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 December 31, 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.
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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 January 31, 1998, there were 2,107,627 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)
DECEMBER 31,1997 MARCH 31, 1997
-------------- --------------
<S> <C> <C>
ASSETS:
Cash .................................................................... $ 5,507,401 $ 3,211,091
Interest-bearing deposits ............................................... 826,877 3,153,385
------------- -------------
Total cash and cash equivalents ......................................... 6,334,278 6,364,476
Securities available for sale - at fair value (amortized cost $88,209,175
and $87,020,254) ..................................................... 88,407,603 85,180,313
Mortgage-backed securities available for sale at fair value (amortized
cost $65,254,222 and $74,846,178) .................................... 65,589,390 74,052,253
Securities held to maturity (fair value $0 and $25,000) ................. -- 25,000
Mortgage-backed securities held to maturity (fair value $23,711,577
and $27,197,070) ..................................................... 23,711,572 27,180,891
Other Investments ....................................................... 1,469,092 1,056,036
Loans (net of allowance for loan losses of $2,098,470 and $2,126,225) ... 214,941,709 210,189,422
Interest receivable, net ................................................ 3,031,585 3,539,085
Office properties and equipment, net .................................... 7,637,083 6,968,587
Real estate owned, net .................................................. 87,943 40,653
Deferred income tax ..................................................... 101,424 1,374,109
Federal Home Loan Bank stock ............................................ 5,466,000 5,192,600
Cash surrender value of life insurance .................................. 1,608,044 1,552,875
Goodwill (net of accumulated amortization of $1,868,945 and $1,741,967) . 492,971 326,198
Other ................................................................... 940,717 655,833
------------- -------------
TOTAL ASSETS ................................................................ $ 419,819,411 $ 423,698,331
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY:
LIABILITIES:
Deposits ................................................................ $ 273,183,064 $ 280,753,353
Federal Home Loan Bank advances ......................................... 99,551,955 98,483,986
Advance payments by borrowers for taxes and insurance ................... 496,485 1,014,598
Other borrowed funds .................................................... -- 1,793,967
Interest payable ........................................................ 2,231,789 2,049,727
Other ................................................................... 2,386,462 508,073
------------- -------------
TOTAL LIABILITIES ........................................................... $ 377,849,755 $ 384,603,704
------------- -------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PERMANENT BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
DECEMBER 31,1997 MARCH 31, 1997
-------------- --------------
<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 - 2,458,982 shares; Outstanding - 2,030,546 and
2,052,075 shares ..................................................... $ 24,590 $ 24,590
Additional paid-in capital .............................................. 24,303,989 24,045,413
Treasury Stock - 355,877 and 317,893 shares ............................. (6,422,247) (5,547,823)
Retained Earnings - substantially restricted ............................ 24,759,682 23,393,701
Unrealized gain (loss) on securities available for sale,
net of deferred tax of
$193,088 and $(1,043,275) ............................................ 340,508 (1,590,591)
ESOP Borrowing .......................................................... (773,663) (952,200)
Unearned compensation - restricted stock awards ......................... (263,203) (278,463)
------------- -------------
TOTAL STOCKHOLDERS' EQUITY .................................................. $ 41,969,656 $ 39,094,627
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .................................. $ 419,819,411 $ 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 NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------------------------- -----------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans ........................................... $ 4,421,004 $ 4,283,531 $ 13,081,605 $ 12,597,851
Mortgage-backed securities ...................... 1,555,066 1,509,932 5,033,751 4,471,764
Investment securities ........................... 1,467,632 1,616,162 4,519,641 4,767,284
Deposits ........................................ 33,785 20,298 65,630 74,682
Dividends on Federal Home Loan Bank stock ....... 110,220 102,467 325,000 283,166
------------ ------------ ------------ ------------
7,587,707 7,532,390 23,025,627 22,194,747
------------ ------------ ------------ ------------
INTEREST EXPENSE:
Deposits ........................................ 3,337,450 3,329,365 10,161,106 10,025,728
Federal Home Loan Bank advances ................. 1,479,848 1,403,942 4,462,541 3,943,744
Short-term borrowings ........................... 19,022 45,827 65,434
------------ ------------ ------------ ------------
4,817,298 4,752,329 14,669,474 14,034,906
