SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number: 0-23370
PERMANENT BANCORP, INC.
- --------------------------------------------------------------------------------
(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 7, 1997, there were 2,103,105 shares of the Registrant's Common
Stock outstanding.
<PAGE>
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 .................................................
<PAGE>
<TABLE>
<CAPTION>
PERMANENT BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
SEPTEMBER 30,1997 MARCH 31, 1997
------------- -------------
<S> <C> <C>
Cash .......................................................................... $ 4,114,126 $ 3,211,091
Interest-bearing deposits ..................................................... 26,510 3,153,385
------------- -------------
Total cash and cash equivalents ............................................... 4,140,636 6,364,476
Securities available for sale - at fair value (amortized cost $85,851,253
and $87,020,254) ........................................................... 85,656,281 85,180,313
Mortgage-backed securities available for sale at fair value (amortized
cost $81,580,475 and $74,846,178) .......................................... 81,845,349 74,052,253
Securities held to maturity (fair value $0 and $25,000) ....................... -- 25,000
Mortgage-backed securities held to maturity (fair value $25,117,433
and $27,197,070) ........................................................... 24,818,609 27,180,891
Other Investments ............................................................. 1,447,670 1,056,036
Loans (net of allowance for loan losses of $2,183,882 and $2,126,225) ......... 215,689,670 210,189,422
Interest receivable, net ...................................................... 3,541,786 3,539,085
Office properties and equipment, net .......................................... 7,863,559 6,968,587
Real estate owned, net ........................................................ 22,001 40,653
Deferred income tax ........................................................... 299,118 1,374,109
Federal Home Loan Bank stock .................................................. 5,466,000 5,192,600
Cash surrender value of life insurance ........................................ 1,589,655 1,552,875
Goodwill (net of accumulated amortization of $1,825,136 and $1,741,967) ....... 536,780 326,198
Other ......................................................................... 651,268 655,833
------------- -------------
$ 433,568,382 $ 423,698,331
============= =============
Deposits ...................................................................... $ 278,921,694 $ 280,753,353
Federal Home Loan Bank advances ............................................... 107,061,260 98,483,986
Advance payments by borrowers for taxes and insurance ......................... 920,412 1,014,598
Other borrowed funds .......................................................... 2,338,202 1,793,967
Interest payable .............................................................. 2,072,197 2,049,727
Other ......................................................................... 1,228,642 508,073
------------- -------------
$ 392,542,407 $ 384,603,704
------------- -------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PERMANENT BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
(continued)
SEPTEMBER 30,1997 MARCH 31, 1997
------------- -------------
<S> <C> <C>
Serial Preferred Stock ($.01 par value) Authorized and unissued -
1,000,000 shares
Common Stock ($.01 par value) Authorized - 9,000,000 shares; Issued -
2,458,982 shares; Outstanding - 2,013,791 and 2,052,075 shares ............. $ 24,590 $ 24,590
Additional paid-in capital .................................................... 24,208,440 24,045,413
Treasury Stock - 356,177 and 317,893 shares ................................... (6,427,005) (5,547,823)
Retained Earnings - substantially restricted .................................. 24,265,803 23,393,701
Unrealized gain (loss) on securities available for sale, net of deferred tax of
$34,808 and $(1,043,275) ................................................... 50,525 (1,590,591)
ESOP Borrowing ................................................................ (833,175) (952,200)
Unearned compensation - restricted stock awards ............................... (263,203) (278,463)
------------- -------------
$ 41,025,975 $ 39,094,627
------------- -------------
$ 433,568,382 $ 423,698,331
============= =============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
PERMANENT BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------ ------------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Loans ............................................... $ 4,372,781 $ 4,196,681 $ 8,660,601 $ 8,314,320
Mortgage-backed securities .......................... 1,818,734 1,435,494 3,478,685 2,961,832
Investment securities ............................... 1,465,321 1,671,767 3,052,009 3,151,122
