SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
AMENDMENT No. 1
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number: 0-23370
PERMANENT BANCORP, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 35-1908797
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(State or other jurisdiction of (I.R.S. Employer
Incorporation or Origination) Identification No.)
101 Southeast Third Street, Evansville Indiana 47708
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (812) 428-6800
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 [ ]
As of October 8, 1996, there were 2,239,234 shares of the Registrant's Common
Stock outstanding.
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PERMANENT BANCORP, INC. AND SUBSIDIARY
FORM 10-Q
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Consolidated Statements of Financial Condition
Consolidated Statements of Income
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Supplemental Data
Regulatory Developments
PART II. OTHER INFORMATION
Signatures
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PERMANENT BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
SEPTEMBER 30, MARCH 31,
1996 1996
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ASSETS:
Cash ................................................................................... $ 2,896,504 $ 4,900,671
Interest-bearing deposits .............................................................. 857,123 15,750
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Total cash and cash equivalents ........................................................ 3,753,627 4,916,421
Securities available for sale - at fair value (amortized cost $100,966,750
and $73,408,686) .................................................................... 99,097,444 73,170,635
Mortgage-backed securities available for sale at fair value (amortized
cost $60,084,202 and $61,888,585) ................................................... 59,436,170 61,953,242
Securities held to maturity (fair value $25,000 and $25,000) ........................... 25,000 25,000
Mortgage-backed securities held to maturity (fair value $29,184,747
and $32,319,409) .................................................................... 29,318,873 32,153,595
Other Investments ...................................................................... 633,302 633,302
Loans (net of allowance for loan losses of $2,274,585 and $2,237,804) .................. 209,615,032 206,909,621
Interest receivable, net ............................................................... 3,558,410 2,874,362
Office properties and equipment, net ................................................... 7,227,375 7,256,587
Real estate owned, net ................................................................. 13,442 21,881
Deferred income tax .................................................................... 1,653,736 281,495
Federal Home Loan Bank stock ........................................................... 5,192,600 3,503,600
Cash surrender value of life insurance ................................................. 974,685 953,199
Goodwill (net of accumulated amortization of $1,621,598 and $1,523,364) ................ 446,567 544,801
Other .................................................................................. 711,374 705,051
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TOTAL ASSETS ............................................................................... $ 421,657,637 $ 395,902,792
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LIABILITIES AND STOCKHOLDERS' EQUITY:
LIABILITIES:
Deposits ............................................................................... $ 271,731,184 $ 280,008,062
Federal Home Loan Bank advances ........................................................ 100,141,308 68,303,217
Advance payments by borrowers for taxes and insurance .................................. 1,150,902 1,022,263
Other borrowed funds ................................................................... 4,654,624 2,681,753
Interest payable ....................................................................... 1,979,473 1,922,635
Other .................................................................................. 2,093,619 471,231
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TOTAL LIABILITIES .......................................................................... $ 381,751,110 $ 354,409,161
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PERMANENT BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
(continued)
SEPTEMBER 30, MARCH 31,
1996 1996
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STOCKHOLDERS' EQUITY
Serial Preferred Stock ($.01 par value) Authorized and unissued -
1,000,000 shares
Common Stock ($.01 par value) Authorized - 9,000,000 shares; Issued -
2,459,839 and 2,460,196 shares; Outstanding - 2,130,356 and 2,134,515 shares ........ $ 24,598 24,602
Additional paid-in capital ............................................................. 23,923,244 23,849,500
Treasury Stock - 215,605 and 211,803 shares ............................................ (3,426,029) (3,361,279)
Retained Earnings - substantially restricted ........................................... 22,383,953 22,727,602
Unrealized loss on securities available for sale, net of deferred tax of
$(997,117) and $(64,521) ............................................................ (1,520,221) (98,371)
ESOP Borrowing ......................................................................... (1,071,225) (1,190,250)
Unearned compensation - restricted stock awards ........................................ (407,793) (458,173)
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TOTAL STOCKHOLDERS' EQUITY ................................................................. $ 39,906,527 $ 41,493,631
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ................................................. $ 421,657,637 $ 395,902,792
============= =============
See notes to consolidated financial statements
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<TABLE>
<CAPTION>
PERMANENT BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
