowance for loan losses 899,881 886,567
------------ ------------
Net loans 241,651,860 235,255,669
Premises and equipment 1,712,140 1,712,774
Federal Home Loan Bank of Indianapolis stock, at cost 2,062,200 2,062,200
Other assets 2,013,233 2,138,330
------------ ------------
Total assets $294,290,647 $290,601,595
============ ============
LIABILITIES
NOW and savings deposits $ 71,331,033 $ 70,539,511
Certificates of deposit 172,195,536 171,250,628
Reverse Repurchase Agreements 4,154,311 3,162,400
Advances by borrowers for taxes and insurance 2,625 1,591
Other liabilities 1,686,896 1,349,295
------------ -------------
Total liabilities 249,370,401 246,303,425
------------ -------------
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--3,390,934 and
3,391,986 shares 3,390,934 3,391,986
Additional paid-in capital 5,240,818 5,263,589
Retained earnings--substantially restricted 36,225,475 35,573,293
Net unrealized loss on securities available for sale 63,019 69,302
------------ -------------
Total stockholders' equity 44,920,246 44,298,170
------------ -------------
Total liabilities and stockholders' equity $294,290,647 $290,601,595
============ =============
See notes to consolidated financial statements.
<PAGE>
PEOPLES BANCORP
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
Three months ended
December 31,
-------------------------------
1997 1996
------------- --------------
Interest Income:
Loans $ 4,914,655 $ 4,664,664
Securities 498,034 499,116
Mortgage-backed securities 11,501 14,457
Other interest and dividend income 219,673 207,206
------------- --------------
5,643,863 5,385,443
------------- --------------
Interest Expense:
Now and savings deposits 516,787 453,109
Certificates of deposit 2,445,742 2,337,141
Short-term borrowings 42,225 21,244
Federal Home Loan Bank advances - -
------------- --------------
3,004,754 2,811,494
------------- --------------
Net Interest Income 2,639,109 2,573,949
Provision for losses on loans 5,121 11,315
------------- --------------
Net Interest Income After Provision
for Losses on Loans 2,633,988 2,562,634
------------- --------------
Other Income:
Trust income 16,858 13,724
Fees and service charges 111,670 110,871
Other income 30,123 33,175
------------- --------------
158,651 157,770
------------- --------------
Other Expense:
Salaries and employee benefits 630,640 633,686
Net occupancy expenses 68,956 73,088
Equipment expenses 59,539 44,317
Data processing expense 77,731 78,095
Deposit insurance expense 37,579 132,992
Other expenses 263,676 226,557
------------- --------------
1,138,121 1,188,735
------------- --------------
Income Before Income Tax 1,654,518 1,531,669
Income tax expense 629,330 587,940
------------- --------------
Net Income $ 1,025,188 $ 943,729
============= ==============
Basic Income Per Common Share $0.30 $0.27
Diluted Income Per Common Share $0.30 $0.27
Average Common Shares Outstanding 3,391,460 3,468,419
See notes to consolidated financial statements.
<PAGE>
PEOPLES BANCORP
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
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, September 30,
1997 3,391,986 $3,391,986 $5,263,589 $35,573,293 $69,302 $44,298,170
Cash dividends
($.11 per share) - - - (373,006) - (373,006)
Net change in unrealized
gain (loss) on securities
available for sale - - - - (6,283) (6,283)
Repurchase of stock (1,052) (1,052) (22,771) - - (23,823)
Net income for the
three months ended
December 31, 1997 - - - 1,025,188 - 1,025,188
----------- ------------ ------------ ------------- ------------- ----------------
Balances, December 31,1997 3,390,934 $3,390,934 $5,240,818 $36,225,475 $63,019 $44,920,246
=========== ============ ============ ============= ============= ================
</TABLE>
See notes to consolidated financial statements.