------------ ------------ ------------ ------------
NET INTEREST INCOME ................................. 2,770,409 2,780,061 8,356,153 8,159,841
PROVISION FOR LOAN LOSSES ........................... (500) (132,040) 152,050 16,446
------------ ------------ ------------ ------------
NET INTEREST INCOME AFTER LOAN LOSS
PROVISION ....................................... 2,770,909 2,912,101 8,204,103 8,143,395
------------ ------------ ------------ ------------
OTHER INCOME:
Service charges ................................. 256,035 215,979 716,521 635,150
Gain on sale of loans ........................... 9,270 6,149 57,899 11,011
Net gain on real estate owned ................... 3,862 2,566 44,539 4,757
Commissions ..................................... 194,592 164,499 494,115 422,400
Gain on sale of investment and mortgage-backed
securities ..................................... 30,407 27,176 40,692 29,542
Other ........................................... 97,508 97,424 264,927 209,504
------------ ------------ ------------ ------------
591,674 513,793 1,618,693 1,312,364
------------ ------------ ------------ ------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PERMANENT BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(continued)
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------------------------- -----------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
OTHER EXPENSE:
Salaries and employee benefits .................. 1,155,679 1,088,592 3,411,340 3,201,132
Deposit insurance assessments ................... 69,790 147,481 207,969 2,281,587
Occupancy ....................................... 221,940 191,856 625,107 608,255
Equipment ....................................... 151,349 133,037 473,658 430,490
Computer service ................................ 124,920 113,636 388,463 362,659
Advertising ..................................... 90,171 81,332 263,123 234,479
Postage and office supplies ..................... 67,754 70,297 212,475 198,162
Other ........................................... 314,569 309,489 878,230 773,934
------------ ------------ ------------ ------------
2,196,172 2,135,720 6,460,365 8,090,698
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES .......................... 1,166,411 1,290,174 3,362,431 1,365,061
INCOME TAX PROVISION ................................ 461,303 573,492 1,374,497 704,470
------------ ------------ ------------ ------------
NET INCOME .......................................... $ 705,108 $ 716,682 $ 1,987,934 $ 660,591
============ ============ ============ ============
EARNINGS PER SHARE OF COMMON STOCK
Basic ........................................... $ 0.35 $ 0.34 $ 0.99 $ 0.31
Diluted ......................................... $ 0.33 $ 0.32 $ 0.93 $ 0.30
</TABLE>
See notes to consolidated financial statements
<PAGE>
<TABLE>
<CAPTION>
PERMANENT BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED DECEMBER 31,
---------------------------------
1997 1996
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .............................................. $ 1,987,934 $ 660,591
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation .................................... 382,879 368,960
Deposit premium purchased ....................... (293,751)
Amortization and accretion ..................... 208,647 76,171
Vesting of restricted stock awards .............. 4,760 63,813
Provisions for loan and real estate owned losses (27,755) (165,421)
(Gain) on sale of securities .................... (18,368) (44,495)
(Gain) on sale of mortgage-backed securities .... (22,325) (95)
(Gain) on sale of loans ......................... (57,899) (11,012)
(Gain) loss on sale of bank premises ............ (13,883) 59,068
(Gain) on sale of real estate owned ............. (57,728)
ESOP shares earned .............................. 261,146 131,620
Changes in assets and liabilities:
Proceeds from the sales of loans .................... 2,274,959 829,997
Origination of loans for resale ..................... (2,217,060) (818,985)
Other investments ................................... (121,886)
Interest receivable ................................. 507,500 (53,983)
Deferred income tax ................................. 337 (46,012)
Other assets ........................................ (284,884) 41,548
Interest payable .................................... 182,062 80,892
Other liabilities ................................... 1,878,390 299,354
------------- -------------
Net cash provided by operating activities ............... 4,573,075 1,472,011
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Loans originated ........................................ (51,312,339) (47,786,343)
Loan principal repayments ............................... 54,588,301 58,640,041
Proceeds from:
Maturities of:
Securities available for sale ................... 28,994,050 16,974,688
Securities held to maturity ..................... 25,000
Sales of:
Securities available for sale ................... 12,992,977 19,379,854
Mortgage-backed securities available for sale ... 12,221,521 11,158,884
Bank premises ................................... 167,742 42,239
Real estate owned ............................... 123,884
Purchases of:
Securities available for sale ................... (43,198,041) (49,920,625)
Mortgage-backed securities available for sale ... (13,576,118) (22,389,606)
Equity Investments .............................. (250,000)
Loans ........................................... (8,190,692) (13,773,496)
FHLB Stock ...................................... (273,400) (1,689,000)