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1996 1995 1996 1995
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INTEREST INCOME:
Loans ............................................... $ 4,196,681 $ 4,029,951 $ 8,314,320 $ 7,969,031
Mortgage-backed securities .......................... 1,435,494 1,372,633 2,961,832 2,627,224
Investment securities ............................... 1,671,767 798,126 3,151,122 1,499,793
Deposits ............................................ 34,583 63,915 54,384 101,389
Dividends on Federal Home Loan Bank stock ........... 97,715 51,849 180,699 101,531
------------ ------------ ------------ ------------
7,436,240 6,316,474 14,662,357 12,298,968
------------ ------------ ------------ ------------
INTEREST EXPENSE:
Deposits ............................................ 3,358,373 3,411,488 6,696,363 6,607,551
Federal Home Loan Bank advances ..................... 1,311,562 657,431 2,539,802 1,146,709
Short-term borrowings ............................... 41,260 12,390 46,412 32,580
------------ ------------ ------------ ------------
4,711,195 4,081,309 9,282,577 7,786,840
------------ ------------ ------------ ------------
NET INTEREST INCOME ...................................... 2,725,045 2,235,165 5,379,780 4,512,128
PROVISION FOR LOAN LOSSES ................................ 88,486 76,070 148,486 102,424
------------ ------------ ------------ ------------
NET INTEREST INCOME AFTER LOAN LOSS
PROVISION ........................................... 2,636,559 2,159,095 5,231,294 4,409,704
------------ ------------ ------------ ------------
OTHER INCOME:
Service charges ..................................... 214,404 150,170 419,171 290,840
Gain on sale of loans ............................... 1,865 3,220 4,862 6,946
Commissions ......................................... 162,588 100,873 257,901 242,910
Gain (loss) on sale of investment and mortgage-backed
securities ......................................... 8,201 (4,549) 2,366 (7,145)
Other ............................................... 55,339 72,995 112,080 149,517
------------ ------------ ------------ ------------
442,397 322,709 796,380 683,068
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<TABLE>
<CAPTION>
PERMANENT BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(continued)
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------- ----------------------------
1996 1995 1996 1995
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OTHER EXPENSE:
Salaries and employee benefits ...................... 1,086,977 1,062,150 2,112,540 2,142,871
Deposit insurance assessments ........................ 1,952,115 175,610 2,134,106 355,822
Occupancy ........................................... 223,152 208,651 416,399 424,809
Equipment ........................................... 137,942 149,056 297,453 294,613
Net (gain) loss on real estate owned ................ (5,020) (11,755) (2,191) 636
Computer service .................................... 118,912 112,673 249,023 233,016
Advertising ......................................... 67,947 80,291 153,147 146,951
Postage and office supplies ......................... 74,988 83,901 127,865 151,400
Other ............................................... 258,259 250,073 464,445 519,243
------------ ------------ ------------ ------------
3,915,272 2,110,650 5,952,787 4,269,361
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INCOME (LOSS) BEFORE INCOME TAXES ........................ (836,316) 371,154 74,887 823,411
INCOME TAX PROVISION (BENEFIT) ........................... (275,822) 56,907 130,978 204,740
------------ ------------ ------------ ------------
NET INCOME (LOSS) ........................................ $ (560,494) $ 314,247 $ (56,091) $ 618,671
============ ============ ============ ============
EARNINGS (LOSS) PER SHARE OF COMMON STOCK
Primary ............................................. $ (0.26) $ 0.14 $ (0.03) $ 0.28
Fully Diluted ....................................... $ (0.26) $ 0.14 $ (0.03) $ 0.27
WEIGHTED AVERAGE SHARES OUTSTANDING
Primary ............................................. 2,140,841 2,209,717 2,137,613 2,336,053
Fully diluted ....................................... 2,220,996 2,296,364 2,217,738 2,322,700
See notes to consolidated financial statements
</TABLE>
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<CAPTION>
PERMANENT BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED SEPTEMBER 30,
-------------------------------------
1996 1995
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) .............................................................. $ (56,091) 618,671
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation ........................................................... 251,699 240,617
Amortization and accretion ............................................ 76,247 85,801
Vesting of restricted stock awards ..................................... 46,810
Provisions for loan and real estate owned losses ....................... 36,781 62,825
Gain on sale of office properties and equipment ........................ (200)
Gain on sale of real estate owned ...................................... (22,028)
(Gain) loss on sale of securities ...................................... (19,813) 9,031
(Gain) on sale of mortgage-backed securities ........................... (761) (1,886)
(Gain) on sale of loans ................................................ (4,862) (6,946)
ESOP shares earned ..................................................... 77,310
Changes in assets and liabilities:
Proceeds from the sales of loans ........................................... 514,847 1,560,046
Origination of loans for resale ............................................ (509,985) (1,287,118)
Interest receivable ........................................................ (684,048) (521,259)
Deferred income tax ........................................................ (439,645) (184,122)
Other assets ............................................................... (6,323) 249,742
Interest payable ........................................................... 56,838 234,905
