SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2000 Commission file 000-20616
PEOPLES BANCORPORATION, INC.
(Exact name of registrant as specified in its charter)
South Carolina 57-09581843
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1800 East Main Street, Easley, South Carolina 29640
--------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (864) 859-2265
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.
Yes ___X___ No _______
The number of outstanding shares of the issuer's $1.67 par
value common stock as of March 31, 2000 was 2,988,402.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Peoples Bancorporation, Inc. and Subsidiaries
Consolidated Balance Sheets
(Amounts in thousands except share data)
<TABLE>
<CAPTION>
March 31, March 31 December 31,
2000 1999 1999
Unaudited Unaudited Audited
--------- --------- -------
ASSETS
<S> <C> <C> <C>
CASH AND DUE FROM BANKS ................................................ $ 7,408 $ 5,562 $ 6,507
INTEREST-BEARING DEPOSITS IN OTHER BANKS ............................... 28 48 5,047
FEDERAL FUNDS SOLD ..................................................... 4,460 15,860 9,200
SECURITIES
Available for sale ................................................ 34,312 32,655 31,209
Held for investment (market value of $3,954,000,
$4,348,000 and $4,438,000) .................................... 3,974 4,226 4,445
LOANS-less allowance for loan losses of $1,690,000,
$1,200,000 and $1,581,000 ......................................... 156,180 99,508 140,336
LOANS HELD FOR SALE .................................................... 9,800 0 6,662
PREMISES AND EQUIPMENT, net of accumulated
depreciation and amortization ..................................... 7,088 5,949 6,969
ACCRUED INTEREST RECEIVABLE ............................................ 1,565 1,106 1,544
OTHER ASSETS ........................................................... 2,169 1,753 1,994
--------- --------- ---------
TOTAL ASSETS .................................................. $ 226,984 $ 166,667 $ 213,913
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
DEPOSITS
Noninterest-bearing ............................................... $ 25,213 $ 18,856 $ 19,953
Interest-bearing .................................................. 158,098 114,102 148,823
--------- --------- ---------
Total deposits ................................................ 183,311 132,958 168,776
SECURITIES SOLD UNDER REPURCHASE
AGREEMENTS ........................................................ 16,162 7,906 15,434
FEDERAL FUNDS PURCHASED ................................................ 2,230 0 0
NOTES PAYABLE TO FEDERAL HOME LOAN BANK ................................ 0 2,000 5,000
ACCRUED INTEREST PAYABLE ............................................... 1,278 800 1,154
OTHER LIABILITIES ...................................................... 315 84 203
--------- --------- ---------
Total Liabilities ............................................. 203,296 143,748 190,567
--------- --------- ---------
SHAREHOLDERS' EQUITY
Common Stock - 10,000,000 shares authorized,
$1.67 Par value per share,
2,988,402 shares, 2,841,401 shares
and 2,987,627 shares outstanding .................................. 4,991 4,745 4,989
Additional paid-in capital ............................................. 18,869 17,306 18,867
Retained Earnings ...................................................... 421 996 0
Accumulated other comprehensive income ................................. (593) (128) (510)
--------- --------- ---------
Total Shareholder's Equity .................................... 23,688 22,919 23,346
--------- --------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY .............................. $ 226,984 $ 166,667 $ 213,913
========= ========= =========
</TABLE>
1
<PAGE>
Peoples Bancorporation, Inc. and Subsidiaries
Consolidated Statements of Income
(Amounts in thousands except share data)
<TABLE>
<CAPTION>
(Unaudited)
Three Months Ended
March 31,
2000 1999
---- ----
INTEREST INCOME
<S> <C> <C>
Interest and fees on loans ...................................................... $ 3,522 $ 2,181
Interest on securities
Taxable ..................................................................... 523 466
Tax-exempt .................................................................. 54 54
Interest on federal funds ....................................................... 152 189
---------- ----------
Total interest income .............................................................. 4,251 2,890
---------- ----------
INTEREST EXPENSE
Interest on deposits ............................................................ 1,759 1,126
Interest on federal funds purchased and securities
sold under repurchase agreements ............................................ 192 68
Interest on notes payable Federal Home Loan Bank ................................... 26 26
---------- ----------
Total interest expense ............................................................. 1,977 1,220
---------- ----------
Net interest income ................................................................ 2,274 1,670
PROVISION FOR LOAN LOSSES .......................................................... 163 119
---------- ----------
Net interest income after provision for loan losses ................................ 2,111 1,551
NON-INTEREST INCOME
Service fees and other income ................................................... 465 368
---------- ----------
NON-INTEREST EXPENSES
Salaries and benefits ........................................................... 1,048 841
Occupancy ....................................................................... 86 62
Equipment ....................................................................... 136 106
Other operating expenses ........................................................ 517 478
---------- ----------
1,787 1,487
---------- ----------
Income before income taxes ...................................................... 789 432
PROVISION FOR INCOME TAXES ......................................................... 263 147
---------- ----------
Net income ...................................................................... $ 526 $ 285
========== ==========