Deposits ............................................ 14,372 34,583 31,845 54,384
Dividends on Federal Home Loan Bank stock ........... 112,875 97,715 214,780 180,699
------------ ------------ ------------ ------------
7,784,083 7,436,240 15,437,920 14,662,357
------------ ------------ ------------ ------------
Deposits ............................................ 3,419,637 3,358,373 6,823,656 6,696,363
Federal Home Loan Bank advances ..................... 1,564,765 1,311,562 2,982,693 2,539,802
Short-term borrowings ............................... 16,876 41,260 45,827 46,412
------------ ------------ ------------ ------------
5,001,278 4,711,195 9,852,176 9,282,577
------------ ------------ ------------ ------------
2,782,805 2,725,045 5,585,744 5,379,780
75,164 88,486 152,550 148,486
------------ ------------ ------------ ------------
PROVISION ........................................... 2,707,641 2,636,559 5,433,194 5,231,294
------------ ------------ ------------ ------------
Service charges ..................................... 233,675 214,404 460,486 419,171
Gain on sale of loans ............................... 29,258 1,865 48,629 4,862
Net gain on real estate owned ....................... 27,436 5,020 40,677 2,191
Commissions ......................................... 171,837 162,588 299,523 257,901
Gain on sale of investment and mortgage-backed
securities ......................................... 4,016 $ 8,201 10,285 $ 2,366
Other ............................................... 63,762 55,339 167,419 112,080
------------ ------------ ------------ ------------
529,984 447,417 1,027,019 798,571
------------ ------------ ------------ ------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PERMANENT BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------ ------------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Salaries and employee benefits ...................... 1,132,894 1,086,977 2,255,661 2,112,540
Deposit insurance assessments ....................... 69,223 1,952,115 138,179 2,134,106
Occupancy ........................................... 204,590 223,152 403,167 416,399
Equipment ........................................... 158,837 137,942 322,309 297,453
Computer service .................................... 138,460 118,912 263,543 249,023
Advertising ......................................... 84,038 67,947 172,952 153,147
Postage and office supplies ......................... 66,474 74,988 144,721 127,865
Other ............................................... 286,239 258,259 563,661 464,445
------------ ------------ ------------ ------------
2,140,755 3,920,292 4,264,193 5,954,978
------------ ------------ ------------ ------------
1,096,870 (836,316) 2,196,020 74,887
451,966 (275,822) 913,194 130,978
------------ ------------ ------------ ------------
$ 644,904 $ (560,494) $ 1,282,826 $ (56,091)
============ ============ ============ ============
Primary ............................................. $ 0.30 $ (0.25) $ 0.60 $ (0.03)
Fully Diluted ....................................... $ 0.30 $ (0.25) $ 0.60 $ (0.03)
Primary ............................................. 2,136,661 2,217,005 2,132,991 2,214,058
Fully diluted ....................................... 2,137,989 2,220,109 2,133,466 2,217,162
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
PERMANENT BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED SEPTEMBER 30,
--------------------------------
1997 1996
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................................. $ 1,282,826 $ (56,091)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation ................................... 267,273 251,699
Deposit premium purchased ...................... (293,751)
Amortization and accretion .................... 163,855 76,247
Vesting of restricted stock awards ............. 4,760 46,810
Provisions for loan and real estate owned losses 57,658 36,781
(Gain) on sale of securities ................... (3,518) (19,813)
(Gain) on sale of mortgage-backed securities ... (1,265) (761)
(Gain) on sale of loans ........................ (48,629) (4,862)
Loss on sale of bank premises .................. 119
(Gain) on sale of real estate owned ............ (24,744)
ESOP shares earned ............................. 165,597 77,310
Changes in assets and liabilities:
Proceeds from the sales of loans ................... 1,921,689 514,847
Origination of loans for resale .................... (1,873,060) (509,985)
Other investments .................................. (126,203)
Interest receivable ................................ (2,701) (684,048)
Deferred income tax ................................ (3,093) (439,645)
Other assets ....................................... 4,565 (6,323)
Interest payable ................................... 22,470 56,838
Other liabilities .................................. 720,569 1,622,388
------------ ------------
Net cash provided by operating activities .............. 2,234,417 961,392
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Loans originated ....................................... (33,644,339) (32,924,343)