Other liabilities .......................................................... 1,622,388 277,383
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Net cash provided by operating activities ...................................... 961,392 1,315,462
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CASH FLOWS FROM INVESTING ACTIVITIES:
Loans originated ............................................................... (32,924,343) (29,535,575)
Loan principal repayments ...................................................... 37,803,024 24,149,849
Proceeds from:
Maturities of:
Securities held to maturity ............................................ 7,338,705
Securities available for sale .......................................... 6,974,688
Sales of:
Securities held to maturity ............................................ 4,967,856
Securities available for sale .......................................... 13,365,641
Mortgage-backed securities held to maturity ............................ 741,183
Mortgage-backed securities available for sale .......................... 7,694,935
Land ................................................................... 7,450
Real estate owned ...................................................... 70,254
Purchases of:
Securities available for sale .......................................... (47,920,625) (4,983,125)
Securities held to maturity ............................................ (12,397,536)
Mortgage-backed securities held to maturity ............................ (14,729,959)
Mortgage-backed securities available for sale .......................... (11,757,132) (7,661,940)
Loans .................................................................. (7,665,460) (1,975,400)
FHLB Stock ............................................................. (1,689,000)
Office properties and equipment ........................................ (222,487) (236,566)
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<CAPTION>
PERMANENT BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(continued)
SIX MONTHS ENDED SEPTEMBER 30,
-------------------------------------
1996 1995
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Payments on mortgage-backed securities ......................................... 8,800,181 4,689,297
Increase in cash surrender value of life insurance ............................. (21,486) (18,906)
Payments on real estate owned .................................................. 8,439 9,894
------------ ------------
Net cash used in investing activities .......................................... (27,553,625) (29,564,519)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid $ (280,538) (117,145)
Net change in deposits (8,276,878) 5,341,790
Receipts from FHLB advances 80,350,000 29,611,698
Payments on FHLB advances (48,511,910) (4,763,186)
Principal repayment of ESOP borrowing 119,025 119,025
Advance payments by borrowers for taxes and insurance 128,639 (101,925)
Net change in other borrowed funds 1,972,871 (193,908)
Purchase of treasury stock (83,750) (1,953,242)
Sale of common stock 11,980 35,690
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Net cash provided by financing activities 25,429,439 27,978,797
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NET DECREASE IN CASH AND CASH EQUIVALENTS (1,162,794) (270,260)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 4,916,421 5,573,343
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CASH AND CASH EQUIVALENTS AT END OF PERIOD 3,753,627 5,303,083
============= ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $6,730,061 $6,446,468
Income taxes 505,000 218,300
Noncash transactions:
Transfers from loans to real estate owned - 70,772
See notes to consolidated financial statements.
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PERMANENT BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
1. BASIS OF PRESENTATION - The consolidated financial statements include the
accounts of Permanent Bancorp, Inc. (the "Company"), its wholly owned
subsidiary, Permanent Federal Savings Bank, its wholly owned subsidiary,
Perma-Service Corp, and its wholly owned subsidiary, Permanent Insurance Agency,
Inc. (collectively the "Bank"). All significant intercompany accounts and
transactions have been eliminated. These consolidated interim financial
statements at September 30, 1996 and for the three and six month periods ended
September 30, 1996, and 1995, have not been examined by independent auditors,
but reflect, in the opinion of the Company's management, all adjustments (which
include only normal recurring adjustments) necessary to present fairly the
financial position and results of operations for such periods.
The preparation of financial statements in conformity with generally accepted
accounting principals requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. Estimates most susceptible to
change in the near term include the allowance for loan losses and the fair value
of securities.
These statements should be read in conjunction with the consolidated financial
statements and related notes which are incorporated by reference in the
Company's Annual Report on Form 10-K for the year ended March 31, 1996.
2. CHANGES IN PRESENTATION - Certain amounts and items appearing in the
financial statements for the quarter and six months ended September 30,1995 have
been reclassified to conform with the presentation presented for the period
ended September 30, 1996.
3. SAVINGS ASSOCIATION INSURANCE FUND (SAIF) SPECIAL ASSESSMENT - The deposits
of savings associations, such as Permanent Federal, are presently insured by the
SAIF, which together with the Bank Insurance Fund (BIF), are the two insurance
funds administered by the Federal Deposit Insurance Corporation (FDIC).
Financial institutions which are members of the BIF have been experiencing
substantially lower deposit insurance premiums because the BIF has achieved its
required level of reserves while the SAIF has not yet achieved its required
reserves. In order to help eliminate this disparity and any competitive
disadvantage due to disparate deposit insurance premium schedules, legislation
to recapitalize the SAIF was enacted in September 1996.