INCOME PER COMMON SHARE:
BASIC ........................................................................... $ 0.18 $ 0.10
========== ==========
DILUTED ......................................................................... $ 0.17 $ 0.09
========== ==========
WEIGHTED AVERAGE COMMON SHARES:
BASIC ........................................................................... 2,988,402 2,983,471
========== ==========
DILUTED ......................................................................... 3,102,687 3,081,043
========== ==========
DIVIDENDS PAID PER COMMON SHARE .................................................... $ 0.035 $ 0.035
========== ==========
</TABLE>
2
<PAGE>
Peoples Bancorporation, Inc. and Subsidiaries
Consolidated Statements of Changes in Shareholders' Equity
for the three months ended March 31, 2000 and 1999
(Amounts in thousands except share data)
(Unaudited)
<TABLE>
<CAPTION>
Additional Accumulated Total
Common stock Additional other Total
------------ paid-in Retained comprehensive shareholders'
Shares Amount capital earnings income equity
------ ------ ------- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1998 .............. 2,764,016 $ 4,616 $ 17,092 $ 811 $ (48) $ 22,471
Net Income .............................. 285 285
Other comprehensive income, net of
tax:
Unrealized holding gains on
securities available for sale ........ (80) (80)
Less reclassification
adjustments for gains
included in net income ............... 0 0
-----------
Comprehensive income .................... 205
Cash Dividends .......................... (100) (100)
Proceeds from stock options ............. 77,385 129 214 343
----------- ---------- ---------- ---------- ------------- ------------
Balance, March 31, 1999 ................. 2,841,401 $ 4,745 $ 17,306 $ 996 $ (128) $ 22,919
=========== ========== ========== ========== ============= ============
Balance, December 31, 1999 .............. 2,987,627 $ 4,989 $ 18,867 $ 0 $ (510) $ 23,346
Net Income 526 526
Other comprehensive income, net of
tax:
Unrealized holding losses on
securities available for sale ........ (83) (83)
Less reclassification
adjustments for gains
included in net income ............... 0 0
-----------
Comprehensive income 443
Cash Dividends .......................... (105) (105)
Proceeds from stock options ............. 775 2 2 4
----------- ---------- ---------- ---------- ------------- ------------
Balance, March 31, 2000 ................. 2,988,402 $ 4,991 $ 18,869 $ 421 $ (593) $ 23,688
=========== ========== ========== ========== ============= ============
</TABLE>
*5% stock dividend issued in January 2000 is reflected in December 31, 1999
data.
3
<PAGE>
Peoples Bancorporation, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Amounts in thousands except share data)
<TABLE>
<CAPTION>
(Unaudited)
Three Months Ended
March 31,
2000 1999
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net Income .......................................................................... $ 526 $ 285
Adjustments to reconcile net income to net cash provided
by operating activities
Provision for loan losses ........................................................... 163 119
Depreciation and amortization ....................................................... 124 77
Amortization and accretion (net) of premiums and
discounts on securities ........................................................... 11 28
Increase in accrued interest receivable ............................................. (31) (183)
(Increase) decrease in other assets ................................................. 109 (346)
Increase in accrued interest payable ................................................ 124 67
Decrease in other liabilities ....................................................... (111) (168)
-------- --------
Net cash provided by (used in) operating activities ............................... 915 (121)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of securities held for investment ......................................... 0 (101)
Purchases of securities available for sale .......................................... (3,780) (6,588)
Proceeds from the maturity of securities available for sale ......................... 878 2,722
Proceeds from the call of securities available for sale ............................. 133 3,060
Net increase in loans ............................................................... (19,146) (12,703)
Purchase of premises and equipment .................................................. (243) (1,219)
-------- --------
Net cash used in investing activities ............................................. (22,158) (14,829)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits ............................................................ 14,536 12,857
Net increase in securities sold under repurchase
agreements ........................................................................ 728 1,926
Net increase in Federal funds purchased ............................................ 2,230 0
Net decrease in notes payable Federal Home Loan Bank ................................ (5,000) 0
Proceeds from stock options exercised ............................................... 4 343
Cash dividend ....................................................................... (113) (99)
-------- --------
Net cash provided by financing activities ......................................... 12,385 15,027
-------- --------
Net increase (decrease) in cash and cash equivalents .............................. (8,858) 77
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR ........................................... 20,754 21,393
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD ............................................... $ 11,896 $ 21,470
======== ========
CASH PAID FOR
Interest .......................................................................... $ 1,853 $ 1,287
======== ========
Income Taxes ...................................................................... $ 42 $ 162
======== ========
</TABLE>
4
<PAGE>
PEOPLES BANCORPORATION, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of these policies is included in the 1999 Annual Report to
shareholders and incorporated herein by reference.