Loan principal repayments .............................. 31,708,431 37,803,024
Proceeds from:
Maturities of:
Securities available for sale .................. 7,000,000 6,974,688
Securities held to maturity .................... 25,000
Sales of:
Securities available for sale .................. 11,957,267 13,365,641
Mortgage-backed securities available for sale .. 338,691 7,694,935
Bank premises .................................. 1,781
Real estate owned .............................. 68,900
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PERMANENT BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED SEPTEMBER 30,
--------------------------------
1997 1996
------------- -------------
<S> <C> <C>
Purchases of:
Securities available for sale ................ (17,825,781) (47,920,625)
Mortgage-backed securities available for sale (13,576,118) (11,757,132)
Equity Investments ........................... (250,000)
Loans ........................................ (3,701,614) (7,665,460)
FHLB Stock ................................... (273,400) (1,689,000)
Office properties, equipment and land ........ (1,164,145) (222,487)
Payments on mortgage-backed securities ............... 8,886,296 8,800,181
Increase in cash surrender value of life insurance ... (36,780) (21,486)
Payments on real estate owned ........................ (3,503) 8,439
------------- -------------
Net cash used in investing activities ................ (10,489,314) (27,553,625)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid ....................................... $ (367,165) $ (280,538)
Net change in deposits ............................... (1,831,659) (8,276,878)
Receipts from FHLB advances .......................... 131,800,000 80,350,000
Payments on FHLB advances ............................ (123,222,726) (48,511,910)
Principal repayment of ESOP borrowing ................ 119,026 119,025
Advance payments by borrowers for taxes and insurance (94,186) 128,639
Net change in other borrowed funds ................... 544,235 1,972,871
Purchase of treasury stock ........................... (993,628) (83,750)
Sale of common stock ................................ 77,160 11,980
------------- -------------
Net cash provided by financing activities ............ 6,031,057 25,429,439
------------- -------------
NET DECREASE IN CASH AND CASH EQUIVALENTS .............. (2,223,840) (1,162,794)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ......... 6,364,476 4,916,421
------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ............... 4,140,636 3,753,627
============= =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest ......................................... $ 6,821,479 $ 6,730,061
Income taxes ..................................... 703,000 505,000
Noncash transactions:
Transfers from loans to real estate owned ........ 22,001 --
</TABLE>
See notes to consolidated financial statements.
<PAGE>
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, 1997 and for the three and six month periods ended
September 30, 1997, and 1996, 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, 1997.
2. CHANGES IN PRESENTATION - Certain amounts and items appearing in the
financial statements for the quarter and six months ended September 30, 1996
have been reclassified to conform with the presentation presented for the period
ended September 30, 1997.
3. FINANCIAL ACCOUNTING STANDARDS NO. 128 (FAS 128) "EARNINGS PER SHARE" - FAS
128 applies to financial statements for public companies for periods ending
after December 15, 1997. Accordingly, the Company will adopt FAS 128 in the
third quarter of fiscal 1998. This statement establishes new accounting
standards for the calculation of basic earnings per share as well as diluted
earnings per share.
The Company's basic and diluted earnings per share calculated in accordance with
FAS 128 for the periods ended September 30, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
Three Months Ended September 30, Six Months ended September 30,
-------------------------------- ------------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Basic .32 (.26) .64 (.03)
Diluted .30 (.25) .60 (.03)
</TABLE>
The difference between basic and diluted earnings per share represents the
dilutive impact of the Company's outstanding stock options.
<PAGE>
4. FINANCIAL ACCOUNTING STANDARDS NO. 130 (FAS 130) "ACCOUNTING FOR
COMPREHENSIVE INCOME" - FAS 130 requires that changes in the amounts of certain
items, including foreign currency translation adjustments and gains and losses
on certain securities be shown in the financial statements. FAS 130 does not
require a specific format for the financial statement in which comprehensive
income is reported, but does require that an amount representing total
comprehensive income be reported in that statement. FAS 130 is effective for
fiscal years beginning after December 15, 1997. FAS 130 will receive
reclassification of earlier financial statements for comparative purposes.