<PAGE>
PEOPLES BANCORP
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Three months ended
December 31,
-----------------------------
1997 1996
-------------- -------------
Operating Activities:
Net income $1,025,188 $1,031,209
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 5,121 (36,502)
Depreciation and amortization 69,594 49,057
Amortization of premiums and discounts on
investment securities (74,707) 4,178
Amortization of deferred loan fees (77,251) (92,714)
Change in:
Interest receivable 1,607 27,208
Interest payable (4,778) 7,707
Other adjustments: 533,790 196,208
------------ -------------
Net cash provided by operating activities 1,478,564 1,186,351
------------ -------------
Investing Activities:
Purchases of interest-bearing deposits (2,070,000) -
Proceeds from maturities of interest-bearing
deposits 350,000 -
Purchases of investment securities (2,051,728) (250,080)
Proceeds from maturities of investment
securities 2,000,000 6,401,786
Payments on mortgage-backed securities 33,544 47,724
Net change in loans (6,409,226) 203,357
Purchases of premises and equipment (68,960) (19,669)
Proceeds from sales of real estate owned - 20,000
------------ -------------
Net cash used by investing activities (8,216,370) 6,403,118
------------ -------------
Financing Activities:
Net change in:
NOW and savings accounts 791,306 242,394
Certificates of deposit 954,186 1,728,064
Short-term borrowings 991,911 -
Net change in advances by borrowers for
taxes and insurance 1,034 29,518
Cash dividends (361,812) (307,177)
Repurchase of common stock (23,823) -
------------ -------------
Net cash provided by financing activities 2,352,802 1,692,799
------------ -------------
Net Change in Cash and Cash Equivalents (4,385,004) 9,282,268
Cash and Cash Equivalents, Beginning of Period 10,732,144 11,961,442
------------ -------------
Cash and Cash Equivalents, End of Period $6,347,140 $21,243,710
============ =============
Additional Cash Flows and Supplementary Information:
Interest paid $3,009,532 $2,848,041
Income tax paid 174,414 151,600
See notes to consolidated financial statements.
<PAGE>
PEOPLES BANCORP
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information with respect to the three months ended December 31, 1997
and 1996, and at December 31, 1997 and 1996, 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 three months ended December 31,
1997, 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, 1997, has
been taken from the audited consolidated financial statements at that date.
3. CASH DIVIDEND
A cash dividend of $.11 per common share was declared on December 16, 1997,
payable on January 22, 1998, to stockholders of record as of January 2, 1998.
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.
<PAGE>
PEOPLES BANCORP
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information with respect to the three months ended December 31, 1997
and 1996, and at December 31, 1997 and 1996, is unaudited.)
5. COMMITMENTS TO FUND LOANS
Commitments to fund mortgage loans are as follows:
December 31, 1997 September 30, 1997
---------------------- -----------------------
Amount Rate Amount Rate
------------ --------- ------------ ---------
Adjustable rate $ 175,000 $ 114,000
Fixed rate 5,594,325 7.40% 5,364,570 7.66%
------------ ========= ------------ =========
$5,769,325 $5,478,570
============ ============
6. STOCK REPURCHASE PLAN
On May 17, 1997, the Company's board of directors authorized the repurchase of
up to 240,000 of the Company's outstanding shares of common stock . Such
purchases will be made subject to market conditions in the open market or
privately negotiated transactions. At December 31, 1997, the Company has
repurchased 26,675 shares of its outstanding stock under this plan.
7. RECLASSIFICATIONS
Certain amounts in the 1997 consolidated financial statements have been
reclassified to conform to the 1998 presentation.
<PAGE>
PEOPLES BANCORP
AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
Total assets at December 31, 1997 were $294,290,647, an increase of $3,689,052
from September 30, 1997. The increase is attributable primarily to loans which
increased $6,396,191 to $241,651,860, and interest-bearing time deposits which
increased $1,700,000 to $2,696,000. These increases were partially offset by a
decrease in short-term interest-bearing deposits.
Total deposits were $243,526,569 at December 31, 1997, an increase of $1,736,430
since September 30, 1997.
LIQUIDITY
As calculated for regulatory purposes, liquidity was 13.53% at December 31, 1997
as compared to 13.00% at September 30, 1997. 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 December 31, 1997.
At December 31, 1997
------------------------------------------------------------
Tangible Capital Core Capital Risk-Based Capital
------------------- ----------------- --------------------
Amount % Amount % Amount % (1)
---------- -------- ---------- ------ --------- ----------
Capital Position $35,073 12.2% $35,073 12.2% $35,948 24.8%
Regulatory
Requirement 4,311 1.5% 8,622 3.0% 11,604 8.0%
Excess Capital
over Regulatory
Requirement $30,762 10.7% $26,451 9.2% $24,344 16.8%
(1) Risk-based capital as a percentage of risk-weighted assets.
<PAGE>
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 $1,025,188 or $0.30 per share
for the three months ended December 31, 1997 as compared to $943,729 or $0.27
per share for the same period ended 1996. The increase was primarily due to
higher net interest income combined with lower expenses.