STATEMENT OF CASH FLOWS
Cash includes currency and coin, cash items in process of collection,
amounts due from banks and federal funds sold.
COMMON STOCK
The Board of Directors declared a cash dividend of $0.035 per common share
to shareholders of record March 23, 2000 payable April 6, 2000.
SFAS No. 128, "Earnings per Share" requires that the Company present basic
and diluted net income per common share. The assumed conversion of stock options
creates the difference between basic and diluted net income per share. Income
per share is calculated by dividing net income by the weighted average number of
common shares outstanding for each period presented. The weighted average number
of common shares outstanding for basic net income per common share was 2,988,402
at March 31, 2000 and 2,983,471 at March 31, 1999. The weighted average number
of common shares outstanding for diluted net income per common share was
3,102,687 at March 31, 2000 and 3,081,043 at March 31, 1999.
The Company issued a five-percent common stock dividend in January 2000.
Per share data in 1999 has been restated to reflect this transaction.
MANAGEMENT'S OPINION
In the opinion of management, the accompanying unaudited financial
statements of Peoples Bancorporation, Inc. contain all adjustments necessary to
fairly present the financial results of the interim periods presented. The
results of operations for any interim period are not necessarily indicative of
the results to be expected for an entire year.
5
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
The following discussion and analysis should be read in conjunction with
the consolidated financial statements and related notes and with the statistical
information and financial data appearing in this report as well as the 1999
Annual Report of Peoples Bancorporation, Inc. on Form 10-K. Results of
operations for the three-month period ending March 31, 2000 are not necessarily
indicative of the results to be attained for any other period.
Forward-Looking Statements
From time to time, Peoples Bancorporation, Inc. (the "Company") may
publish forward-looking statements relating to such matters as anticipated
financial performance, business prospects, technological developments, new
products and similar matters. The Private Securities Litigation Reform Act of
1995 provides a safe harbor for forward-looking statements. In order to comply
with the terms of the safe harbor, the Company notes that a variety of factors
could cause the Company's actual results and experience to differ materially
from the anticipated results or other expectations expressed in the Company's
forward-looking statements. The risks and uncertainties that may affect the
operations, performances, development and results of the Company's business
include, but are not limited to, the following: risks from changes in economic
and industry conditions; changes in interest rates; risks inherent in making
loans including repayment risks and value of collateral; dependence on senior
management; and recently-enacted or proposed legislation. Statements contained
in this filing regarding the demand for the Company's products and services,
changing economic conditions, interest rates, consumer spending and numerous
other factors may be forward-looking statements and are subject to uncertainties
and risks.
Overview
Peoples Bancorporation, Inc. was incorporated under South Carolina law on
March 6, 1992, for the purpose of becoming a bank holding company by acquiring
all of the Common Stock of The Peoples National Bank, Easley, South Carolina.
The Company commenced operations on July 1, 1992 upon effectiveness of the
acquisition of The Peoples National Bank. The Company has three wholly-owned
subsidiaries: The Peoples National Bank, Easley, South Carolina, a national bank
which commenced business operations in August 1986; Bank of Anderson, National
Association, Anderson, South Carolina, a national bank which commenced business
operations in September 1998; and, Seneca National Bank, Seneca, South Carolina,
a national bank which commenced business operations in February 1999 (sometimes
referred to herein as the "Banks").
The Company engages in no significant operations other than the ownership
of its three subsidiaries and the support thereof. The Company conducts its
business from six banking offices located in the Upstate Area of South Carolina.
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
EARNINGS PERFORMANCE
Overview
The consolidated Company's net income for the first quarter of 2000 was
$526,000, or $0.17 per diluted share compared to $285,000, or $0.09 per diluted
share for the first quarter of 1999. Return on average equity for the three
months ended March 31, 2000 was 8.76% compared to 5.08% for the three months
ended March 31, 1999. Return on average assets for the three months ended March
31, 2000 was 0.96% compared to 0.72% for the three months ended March 31, 1999.
The increases in the Company's net income, earnings per fully diluted share,
return on average equity, and return on average assets in 2000 are attributable
to the diminished early operating losses associated with Seneca National Bank,
which commenced operations in February 1999, the attainment of profitability
associated with Bank of Anderson, N. A., which commenced business operations in
September 1998, and increased earnings at The Peoples National Bank resulting
largely from an increase in interest income from a larger base of
interest-earning assets. For the quarter ended March 31, 2000, Bank of Anderson,
N. A. recorded net earnings of $32,000 compared to a net loss of $56,000 for the
quarter ended March 31, 1999. Seneca National Bank recorded a net loss of $1,000
for the quarter ended March 31, 2000 compared to a net loss of $98,000 for the
quarter ended March 31, 1999. The Peoples National Bank recorded net earnings of
$503,000 for the quarter ended March 31, 2000 compared to net earnings of
$417,000 for the quarter ended March 31, 1999.