Management has not yet determined the effect, if any, of FAS 130 on the
consolidated financial statements.
5. FINANCIAL ACCOUNTING STANDARDS NO. 131 (FAS 131) "DISCLOSURES ABOUT SEGMENTS
OF AN ENTERPRISE AND RELATED INFORMATION" FAS 131 changes the way public
companies report information about segments of their business in their annual
financial statements and requires them to report selected segment information in
their quarterly reports issued to shareholders. It also requires entity-wide
disclosures about the products and services an entity provides, the material
countries in which it holds assets and reports revenues, and its major
customers. FAS 131 is effective for fiscal years beginning after December 15,
1997. Management has not yet determined the effect, if any, of FAS 131 on the
consolidated financial statements.
<PAGE>
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, 1997 COMPARED TO SEPTEMBER 30, 1996
NET INTEREST INCOME - Net interest income before provision for loan losses
increased by $58,000 or 2.1% for the quarter ended September 30, 1997 compared
to the quarter ended September 30, 1996. This increase was primarily
attributable to an increase in interest earning assets which offset a slight
decline 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 loan loss provisions increased by $71,000, or 2.7% for
the quarter ended September 30, 1997 compared to the quarter ended September 30,
1996. The increase was larger than the increase in net interest income before
provision for loan losses because of a decrease in the loss provision.
INTEREST INCOME - Total interest income for the three months ended September 30,
1997 increased $348,000, or 4.7%, from the three month period ended September
30, 1996. This increase was attributable to an increase of 4 basis points in the
average rate earned on total interest earning assets and an increase of $17.4
million in average balances for the comparable periods.
INTEREST EXPENSE - Total interest expense increased by $290,000, or 6.2%, during
the three months ended September 30, 1997 compared to the three months ended
September 30, 1996. Average interest bearing liabilities increased by $18.6
million and the average cost of such liabilities increased by 9 basis points,
compared to the quarter ended September 30, 1996.
OTHER INCOME - Total other income increased by $83,000 during the quarter ended
September 30, 1997 compared to the quarter ended September 30, 1996. Service
charges were $19,000 more and commissions were $9,000 more during the quarter
ended September 30, 1997 than during the comparable quarter in 1996. During the
quarter ended September 30, 1997 the Company recognized gains on sales of loans
of $29,000 compared to $2,000 during the quarter ended September 30, 1996 and
recognized gains of $27,000 on sales of real estate owned compared to gains of
$5,000 during the quarter ended September 30, 1996. The remaining other income
accounts were down by $6,000 during the current year quarter.
OTHER EXPENSE - Other expense decreased a total of $1,780,000 during the quarter
ended September 30, 1997 compared to the quarter ended September 30, 1996,
largely because of the one time FDIC assessment in the amount of $1,766,000 paid
during the quarter ended September 30, 1996. Deposit insurance assessments,
excluding the one time assessment, decreased by $117,000 during the quarter
ended September 30, 1997 compared to the quarter ended September 30, 1996 due to
<PAGE>
lower rates. Salaries and employee benefits increased by $46,000 or 4.2% during
the quarter ended September 30, 1997 compared to the same period in 1996.
Occupancy expenses decreased by $19,000 while equipment and computer expenses
increased by $40,000 during the comparable periods. Advertising expenditures
were $16,000 higher during the quarter ended September 30, 1997 than during the
quarter ended September 30, 1996. Postage and office supplies were $9,000 lower
during the quarter ended September 30, 1997. The remaining other expense
categories were $29,000 higher during the current year quarter.
INCOME TAXES - Provisions for income taxes amounted to $452,000, or 41.2% of
income before taxes during the quarter ended September 30, 1997, compared to a
credit of $276,000, or 33.0% of income before taxes during the quarter ended
September 30, 1996.
SIX MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO SIX MONTHS ENDED SEPTEMBER 30,
1996
NET INTEREST INCOME - Net interest income before provision for loan losses
increased by $206,000 or 3.8% for the six months ended September 30, 1997
compared to the six months ended September 30, 1996. This increase was primarily
attributable to an increase in interest earning assets.