NET INTEREST INCOME
Net interest income was $2,633,988 for the three months ended December 31, 1997
as compared to $2,562,634 for the same period ended 1996. Interest income
increased $258,420 to $5,643,863 for the three months primarily due to higher
volumes of loans. Interest expense increased $193,260 to $3,004,754 for the
three months primarily due to higher deposit volumes. Provision for loan loss
decreased $6,194 to $5,121 for the three months ended December 31, 1997,
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
three months ended December 31, 1997 and 1996. (dollars in thousands)
1997 1996
------------------------------ --------------------------
Average Interest Effective Average Interest Effective
Balance Yield Rate Balance Yield Rate
--------- -------- --------- ---------- -------- --------
Loans $238,282 $4,915 8.25% $227,220 $4,665 8.21%
Securities 37,923 543 5.73% 36,821 499 5.42%
Mortgage-backed
securities 481 11 9.15% 628 14 8.92%
Other 9,722 175 7.20% 13,804 207 6.00%
--------- -------- ---------- --------
Combined 286,408 5,644 7.88% 278,473 5,385 7.74%
---------- -------- ---------- --------
NOW and savings
deposits 71,934 517 2.87% 68,589 453 2.64%
Certificates of deposit 171,936 2,446 5.69% 165,213 2,337 5.66%
Borrowings 3,491 42 4.81% 1,804 21 4.66%
--------- -------- ---------- --------
Combined 247,361 3,005 4.86% 235,606 2,811 4.77%
--------- -------- ---------- --------
Net interest income/
interest rate spread $2,639 3.02% $2,574 2.97%
======== ===== ======== =====
<PAGE>
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)
Three months ended December 31, 1997 vs. 1996
Rate Volume Total
-------- --------- ---------
Loans $ 12 $ 238 $ 250
Securities 21 (22) (1)
Mortgage-backed
securities - (3) (3)
Other 34 (22) 12
------- --------- --------
Total 67 191 258
------- --------- --------
NOW and savings deposits 41 23 64
Certificates of deposit 12 96 108
Short-term borrowings 1 20 21
------- --------- --------
Total 54 139 193
------- --------- --------
Net interest income $ 13 $ 52 $ 65
======== ========= =========
NON-PERFORMING ASSETS AND SUMMARY OF LOAN LOSS EXPERIENCE
Non-performing assets at December 31, 1997 and September 30, 1997 are as
follows: (dollars in thousands)
December 31, 1997 September 30, 1997
Non-accruing loans $ 566 $ 658
Loans contractually past due 90 days
or more other than nonaccruing 134 64
Real estate owned 73 -
---------- --------
$ 773 $ 722
========== ========
<PAGE>
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 three
months ended December 31, 1997 and 1996. (dollars in thousands)
Loans REO
----------------- -----------------
1997 1996 1997 1996
-------- -------- ------- --------
Balance at 9/30 $ 887 $ 887 $ - $ -
Provision adjustment charged
(credited) to expense 5 11 - -
Chargeoffs (5) (12) - -
Recoveries 13 3 - -
------- ------- -------- --------
Balance at 12/31 $ 900 $ 889 $ - $ -
======= ======= ======== ========
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 December
31, 1997, asset balances and the corresponding allocation of the provision for
loan losses were as follows: (dollars in thousands)
Asset Allocation of
Balance Reserve
---------------- ------------
Loss $ 25 $ 25
Doubtful - -
Substandard 802 160
Unclassified 293,464 715
---------------- ------------
$ 294,291 $ 900
================ ============
<PAGE>
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
applicable to: 1997 1996
-------------------- -----------------
Residential Mortgage Loans $ 16 92.4% $ - 92.7%
Commercial Real Estate Loans - 2.0% - 2.1%
Commercial and Other Loans - - - -
Consumer Loans 9 5.6% 21 5.2%
Unallocated 875 868
-------- ---------- ------ ---------
Total $900 100.0% $889 100.0%
======== ========== ====== =========
<PAGE>
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 remained basically unchanged at $158,651 as
compared to $157,770 for the same period one year ago.
NON-INTEREST EXPENSE
Total non-interest expense for the three months ended December 31 , 1997 was
$1,138,121 as compared to $1,188,735 for 1996. The decrease was due to decreased
deposit insurance expense due to the September 30, 1996 recapitalization of the
SAIF insurance fund, partially offset by small increases in equipment expenses,
and other miscellaneous expenses.
INCOME TAXES
Income taxes for the three months ended December 31, 1997 were $629,330, as
compared to $587,940 for a year ago. The higher tax figure this year is a result
of higher pretax income.
<PAGE>
PART II. OTHER INFORMATION
PEOPLES BANCORP
AND SUBSIDIARY
Item 6. Reports on Form 8-K
One report on Form 8-K was filed during the three months ended December 31,
1997. This 8-K reported the stock split effective November 24, 1997 and was
reported on October 16, 1997.
<PAGE>
PEOPLES BANCORP
AND SUBSIDIARY
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 BANCORP
(REGISTRANT)
Date: January 19, 1997 Maurice F. Winkler III
President and Chief Operating Officer
Date: January 19, 1997 Deborah K. Stanger
Vice President and Chief Financial Officer
