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 June 30, 1999
[ ] 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 August 6, 1999, there were 3,968,822 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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<TABLE>
<CAPTION>
PERMANENT BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
JUNE 30, 1999 MARCH 31, 1999
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ASSETS:
Cash .......................................................... $ 10,297,885 $ 7,591,117
Interest-bearing deposits ..................................... 3,160,878 6,361,293
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Total cash and cash equivalents ............................... 13,458,763 13,952,410
Securities available for sale - at fair value
(amortized cost - $116,898,718 and $117,279,217) ........... 113,996,680 117,289,086
Securities held to maturity (fair value - $6,429,219
and $6,627,235) ............................................ 6,919,486 6,919,793
Other investments ............................................. 2,789,932 1,698,477
Loans (net of allowance for loan losses of $2,593,404 and
$2,706,408) ................................................ 328,115,010 321,017,805
Interest receivable, net ...................................... 3,365,424 2,824,211
Office properties and equipment ............................... 8,912,465 8,687,387
Other assets .................................................. 20,192,298 19,937,789
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TOTAL ASSETS .................................................. $ 497,750,058 $ 492,326,958
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits ...................................................... $ 352,473,683 $ 345,341,089
Federal Home Loan Bank advances ............................... 96,167,819 96,503,610
Advance payments by borrowers for taxes and insurance ......... 548,513 974,636
Other long-term debt .......................................... 3,000,000 3,000,000
Interest payable .............................................. 2,259,131 2,204,007
Other liabilities ............................................. 3,783,480 3,442,429
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TOTAL LIABILITIES ............................................. 458,232,626 451,465,771
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Commitments and contingencies
</TABLE>
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<TABLE>
<CAPTION>
PERMANENT BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
(continued)
JUNE 30, 1999 MARCH 31, 1999
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STOCKHOLDERS' EQUITY:
Serial Preferred Stock ($.01 par value) Authorized and unissued
- 1,000,000 shares
Common Stock ($.01 par value) Authorized -
9,000,000 shares Issued - 4,930,508
and 4,930,508 Outstanding - 3,968,822
and 3,978,322 .............................................. 49,241 49,241
Additional paid-in capital .................................... 24,891,317 24,844,508
Treasury Stock - 946,286 and 936,286 shares - at cost ......... (10,008,454) (9,920,624)
Retained Earnings - substantially restricted .................. 27,072,154 26,573,401
Accumulated other comprehensive income, net
of deferred tax of ($1,216,726) and $3,909 ................. (1,855,039) 5,960
ESOP borrowing ................................................ (416,588) (476,100)
Unearned compensation - restricted stock awards ............... (215,199) (215,199)
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TOTAL STOCKHOLDERS' EQUITY .................................... 39,517,432 40,861,187
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .................... $ 497,750,058 $ 492,326,958
============= =============
</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
JUNE 30,
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INTEREST INCOME: 1999 1998
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Loans .......................................... $6,240,082 $4,527,134
Securities ..................................... 1,861,567 2,810,934
Deposits ....................................... 66,330 53,920
Dividends on Federal Home Loan Bank stock ...... 109,021 109,021
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8,277,000 7,501,009
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INTEREST EXPENSE:
Deposits ....................................... 3,602,105 3,421,324
Federal Home Loan Bank advances ................ 1,245,555 1,279,422
Other long-term debt ........................... 51,718
Short-term borrowings .......................... 6,762
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4,906,140 4,700,746
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NET INTEREST INCOME .............................. 3,370,860 2,800,263
PROVISION FOR LOAN LOSSES ........................ 70,000 75,000
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NET INTEREST INCOME AFTER LOAN LOSS PROVISION .... 3,300,860 2,725,263
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OTHER INCOME:
Service charges ................................ 423,375 270,804
Gain on sale of loans .......................... 74,671 24,879
Commissions .................................... 196,916 163,394
Gain on sale of securities ..................... 64,815
Gain on sale of real estate owned .............. 10,310 27,040
Other .......................................... 98,985 64,658
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804,257 615,590
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</TABLE>
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<TABLE>
<CAPTION>
PERMANENT BANCORP, INC. AND SUBSIDIARY
PERMANENT BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(continued)
THREE MONTHS ENDED
JUNE 30,
-------------------------
1999 1998
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OTHER EXPENSE:
Salaries and employee benefits ................. 1,452,742 1,244,532
Deposit insurance assessment ................... 66,649 67,561
Occupancy ...................................... 287,970 205,409
Equipment ...................................... 197,676 159,887
