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, 1998
[ ] 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 November 9, 1998, there were 3,859,098 shares of the Registrant's Common
Stock outstanding.
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PERMANENT BANCORP, INC.
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
Item 3. Quantitative & Qualitative Disclosures of Market Risk
PART II. OTHER INFORMATION
Signatures
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<CAPTION>
PERMANENT BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
September 30, March 31,
1998 1998
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<S> <C> <C>
ASSETS:
Cash .................................................................... $ 6,686,087 $ 4,274,700
Interest-bearing deposits ............................................... 11,868,825 1,808,159
------------ ------------
Total cash and cash equivalents ......................................... 18,554,912 6,082,859
Securities available for sale - at fair value (amortized cost $95,118,385
and $105,529,613) ..................................................... 95,462,255 105,618,621
Mortgage-backed securities available for sale at fair value (amortized
cost $46,897,643 and $62,368,921) ....................................... 47,661,574 62,652,286
Mortgage-backed securities held to maturity (fair value $16,324,314
and $19,119,093) ...................................................... 16,113,992 18,861,416
Other investments ....................................................... 1,171,347 1,100,826
Loans (net of allowance for loan losses of $2,045,942 and $1,973,410) ... 285,270,126 225,349,258
Interest receivable, net ................................................ 3,155,700 3,270,173
Office properties and equipment, net .................................... 8,739,924 7,533,251
Real estate owned ....................................................... 10,413 93,182
Federal Home Loan Bank stock ............................................ 5,466,000 5,466,000
Cash surrender value of life insurance .................................. 2,248,917 1,625,253
Goodwill (net of accumulated amortization of $2,130,606 and $1,909,003) . 9,801,420 452,912
Other ................................................................... 9,172,479 1,008,463
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TOTAL ASSETS ............................................................... $502,829,059 $439,114,500
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY:
LIABILITIES:
Deposits ................................................................ $351,254,152 $282,942,123
Federal Home Loan Bank advances ......................................... 96,013,124 99,352,678
Other Long-Term Debt .................................................... 4,153,875
Advance payments by borrowers for taxes and insurance ................... 905,032 979,859
Interest payable ........................................................ 2,162,129 2,193,548
Other ................................................................... 8,253,370 10,963,033
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TOTAL LIABILITIES .......................................................... 462,741,682 396,431,241
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</TABLE>
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<TABLE>
<CAPTION>
PERMANENT BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
(continued)
September 30, March 31,
1998 1998
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<S> <C> <C>
STOCKHOLDERS' EQUITY:
Serial Preferred Stock ($.01 par value) Authorized and unissued-
1,000,000 shares
Common Stock ($.01 par value) Authorized - 9,000,000 shares; issued -
4,927,000 shares; Outstanding - 3,858,898 and 4,102,094 shares ........ 49,212 49,241
Additional paid-in capital .............................................. 24,777,513 24,525,662
Treasury Stock - 947,244 and 682,674 shares ............................. (10,080,753) (6,255,083)
Retained Earnings - substantially restricted ............................ 25,561,453 25,127,127
Unrealized gain on securities available for sale, net of deferred tax of
$437,720 and $147,127 ................................................. 670,081 225,247
ESOP Borrowing .......................................................... (595,125) (714,150)
Unearned compensation - restricted stock awards ......................... (295,004) (274,785)
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TOTAL STOCKHOLDERS' EQUITY ................................................. 40,087,377 42,683,259
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ................................ $502,829,059 $439,114,500
============ ============
</TABLE>
See notes to consolidated financial statements
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<TABLE>
<CAPTION>
PERMANENT BANCORP, INC. AND SUBSIDIARY
PERMANENT BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------- ---------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans ........................................ $ 5,699,498 $ 4,372,781 $10,146,753 $ 8,660,601
Mortgage-backed securities ................... 1,152,247 1,818,734 2,369,188 3,478,685
Investment securities ........................ 1,586,876 1,465,321 3,170,038 3,052,009
Deposits ..................................... 50,464 14,372 142,203 31,845
Dividends on Federal Home Loan Bank stock .... 110,634 112,875 219,655 214,780
----------- ----------- ----------- -----------
8,599,719 7,784,083 16,047,837 15,437,920
----------- ----------- ----------- -----------
INTEREST EXPENSE:
Deposits ..................................... 3,998,808 3,419,637 7,420,132 6,823,656
Federal Home Loan Bank advances .............. 1,201,856 1,564,765 2,481,278 2,982,693