Office properties, equipment and land ........... (1,205,234) (260,511)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PERMANENT BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(continued)
NINE MONTHS ENDED DECEMBER 31,
---------------------------------
1997 1996
-------------- --------------
<S> <C> <C>
Payments on mortgage-backed securities .................. 14,471,457 12,094,301
Increase in cash surrender value of life insurance ...... (55,169) (63,229)
Payments on real estate owned ........................... (3,202) 7,946
------------- -------------
Net cash provided by (used in) investing activities ..... 5,520,737 (17,584,857)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid .......................................... $ (574,879) $ (448,482)
Net change in deposits .................................. (7,570,289) (8,708,828)
Receipts from FHLB advances ............................. 180,000,000 116,450,000
Payments on FHLB advances ............................... (178,932,031) (87,820,246)
Principal repayment of ESOP borrowing ................... 178,538 178,538
Advance payments by borrowers for taxes and insurance ... (518,114) (491,285)
Net change in other borrowed funds ...................... (1,793,967) (1,316,556)
Purchase of treasury stock .............................. (993,628) (1,389,091)
Sale of common stock ................................... 80,360 14,590
------------- -------------
Net cash provided by (used in) financing activities ..... (10,124,010) 16,468,640
------------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ........ (30,198) 355,794
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ............ 6,364,476 4,916,421
------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD .................. 6,334,278 5,272,215
============= =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest ............................................ $ 10,009,683 $ 10,015,622
Income taxes ........................................ 1,123,000 730,000
Noncash transactions:
Transfers from loans to real estate owned ........... 110,415 --
</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 December 31, 1997 and for the three and nine month periods ended
December 31, 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 nine months ended December 31, 1996
have been reclassified to conform with the presentation presented for the period
ended December 31, 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 adopted 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.
<PAGE>
The following is a reconciliation of the weighted average common shares for the
basic and diluted earnings per shaer computations:
<TABLE>
<CAPTION>
Three Months Ended Nine Months ended
December 31, December 31,
--------------------- ---------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Basic earnings per share:
Weighted average common shares 2,024,643 2,127,977 2,018,160 2,134,006
Diluted earnings per share:
Weighted average common shares 2,024,643 2,127,977 2,018,160 2,134,006
Dilutive effect of stock options 124,846 94,338 119,696 81,157
--------- --------- --------- ---------
Weighted average common and
incremental shares 2,149,489 2,222,315 2,137,856 2,215,163
========= ========= ========= =========
</TABLE>
The difference between basic and diluted earnings per share represents the
dilutive impact of the Company's outstanding stock options.
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 DECEMBER 31, 1997 COMPARED TO DECEMBER 31,1996
NET INTEREST INCOME - Net interest income before provision for loan losses
decreased by $10,000 or 0.3% for the quarter ended December 31, 1997 compared to
the quarter ended December 31, 1996. This decrease was primarily attributable to
a decline in the interest rate spread (the difference between the rate earned on
interest earning assets and the rate paid on interest bearing liabilities) which
more than offset the increase in interest earning assets.
Net interest income after loan loss provisions decreased by $142,000, or 4.9%
for the quarter ended December 31, 1997 compared to the quarter ended December
31, 1996. The loan loss provision was a benefit of $500 during the quarter ended
December 31, 1997, compared to a benefit of $132,000 during the quarter ended
December 31, 1996. During the quarter ended December 31, 1997, the Bank reduced
loan loss provisions by $75,500 relating to the reversal of specific reserves of
$75,000 on an impaired loan which was paid off through a negotiated settlement,
and by $500 on another previously impaired loan. This reversal was offset by
provision increases of $75,000 reflecting actual and anticipated loan growth.
During the quarter ended December 31, 1996, the Bank reduced the loan loss
provision by $232,000 relating to the reversal of specific reserves on a
previously impaired loan. This reversal was partially offset by provision
increases of $100,000 reflecting actual and anticipated loan growth.
INTEREST INCOME - Total interest income for the three months ended December 31,
1997 increased $55,000, or 0.7%, from the three month period ended December 31,
1996. This increase was attributable to an increase of $6.7 million in average
balances of interest earning assets for the comparable periods which was nearly
offset by a decrease of one basis point in the average rate earned on total
interest earning assets and a decrease in interest received on non-accrual loans
(not considered interest earning assets by definition) which have been settled
since the quarter ended December 31, 1996.