Computer service ............................... 203,400 154,760
Advertising .................................... 125,308 110,155
Postage and office supplies .................... 92,936 92,081
Other .......................................... 474,765 243,439
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2,901,446 2,277,824
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INCOME BEFORE INCOME TAXES ....................... 1,203,671 1,063,029
INCOME TAX PROVISION ............................. 426,781 435,681
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NET INCOME ....................................... $ 776,890 $ 627,348
========== ==========
EARNINGS PER SHARE OF COMMON STOCK:
Basic ......................................... $ 0.20 $ 0.15
Diluted ....................................... 0.19 0.14
AVERAGE SHARES OUTSTANDING
Basic ......................................... 3,892,815 4,109,308
Diluted ....................................... 4,057,710 4,374,732
</TABLE>
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<TABLE>
<CAPTION>
PERMANENT BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED JUNE 30
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1999 1998
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ................................................. $ 776,890 $ 627,348
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation .......................................... 139,238 125,949
Amortization .......................................... 197,584 (9,393)
Amortization and accretion ............................ 53,921
Provisions for loan losses ............................ (113,004) 50,849
(Gain) loss on sale of securities ..................... (64,814)
(Gain) loss on sale of loans ......................... (74,671) (27,531)
(Gain) loss on sale of office properties and equipment (585)
(Gain) loss on sale of real estate owned .............. (8,735) (32,453)
ESOP shares earned .................................... 49,603 133,609
Changes in assets and liabilities:
Proceeds from the sales of loans held for sale ........... 5,287,403 1,946,531
Origination of loans for resale .......................... (5,212,732) (1,919,000)
Other investments ........................................ (1,091,455)
Interest receivable ...................................... (541,213) (412,954)
Other assets ............................................. (414,593) (1,749,076)
Interest payable ......................................... 55,124 156,791
Other liabilities ........................................ 341,051 12,313,284
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Net cash provided by (used in) operating activities ....... (556,174) 11,139,140
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CASH FLOWS FROM INVESTING ACTIVITIES:
Cash acquired through branch purchase ...................... 26,872,394
Loans originated ........................................... (39,294,105) (28,456,848)
Loan principal repayments .................................. 34,857,661 29,651,038
Proceeds from:
Maturities and calls of:
Securities available for sale ....................... 300,000 23,235,000
Commercial Paper .................................... 13,120,000
Sale of:
Securities available for sale ....................... 6,055,625
Office properties and equipment ..................... 1,781
Real estate owned ................................... 130,000 84,886
Purchases of:
Securities available for sale ....................... (2,296,406) (37,250,482)
Securities held to maturity
Commercial .......................................... (14,398,297)
Office properties and equipment ..................... (365,489) (359,045)
Equity Investment ....... ........................... (9,375)
Payments on mortgage-backed securities ..................... 1,953,386 8,743,325
Increase in cash surrender value of life insurance ......... (37,500) (19,332)
Other ...................................................... 162
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Net cash provided by (used in) investing activities ........ (6,038,344) 28,556,723
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</TABLE>
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<TABLE>
<CAPTION>
PERMANENT BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(continued)
THREE MONTHS ENDED JUNE 30,
--------------------------------
1999 1998
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CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid ...................................... (238,697) (225,306)
Purchase of treasury stock .......................... (93,125)
Net change in deposits .............................. 7,132,594 (1,396,076)
Proceeds from FHLB advances ......................... 3,000,000 27,000,000
Payments on FHLB advances ........................... (3,335,791) (41,122,746)
Principal repayment of ESOP borrowing ............... 59,513 59,513
Advance payments by borrowers for taxes and insurance (426,123) (428,497)
Net proceeds from issuance of common stock .......... 2,500 81,410
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Net cash provided by (used in) financing activities .... 6,100,871 (16,031,702)
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NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ... (493,647) 23,664,161
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ....... 13,952,410 6,082,859
CASH AND CASH EQUIVALENTS AT END OF PERIOD ............. $ 13,458,763 $ 29,747,020
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest ....................................... $ 4,851,016 $ 4,543,955
Income taxes ................................... 335,000 475,000
</TABLE>
See notes to consolidated financial statements
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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") and Permanent Federal
Savings Bank, its wholly owned subsidiary (the "Bank"). All significant
intercompany accounts and transactions have been eliminated. These consolidated
interim financial statements at June 30, 1999 and for the three month periods
ended June 30, 1999 and 1998 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, 1999.