The legislation requires a special one-time assessment of approximately 65.7
cents per $100 of SAIF insured deposits held by the bank at March 31, 1995. The
one-time special assessment resulted in a tax affected charge to earnings of
approximately $1,067,000 during the quarter ended September 30, 1996. The
legislation is intended to fully recapitalize the SAIF fund so that commercial
bank and thrift deposits will be charged the same FDIC premiums beginning
October 1, 1996. As of such date deposit insurance premiums for highly rated
institutions, such as the Bank, have been eliminated.
The Bank, however, will continue to be subject to an assessment to fund
repayment of the Financing Corporation (FICO) obligations. It is anticipated
that the FICO assessment for SAIF insured institutions will be 18 cents per
annum per $100 of deposits for the quarter ended December 31, 1996. Beginning
January 1, 1997 financial institutions insured by BIF will begin sharing in the
FICO obligation and it is expected SAIF insured institutions will pay an
<PAGE>
assessment of 6.4 cents per $100 of deposits while BIF insured Institutions will
pay 1.3 cents per $100 of deposits until the year 2000 when the assessment will
be imposed at the same rate on all FDIC insured institutions. Accordingly, as a
result of the reduction of the SAIF assessment and the resulting FICO
assessment, the annual after tax decrease in assessment costs is expected to be
approximately $272,000 based upon the September 30, 1996 assessment base.
4.NEW ACCOUNTING PRONOUNCEMENTS
FINANCIAL ACCOUNTING STANDARDS NO. 122 (FAS 122) " ACCOUNTING FOR MORTGAGE
SERVICING RIGHTS" - FAS 122 was adopted by the Company effective April 1, 1996.
This statement specifies conditions under which mortgage servicing rights should
be accounted for separately from the underlying mortgage loans. Generally the
statement applies to mortgages sold with servicing rights retained. An
allocation of the loan's book value is made to the servicing rights retained.
The value of the servicing rights are capitalized and written off as servicing
income is received. The effect is to increase profits recognized when loans are
sold, but to reduce net income recognized on servicing, as loans are repaid. The
application of FAS 122 had a nominal effect on the Company's financial
statements for the three and six months ended September 30, 1996, but could have
a more material impact if loan sales are increased.
FINANCIAL ACCOUNTING STANDARDS NO. 123 (FAS 123) "ACCOUNTING FOR STOCK BASED
COMPENSATION" - Effective April 1, 1996, the Company adopted FAS 123 by
continuing to account for stock compensation in accordance with Accounting
Principals Board Opinion No. 25 "Accounting for Stock Issued to Employees."
However, the fair value disclosures are not included as the fair values are not
deemed to have a significant impact on the financial position or results of
operations of the Company.
FINANCIAL ACCOUNTING STANDARDS NO. 125 (FAS 125) "ACCOUNTING FOR TRANSFERS AND
SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENTS OF LIABILITIES" - FAS 125 was
issued in June 1996 and provides accounting and reporting standards for
transfers and servicing of financial assets and extinquishments of liabilities.
FAS 125 applies to transactions occuring after December 31, 1996. Management has
not yet quantified the effect of this new standard on the Consolidated Financial
Statements.
5. SUBSEQUENT EVENTS - During October 1996 the Bank recognized profit on the
sale of a parcel of real estate owned in the amount of $232,000. The actual
sales transaction occured during the fiscal year ended March 31, 1995, however
no profit could be recognized at the time because the purchaser (a limited
partnership) did not have a significant equity interest in the property. The
property has since been rehabilitated as a low income housing project with the
limited partners making substantial equity contributions during October 1996.
The gain on the sale of real estate owned was partially offset by a loss of
$59,000 on the sale of Bank premises and equipment.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Permanent Bancorp, Inc. (the "Company") is a bank holding company which owns
100% of the capital stock of Permanent Federal Savings Bank (the "Bank") and has
no other subsidiaries. Material changes in the consolidated statements of
Financial Condition and Results of Operations of the Company, except where
noted, are attributed to the operations of the Bank; therefore the following
analysis is centered on the activities of the Bank.
QUARTER ENDED SEPTEMBER 30, 1996 COMPARED TO SEPTEMBER 30, 1995
NET INTEREST INCOME - Net interest income before provision for loan losses
increased by $490,000 or 21.9% for the quarter ended September 30, 1996 compared
to the quarter ended September 30, 1995. This increase was primarily
attributable to an increase in interest earning assets and an improvement in the
interest rate spread (the difference between the rate earned on interest earning
assets and the rate paid on interest bearing liabilities).