INTEREST EXPENSE - Total interest expense increased by $65,000, or 1.4%, during
the three months ended December 31, 1997 compared to the three months ended
December 31, 1996. Average interest bearing liabilities increased by $7.6
million and the average cost of such liabilities increased by 1 basis point
compared to the quarter ended December 31, 1996.
OTHER INCOME - Total other income increased by $78,000 during the quarter ended
December 31, 1997 compared to the quarter ended December 31, 1996. Service
charges were $40,000 more and commissions were $30,000 more during the quarter
ended December 31, 1997 than during the comparable quarter in 1996. During the
quarter ended December 31, 1997 the Company recognized gains on sales of loans
of $9,000 compared to $6,000 during the quarter ended December 31, 1996,
recognized gains of $4,000 on sales of real estate owned compared to $3,000
<PAGE>
during the quarter ended December 31, 1996 and recognized gains on sales of
investment and mortgage-backed securities of $30,000 during the quarter ended
December 31, 1997, compared to $27,000 during the quarter ended December 31,
1996. The remaining other income accounts were nearly identical during the
comparable quarters.
OTHER EXPENSE - Other expense increased a total of $60,000 during the quarter
ended December 31, 1997 compared to the quarter ended December 31, 1996. Deposit
insurance assessments decreased by $78,000 during the quarter ended December 31,
1997 compared to the quarter ended December 31, 1996 due to lower rates.
Salaries and employee benefits increased by $67,000 or 6.2% during the quarter
ended December 31, 1997 compared to the same period in 1996, with $41,000 of the
increase due to an increase in Employee Stock Ownership Plan expenses
attributable to increases in the market value of the Company's stock. Occupancy
expenses increased by $30,000 and equipment and computer expenses also increased
by $30,000 during the comparable periods. Advertising expenditures were $9,000
higher during the quarter ended December 31, 1997 than during the quarter ended
December 31, 1996. Postage and office supplies were $3,000 lower during the
quarter ended December 31, 1997. The remaining other expense categories were
$5,000 higher during the current year quarter.
INCOME TAXES - Provisions for income taxes amounted to $461,000, or 39.5% of
income before taxes during the quarter ended December 31, 1997, compared to
$573,000, or 44.5% of income before taxes during the quarter ended December 31,
1996.
NINE MONTHS ENDED DECEMBER 31, 1997 COMPARED TO NINE MONTHS ENDED DECEMBER 31,
1996
NET INTEREST INCOME - Net interest income before provision for loan losses
increased by $196,000 or 2.4% for the nine months ended December 31, 1997
compared to the nine months ended December 31, 1996. This increase was primarily
attributable to an increase in interest earning assets.
Net interest income after loan loss provisions increased by $61,000 for the nine
months ended December 31, 1997 compared to the nine months ended December 31,
1996. The loan loss provision was $152,000 during the nine months ended December
31, 1997, compared to $16,000 during the nine months ended December 31, 1996.
During the period ended December 31, 1997, the Bank reduced loan loss provisions
by $75,500 relating to the reversal of specific reserves of $75,000 on an
impaired loan which was paid off through a negotiated settlement, and by $500 on
another previously impaired loan. During the period ended December 31, 1996, the
bank reduced the loan loss provision by $232,000 relating to the reversal of
specific reserves on a previously impaired loan. This reversal was offset by
provision increases of $248,000 reflecting actual and anticipated loan growth.
INTEREST INCOME - Total interest income for the nine months ended December 31,
1997 increased $831,000, or 3.7%, from the nine month period ended December 31,
1996. This increase was attributable to an increase of $11.3 million in average
balances of interest earning assets and an increase of 22 basis points in the
average rate earned on total interest earning assets for the comparable periods.
INTEREST EXPENSE - Total interest expense increased by $635,000, or 4.5%, during
the nine months ended December 31, 1997 compared to the nine months ended
December 31, 1996. Average interest bearing liabilities increased by $14.2
million and the average rate on such liabilities increased by 17 basis points,
compared to the nine months ended December 31, 1996.
<PAGE>
OTHER INCOME - Total other income increased by $306,000 during the nine months
ended December 31, 1997 compared to the nine months ended December 31, 1996.
Service charges were $81,000 more and commissions were $72,000 more during the
nine months ended December 31, 1997 than during the comparable quarter in 1996.