6
<PAGE>
Interest Income, Interest Expense and Net Interest Income
The largest component of the Company's net income is net interest income.
Net interest income, which is the difference between the interest earned on
assets and the interest paid for the liabilities used to fund those assets,
measures the gross profit from lending and investing activities and is the
primary contributor to the Company's earnings. Net interest income before
provision for loan losses increased $604,000, or 36.2%, to $2,274,000 in the
2000-quarter compared to $1,670,000 in the 1999-quarter. The Company's net
interest margin was 4.51% for the 2000-quarter compared to 4.57% for the 1999
quarter. The increase in the dollar amount of net interest income resulted
primarily from an increase in the amount of interest-earning assets, primarily
loans, at the Banks. The decrease in the Company's net interest margin resulted
from an increase in rates paid on interest-bearing liabilities at the Banks
resulting from an increase in market rates.
The Company's total interest income for the first quarter of 2000 was
$4,251,000 compared to $2,890,000 for the first quarter of 1999, an increase of
$1,361,000, or 47.1%. Interest and fees on loans, the largest component of total
interest income, increased $1,341,000 in the first quarter of 2000 to $3,522,000
compared to $2,181,000 for the first quarter of 1999, an increase of 61.5%. The
significant increase in interest and fees on loans and the corresponding
increase in total interest income is attributable to a larger base of
outstanding loans in the 2000 period when compared to the 1999 period.
The Company's total interest expense for the first quarter of 2000 was
$1,977,000 compared to $1,220,000 for the first quarter of 1999, an increase of
$757,000, or 62.0%. Interest expense on deposits, the largest component of total
interest expense, increased $633,000 in the first quarter of 2000 to $1,759,000
compared to $1,126,000 for the first quarter of 1999, an increase of 56.2%.
Interest on Federal funds purchased and securities sold under repurchase
agreements, the second largest component of total interest expense, increased
$124,000 in the first quarter of 2000 to $192,000 compared to $68,000 for the
first quarter of 1999, an increase of 182.4%. The significant increase in total
interest expense and corresponding increases in interest expense on deposits,
Federal funds purchased and securities sold under repurchase agreements is
attributable to an increase in the dollar amounts outstanding in these
categories of liabilities coupled with an increase in rates paid resulting from
an increase in market rates.
Provision for Loan Losses
The amount charged to the provision for loan losses by the Company is based
on management's judgement as to the amount required to maintain an allowance
adequate to provide for potential losses in the Company's loan portfolio.
The provision for loan losses charged to operations during the three months
ended March 31, 2000 was $163,000 compared to $119,000 for the three months
ended March 31, 1999. The increase in the Company's provision for loan losses in
the 2000 quarter is attributable to continued strong loan growth experienced
during the period by all three of the Company's banking subsidiaries. During the
2000 quarter, Bank of Anderson, N. A. made provisions of $43,000 compared to
$52,000 for the 1999 quarter, Seneca National Bank made provisions of $30,000
during the 2000 quarter compared to $42,000 for the 1999 quarter and The Peoples
National Bank made provisions of $90,000 for the 2000 quarter compared to
provisions of $25,000 in the 1999 quarter.
Non-interest Income
Non-interest income increased $97,000, or 26.4%, to $465,000 for the first
quarter of 2000 compared to $368,000 for the 1999-quarter. A $21,000 increase in
origination fees on mortgage loans, a $31,000 increase in service charges on
deposit accounts and a $17,000 increase in fees from the sale of alternative
investment products were the main contributors to this increase. No gain or loss
was realized on the sale of available for sale securities during the first three
months of either 2000 or 1999.
7
<PAGE>
Non-interest Expense
Total non-interest expense increased $300,000 or 20.2% for the first
quarter of 2000 over the first quarter of 1999. Salaries and benefits, the
largest component of non-interest expense, increased $207,000, or 24.6%, in the
2000-quarter compared to the 1999 quarter. The increase in salaries and benefits
is primarily attributable to the staffing of Seneca National Bank in the first
quarter of 1999, additional staffing associated with the Company's mortgage
lending activities during the second and third quarters of 1999, and normal
salary increases throughout the Company. Occupancy and equipment expenses,
combined, increased $54,000, or 32.1%, in the 2000 quarter due primarily to an
increase in depreciation expense and maintenance expenses on the equipment and
main office buildings of Bank of Anderson, N. A. and Seneca National Bank,
depreciation and maintenance expense associated with the new branch facility for
The Peoples National Bank which opened during the fourth quarter of 1999 and
depreciation and maintenance expenses associated with the Company's Wide Area
Network. Other operating expense increased $39,000, or 8.2%, and is primarily
attributable to increases in miscellaneous other expense categories resulting
from a larger asset and deposit base.