Net interest income after provision for loan losses increased by $477,000, or
22.1% for the quarter ended September 30, 1996 compared to the quarter ended
September 30, 1995. The increase was smaller than the increase in net interest
income before provision for loan losses because of an increase in the loss
provision reflecting actual and anticipated loan growth.
INTEREST INCOME - Total interest income for the three months ended September 30,
1996 increased $1,120,000, or 17.7%, from the three month period ended September
30, 1995. This increase was attributable to an increase of 18 basis points in
the average rate earned on total interest earning assets and an increase of
$51.9 million in average balances for the comparable periods.
INTEREST EXPENSE - Total interest expense increased by $630,000, or 15.4%,
during the three months ended September 30, 1996 compared to the three months
ended September 30, 1995. Average interest bearing liabilities increased by
$54.1 million, but the cost of such liabilities decreased by 7 basis points,
compared to the quarter ended September 30, 1995.
OTHER INCOME - Total other income increased by $120,000 during the quarter ended
September 30, 1996 compared to the quarter ended September 30, 1995. Service
charges were $64,000 more and commissions were $62,000 more during the quarter
ended September 30, 1996 than during the comparable quarter in 1995. During the
quarter ended September 30, 1996 the Company earned gains on sales of loans of
$2,000 compared to $3,000 during the quarter ended September 30, 1995 and
recognized gains of $8,000 on sales of investment and mortgage-backed securities
compared to losses of $5,000 during the quarter ended September 30, 1995. The
remaining other income accounts were down by $18,000 during the current year
quarter, primarily because the prior year quarter included an adjustment for the
conversion from regulatory accounting principals to generally acceptable
accounting principals for the recognition of loan fees in the amount of $69,000.
The conversion which had been phased in over a period of years was completed
during January, 1996. The loss of the conversion fee recognition was partially
offset by increases in other fees.
<PAGE>
OTHER EXPENSE - Other expense increased a total of $1,805,000 during the quarter
ended September 30, 1996 compared to the quarter ended September 30, 1995,
primarily because of the one time FDIC assessment in the amount of $1,766,000
(see Note 3 of "Notes to Consolidated Financial Statements"). Salaries and
employee benefits increased by $25,000 or 2.3% during the quarter ended
September 30, 1996 compared to the same period in 1995. Occupancy expenses
increased by $15,000 while equipment and computer expenses decreased by $5,000
during the comparable periods. Deposit insurance assessments, exclusive of the
one time assessment, were $10,000 higher during the quarter ended September 30,
1996, while advertising expenditures were $12,000 lower than during the quarter
ended September 30, 1995. Postage and office supplies were $9,000 lower during
the quarter ended September 30, 1996. Net gains on reas estate owned were $7,000
lower during the quarter ended September 30, 1996 than during the comparable
period in 1995.
INCOME TAXES - Provisions for income taxes resulted in a credit of $276,000, or
33.0% of losses before taxes during the quarter ended September 30, 1996,
compared to $57,000, or 15.3% of income before taxes during the quarter ended
September 30, 1995. The low rate of income taxes during the quarter ended
September 30, 1995 was primarily the result of loan growth enabling the Bank to
claim greater loan loss provisions for tax purposes than for book purposes.
SIX MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO SIX MONTHS ENDED SEPTEMBER 30,
1995
NET INTEREST INCOME - Net interest income before provision for loan losses
increased by $868,000 or 19.2% for the six months ended September 30, 1996
compared to the six months ended September 30, 1995. This increase was primarily
attributable to an increase in interest earning assets and an improvement in the
interest rate spread (the difference between the rate earned on interest earning
assets and the rate paid on interest bearing liabilities).
Net interest income after provision for loan losses increased by $822,000, or
18.6% for the six months ended September 30, 1996 compared to the six months
ended September 30, 1995. The increase was smaller than the increase in net
interest income before provision for loan losses because of an increase in the
loss provision reflecting actual and anticipated loan growth.
INTEREST INCOME - Total interest income for the six months ended September 30,
1996 increased $2,363,000, or 19.2%, from the six month period ended September
30, 1995. This increase was attributable to an increase of 25 basis points in
the average rate earned on total interest earning assets and an increase of
$51.9 million in average balances for the comparable periods.
INTEREST EXPENSE - Total interest expense increased by $1,496,000, or 19.2%,
during the six months ended September 30, 1996 compared to the six months ended
September 30, 1995. Average interest bearing liabilities increased by $53.2
million, but the cost of such liabilities decreased by 8 basis points, compared
to the six months ended September 30, 1995.
OTHER INCOME - Total other income increased by $113,000 during the six months
ended September 30, 1996 compared to the six months ended September 30, 1995.