2. 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. This statement
was adopted by the Company effective April 1, 1998 and prior year financial
statements have been reclassified for comparative purposes.
The following is a summary of the Company's total comprehensive income for the
interim three month periods ended June 30, 1999 and 1998 under FAS 130:
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<CAPTION>
Three Months Ended
June 30,
1999 1998
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Net income .................................. $ 776,890 $ 627,348
Other comprehensive income, net of tax:
Unrealized gains (losses) on securities:
Unrealized holding gains (losses)
arising during period ............. (1,860,999) 352,275
Reclassification adjustment for
losses included in net income ..... 5,744
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Other comprehensive income (loss) ........... (1,860,999) 358,019
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COMPREHENSIVE INCOME (LOSS) ................. ($1,084,109) $ 985,367
=========== ===========
</TABLE>
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3. EARNINGS PER SHARE - The difference between basic and diluted earnings per
share represents the dilutive impact of the Company's outstanding stock options.
The following is a reconciliation of the weighted average common shares for the
basic and diluted earnings per share computations.
<TABLE>
<CAPTION>
Three Months Ended June 30,
1999 1998
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Basic average common shares ................ 3,892,815 4,109,308
Dilutive effect of stock options ........... 164,895 265,424
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Diluted average common shares .............. 4,057,710 4,374,732
========= =========
</TABLE>
4. SEGMENT REPORTING - The Company has determined that it operates a single
segment which is community banking. At June 30, 1999 and March 31, 1999, the
Bank had assets of approximately $496.5 million and $493.7 million, or
approximately 99.7% of consolidated assets. Net income of the Bank for the three
months ended June 30, 1999 and 1998 was $841,000 and $669,000 or 108% and 106%
of consolidated net income. Net interest income at the Bank for each of the
three months ended June 30, 1999 and 1998 exceeded 96% of consolidated net
interest income.
5. ACQUISITION - On June 26, 1998 the Company acquired deposits and certain
assets of four branch banking locations from NBD Bank, N.A. in a purchase
transaction. The operating results of the acquired branches have been
consolidated since the acquisition date. As a result of the purchase, the
company acquired $79.1 million of deposits, $43.6 million of loans, $900,000 of
office properties and equipment and received cash of approximately $26.9
million. The purchase created approximately $9.5 million of goodwill.
Pro forma information is not presented since the transaction is not considered
significant.
6. CHANGES IN PRESENTATION - Certain amounts and items appearing in the
financial statements for the quarter ended June 30, 1998 have been reclassified
to conform with June 30, 1999 presentation.
-8-
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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 primarily attributable to the operations of the Bank.
FORWARD-LOOKING STATEMENTS
The Company may from time to time make "forward-looking statements," including
statements contained in the Company's filings with the Securities and Exchange
Commission (the "SEC"), in its reports to shareholders and in other
communications, which are made in good faith by the Company pursuant to the
"safe harbor" provisions of the Private Securities Litigation Reform Act of
1995.
These forward-looking statements include statements with respect to the
Company's beliefs, expectations, estimates and intentions, that are subject to
significant risks and uncertainties, and are subject to change based on various
factors (some of which are beyond the Company's control). Those risks and
uncertainties could cause the Company's financial performance to differ
materially from expectations, estimates, and intentions expressed in such
forward-looking statements.
The Company does not undertake, and expressly disclaims any intent or
obligation, to update any forward-looking statement, whether written or oral,
that may be made from time to time by or on behalf of the Company.