Long-term borrowings ......................... 29,374 29,374
Short-term borrowings ........................ 16,876 45,827
----------- ----------- ----------- -----------
5,230,038 5,001,278 9,930,784 9,852,176
----------- ----------- ----------- -----------
NET INTEREST INCOME ............................. 3,369,681 2,782,805 6,117,053 5,585,744
PROVISION FOR LOAN LOSSES ....................... 75,000 75,164 150,000 152,550
----------- ----------- ----------- -----------
NET INTEREST INCOME AFTER LOAN LOSS
PROVISION .................................... 3,294,681 2,707,641 5,967,053 5,433,194
----------- ----------- ----------- -----------
OTHER INCOME:
Service charges .............................. 483,172 233,675 865,086 460,486
Gain on sale of loans ........................ 34,222 29,258 60,427 48,629
Gain on sale of real estate owned ............ 13,656 27,436 46,109 40,677
Commissions .................................. 140,298 171,837 303,692 299,523
Gain on sale of investment and mortgage-backed
securities ................................. 88,146 4,016 152,961 10,285
Other ........................................ 113,507 63,762 226,535 167,419
----------- ----------- ----------- -----------
873,001 529,984 1,654,810 1,027,019
----------- ----------- ----------- -----------
</TABLE>
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<TABLE>
<CAPTION>
PERMANENT BANCORP, INC. AND SUBSIDIARY
PERMANENT BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(continued)
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------- ---------------------------
1998 1997 1998 1997
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<S> <C> <C> <C> <C>
OTHER EXPENSE:
Salaries and employee benefits ............... 1,524,548 1,132,894 2,767,201 2,255,661
Deposit insurance assessments ................ 70,618 69,223 138,179 138,179
Occupancy .................................... 194,048 204,590 405,174 403,167
Equipment .................................... 187,110 158,837 347,200 322,309
Computer service ............................. 225,445 138,460 380,205 263,543
Advertising .................................. 136,747 84,038 250,446 172,952
Postage and office supplies .................. 187,265 66,474 279,346 144,721
Other ........................................ 540,503 286,239 877,185 563,661
----------- ----------- ----------- -----------
3,066,284 2,140,755 5,444,936 4,264,193
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES ...................... 1,101,398 1,096,870 2,176,927 2,196,020
INCOME TAX PROVISION ............................ 415,539 451,966 863,720 913,194
----------- ----------- ----------- -----------
NET INCOME ...................................... $ 685,859 $ 644,904 $ 1,313,207 $ 1,282,826
=========== =========== =========== ===========
EARNINGS PER SHARE OF COMMON STOCK
Basic ........................................ $ 0.17 $ 0.16 $ 0.32 $ 0.32
Diluted ...................................... $ 0.16 $ 0.15 $ 0.30 $ 0.30
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic ........................................ 4,014,550 4,036,192 4,061,701 4,029,802
Diluted ...................................... 4,249,693 4,278,000 4,315,675 4,270,520
</TABLE>
See notes to consolidated financial statements
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<TABLE>
<CAPTION>
PERMANENT BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED SEPTEMBER 30,
------------------------------
1998 1997
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .......................................... $ 1,313,207 $ 1,282,826
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation ................................... 258,127 267,273
Amortization and accretion ..................... 552,024 163,855
Vesting of restricted stock awards ............. 4,760
Provisions for loan and real estate owned losses 72,532 57,658
(Gain) on sale of securities ................... (152,961) (10,285)
(Gain) on sale of loans ........................ (60,427) (48,629)
Loss on sale of bank premises .................. 119
(Gain) on sale of real estate owned ............ (46,109) (40,677)
ESOP shares earned ............................. 231,623 165,597
Changes in assets and liabilities:
Proceeds from the sales of loans .................. 4,392,468 1,921,689
Origination of loans for resale ................... (4,332,000) (1,873,060)
Other investments ................................. (51,998) (126,203)
Interest receivable ............................... 114,473 (2,701)
Other assets ...................................... (2,052,202) 1,472
Interest payable .................................. 31,419 22,470
Other liabilities ................................. (2,709,704) 742,004
------------ ------------
Net cash provided by (used in )operating activities . (2,439,528) 2,528,168
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash acquired through branch acquisitions ........... 26,872,394 4,578,736
Loans originated .................................... (56,251,768) (33,644,339)
Loan principal repayments ........................... 44,588,930 31,708,431
Proceeds from:
Maturities of:
Securities available for sale ................ 66,935,465 7,000,000
Securities held to maturity .................. 25,000
Sales of:
Securities available for sale ................ 30,607,069 12,295,958
Real estate owned ............................ 115,060 68,900
Purchases of:
Securities available for sale ................ (79,417,891) (17,825,781)
Mortgage-backed securities available for sale (14,652,047) (13,576,118)
Equity Investments ........................... (250,000)
Loans ........................................ (5,099,080) (3,731,733)
FHLB Stock ................................... (273,400)
Office properties, equipment and land ........ (556,808) (265,998)