Service charges were $128,000 more and commissions were $15,000 more during the
six months ended September 30, 1996 than during the comparable period in 1995.
During the six months ended September 30, 1996 the Company earned gains on sales
of loans of $5,000 compared to $7,000 during the period ended September 30,
1995 and recognized gains of $2,000 on sales of investment and mortgage-backed
<PAGE>
securities compared to losses of $7,000 during the six months ended September
30, 1995. The remaining other income accounts were down by $37,000 during the
current year period, primarily because the prior year period included an
adjustment for the conversion from regulatory accounting principals to generally
acceptable accounting principals for the recognition of loan fees in the amount
of $138,000. The conversion which had been phased in over a period of years was
completed during January, 1996. The loss of the conversion fee recognition was
partially offset by increases in other fees.
OTHER EXPENSE - Other expense increased a total of $1,684,000 during the six
months ended September 30, 1996 compared to the six months ended September 30,
1995, primarily because of the one time FDIC assessment in the amount of
$1,766,000 (see Note 3 of "Notes to Consolidated Financial Statements").
Salaries and employee benefits decreased by $30,000 or 1.4% during the six
months ended September 30, 1996 compared to the same period in 1995. Occupancy
expenses decreased by $8,000 and equipment and computer expenses increased by
$19,000 during the comparable periods. Deposit insurance assessments, exclusive
of the one time assessment, were $12,000 higher during the six months ended
September 30, 1996, and advertising expenditures were $6,000 higher than during
the six months ended September 30, 1995. Postage and office supplies were
$24,000 lower during the six months ended September 30, 1996. The remaining
other expense categories were reduced by $55,000 during the six months ended
September 30, 1996 compared to the comparable period in 1995.
INCOME TAXES - Provisions for income taxes amounted to $131,000, even though
income before taxes amounted to only $75,000 during the six months ended
September 30, 1996, compared to $205,000, or 24.8% of income before taxes during
the six months ended September 30, 1995. The 1996 taxes in excess of income
before taxes was the result of the Bank's inability to claim loan loss
provisions for tax purposes as high as the expense recognized for book purposes
during the six months ended September 30, 1996 and because of other differences
in income per books and taxable income. The low rate of income taxes during the
six months ended September 30, 1995 was primarily the result of loan growth
enabling the Bank to claim greater loan loss provisions for tax purposes than
for book purposes.
FINANCIAL CONDITION SEPTEMBER 30, 1996 COMPARED TO MARCH 31, 1996
The Company's total assets at September 30, 1996 were $421.7 million
representing an increase of $25.8 million, or 6.5%, from March 31, 1996.
Investment and mortgage-backed securities, including those classified as
available for sale, increased by $20.6 million to $187.9 million at September
30, 1996 from $167.3 million at March 31, 1996. Net loans increased by $2.7
million to $209.6 million at September 30, 1996 compared to $206.9 million at
March 31, 1996.
The loan growth, primarily in single family mortgage loans and in automobile
loans, is indicative of the strength of the local economy. By policy, the Bank
retains all adjustable rate loans and all fixed rate loans with terms of 20
years or less in its portfolio, and sells all fixed rate loans of terms
exceeding 20 years. During the six months ended September 30, 1996, customers
showed a marked preference for the Bank's mortgage loan program offering loans
at an interest rate which is fixed for ten years, then adjustable annually.
In July, 1996 the bank received a payoff on a (Cardinal Industries) multi-family
housing loan. The loan, with a principal balance of $1,439,858 was carried as a
criticized asset in the "other assets especially mentioned" category. The Bank
received its full principal balance on the loan. As previously disclosed, the
<PAGE>
Bank holds an additional five Cardinal Industries' loans with aggregate
principal balances of nearly $6.8 million; three of the five remaining loans
with principal balances of approximately $4.3 million are carried as impaired
loans and one with a principal balance of nearly $2.0 million is a troubled debt
restructuring. The remaining loan is a 50% participation and has always
performed according to the note terms. Management of the Bank and of Cardinal
Industries have reached a contingent agreement, deemed acceptable by the Bank's
board of directors, on two of the impaired loans with total principal balances
of approximately $3.0 million. The contingencies are satisfactory appraisals,
and Cardinal's ability to obtain other financing. If the proposed settlement is
reached, it will have little or no effect on the Bank's earnings, however
nonperforming assets will decline significantly. Bank management cannot now
predict if the contingencies will be satisfied.