BALANCE SHEET REVIEW
Loans
Outstanding loans represent the largest component of earning assets at
75.0% of total earning assets. As of March 31, 2000, the Company had total gross
loans outstanding of $157,870,000. Loans increased $15,953,000, or 11.2%, from
$141,917,000 in total gross outstanding loans at December 31, 1999 and
$57,162,000, or 56.8% from $100,708,000, in total gross loans outstanding at
March 31, 1999. The increase resulted from new loans generated by Bank of
Anderson and Seneca National Bank and strong internal loan growth experienced by
The Peoples National Bank.
The interest rates charged on loans vary with the degree of risk, maturity
and amount of the loan. Competitive pressures, money market rates, availability
of funds, and government regulation also influence interest rates. The average
yield on the company's loans for the quarter ended March 31, 2000 was 8.97%
compared to 9.34% for the quarter ended March 31, 1999. Approximately 33.4% of
the Company's loans are tied to the prime interest rate.
The Company's loan portfolio consists principally of residential mortgage
loans, commercial loans and consumer loans. Substantially all of these loans are
to borrowers located in South Carolina and are concentrated in the Company's
market areas
The Company's real estate loans are primarily construction loans and loans
secured by real estate, both commercial and residential, located within the
Company's trade areas. The Company does not actively pursue long-term,
fixed-rate mortgage loans for retention in its loan portfolio. The Banks have
mortgage loan originators who originate and package loans that are pre-sold at
origination to third parties and are classified as loans held for sale for
reporting purposes. At March 31, 2000 the Company held $9,800,000 of mortgage
loans held for sale compared to $6,662,000 at December 31, 1999 and none at
March 31, 1999. During the first quarter of 2000, the Company originated
$32,261,000 and sold $22,461,000 in mortgages held for sale.
The Company's commercial lending activity is directed principally towards
businesses whose demands for funds fall within each Bank's legal lending limits
and which are potential deposit customers of the Banks. This category of loans
includes loans made to individuals, partnerships or corporate borrowers, and
which are obtained for a variety of business purposes. Particular emphasis is
placed on loans to small and medium-sized businesses. The Company's commercial
loans are spread throughout a variety of industries, with no industry or group
of related industries accounting for a significant portion of the commercial
loan portfolio. Commercial loans are made on either a secured or unsecured
basis. When taken, security consists of liens on inventories, receivables,
equipment and furniture and fixtures. Unsecured commercial loans are generally
short-term with emphasis on repayment strengths and low debt to worth ratios. At
March 31, 2000, approximately $11,913,000, or 44.8%, of commercial loans were
unsecured.
The Company's direct consumer loans consist primarily of secured
installment loans to individuals for personal, family and household purposes,
including automobile loans to individuals, and pre-approved lines of credit.
8
<PAGE>
Management believes the loan portfolio is adequately diversified. . The
Company has no foreign loans or loans for highly leveraged transactions. The
Company has few agricultural loans.
Allowance for Loan Losses
The allowance for loan losses at March 31, 2000 was $1,690,000, or 1.01% of
loans outstanding compared to $1,581,000, or 1.06% of loans outstanding at
December 31, 1999 and to $1,200,000, or 1.19% of loans outstanding at March 31,
1999. The allowance for loan losses is based upon management's continuing
evaluation of the collectibility of past due loans based on the historical loan
loss experience of the Company, current economic conditions affecting the
ability of borrowers to repay, the volume of loans, the quality of collateral
securing non-performing and problem loans, and other factors deserving
recognition.
At March 31, 2000, the Company had $485,000 in non-accruing loans, no
restructured loans, no loans more than ninety days past due and still accruing
interest, and $219,000 in Other Real Estate Owned. This compares to $628,000 in
non-accruing loans, $150,000 in restructured loans, no loans more than ninety
days past due on which interest was still being accrued, and $219,000 in Other
Real Estate Owned at December 31, 1999. At March 31, 1999, The Company had
$513,000 in non-accruing loans, $8,000 in restructured loans and no loans more
than ninety days past due and still accruing interest. Non-performing loans at
March 31, 2000 consisted of $69,000 in commercial loans; $388,000 in mortgage
loans; and $28,000 in consumer loans. Non-performing assets as a percentage of
loans and other real estate owned was 0.29%, 0.67% and 0.51% at March 31, 2000,
December 31, 1999 and March 31, 1999, respectively.
Net charge-offs during the first three months of 2000 were $54,000,
compared to net charge-offs of $12,000 for the first three months 1999 and net
charge-offs of $83,000 for the year ended December 31, 1999. All charge-offs are
attributable to The Peoples National Bank. Neither Bank of Anderson, N. A., nor
Seneca National Bank has experienced any charge-offs since commencing
operations. The allowance for loan losses as a percentage of non-performing
loans was 348%, 234% and 252%, respectively, as of March 31, 2000, March 31,
1999 and December 31, 1999.