Payments on mortgage-backed securities .............. 16,243,701 8,886,296
Increase in cash surrender value of life insurance .. (623,664) (36,780)
Other ............................................... (10,513)
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Net cash provided by (used in) investing activities . 28,761,361 (5,051,341)
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</TABLE>
(continued to next page)
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<TABLE>
<CAPTION>
SIX MONTHS ENDED SEPTEMBER 30,
------------------------------
1998 1997
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<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid ...................................... (480,263) ($ 367,165)
Net change in deposits .............................. (10,436,728) (7,563,383)
Receipts from FHLB advances ......................... 88,000,000 131,800,000
Payments on FHLB advances ........................... (91,339,554) (123,222,726)
Principal repayment of ESOP borrowing ............... 119,026 119,026
Advance payments by borrowers for taxes and insurance (74,827) (94,186)
Net change in other borrowed funds .................. 544,235
Net change in long-term debt ........................ 4,153,875
Purchase of treasury stock .......................... (4,163,316) (993,628)
Sale of common stock ................................ 90,390 77,160
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Net cash provided by (used in) financing activities . (14,131,397) 299,333
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NET (INCREASE) IN CASH AND CASH EQUIVALENTS ............ 12,190,436 (2,223,840)
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CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ....... 6,364,476 6,364,476
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CASH AND CASH EQUIVALENTS AT END OF PERIOD ............. 18,554,912 4,140,636
============= =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest ....................................... $9,962,203 $ 6,821,479
Income taxes ................................... 850,000 703,000
Noncash transactions:
Transfers from loans to real estate owned ...... 22,001
</TABLE>
See notes to consolidated financial statements.
<PAGE>
PERMANENT BANCORP, INC.
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 financial statements at
September 30, 1998 and for the three and six month periods ended September 30,
1998 and 1997 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.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is therefore suggested that these statements
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, 1998.
2. BRANCH ACQUISITION - On June 26, 1998 the Company acquired four branch
banking offices from NBD, N.A. in a transaction accounted for as a purchase. The
Company acquired approximately $79 million of deposit liabilities and $43
million of loans in the transaction. Included in the Consolidated Statements of
Financial Condition at September 30, 1998 is approximately $9.4 million of
goodwill related to the acquisition, net amortization of approximately $159,000.
Generally accepted accounting principles provide for an allocation period,
generally not to exceed one year, to identify and quantify the fair value of
assets acquired and liabilities assumed. Therefore, the allocations reflected in
the accompanying financial statements are subject to change as additional
information concerning fair values becomes available.
3. STOCK DIVIDEND - In April, 1998 the Company announced a two-for-one stock
split effected in the form of a 100% stock dividend paid on April 14, 1998. The
consolidated financial statements, notes and other references to share and per
share data have been retroactively restated for this stock dividend.
4. STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 130, "COMPREHENSIVE INCOME" -
This statement requires that changes in the amounts of certain items, including
foreign currency translation adjustments and unrealized gains and losses on
certain securities be shown in the annual financial statements. FAS 130 does not
require a specific format for the annual financial statement in which
comprehensive income is reported, but does require that an amount representing
total comprehensive income be reported in that statement. This statement was
adopted by the Company effective April 1, 1998 and all prior year financial
statements will be reclassified for comparative purposes.
<PAGE>
The following is a summary of the Company's total comprehensive income for the
interim three month and six month periods ended September 30, 1998 and 1997
under FAS 130:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net income .................................. $ 685,859 $ 644,904 $1,313,207 $1,282,826
Other comprehensive income, net of tax:
Unrealized gains (losses) on securities:
Unrealized holding gains
arising during period ............. 145,961 717,651 537,207 932,098
Reclassifications adjustment for (gains)
losses included in net income ..... (53,231) (2,422) (92,373) (6,211)
---------- ---------- ---------- ----------
Other comprehensive income .................. 92,730 715,229 444,834 925,887
COMPREHENSIVE INCOME ........................ $ 778,589 $1,360,133 $1,758,041 $2,208,713
========== ========== ========== ==========
</TABLE>
5. STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 131, "DISCLOSURES ABOUT
SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION". The statement is not
required to be applied to interim reporting and will be applied in the Company's
fiscal 1999 annual financial statements. The statement requires financial
disclosure and descriptive information about reportable operating segments. Upon
its adoption, this statement may result in additional financial statement
disclosures.
6. STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 133, "ACCOUNTING FOR
DERIVATIVE INSTRUMENTS" - This statement was issued on June 16, 1998 and is
effective for all quarters of fiscal years beginning after June 15, 1999. This
statement establishes accounting and reporting standards for derivative
instruments, including derivative instruments embedded in financial contracts
and for hedging. The Company adopted this statement as of October 1, 1998.
Except as noted below, adoption of this statement is not expected to have a
significant impact on the financial condition, results of operations or cash
flows of the Company.
As permitted by the statement, the Company, as of October 1, 1998, transferred
debt securities previously classified as held-to-maturity into the
available-for-sale category. As of September 30, 1998 these securities had a
book value of $16,113,992 and a fair value of $16,324,314.
7. STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 134, "ACCOUNTING FOR
MORTGAGE-BACKED SECURITIES RETAINED AFTER THE SECURITIZATION OF MORTGAGE LOANS
HELD FOR SALE BY A MORTGAGE BANKING ENTERPRISE." This statement was issued on
October 9, 1998 and is effective for fiscal quarters beginning after December
15, 1998. This statement conforms the accounting for securities retained after
securitization of mortgage loans by a mortgage banking enterprise with the
accounting for securities retained after the securitization of other types of
assets by a non-mortgage banking enterprise. The Company is currently evaluating
the statement to determine the impact, if any, that it will have on its results
of operations or financial condition.
<PAGE>
8. COMPANY BORROWING - On August 25, 1998, the Company borrowed $4,153,875 from
an unaffiliated financial institution to purchase 302,100 shares of its common
stock. The debt is secured by the Bank stock owned by the Company. Interest only
on the debt is payable quarterly and is, at the option of the Company, based
upon the prime rate or the ninety day LIBOR rate plus 1.80%.
Annual principal repayments in the amount of $500,000 commence on February 29,
2000 and continue until August 15, 2003 at which time any principal which
remains outstanding is due and payable. The Company may repay principal at
anytime without penalty.
The loan agreement requires that the Company maintain minimum levels of capital
(as regulatorily defined), attain a defined minimum annual return on assets and
maintain a defined level of loan loss reserve to non-performing loans. In
addition, the loan agreement specifies that non-performing loans shall not
exceed 25% of equity. The Company is in compliance with the loan requirements as
of September 30, 1998.
9. CHANGES IN PRESENTATION - Certain amounts and items appearing in the
financial statements for the quarter ended September 30, 1997 have been
reclassified to conform with September 30, 1998 presentation.
<PAGE>
PERMANENT BANCORP, INC.
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 Consolidated Statements of Income, except where noted
are attributable primarily to the operations of the Bank.
INFORMATION SYSTEMS AND THE YEAR 2000
As is the case with most other companies using computers in its operations, the
Company is currently engaged in a comprehensive project to ascertain that the
computer programs it utilizes, both internally generated and those provided by
outside sources, will consistently and properly recognize the year 2000. Many of
the Company's significant systems used to generate both internal reports and
external documents (such as account statements and year-end tax reports) are
generated by an outside provider of data processing services which has
represented these systems will be Year 2000 compliant. The Company has initiated
contingency processing plans should this supplier not become Year 2000 compliant
in a timely manner. The Company is in the process of obtaining assurances from
vendors that timely updates will be made available to make all remaining
purchased software Year 2000 compliant.
The Company has utilized and will continue to utilize both internal and external
resources to reprogram or replace and test all of its software for Year 2000
compliance and the Company expects to complete the project in early calendar
year 1999. The estimated cost for this project is being funded through operating
cash flows. While the Company believes it is taking reasonable steps to assure
Year 2000 compliance, and to date is satisfied with the results of its
evaluation and testing procedures, no assurance can be given by the Company that
either it or its vendors will be Year 2000 compliant and failure by the Company
and/or significant vendors to complete Year 2000 compliance work in a timely
manner could have a material adverse effect on certain of the Company's
operations.