Non-performing assets were at $7.2 million at September 30, 1996, compared to
$6.9 million at March 31, 1996 and $8.3 million at September 30, 1995. As of
September 30, 1996, the Bank's loan loss allowance was $2,274,585. Although no
assurance can be provided, management believes this amount to be sufficient
based upon historical averages and current trends. Based on management's
analysis of classified assets, loss histories and future projections, the
allowance for loan losses (presented below in tabular form) was deemed by
management to be adequate at September 30, 1996. Figures presented for April 1,
1995 have been restated to reflect the reclassification of impaired loans from
in-substance foreclosure back to loan categories pursuant to the provisions of
Statement of Financial Accounting Standards No. 114 (FAS 114), which was adopted
during the quarter ended June 30, 1995.
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Balance, April 1 $2,237,804 $2,093,491
Provision for loan losses 148,486 102,424
Net charge offs (111,705) (24,344)
---------- ----------
Balance, September 30 $2,274,585 $2,171,571
</TABLE>
The loan growth and the increase in investment and mortgage-backed securities
was funded through Federal Home Loan Bank advances which increased by $31.8
million to $100.1 million at September 30, 1996 compared to $68.3 million at
March 31, 1996. Deposits decreased by $8.3 million to $271.7 million at
September 30, 1996 compared to $280.0 million at March 31, 1996.
Total stockholders' equity decreased by $1.6 million to $39.9 million at
September 30, 1996 from $41.5 million at March 31, 1996. The decrease was
primarily attributable to an increase of $1.4 million in unrealized losses on
securities available for sale. Additionally, the Company paid dividends of
$280,538 and purchased treasury stock at a cost of $83,750 during the six months
ended September 30, 1996. Increases resulted from the retention of earnings,
reduction of employee stock ownership liability, vesting of restricted stock
awards, and through the exercise of stock options resulting in the sale of 1,198
shares of treasury stock at $10 per share.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES - The standard measure of liquidity for the
thrift industry is the ratio of cash and eligible investments to a certain
percentage of borrowings due within one year and net withdrawable deposit
accounts. The minimum required level is currently set by OTS regulation at 5%.
At September 30, 1996, the Bank's liquidity ratio was 10.02%. Historically, the
Bank has maintained its liquid assets which qualify for purposes of the OTS
liquidity regulations above the minimum requirements imposed by such regulations
and at a level believed adequate to meet requirements of normal daily
activities, repayment of maturing debt, and potential deposit outflows. Cash
flow projections are regularly reviewed and updated to assure that adequate
liquidity is maintained. Cash for these purposes is generated through the
maturity of investment securities and loan sales and repayments, and may be
generated through increases in deposits. Loan payments are a relatively stable
source of funds while deposit flows are influenced significantly by the level of
interest rates and general money market conditions. Borrowings may be used to
compensate for reductions in other sources of funds such as deposits. As a
member of the FHLB system, the Bank may borrow from the FHLB of Indianapolis. At
September 30, 1996, the Bank had $100,141,000 in such borrowings. As of that
date, the Bank had commitments to fund loan origination's of approximately $2.3
million and commitments to sell loans in the amount of $89,000. The Company had
no commitments to either purchase or sell securities. In the opinion of
management, the Bank has sufficient cash flow and borrowing capacity to meet
current and anticipated funding commitments.
The following table sets forth the Bank's compliance with its capital
requirements at September 30, 1996.
<TABLE>
<CAPTION>
Amount Percent (*)
------ -----------
<S> <C> <C>
Tangible Capital:
Capital level ...................... $33,004,781 7.90%
Requirement ........................ 6,266,623 1.50%
----------- -----
Excess ............................. $26,738,158 6.40%
----------- -----
Core Capital:
Capital level ...................... $33,004,781 7.90%
Requirement ........................ 12,533,246 3.00%
----------- -----
Excess ............................. $20,471,535 4.90%
----------- -----
Risk-Based Capital:
Capital level ...................... $34,750,130 19.95%
Requirement ........................ 13,936,729 8.00%
----------- -----
Excess ............................. $20,813,401 11.95%
----------- -----
</TABLE>
(*) Tangible and core capital are computed as a percentage of adjusted total
assets of $417,774,856. Risk-based capital is computed as a percentage of
risk-weighted assets of $174,209,107.
<PAGE>
REGULATORY DEVELOPMENTS
Pending Legislation Regarding Bad Debt Reserves - Under Section 593 of the
Internal Revenue Code of 1986, as amended (the "Code"), thrift institutions such
as the Bank, which meet certain definitional tests primarily relating to their
assets and the nature of their business, are permitted to establish a tax
reserve for bad debts and to make annual additions thereto, which additions may,
within specified limitations, be deducted in arriving at their taxable income.