INFORMATION SYSTEMS AND THE YEAR 2000
The Company began working on its Year 2000 (or "Y2K") plan, a term which refers
to uncertainties about the ability of data processing hardware and software to
properly interpret dates after the beginning of the Year 2000, in calendar year
1997. A project leader who is a member of senior management has been assigned to
the project while senior management oversees it and regularly reports to the
Board of Directors. A comprehensive Year 2000 Plan (the "Plan") that includes
phases relating to awareness, assessment, renovation, validation and
implementation has been established and includes a timetable and summarizes each
major phase of the project and the estimated costs to renovate and test systems
in preparation for the Year 2000.
The awareness phase included a Company-wide campaign to communicate and identify
the problem and the potential ramifications to the organization. Concurrent with
this phase, the assessment phase began which included the inventorying of
systems that may be impacted. The business use of each system was analyzed and
prioritized based upon the perceived adverse effect on the financial condition
of the Company in the event of a loss or interruption in the use of that system.
The Company has completed the awareness and assessment phases of the project.
The Company has outsourced the most critical data processing activities to an
industry-known service provider who is responsible for modifying its programs to
be compliant with Year 2000 processing; however, testing of those systems is the
responsibility of the Company. Focusing on these critical systems, the Company
has closely reviewed and monitored this vendor's progress. Year 2000 compliant
upgrades to these outsourced critical data processing systems were installed
throughout fiscal 1999 and the service provider has represented that this
process is now complete.
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The Y2K upgrades have been tested according to a comprehensive plan. All issues
discovered during the testing were reported to the service provider for
remediation. Additional testing was conducted to assure that each identified
issue was correctly repaired. The Company has not discovered any material issues
during the testing. The Company is currently using the upgraded Y2K software for
its critical systems.
Other critical systems have also been assessed as to their Year 2000 readiness.
These systems have been purchased from other industry-known vendors and are
generally used in their purchased configuration. The Company is closely
reviewing and monitoring these systems in addition to reviewing less critical
systems as to each vendor's progress and testing. Systems are being tested in a
non-production environment. Assurance of Year 2000 compliance for these systems
has been received from substantially all of our vendors including all those
deemed critical. Integrated testing on all critical and non-critical systems has
been completed. A system is deemed validated upon completion of an appropriate
test plan and system testing of the Year 2000 compliant version without
problems.
The Company's overall costs associated with year 2000 implementation will be
reduced due to its outsourcing arrangement previously discussed; however,
incremental direct expenses to date of approximately $70,000 have been incurred
and the Company anticipates incurring approximately $75,000 of additional
incremental expenses in fiscal 2000. Included in this amount are capital
improvements which will be accelerated in part due to Year 2000 concerns. The
capital improvements include replacing older technology, personal computers and
software and telecommunication systems. Although implementation of this
equipment and software will resolve certain Year 2000 issues, they will also
provide increased or improved functionality and efficiencies. The cost of this
equipment and software is expected to be charged to expense over the estimated
useful lives. The aforementioned costs do not include the salary of the project
leader or the time of management and staff assisting on the project which are
estimated to total 2,000 hours from fourth quarter 1998 through calendar 1999.
The total cost could vary significantly from those currently estimated because
of unforeseen circumstances which could develop in implementing the Plan.
The Company has begun communications with its customers informing them of its
efforts to become Y2K compliant and is periodically inserting a summary of its
progress in its periodic mailings to customers. The Company is providing to its
customers some guidelines for their personal Y2K preparedness. The Company has
posted Y2K information on its Web Site and is training its employees to become
knowledgeable about the progress being made to be compliant. Posters are
displayed in the Bank's lobbies with Y2K information. Information brochures are
available to customers at our counters.
Concurrent with the development and execution of the Plan is the evolution of
the Company's Year 2000 contingency plan. The contingency plan is intended to be
a changing document developed and modified based on the results of the project.
The contingency plan currently includes the contingency procedures for critical
data processing and environmental systems and key suppliers. The contingency
plan also addresses a variety of additional issues including credit risk,
liquidity and loan and deposit customers. The key elements of the contingency
plan are currently being implemented to assure the plan will work if needed.