FORWARD LOOKING STATEMENTS
When used in this Form 10-Q and in future filings with the SEC, in the Company's
press releases or other public or shareholder communications, as well as in oral
statements made by the executive officers of the Company or its primary
subsidiary, the words or phrases "will likely result," "are expected to," "will
continue," "is anticipated," "estimated," "project," or similar expresssions are
intended to identify "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements are subject to
certain risks and uncertainties, including, among other things, changes in
economic conditions in the Company's market area, changes in policies by
regulatoroy agencies, fluctuations in interest rates, demand for loans in the
Company's market area and competition, that could cause actual results to differ
materially from historical earnings and those presently anticipated or
projected. The Company wishes to caution readers not to place undue reliance on
any such forward-looking statements, which speak only as of the date made. The
Company wishes to advise readers that the factors listed above could affect its
financial performances and could cause its actual results for future periods to
differ materially from any opinions or statements expressed with respect to
future periods in any current statements.
<PAGE>
The Company does not undertake -- and specifically declines any obligation -- to
publicly release the result of any revisions which may be made to any
forward-looking statements to reflect events or circumstances after the date of
such statements or to reflect the occurrence of anticipated or unanticipated
events.
QUARTER ENDED SEPTEMBER 30, 1998 COMPARED TO SEPTEMBER 30, 1997
NET INTEREST INCOME - Net interest income before provision for loan losses
increased by $586,876 or approximately 21.1% for the quarter ended September 30,
1998 compared to the quarter ended September 30, 1997. This increase is
primarily the result of the acquisition of assets and liabilities of branch
locations from NBD Bank, N.A..
Net interest income after provision for loan losses increased by $587,040, or
approximately 21.7% for the quarter ended September 30, 1998 compared to the
quarter ended September 30, 1997. The increase was larger than the increase in
net interest income before provision for loan losses because of a slight
decrease in the loss provision reflecting a decrease in the level of
non-performing loans.
INTEREST INCOME - Total interest income for the three months ended September 30,
1998 increased $815,636, or approximately 10.5% from the three month period
ended September 30, 1997. This increase occurred despite a decrease of 10 basis
points (.10%) on the interest rate earned on earning assets from the comparable
quarter of 1997, since average interest earning assets at the Bank increased by
approximately $56 million from the quarter ended September 30, 1997 to the
quarter ended September 30, 1998.
INTEREST EXPENSE - Total interest expense increased by $228,760 or approximately
4.6% during the three months ended September 30, 1998 compared to the three
months ended September 30, 1997, despite a decrease in the cost of
interest-bearing liabilities of 49 basis points (.49%) which was offset by an
increase in average interest-bearing liabilities at the Bank of approximately
$77.3 million from the comparable quarter of 1997.
OTHER INCOME - Total other income increased by $343,017 during the quarter ended
September 30, 1998 compared to the quarter ended September 30, 1997. Service
charges increased $249,497 during the quarter ended September 30, 1998 compared
to the same quarter of 1997. During the quarter ended September 30, 1998 the
Company had gains on sales of loans of $34,222 compared to $29,258 during the
quarter ended September 30, 1997 and recognized gains of $88,146 on sales of
investment and mortgage-backed securities compared to gains of $4,016 during the
quarter ended September 30, 1997. The Company recognized gains on the sale of
real estate owned of $13,656 during the current year quarter compared to gains
of $27,436 during the previous year's quarter. Commissions were $140,298 for the
quarter ended September 30, 1998 compared to $171,837 for the quarter ended
September 30, 1997.
OTHER EXPENSE - Other expense increased a total of $925,529 during the quarter
ended September 30, 1998 compared to the quarter ended September 30, 1997.
Salaries and employee benefits increased by $391,654 during the quarter ended
September 30, 1998 compared to the same period in 1997, primarily as a result of
additional personnel acquired in the branch acquisitions. Occupancy expenses
decreased by $10,542 and equipment and computer expenses increased by $28,723
and $86,985, respectively, from the comparable period in the prior year.
Advertising expenses were $52,709 higher than during the quarter ended September
30, 1997 due principally to costs incurred in conjunction with branch
<PAGE>
acquisitions. For this same reason postage and office supplies were $120,791
higher during the quarter ended September 30, 1998 compared to the three months
ended September 30, 1997. The remaining other expense categories were $255,209
higher during the quarter ended September 30, 1998 than during the quarter ended
September 30, 1997, with the most significant change being an increase of
$158,668 in amortization of goodwill.
INCOME TAXES - Provisions for income taxes amounted to $415,539, or 37.7% of
income before taxes during the quarter ended September 30, 1998 compared to
$451,966, or 41.2% of income before taxes during the quarter ended September 30,
1997.