Net interest income after loan loss provisions increased by $202,000, or 3.9%
for the six months ended September 30, 1997 compared to the six months ended
September 30, 1996. The increase was smaller than the increase in net interest
income before provision for loan losses because of an increase of $4,000 in the
loss provision.
INTEREST INCOME - Total interest income for the six months ended September 30,
1997 increased $776,000, or 5.3%, from the six month period ended September 30,
1996. This increase was attributable to an increase of $18.6 million in average
balances which more than offset a decrease of 4 basis points in the average rate
earned on total interest earning assets for the comparable periods.
INTEREST EXPENSE - Total interest expense increased by $570,000, or 6.1%, during
the six months ended September 30, 1997 compared to the six months ended
September 30, 1996. Average interest bearing liabilities increased by $21.1
million, which more than offset the 3 basis point decrease in the average rate
on such liabilities, compared to the six months ended September 30, 1996.
OTHER INCOME - Total other income increased by $228,000 during the six months
ended September 30, 1997 compared to the six months ended September 30, 1996.
Service charges were $42,000 more and commissions were $42,000 more during the
six months ended September 30, 1997 than during the comparable quarter in 1996.
During the six months ended September 30, 1997 the Company earned gains on sales
of loans of $48,000 compared to $5,000 during the six months ended September 30,
1996 and recognized gains of $10,000 on sales of investment and mortgage-backed
securities compared to gains of $2,000 during the six months ended September 30,
1996. The Company recognized gains of $41,000 on the sale of real estate owned
during the current year period compared to $2,000 during the prior year period.
The remaining other income accounts were up by $54,000 during the current year
period.
<PAGE>
OTHER EXPENSE - Other expense decreased a total of $1,691,000 during the six
months ended September 30, 1997 compared to the six months ended September 30,
1996, largely because of the one time FDIC assessment in the amount of
$1,766,000 paid during the 1996 period. Salaries and employee benefits increased
by $143,000 or 6.8% during the six months ended September 30, 1997 compared to
the same period in 1996. Occupancy expenses decreased by $13,000 and equipment
and computer expenses increased by $39,000 during the comparable periods.
Deposit insurance assessments, exclusive of the one time assessment, were
$230,000 lower during the six months ended September 30, 1997 due to a decrease
in deposit insurance rates paid. Advertising expenditures were $20,000 higher
and postage and office supplies were $17,000 higher than during the six months
ended September 30, 1996. The remaining other expense categories were up by
$99,000 during the six months ended September 30, 1997 compared to the
comparable period in 1996.
INCOME TAXES - Provisions for income taxes were $913,000, or 41.6% of income
before taxes during the six months ended September 30, 1997. During the six
month period ended September 30, 1996 the Company recorded a tax liability of
$131,000 even though income before tax amounted to only $75,000. This occurred
because the Company incurred expenses, including loan loss provisions, which
were not deductible for tax purposes.
FINANCIAL CONDITION SEPTEMBER 30, 1997 COMPARED TO MARCH 31, 1997
The Company's total assets at September 30, 1997 were $433.6 million
representing an increase of $9.9 million, or 2.3%, from March 31, 1997.
Investment and mortgage-backed securities, including those classified as
available for sale, increased by $5.9 million to $192.3 million at September 30,
1997 from $186.4 million at March 31, 1997. Net loans increased by $5.5 million
to $215.7 million at September 30, 1997 compared to $210.2 million at March 31,
1997.
During May, 1997 the Bank assumed the $5.7 million deposit liabilities and
purchased the building and certain other assets of a branch of First Chicago/NBD
Corp. located in Bell Oaks Shopping Center in Newburgh, Indiana. This branch is
located in what is widely considered the prime banking and commercial area of
Newburgh, an upscale and rapidly growing community immediately east of
Evansville. On September 19, 1997, the Bank's existing Newburgh Branch at
Stonegate Square was closed and the accounts transferred to the new location.