During the nine months ended December 31, 1997 the Company recognized gains on
sales of loans of $58,000 compared to $11,000 during the nine months ended
December 31, 1996 and recognized gains of $41,000 on sales of investment and
mortgage-backed securities compared to gains of $30,000 during the nine months
ended December 31, 1996. The Company recognized gains of $45,000 on the sale of
real estate owned during the current year period compared to $5,000 during the
prior year period. The remaining other income accounts were up by $55,000 during
the current year period.
OTHER EXPENSE - Other expense decreased a total of $1,630,000 during the nine
months ended December 31, 1997 compared to the nine months ended December 31,
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 $210,000 during the nine months ended December 31, 1997 compared to the same
period in 1996, with $130,000 of the increase due to an increase in Employee
Stock Ownership Plan expenses attributable to increases in the market value of
the Company's stock. Occupancy expenses increased by $17,000 and equipment and
computer expenses increased by $69,000 during the comparable periods. Deposit
insurance assessments, exclusive of the one time assessment, were $308,000 lower
during the nine months ended December 31, 1997 due to a decrease in deposit
insurance rates paid. Advertising expenditures were $29,000 higher and postage
and office supplies were $14,000 higher than during the nine months ended
December 31, 1996. The remaining other expense categories were up by $104,000
during the nine months ended December 31, 1997 compared to the comparable period
in 1996.
INCOME TAXES - Provisions for income taxes were $1,374,000, or 40.9% of income
before taxes during the nine months ended December 31, 1997 compared to
$704,000, or 51.6% during the nine month period ended December 31, 1996.
FINANCIAL CONDITION DECEMBER 31, 1997 COMPARED TO MARCH 31, 1997
The Company's total assets at December 31, 1997 were $419.8 million representing
a decrease of $3.9 million, or 0.9%, from March 31, 1997. Investment and
mortgage-backed securities, including those classified as available for sale,
decreased by $8.7 million to $177.7 million at December 31, 1997 from $186.4
million at March 31, 1997. Net loans increased by $4.7 million to $214.9 million
at December 31, 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 Stonegate Square building and land was subsequently sold at a profit of
$14,000. The sale was financed by the Bank at market rates and terms.
The loan growth occurred in single family mortgage loans, commercial loans and
through the purchase of commercial paper. Consumer loans decreased by $3.1
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>
During December 1998, the Bank received negotiated settlements on two impaired
loans. The settlements slightly exceeded the loans carrying value of $1.1
million. As a result, non-performing assets were reduced to $3.0 million, or
0.7% of total assets at December 31, 1997, compared to $4.7 million, or 1.1% of
total assets at March 31, 1997. As of December 31, 1997, the Bank's loan loss
allowance was $2.1 million. 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 December 31, 1997.
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Balance, April 1 $2,126,225 $2,237,804
Provision for loan losses 152,050 16,446
Net charge offs (179,805) (181,867)
---------- ----------
Balance, December 31 $2,098,470 $2,072,383
</TABLE>
Federal Home Loan Bank advances increased by $1.1 million to $99.6 million at
December 31, 1997 compared to $98.5 million at March 31, 1997. Deposits
decreased by $7.6 million to $273.2 million at December 31, 1997 compared to
$280.8 million at March 31, 1997.
Total stockholders' equity increased by $2.9 million to $42.0 million at
December 31, 1997 from $39.1 million at March 31, 1997. The increase was
attributable to an increase of $1.9 million in unrealized gains 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 4%.
At December 31, 1997, the Bank's liquidity ratio was 60.88%. 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
December 31, 1997, the Bank had $99,552,000 in such borrowings. As of that date,
the Bank had commitments to fund loan originations and construction loans of
approximately $11.9 million and commitments to sell loans in the amount of
$185,000. The Company had commitments to purchase $2.0 million in securities and
no commitments to sell 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 December 31, 1997.
<TABLE>
<CAPTION>
Amount Percent (*)
----------- -----
<S> <C> <C>
Tangible Capital:
Capital level .................... $37,023,068 8.89%
Requirement ...................... 6,248,034 1.50%
----------- -----
Excess ........................... $30,775,034 7.39%
----------- -----
Core Capital:
Capital level .................... $37,304,579 8.95%
Requirement ...................... 12,504,512 3.00%
----------- -----
Excess ........................... $24,800,067 5.95%
----------- -----
Risk-Based Capital:
Capital level .................... $39,137,774 22.05%
Requirement ...................... 14,198,160 8.00%
----------- -----
Excess ........................... $24,939,614 14.05%
----------- -----
</TABLE>
(*) Tangible capital is computed as a percentage of adjusted total assets of
$416,535,571. Core capital is computed as a percentage of adjusted total assets
of $416,817,082. Risk-based capital is computed as a percentage of risk-weighted
assets of $177,477,001.