SIX MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO SIX MONTHS ENDED SEPTEMBER 30,
1997.
NET INTEREST INCOME - Net interest income before provision for loan losses
increased by $531,309 or 9.5% for the six months ended September 30, 1998
compared to the six months ended September 30, 1997.
Net interest income after loan loss provisions increased by $533,859, or 9.8%
for the six months ended September 30, 1998 compared to the six months ended
September 30, 1997. The increase was larger than the increase in net interest
income before provision for loan losses because of a decrease of $2,550 in the
provision for loan losses during the first six months of fiscal 1999 compared to
the prior year.
INTEREST INCOME - Total interest income for the six months ended September 30,
1998 increased $609,917, or 4.0% , from the six month period ended September 30,
1997. This increase was attributable to an increase of $18.6 million in average
interest-earning balances which more than offset a decrease of 9 basis points in
the average rate earned on total interest earning assets for the comparable
periods.
INTEREST EXPENSE - Total interest expense increased by $78,608, or .8% during
the six months ended September 30, 1998 compared to the six months ended
September 30, 1997. Average interest bearing liabilities increased by $29.2
million, which more than offset the 29 basis point decrease in the average rate
on such liabilities, compared to the six months ended September 30, 1997.
OTHER INCOME - Total other income increased by $627,791 during the six months
ended September 30, 1998 compared to the six months ended September 30, 1997.
Service charges were $404,600 more and commissions were $4,169 more during the
six months ended September 30, 1998 than during the comparable quarter in 1997.
During the six months ended September 30, 1998 the Company earned gains on sales
of loans of $60,427 compared to $48,629 during the six months ended September
30, 1997 and recognized gains of $152,961 on sales of investment and
mortgage-backed securities compared to gains of $10,285 during the six months
ended September 30, 1997. The Company recognized gains of $46,109 on the sale of
real estate owned during the current year period compared to $40,677 during the
prior year period. The remaining other income accounts were up by $59,116 during
the current year period.
OTHER EXPENSE - Other expense increased a total of $1,180,743 during the six
months ended September 30, 1998 compared to the six months ended September 30,
1997. Salaries and employee benefits increased by $511,540 or 22.7% during the
six months ended September 30, 1998 compared to the same period in 1997.
Equipment and computer expenses increased by $24,891 and $116,662, respectively,
from the comparable period last year. Advertising expenditures and postage and
office supplies were $77,494 and $134,625 higher, respectively, than during the
<PAGE>
six months ended September 30, 1997. The remaining other expense categories were
up by $315,531 during the six months ended September 30, 1998 compared to the
comparable period in 1997 primarily due to an increase in the amortization of
goodwill expense.
INCOME TAXES - Provisions for income taxes were $863,720, or 39.7% of income
before taxes during the six months ended September 30, 1998. During the six
month period ended September 30, 1997 the Company recorded a provision for
income taxes of $913,194 or 41.6% of income before taxes.
FINANCIAL CONDITION SEPTEMBER 30, 1998 COMPARED TO MARCH 31, 1998
The Company's total assets at September 30, 1998 were $502.8 million
representing an increase of $63.7 million, or 14.5%, from March 31, 1998.
Investment and mortgage-backed securities, including those classified as
available for sale, decreased by $27.9 million to $159.2 million at September
30, 1998 from $187.1 million at March 31, 1998. Net loans increased by $60.0
million to $285.3 million at September 30, 1998 compared to $225.3 million at
March 31, 1998, primarily as a result of the Company's acquisition of loans
associated with its acquisition of additional branches.
During June, 1998 the Bank purchased deposits amounting to approximately $78.7
million, loans amounting to approximately $43.4 million, and certain other
assets of four branch offices of NBD, N.A. located in Evansville, Indiana. As
part of the transaction the Bank purchased two of the branch banking facilities,
including land, and assumed the lease liabilities for the other two branch
facilities.
Loans acquired in the branch acquisition included consumer line of credit loans
of approximately $7.8 million, other consumer loans of approximately $11.4
million, commercial real estate loans of approximately $800,000 and commercial
loans of approximately $23.4 million. Approximately 72% of the Company's loan
growth from March 31, 1998 to September 30, 1998 was the result of this
transaction.
Non-performing assets were approximately $1.1 million at both September 30, 1998
and at March 31, 1998, compared to $4.7 million at September 30, 1997. As of
September 30, 1998, the Bank's loan loss allowance was $2,045,942. 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 and non-performing 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, 1998. The Bank conducts an
on-going review of its loan portfolio for potential problems and is currently
focusing its analysis on the loans acquired as part of the branch acquisition
described above.