The loan growth occurred in single family mortgage loans, commercial loans and
through the purchase of commercial paper. Consumer loans decreased by $3.3
million during the period. 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 with terms exceeding 20 years.
<PAGE>
Non-performing assets were at $4.7 million at September 30, 1997, and at March
31, 1997, compared to $7.2 million at September 30, 1996. As of September 30,
1997, the Bank's loan loss allowance was $2,183,882. 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, 1997.
<TABLE>
<CAPTION>
1997 1996
---------- -----------
<S> <C> <C>
Balance, April 1 $2,126,225 $2,237,804
Provision for loan losses 152,550 148,486
Net charge offs (94,893) (111,705)
---------- ----------
Balance, September 30 $2,183,882 $2,274,585
</TABLE>
The loan growth and the increase in investment and mortgage-backed securities
was funded through Federal Home Loan Bank advances which increased by $8.6
million to $107.1 million at September 30, 1997 compared to $98.5 million at
March 31, 1997. Deposits decreased by $1.9 million to $278.9 million at
September 30, 1997 compared to $280.8 million at March 31, 1997.
Total stockholders' equity increased by $1.9 million to $41.0 million at
September 30, 1997 from $39.1 million at March 31, 1997. The increase was
attributable to a decrease of $1.6 million in unrealized losses on securities
available for sale, retention of earnings, reduction of Employee Stock Ownership
Plan liability, vesting of restricted stock awards and through the exercise of
stock options. Decreases in stockholders' equity resulted from the repurchase of
stock and the payment of dividends. 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, 1997, the Bank's liquidity ratio
was 11.86%. 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, 1997, the Bank had $107,061,000
in such borrowings. As of that date, the Bank had commitments to fund loan
origination's and construction loans of approximately $4.6 million and
commitments to sell loans in the amount of $104,000. The Company had no
commitments to purchase securities, but had commitments to sell approximately
$9.0 million in mortgage pool securities and $1.0 million in U.S. Treasury
securities. In the opinion of management, the Bank has sufficient cash flow and
borrowing capacity to meet current and anticipated funding commitments.
<PAGE>
The following table sets forth the Bank's compliance with its capital
requirements at September 30, 1997.
<TABLE>
<CAPTION>
Amount Percent (*)
------ -----------
<S> <C> <C>
Tangible Capital:
Capital level $36,113,994 8.38%
Requirement 6,467,510 1.50%
----------- ----
Excess $29,646,484 6.88%
----------- ----
Core Capital:
Capital level $36,400,401 8.44%
Requirement 12,943,613 3.00%
----------- ----
Excess $23,456,788 5.44%
----------- ----
Risk-Based Capital:
Capital level $38,235,582 21.01%
Requirement 14,561,198 8.00%
----------- -----
Excess $23,674,384 13.01%
----------- -----
</TABLE>
(*) Tangible capital is computed as a percentage of adjusted total assets of
$431,167,366. Core capital is computed as a percentage of adjusted total assets
of $431,453,773. Risk-based capital is computed as a percentage of risk-weighted
assets of $182,014,980.