<PAGE>
<TABLE>
<CAPTION>
SUPPLEMENTAL DATA
Three Months Ended Six Months Ended
December 31, 1997 December 31, 1997
------------------ ------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average interest rate earned on
total interest-earning assets ........................ 7.61% 7.62% 7.70% 7.48%
Weighted average cost of total
interest-bearing liabilities ......................... 5.17% 5.16% 5.25% 5.08%
Interest rate spread during period ..................... 2.44% 2.46% 2.45% 2.40%
Net yield on interest-earning assets
(net interest income divided by average
interest-earning assets on annualized basis) ......... 2.73% 2.78% 2.77% 2.79%
Total interest income divided by average
total assets (on annualized basis) ................... 7.11% 7.22% 7.28% 7.32%
Total interest expense divided by
average total assets (on annualized basis) ........... 4.52% 4.56% 4.64% 4.63%
Net interest income divided by average
total assets (on annualized basis) ................... 2.59% 2.66% 2.64% 2.69%
Return on assets (net income divided by
average total assets on annualized basis) ............ 0.66% 0.69% 0.63% 0.22%
Return on equity (net income divided by
average total equity on annualized basis) ............ 6.80% 7.17% 6.54% 2.16%
Interest rate spread at end of period .................. 2.44% 2.36% 2.44% 2.36%
<CAPTION>
Data as of
Dec. 31, March 31,
1997 1997
------ ------
(IN THOUSANDS)
<S> <C> <C>
NONPERFORMING ASSETS:
Loans: Non-accrual .............................. $ 782 $2,463
Restructured ............................ 1,941 2,128
------ ------
Total nonperforming loans ........................ $2,723 $4,591
Real estate owned, net ........................... 88 41
Other repossessed assets, net .................... 146 58
------ ------
Total Nonperforming Assets ......................... $2,957 $4,690
Nonperforming assets divided by total assets ....... 0.70% 1.11%
Nonperforming loans divided by total loans ......... 1.37% 2.18%
Balance in Allowance for Loan Losses ............... $2,098 $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
None
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 February 12, 1998 By /s/ Donald P. Weinzapfel
------------------------
Donald P. Weinzapfel,
Chairman of the Board
President and Chief Executive Officer
(Principal Executive Officer)
DATE February 12, 1998 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 DECEMBER 31, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> DEC-31-1997
<CASH> 5,507,401
<INT-BEARING-DEPOSITS> 826,877
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 153,996,993
<INVESTMENTS-CARRYING> 23,711,572
<INVESTMENTS-MARKET> 23,711,577
<LOANS> 217,040,179
<ALLOWANCE> 2,098,470
<TOTAL-ASSETS> 419,819,411
<DEPOSITS> 273,183,064
<SHORT-TERM> 69,950,000
<LIABILITIES-OTHER> 5,114,736
<LONG-TERM> 29,608,345
24,590
0
<COMMON> 0
<OTHER-SE> 41,945,066
<TOTAL-LIABILITIES-AND-EQUITY> 419,819,411
<INTEREST-LOAN> 13,081,605
<INTEREST-INVEST> 9,553,392
<INTEREST-OTHER> 390,630
<INTEREST-TOTAL> 23,025,627
<INTEREST-DEPOSIT> 10,161,106
<INTEREST-EXPENSE> 14,669,474
<INTEREST-INCOME-NET> 8,204,103
<LOAN-LOSSES> 152,050
<SECURITIES-GAINS> 40,692
<EXPENSE-OTHER> 6,460,365
<INCOME-PRETAX> 3,362,431
<INCOME-PRE-EXTRAORDINARY> 1,987,934
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,987,934
<EPS-PRIMARY> 0.99
<EPS-DILUTED> 0.93
<YIELD-ACTUAL> 7.70
<LOANS-NON> 782,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 1,941,000
<LOANS-PROBLEM> 337,329
<ALLOWANCE-OPEN> 2,126,225
<CHARGE-OFFS> 304,821
<RECOVERIES> 125,016
<ALLOWANCE-CLOSE> 2,098,470
<ALLOWANCE-DOMESTIC> 260,275
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,838,195
</TABLE>