1998 1997
---------- ----------
Balance, April 1 $1,973,410 $2,126,225
Provision for loan losses 150,000 152,550
Net charge offs (77,468) (94,893)
---------- ----------
Balance, June 30 $2,045,942 $2,183,882
========== ==========
<PAGE>
Federal Home Loan Bank advances decreased by $3.4 million to $96.0 million at
September 30, 1998 compared to $99.4 million at March 31, 1998 and, as a result
of the acquisition described above, deposits increased by $68.3 million to
$351.2 million at September 30, 1998 compared to $282.9 million at March 31,
1998. Substantially all of the Company's deposit growth from March 31, 1998 to
September 30, 1998 is attributable to the branch acquisitions.
Total stockholders' equity decreased by $2.6 million to $40.1 million at
September 30, 1998 from $42.7 million at March 31, 1998. This decrease was
primarily the result of the purchase of 302,100 treasury shares at a cost of
$4,163,316 and dividends of $480,263. Offsetting these decreases were net income
of $1,313,207, an increase of $444,834 (net of taxes) in the fair value of
available-for-sale securities, a reduction of the Employee Stock Ownership Plan
liability of $119,025 and the sale of $90,390 of common stock.
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 4%.
At September 30, 1998, the Bank's liquidity ratio was 47.75%. 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, 1998, the Bank had $96.0 million in such
borrowings. As of that date, the Bank had commitments to fund loans of
approximately $16.3 million (which includes unfunded lines and letters of credit
of approximately $12.4 million) and purchase investment securities of
approximately $10.6 million. 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, 1998.
Amount Percent (*)
----------- -----
Core Capital:
Capital level $30,293,617 6.18%
Requirement 19,597,865 4.00%
----------- -----
Excess $10,695,752 2.18%
=========== =====
Risk-Based Capital:
Capital level $32,157,040 12.39%
Requirement 20,774,702 8.00%
----------- -----
Excess $11,382,338 4.39%
=========== =====
(*) Core capital is computed as a percentage of adjusted total assets of
$489,946,635. Risk-based capital is computed as a percentage of risk-weighted
assets of $259,683,770.
<PAGE>
<TABLE>
<CAPTION>
SUPPLEMENTAL DATA
Three Months Ended Six Months Ended
September 30, September 30,
--------------------- ---------------------
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Weighted average interest rate earned on
total interest-earning assets 7.43% 7.53% 7.38% 7.47%
Weighted average cost of total
interest-bearing liabilities 4.69 5.18 4.81 5.10
Interest rate spread during period 2.79 2.35 2.57 2.37
Net yield on interest-earning assets
(net interest income divided by average
interest-earning assets on annualized basis) 2.88 2.68 2.83 2.73
Total interest income divided by average
total assets (on annualized basis) 6.79 7.18 7.00 7.20
Total interest expense divided by
average total assets (on annualized basis) 4.13 4.62 4.31 4.60
Net interest income divided by average
total assets (on annualized basis) 2.66 2.56 2.69 2.60
Return on assets (net income divided by
average total assets on annualized basis) 0.54 0.60 0.57 0.60
Return on equity (net income divided by
average total equity on annualized basis) 6.52 6.39 6.24 6.40
Interest rate spread at end of period 2.78 2.37 2.78 2.37
<CAPTION>
Data as of
----------------------------
September 30, March 31,
1998 1998
------ ------
(IN THOUSANDS)
<S> <C> <C>
NONPERFORMING ASSETS:
Loans: Non-accrual ...................................... $1,025 $ 911
Restructured ..................................... 0 0
------ ------
Total nonperforming loans ................................ 1,025 911
Real estate owned, net ...................... 10 93
Other repossessed assets, net ............... 77 81
------ ------
Total Nonperforming Assets ............................... $1,112 $1,085
====== ======
Nonperforming assets divided by total assets ............. .22% .25%
Nonperforming loans divided by total loans ............... .36% .40%
Balance in Allowance for Loan Losses ..................... $2,046 $1,973
</TABLE>
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Office of Thrift Supervision (OTS) requires each thrift institution to
calculate the estimated change in the institution's market value of portfolio
equity (MVPE) assuming an instantaneous, parallel shift in the Treasury yield
curve of 100 to 400 basis points either up or down in 100 basis point
increments. MVPE is defined as the net present value of an institution's
existing assets, liabilities and off-balance sheet instruments. The OTS permits
institutions to perform this MVPE analysis using their own internal model based
upon reasonable assumptions.