The Company accounts for impaired loans in accordance with the
provisions of Statement of Financial Accounting Standards ("SFAS") 114,
Accounting by Creditors for Impairment of a Loan. SFAS No. 114, as amended by
SFAS No. 118, requires that impaired loans be measured based on the present
value of expected future cash flows or the underlying collateral values as
defined in the pronouncement. The Company includes the provisions of SFAS NO.
114, if any, in the allowance for loan losses. When the ultimate collectability
of an impaired loan's principal is in doubt, wholly or partially, all cash
receipts are applied to principal. When this doubt does not exist, cash receipts
are applied under the contractual terms of the loan agreement first to principal
then to interest income. Once the recorded principal balance has been reduced to
zero, future cash receipts are applied to interest income, to the extent that
any interest has been foregone. Further cash receipts are recorded as recoveries
on any amounts previously charged off. At each of March 31, 2000, March 31, 1999
and December 31, 1999 the Company had no impaired loans.
Securities
The Company invests primarily in obligations of the United States or
obligations guaranteed as to principal and interest by the United States, other
taxable securities and in certain obligations of states and municipalities. The
Company does not invest in corporate bonds nor does it hold any trading
securities. The Company uses its investment portfolio to provide liquidity for
unexpected deposit liquidation or loan generation, to meet the Company's
interest rate sensitivity goals and to generate income. At March 31, 2000,
securities totaled $38,286,000. Securities increased $2,632,000 from $35,654,000
invested as of December 31, 1999 and $1,405,000 from $36,881,000 invested as of
March 31, 1999. The slight increase is due to increases in investment securities
held by Bank of Anderson, N. A.
At March 31, 2000, the Company's total investments classified as
available for sale had a book value of $35,210,000 and a market value of
$34,312,000 for an unrealized net loss of $898,000. This compares to a book
value of $32,850,000 and a market value of $32,655,000 for an unrealized net
loss of $195,000 on the Company's investments classified as available for sale
at March 31, 1999. At December 31, 1999 the Company's total investments
classified as available for sale had a book value of $31,982,000 and a market
value of $31,209,000 for an unrealized net loss of $773,000.
9
<PAGE>
Deposits
The Bank's primary source of funds for loans and investments is its
deposits. Deposits grew $50,353,000 or 37.9%, to $183,311,000 at March 31, 2000
from $132,958,000 at March 31, 1999. The increase resulted from deposits
generated by all of the Banks. Competition for deposit accounts is primarily
based on the interest rates paid, location convenience and services offered.
During the first three months of 2000, interest-bearing deposits
averaged $152,483,000 compared to $109,314,000 for the first three months of
1999. The average interest rate paid on interest-bearing deposits was 4.61% for
the 2000-quarter compared to 4.18% for the 1999-quarter. In pricing deposits,
the Company considers its liquidity needs, the direction and levels of interest
rates and local market conditions. At March 31, 2000 interest-bearing deposits
comprised 86.2% of total deposits compared to 85.8% at March 31, 1999.
The Company's core deposit base consists of consumer time deposits,
savings, NOW accounts, money market accounts and checking accounts. Although
such core deposits are becoming increasingly interest sensitive for both the
Company and the industry as a whole, such core deposits continue to provide the
Company with a large and stable source of funds. Core deposits as a percentage
of total deposits averaged approximately 79.5% and 83.4% for the three months
ended March 31, 2000 and 1999, respectively. The Company closely monitors its
reliance on certificates greater than $100,000, which are generally considered
less stable and less reliable than core deposits.
Short Term Borrowings
The Company's short-term borrowings are comprised of securities sold
under repurchase agreements, Federal funds purchased and short-term borrowings
from the Federal Home Loan Bank of Atlanta. At March 31, 2000 short-term
borrowings totaled $18,392,000 and were comprised of $2,230,000 in Federal funds
purchased and $16,162,000 in securities sold under repurchase agreements. At
December 31, 1999 and March 31, 1999, short-term borrowings totaled $15,434,000
and $7,906,000, respectively, and were comprised solely of securities sold under
repurchase agreements. The increase in short-term borrowings at March 31, 2000
is largely attributable to the purchase of Federal funds, which wereto fund the
short-term cash needs of the Company. The Company had no short-term borrowings
from the Federal Home Loan Bank of Atlanta at March 31, 2000 compared to
$5,000,000 at December 31, 1999 and $2,000,000 at March 31, 1999.
LIQUIDITY
Liquidity management involves meeting the cash flow requirements of the
Company. The Company's liquidity position is primarily dependent upon its need
to respond to short-term demand for funds caused by withdrawals from deposit
accounts and upon the liquidity of its assets. The Company's primary liquidity
sources include cash and due from banks, federal funds sold and "securities
available for sale". In addition, the Company (through the Banks) has the
ability, on a short-term basis, to borrow funds from the Federal Reserve System
and to purchase federal funds from other financial institutions. The Banks are
also members of the Federal Home Loan Bank System and have the ability to borrow
both short and long-term funds on a secured basis. At March 31, 2000 The Peoples
National Bank had unused borrowing capacity from the Federal Home Loan Bank of
Atlanta equal to sixteen percent (16%) of its total assets or approximately
$26,000,000. The Company's other two bank subsidiaries, Bank of Anderson and
Seneca National Bank have established secured lines of credit with the Federal
Home Loan Bank totaling ten percent (10%) of each respective bank's total assets
or approximately $6,500,000. At March 31, 2000, the Banks had unused federal
funds lines of credit totaling $11,300,000 with correspondent banks.