<PAGE>
<TABLE>
<CAPTION>
SUPPLEMENTAL DATA
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------- ------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average interest rate earned on
total interest-earning assets 7.53% 7.49% 7.47% 7.51%
Weighted average cost of total
interest-bearing liabilities 5.18% 5.09% 5.10% 5.13%
Interest rate spread during period 2.35% 2.40% 2.37% 2.38%
Net yield on interest-earning assets
(net interest income divided by average
interest-earning assets on annualized basis) 2.68% 2.74% 2.73% 2.75%
Total interest income divided by average
total assets (on annualized basis) 7.18% 7.14% 7.20% 7.17%
Total interest expense divided by
average total assets (on annualized basis) 4.62% 4.53% 4.60% 4.54%
Net interest income divided by average
total assets (on annualized basis) 2.56% 2.61% 2.60% 2.63%
Return on assets (net income divided by
average total assets on annualized basis) 0.60% -0.54% 0.60% 0.03%
Return on equity (net income divided by
average total equity on annualized basis) 6.39% -5.59% 6.40% 0.28%
Interest rate spread at end of period 2.37% 2.41% 2.37% 2.41%
<CAPTION>
Data as of
September 30, March 31,
1997 1997
------ ------
(IN THOUSANDS)
<S> <C> <C>
NONPERFORMING ASSETS:
Loans: Non-accrual .......................... $2,425 $2,463
Restructured ........................ 2,109 2,128
------ ------
Total nonperforming loans .................... $4,534 $4,591
Real estate owned, net ....................... 22 41
Other repossessed assets, net ................ 90 58
------ ------
Total Nonperforming Assets ..................... $4,646 $4,690
Nonperforming assets divided by total assets ... 1.07% 1.11%
Nonperforming loans divided by total loans ..... 2.10% 2.18%
Balance in Allowance for Loan Losses ........... $2,184 $2,126
</TABLE>
<PAGE>
REGULATORY DEVELOPMENTS
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, were permitted to establish a tax reserve for
bad debts and to make annual additions thereto, which additions could, 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, could previously 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 recently 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 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 the
current or 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 22, 1997. A total of 1,662,918 shares of Common Stock, 79.2% 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 2000:
FOR VOTES WITHHELD
--- --------------
Daniel F. Korb 1,504,659 158,259
Robert L. Northerner 1,504,658 158,260
James W. Vogel 1,505,288 157,630
Accordingly, the individuals named above were declared to be duly
elected directors of the Company.
Messrs. Weinzapfel, Stone, Butterfield, Forster, McCarty, Brown, 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, 1998.
PERCENTAGE OF
VOTES IN
NUMBER ATTENDANCE
OF VOTES AT THE MEETING
-------- --------------
FOR 1,628,718 97.94%
AGAINST 19,950 1.20
ABSTAIN 14,250 .86
Accordingly, the proposal described above was declared to be duly
adopted by the stockholders of the company.
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 12, 1997 By: /s/Donald P. Weinzapfel,
-----------------------
Donald P. Weinzapfel,
Chairman of the Board
President and Chief Executive Officer
(Principal Executive Officer)
DATE: November 12, 1997 By: /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 ON FORM 10-Q FOR THE FISCAL QUARTER ENDED SEPTEMBER 30, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> SEP-30-1997
<CASH> 4,114,126
<INT-BEARING-DEPOSITS> 26,510
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 167,501,630
<INVESTMENTS-CARRYING> 24,818,609
<INVESTMENTS-MARKET> 25,117,433
<LOANS> 217,873,552
<ALLOWANCE> 2,183,882
<TOTAL-ASSETS> 433,568,382
<DEPOSITS> 278,921,694
<SHORT-TERM> 83,788,202
<LIABILITIES-OTHER> 4,221,251
<LONG-TERM> 25,618,040
24,590
0
<COMMON> 0
<OTHER-SE> 41,001,385
<TOTAL-LIABILITIES-AND-EQUITY> 433,568,382
<INTEREST-LOAN> 8,660,601
<INTEREST-INVEST> 6,530,694
<INTEREST-OTHER> 246,625
<INTEREST-TOTAL> 15,437,920
<INTEREST-DEPOSIT> 6,823,656
<INTEREST-EXPENSE> 9,852,176
<INTEREST-INCOME-NET> 5,433,194
<LOAN-LOSSES> 152,550
<SECURITIES-GAINS> 10,285
<EXPENSE-OTHER> 4,264,193
<INCOME-PRETAX> 2,196,020
<INCOME-PRE-EXTRAORDINARY> 913,194
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 913,194
<EPS-PRIMARY> 0.60
<EPS-DILUTED> 0.60
<YIELD-ACTUAL> 7.47
<LOANS-NON> 2,425,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 2,109,000
<LOANS-PROBLEM> 300,699
<ALLOWANCE-OPEN> 2,126,225
<CHARGE-OFFS> 137,963
<RECOVERIES> 43,070
<ALLOWANCE-CLOSE> 2,183,882
<ALLOWANCE-DOMESTIC> 343,702
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,840,180
</TABLE>