The Company has determined that, as of September 30, 1998, there has been no
material change in prepayment assumptions or the estimated sensitivity of the
Company's MVPE to parallel yield curve shifts in comparison to the disclosures
set forth in the Company's 1998 annual report to shareholders.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
Other than ordinary routine litigation incidental to the business,
there are no material pending legal proceedings to which the Company
or the Bank are a party.
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 meting of stockholder was held in Evansville, Indiana on
July 28, 1998. A total of 3,666,149 shares of Common Stock, 86.3% 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 2001.
FOR VOTES WITHHELD
--- --------------
Jack H. Kinkel 3,602,310 63,839
James A. McCarty, Jr. 3,597,321 68,828
Murray J. Brown 3,582,945 83,204
Accordingly, the individuals named above were declared to be duly
elected directors of the Company.
Messieurs. Weinzapfel, Stone, Butterfield, Vogel, Schenk, Korb, and
Northener 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, 1999.
PERCENTAGE OF
VOTES IN
NUMBER ATTENDANCE
OF VOTES AT THE MEETING
FOR 3,613,948 98.6%
AGAINST 47,981 1.3%
ABSTAIN 4,220 .1%
Accordingly, the proposal described above was declared to be duly
adopted by the stockholders of the company.
ITEM 5. Other Information
If a stockholder proposal is not received by the Company by February
26, 1999, but otherwise meets the Company's eligibility requirements
to be presented at the next Annual Meeting of Stockholders, the
persons named in the Company's form of proxy and acting thereon will
have the discretion to vote on any such proposal in accordance with
their best judgment if the proposal is received at the Company's main
office later than April 21, 1999.
<PAGE>
ITEM 6. Exhibits and Reports on Form 8-
(a) Exhibits
None.
(b) Reports on Form 8-K A Form 8-K was filed on August 25, 1998,
with the Securities and Exchange Commission, regarding the
purchase of 302,100 shares of the Company's common stock held
by LaSalle Financial Partners, L.P. The purchase was made
pursuant to an agreement dated August 25, 1998 between the
Company, LaSalle and certain persons and entities affiliated
with LaSalle. The purchase of the stock was funded by a loan
from an unaffiliated financial institution.
<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, 1998 By /s/ Donald P. Weinzapfel
----------------- -------------------------
Donald P. Weinzapfel,
Chairman of the Board
Chief Executive Officer
(Principal Executive Officer)
Date: November 13, 1998 By /s/ Robert A. Cern
----------------- -------------------
Robert A. Cern
Chief Financial Officer and Secretary
(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, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<CASH> 6,686,087
<INT-BEARING-DEPOSITS> 11,868,825
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 143,123,829
<INVESTMENTS-CARRYING> 16,113,992
<INVESTMENTS-MARKET> 16,324,314
<LOANS> 287,316,068
<ALLOWANCE> 2,045,942
<TOTAL-ASSETS> 502,829,059
<DEPOSITS> 351,254,152
<SHORT-TERM> 14,645,536
<LIABILITIES-OTHER> 10,415,499
<LONG-TERM> 81,367,588
0
0
<COMMON> 49,212
<OTHER-SE> 40,758,165
<TOTAL-LIABILITIES-AND-EQUITY> 502,829,059
<INTEREST-LOAN> 10,146,753
<INTEREST-INVEST> 5,539,226
<INTEREST-OTHER> 361,858
<INTEREST-TOTAL> 16,047,837
<INTEREST-DEPOSIT> 7,402,132
<INTEREST-EXPENSE> 9,930,784
<INTEREST-INCOME-NET> 6,117,053
<LOAN-LOSSES> 150,000
<SECURITIES-GAINS> 152,961
<EXPENSE-OTHER> 5,444,936
<INCOME-PRETAX> 2,176,927
<INCOME-PRE-EXTRAORDINARY> 1,313,207
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,313,207
<EPS-PRIMARY> .32
<EPS-DILUTED> .30
<YIELD-ACTUAL> 7.38
<LOANS-NON> 1,025
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 3,840,000
<ALLOWANCE-OPEN> 1,973,410
<CHARGE-OFFS> 63,858
<RECOVERIES> 49,796
<ALLOWANCE-CLOSE> 2,045,942
<ALLOWANCE-DOMESTIC> 177,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,868,942
</TABLE>