The Company's deduction with respect to "qualifying loans", which are generally
loans secured by certain interests in real property, may currently be computed
using an amount based on the Company's loss experience (the "experience
method"), or a percentage equal to 8.0% of the Company's taxable income (the
"percentage of taxable income method"), computed without regard to this
deduction and with additional modifications and reduced by the amount of any
permitted addition to the non-qualifying reserve.
Under recenty passed legislation, Section 593 of the Internal Revenue Code of
1986 has been repealed and the Bank will be permitted to use only the experience
method of computing additions to its bad debt reserve. In addition, the Bank
will be unable to make additions to its tax bad debt reserve, and will be
permitted to deduct bad debts only as they occur. The legislation will not
affect the Company's tax calculation during the current fiscal year. Management
can not now predict the impact of the legislation on the results of operations
in future fiscal years.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
None.
ITEM 2. Changes in Securities
None.
ITEM 3. Defaults Upon Senior Securities
None.
ITEM 4. Submission of Matters to a Vote of Security Holders
The annual meeting of stockholder was held in Evansville, Indiana on July 23,
1996. A total of 1,698,949 shares of Common Stock, 75.6% of outstanding shares,
were represented in person or by proxy.
The following is a record of votes cast in the election of directors of the
Company for 3-year terms expiring in 1999:
<TABLE>
<CAPTION>
FOR VOTES WITHELD
--- -------------
<S> <C> <C>
Donald P. Weinzapfel 1,652,300 46,649
John R. Stone 1,650,393 48,556
James D. Butterfield 1,651,465 47,484
</TABLE>
Accordingly, the individuals named above were declared to be duly
elected directors of the Company.
Messrs. Korb, Northerner, Vogel, Forster, and Kinkel will continue as
directors.
The following is a record of the votes cast in respect of the proposal to ratify
the appointment of Deloitte & Touche LLP as auditors of the Company for the
fiscal year ending March 31, 1997.
<TABLE>
<CAPTION>
PERCENTAGE OF
VOTES IN
NUMBER ATTENDANCE
OF VOTES AT THE MEETING
-------- --------------
<S> <C> <C>
FOR 1,695,924 98.82%
AGAINST 1,700 .10
ABSTAIN 1,325 .08
</TABLE>
Accordingly, the proposal described above was declared to be duly
adopted by the stockholders of the company.
<PAGE>
ITEM 5. Other Information
None
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
<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.
PERMANENT BANCORP, INC.
DATE: November 13, 1996 By: s/sDonald P. Weinzapfel
-----------------------
Donald P. Weinzapfel
Chairman of the Board
President and Chief Executive Officer
(Principal Executive Officer)
DATE: November 13, 1996 By: s/s Joseph M. Schnapf
---------------------
Joseph M. Schnapf
Chief Financial Officer
(Principal Financial Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
The schedule contains summary financial information extracted from the quarterly
report of Form 10-Q for the fiscal quarter ended September 30, 1996 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> SEP-30-1996
<CASH> 2,896,504
<INT-BEARING-DEPOSITS> 857,123
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 158,533,614
<INVESTMENTS-CARRYING> 29,343,873
<INVESTMENTS-MARKET> 29,209,747
<LOANS> 211,889,617
<ALLOWANCE> 2,274,585
<TOTAL-ASSETS> 421,657,637
<DEPOSITS> 271,731,184
<SHORT-TERM> 61,954,624
<LIABILITIES-OTHER> 5,223,994
<LONG-TERM> 42,841,308
24,598
0
<COMMON> 0
<OTHER-SE> 39,881,929
<TOTAL-LIABILITIES-AND-EQUITY> 421,657,637
<INTEREST-LOAN> 8,314,320
<INTEREST-INVEST> 6,112,954
<INTEREST-OTHER> 235,083
<INTEREST-TOTAL> 14,662,357
<INTEREST-DEPOSIT> 6,696,363
<INTEREST-EXPENSE> 9,282,577
<INTEREST-INCOME-NET> 5,379,780
<LOAN-LOSSES> 148,486
<SECURITIES-GAINS> 2,366
<EXPENSE-OTHER> 5,952,787
<INCOME-PRETAX> 74,887
<INCOME-PRE-EXTRAORDINARY> (56,091)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (56,091)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> (0.03)
<YIELD-ACTUAL> 7.51
<LOANS-NON> 4,916,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 2,147,000
<LOANS-PROBLEM> 267,650
<ALLOWANCE-OPEN> 2,251,907
<CHARGE-OFFS> 77,608
<RECOVERIES> 19,832
<ALLOWANCE-CLOSE> 2,274,585
<ALLOWANCE-DOMESTIC> 529,236
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,745,349
</TABLE>