Peoples Bancorporation, Inc., the parent holding company, has limited
liquidity needs. Peoples Bancorporation requires liquidity to pay limited
operating expenses and dividends.
During the first quarter of 2000, the Company had no capital
expenditures other than through the normal course of business. No large capital
expenditures are anticipated through the remainder of 2000.
Company management believes its liquidity sources are adequate to meet
its operating needs and does not know of any trends that may result in the
Company's liquidity materially increasing or decreasing.
10
<PAGE>
CAPITAL ADEQUACY and RESOURCES
The capital needs of the Company have been met through the retention of
earnings and from the proceeds of prior public stock offerings.
The Board of Governors of the Federal Reserve (the "Federal Reserve
Board") has adopted a risk-based capital measure to assist in the assessment of
the capital adequacy of bank holding companies. The risk-based capital
guidelines establish minimum ratios of capital to risk-weighted assets.
Generally, bank holding companies are expected to operate well above the minimum
risk-based ratios. Under the requirements, bank holding companies are required
to have qualifying capital to risk-weighted assets of at least 8%, with at least
4% being "Tier 1" capital. Tier 1 capital consists principally of common
stockholders' equity, qualifying non-cumulative perpetual preferred stock,
qualifying cumulative perpetual preferred stock, and minority interests in
equity accounts of consolidated subsidiaries, less goodwill and certain
intangible assets. "Tier 2" (or supplementary) capital consists of (subject to
certain limitations and conditions), the allowance for loan and lease losses;
perpetual preferred stock and related surplus; hybrid capital instruments,
perpetual debt and mandatory convertible debt securities; term subordinated debt
and intermediate-term preferred stock, including related surplus; and unrealized
holding gains on equity securities. A bank holding company's qualifying capital
base for purposes of its risk-based capital ratio consists of the sum of its
Tier 1 and Tier 2 capital components, provided that the maximum amount of Tier 2
capital that may be treated as qualifying capital is limited to 100% of Tier 1
capital. The Comptroller imposes a similar standard on national banks.
As a supplement to the risk-based capital measure, the Federal Reserve
Board has also adopted a minimum ratio of Tier 1 capital to total assets to
assist in the assessment of the capital adequacy of bank holding companies. This
measure is intended to constrain the maximum degree to which a bank holding
company can leverage its equity capital base. A minimum ratio of Tier 1 capital
to total assets of 3% is required for strong bank holding companies and for bank
holding companies that have implemented the Board's risk-based capital measure
for market risk. For all other bank holding companies, the minimum ratio of Tier
1 capital to total assets is 4%.
Bank holding companies with supervisory, financial, operational, or
managerial weaknesses, as well as organizations that are anticipating or
experiencing significant growth, are expected to maintain capital levels well
above the minimum levels. Furthermore, the Federal Reserve Board may require
higher ratios for any bank holding company if warranted by its particular
circumstances or risk profile. The Company has not been notified that it must
maintain capital levels above the regulatory minimums.
11
<PAGE>
The following table sets forth the capital ratios for the Company and
the Banks as of March 31, 2000:
CAPITAL RATIOS
(Amounts in Thousands)
<TABLE>
<CAPTION>
Well Adequately
Capitalized Capitalized
Actual Requirement Requirement
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
Company:
<S> <C> <C> <C> <C> <C> <C>
Total Risk-based Capital ............... $25,971 15.23% $17,053 10.00% $13,642 8.00%
Tier 1 Risk-based Capital .............. 24,281 14.24 10,231 6.00 6,821 4.00
Leverage Ratio ......................... 24,281 10.59 11,464 5.00 9,171 4.00
Peoples National Bank:
Total Risk-based Capital ............... $13,884 11.74% $11,826 10.00% $ 9,461 8.00%
Tier 1 Risk-based Capital .............. 12,726 10.24 7,457 6.00 4,971 4.00
Leverage Ratio ......................... 12,726 8.07 7,885 5.00 6,308 4.00
Bank of Anderson, N. A:
Total Risk-based Capital ............... $ 5,488 17.12% $ 3,206 10.00% $ 2,564 8.00%
Tier 1 Risk-based Capital .............. 5,133 16.01 1,924 6.00 1,282 4.00
Leverage Ratio ......................... 5,133 11.63 2,207 5.00 1,765 4.00
Seneca National Bank:
Total Risk-based Capital ............... $ 3,423 24.34% $ 1,406 10.00% $ 1,125 8.00%
Tier 1 Risk-based Capital .............. 3,247 23.09 844 6.00 562 4.00
Leverage Ratio ......................... 3,247 17.48 929 5.00 743 4.00
</TABLE>
EFFECTS OF REGULATORY ACTION
The managements of the Company and the Banks are not aware of any current
recommendations by regulatory authorities, which if they were to be implemented,
would have a material effect on liquidity, capital resources, or operations.