The Company has completed an evaluation of Year 2000 risks relating to its lines
of business separate from its dependence on data processing that includes a
review of larger commercial customers to ascertain their overall preparedness
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<PAGE>
for Year 2000. The process required lending and other bank officers to meet with
their customers to review and assess their preparedness. The failure of a
commercial customer to prepare adequately for Year 2000 could have a significant
adverse effect on such customer's operations and profitability and thereby
inhibit its ability to repay loans or require the use of its deposited funds.
While the process of evaluating the potential adverse effects of Year 2000 risks
on these customers is substantially complete, it is not possible to quantify the
overall potential effect on the Company. All new commercial customers are
evaluated at the time of application. A statement of the customer's readiness
has been made a part of the closing documents each customer must sign.
The plan also includes provisions which address the Year 2000 compliance of
environmental systems, which include items such as elevators, security systems
and heating and air conditioning systems. No significant business risks have
been revealed regarding these types of systems.
While the Company is making a substantial effort to become Year 2000 compliant,
there is no assurance that the failure to adequately address all issues relating
to the Year 2000 problem would not have a material adverse effect on its
financial condition or results of operations.
QUARTER ENDED JUNE 30, 1999 COMPARED TO JUNE 30, 1998
NET INTEREST INCOME - Net interest income before provision for loan losses
increased by approximately $571,000 or 20.4% for the quarter ended June 30, 1999
compared to the quarter ended June 30, 1998. This increase was primarily
attributable to a 33 basis point (.33%) increase in interest rate spread from
the comparable quarter of 1998. The components of the improved spread include a
42 basis point (.42%) decrease in the cost of funds which was offset by a 9
basis point (.9%) decrease in the earning asset yield.
INTEREST INCOME - Total interest income for the three months ended June 30, 1999
increased approximately $776,000, or 10.3% from the three month period ended
June 30, 1998. This increase was primarily attributable to an increase in the
level of average earning assets to $458.5 million in the current year compared
to $410.3 million in the prior year since earning assets acquired from NBD Bank
are included in the average from June 26, 1998, the acquisition date, and a
greater percentage of average earning assets are comprised of loans which
generally have higher yields than other types of assets.
INTEREST EXPENSE - Total interest expense increased by approximately $205,000,
or 4.4% during the three months ended June 30, 1999 compared to the three months
ended June 30, 1998, primarily due to an increase in the level of average
interest bearing liabilities to $430.9 million from $371.5 million in the
comparable quarter of the prior year due to the previously mentioned
acquisition. Non-interest bearing checking accounts represented 4.5% and 1.8% of
average deposits for the quarters ended June 30, 1999 and 1998, respectively.
OTHER INCOME - Total other income increased by approximately $187,000 or 30.6%
during the quarter ended June 30, 1999 compared to the quarter ended June 30,
1998. Service charges increased $153,000 due to higher fee levels and a greater
number of accounts because of the before mentioned acquisition, commissions
increased $34,000 and gains on the sale of loans increased by $50,000 during the
quarter ended June 30, 1999 compared to the same quarter of 1998. Gains on sales
of loans increased since the Company is selling more of the current production
<PAGE>
of fixed rate mortgage loans. Compared to the quarter ended June 30, 1998, the
Company had decreased gains on the sale of securities and gains on the sale of
other real estate owned of $65,000 and $17,000, respectively. Miscellaneous
other income categories increased by $34,000 from the comparable quarter of the
prior year with increases in cash surrender value on life insurance policies and
income from automated teller machine services being major components of the
increase.
OTHER EXPENSE - Other expense increased approximately $624,000 during the
quarter ended June 30, 1999 compared to the quarter ended June 30, 1998.
Salaries and employee benefits increased by $208,000, occupancy expenses
increased by $83,000, equipment expenses increased by $38,000 and computer
service expense increased by $49,000 from the comparable period in the prior
year. These increases are primarily attributable to the costs related to the
acquired NBD Bank, N.A. branches being consolidated for the entire quarter in
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<PAGE>
the current year whereas these expenses are included only from the acquisition
date in the quarter ended June 30, 1998. The increased expenses are the result
of an expansion of personnel to staff additional branch locations to service
acquired loan and deposit relationships. Advertising expenses were $15,000
higher than during the quarter ended June 30, 1998 and all other operating
expenses increased $233,000 with amortization of goodwill of $159,000 associated
with the NBD Bank, N.A. branches acquired on June 26, 1998 being the principal
component.
INCOME TAXES - The provision for income taxes was approximately $427,000, or
35.5% of pretax income during the quarter ended June 30, 1999 compared to,
approximately $436,000, or 40.9% of income before taxes during the quarter ended
June 30, 1998.
FINANCIAL CONDITION JUNE 30, 1999 COMPARED TO MARCH 31, 1999
The Company's total assets at June 30, 1999 were $497.8 million representing an
increase of $5.4 million, or 1.1%, from March 31, 1999. Securities decreased by
$3.3 million to $120.9 million at June 30, 1999 from $124.2 million at March 31,
1999 as the Company invested a higher percentage of its resources in loans. Net
loans increased by $7.1 million to $328.1 million at June 30, 1999 compared to
$321 million at March 31, 1999. Loan growth was primarily in the consumer and
commercial loan areas.
Non-performing assets were $1.0 million at June 30, 1999 and $1.2 million at
March 31, 1999. As of June 30, 1999, the Bank's loan loss allowance was $2.6
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 and non-performing assets, loss histories
and other quantitative and qualitative factors, the allowance for loan losses
(presented below in tabular form) was deemed by management to be adequate at
June 30, 1999. The Bank conducts an on-going review of its loan portfolio for
potential problems.
1999 1998
---------- ----------
Balance, April 1 $2,706,408 $1,973,410
Provision for loan losses 70,000 75,000
Net charge offs (183,004) (24,151)
---------- ----------
Balance, June 30 $2,593,404 $2,024,259
========== ==========
Federal Home Loan Bank advances decreased by $335,000 to $96.2 million at June
30, 1999 compared to $96.5 million at March 31, 1999. The Company has in the
past and anticipates continuing to utilize advances in its funding strategy
since the cost of advances can be lower than the cost of acquiring or retaining
deposits. Deposits increased by $7.1 million to $352.5 million at June 30, 1999
compared to $345.3 million at March 31, 1999 as the Company continues to pay
competitive rates on its deposit accounts.
Total stockholders' equity decreased by $1.3 million to $39.5 million at June
30, 1999 from $40.9 million at March 31, 1999. The decrease is attributable to
an increase of $1.8 million in net unrealized losses on securities available for
sale and the declaration of $278,000 of dividends. Increasing stockholders'
equity were net income of $777,000 and a reduction in the ESOP borrowing of
$60,000.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES - The standard measure of liquidity for the
thrift industry is the ratio of cash and eligible investments to a certain
percentage of borrowings due within one year and net withdrawable deposit
accounts. The minimum required level is currently set by OTS regulation at 4%.
At June 30, 1999, the Bank's liquidity ratio was 40.47%. 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.
-12-
<PAGE>
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 June 30, 1999, the Bank had $96.2 million in such
borrowings. As of that date, the Bank had commitments to fund loans of
approximately $21.1 million (which includes unfunded lines and letters of credit
of approximately $18 million). In the opinion of management, the Bank has
sufficient cash flow and borrowing capacity to meet current and anticipated
funding commitments.
The following table sets forth the Bank's compliance with its capital
requirements at June 30, 1999.
<TABLE>
<CAPTION>
Amount Percent (*)
----------- -----------
<S> <C> <C>
Core Capital:
Capital level $34,711,000 7.07%
Requirement 19,651,000 4.00%
----------- -----
Excess $15,060,000 3.07%
=========== =====
Risk-Based Capital:
Capital level $36,966,000 13.17%
Requirement 22,451,000 8.00%
----------- -----
Excess $14,515,000 5.17%
=========== =====
</TABLE>
(*) Core capital is computed as a percentage of adjusted total assets of
$491,282,000. Risk-based capital is computed as a percentage of risk-weighted
assets of $280,641,000.