Item 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT
MARKET RISK
Market risk is the risk of loss from adverse changes in market prices and
rates. The Company's market risk arises principally from interest rate risk
inherent in its lending, deposit and borrowing activities. Management actively
monitors and manages its interest rate risk exposure. Although the Company
manages other risks, such as credit quality and liquidity risk, in the normal
course of business, management considers interest rate risk to be its most
significant market risk and the risk that could potentially have the largest
material effect on the Company's financial condition and results of operations.
Other types of market risks, such as foreign currency risk and commodity price
risk, do not arise in the normal course of the Company's business activities.
The primary objective of Asset/Liability Management at the Company is to
manage interest rate risk and achieve reasonable stability in net interest
income throughout interest rate cycles. This is achieved by maintaining the
proper balance of rate sensitive earning assets and rate sensitive earning
liabilities. The relationship of rate sensitive earning assets to rate sensitive
liabilities, is the principal factor in projecting the effect that fluctuating
interest rates will have on future net interest income. Rate sensitive assets
and interest-bearing liabilities are those that can be repriced to current
market rates within a relatively short time period. Management monitors the rate
sensitivity of earning assets and interest-bearing liabilities over the entire
life of these instruments, but places particular emphasis on the first year. At
March 31, 2000, on a cumulative basis through 12 months, rate sensitive
liabilities exceeded rate-sensitive assets, resulting in a liability sensitive
position of $68.5 million. This liability sensitive position is largely
attributable to assuming that the Company's NOW accounts, which totaled $25.5
million at March 31, 2000, will reprice within one year. This assumption may or
may not hold true as the Company believes its NOW accounts are generally not
price sensitive.
12
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is involved in various claims and legal actions
arising in the normal course of business. Management believes
that these proceedings will not result in a material loss to the
Company.
Item 2. Changes in Securities and Use of Proceeds
During the period ended March 31, 2000 the Registrant issued
shares of common stock to the following classes of persons upon
the exercise of options issued pursuant to the Registrant's 1993
Incentive Stock Option Plan. The securities were issued pursuant
to the exemption from registration provided by Section 4(2) of
the Securities Act of 1933 because the issuance did not involve a
public offering.
Aggregate
Class of # of Shares Exercise
Date Issued Purchasers Issued Price
----------- ---------- ------ -----
01/07/2000 Employees 775 $3,666
13
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
27. Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended March 31,
2000.
14
<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 BANCORPORATION, INC.
Dated: May 1, 2000 By: /s/ Robert E. Dye
-------------------
Robert E. Dye
President and Chairman of the Board
Dated: May 1, 2000 By: /s/ William B. West
---------------------
William B. West
Sr. Vice President & CFO
(principal financial officer)
15
<PAGE>
EXHIBIT INDEX
Exhibit No. from
Item 601 of
Regulation S-B Description
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet at March 31, 2000, (unaudited) and the Consolidated
Statement of Income for the three months ended March 31, 2000 (unaudited) and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-2000
<CASH> 1,011
<INT-BEARING-DEPOSITS> 158,098
<FED-FUNDS-SOLD> 4,460
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 34,312
<INVESTMENTS-CARRYING> 3,974
<INVESTMENTS-MARKET> 3,954
<LOANS> 167,670
<ALLOWANCE> 1,690
<TOTAL-ASSETS> 226,984
<DEPOSITS> 183,311
<SHORT-TERM> 18,392
<LIABILITIES-OTHER> 315
<LONG-TERM> 0
0
0
<COMMON> 4,991
<OTHER-SE> 18,697
<TOTAL-LIABILITIES-AND-EQUITY> 226,984
<INTEREST-LOAN> 3,522
<INTEREST-INVEST> 729
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 4,251
<INTEREST-DEPOSIT> 1,759
<INTEREST-EXPENSE> 1,977
<INTEREST-INCOME-NET> 2,274
<LOAN-LOSSES> 163
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,787
<INCOME-PRETAX> 789
<INCOME-PRE-EXTRAORDINARY> 789
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 526
<EPS-BASIC> 0.18
<EPS-DILUTED> 0.17
<YIELD-ACTUAL> 4.51
<LOANS-NON> 485
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,581
<CHARGE-OFFS> 56
<RECOVERIES> 2
<ALLOWANCE-CLOSE> 1,690
<ALLOWANCE-DOMESTIC> 1,690
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