-13-
<PAGE>
<TABLE>
<CAPTION>
SUPPLEMENTAL DATA
Three Months Ended
June 30,
1999 1998
---- ----
<S> <C> <C>
Weighted average interest rate earned on
total interest-earning assets 7.24% 7.33%
Weighted average cost of total
interest-bearing liabilities 4.57% 4.99%
Interest rate spread during period 2.67% 2.34%
Net yield on interest-earning assets
(net interest income divided by average
interest-earning assets on annualized basis) 2.95% 2.70%
Total interest income divided by average
total assets (on annualized basis) 6.70% 6.98%
Total interest expense divided by
average total assets (on annualized basis) 3.97% 4.41%
Net interest income divided by average
total assets (on annualized basis) 2.73% 2.57%
Return on assets (net income divided by
average total assets on annualized basis) 0.63% 0.59%
Return on equity (net income divided by
average total equity on annualized basis) 7.61% 5.83%
Interest rate spread at end of period 2.72% 2.49%
<CAPTION>
Data as of
June 30, March 31,
1999 1999
(IN THOUSANDS EXCEPT %)
<S> <C> <C>
NONPERFORMING ASSETS:
Loans: Non-accrual ................................ $ 668 $ 818
Restructured .......................... 0 0
------ ------
Total nonperforming loans .......................... $ 668 $ 818
Real estate owned, net ................ 174 112
Other repossessed assets, net ......... 200 236
------ ------
Total Nonperforming Assets ......................... $1,042 $1,166
====== ======
Nonperforming assets divided by total assets ....... .21% .24%
Nonperforming loans divided by total loans ......... .20% .25%
Balance in Allowance for Loan Losses ............... $2,593 $2,706
</TABLE>
-14-
<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 300 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 June 30, 1999, 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 1999 annual report to shareholders.
-15-
<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
---------------------------------------------------
None
ITEM 5. Other Information
-----------------
If a stockholder proposal is not received by the Company by February
5, 2000, 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, 2000.
ITEM 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
None.
(b) Reports on Form 8-K
None
-16-
<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: August 13, 1999 By /s/ Donald P. Weinzapfel
---------------- -------------------------
Donald P. Weinzapfel,
Chairman of the Board,
and Chief Executive Officer
(Principal Executive Officer)
Date: August 13, 1999 By /s/ Robert A. Cern
--------------- -------------------
Robert A. Cern
Chief Financial Officer and Secretary
(Principal Financial Accounting Officer)
-17-
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> JUN-30-1999
<CASH> 10,297,885
<INT-BEARING-DEPOSITS> 3,160,878
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 113,996,680
<INVESTMENTS-CARRYING> 6,919,486
<INVESTMENTS-MARKET> 6,429,219
<LOANS> 330,708,414
<ALLOWANCE> 2,593,404
<TOTAL-ASSETS> 497,750,058
<DEPOSITS> 352,473,683
<SHORT-TERM> 2,388,098
<LIABILITIES-OTHER> 6,591,124
<LONG-TERM> 96,779,721
0
0
<COMMON> 49,241
<OTHER-SE> 39,468,191
<TOTAL-LIABILITIES-AND-EQUITY> 497,750,058
<INTEREST-LOAN> 6,240,082
<INTEREST-INVEST> 1,861,567
<INTEREST-OTHER> 175,351
<INTEREST-TOTAL> 8,277,000
<INTEREST-DEPOSIT> 3,602,105
<INTEREST-EXPENSE> 4,906,140
<INTEREST-INCOME-NET> 3,370,860
<LOAN-LOSSES> 70,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,901,447
<INCOME-PRETAX> 1,203,671
<INCOME-PRE-EXTRAORDINARY> 776,890
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 776,890
<EPS-BASIC> .20
<EPS-DILUTED> .19
<YIELD-ACTUAL> 7.24
<LOANS-NON> 668,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 2,621,000
<ALLOWANCE-OPEN> 2,706,408
<CHARGE-OFFS> 208,004
<RECOVERIES> 25,000
<ALLOWANCE-CLOSE> 2,593,404
<ALLOWANCE-DOMESTIC> 96,785
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,496,619
</TABLE>
