U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______________ TO
_________________
Commission file number 000-22449
PTC Bancorp
(Exact name of small business issuer as specified in its charter)
Indiana 35-1606016
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Reservoir Hill Road
9014 State Road 101
P.O. Box 7
Brookville, Indiana 47012
(Address of principal executive offices) (Zip Code)
765-647-3591
(Issuer's telephone number)
NA
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 No X
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
1,024,452 shares of common stock outstanding on August 15, 1997
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT
(Check one):
Yes No X
--- ---
<PAGE>
TABLE OF CONTENTS
Part I
Item 1. Financial Statements............................................ 3
Consolidated Balance Sheets................................... 3
Consolidated Statements of Income............................. 4
Consolidated Statements of Changes in Shareholders' Equity.... 5
Consolidated Statements of Cash Flows......................... 6
Notes to Consolidated Financial Statements.................... 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operation............................................ 8
Part II
Item 1. Legal Proceedings............................................... 11
Item 2. Change in Securities............................................ 11
Item 3. Defaults Upon Senior Securities................................. 11
Item 4. Submission of Matters to a Vote of Security Holders............. 11
Item 5. Other Information............................................... 12
Item 6. Exhibits and Reports on Form 8-K................................ 12
2
<PAGE>
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
PTC BANCORP
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Dollars in Thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
-------- ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents........................................ $ 12,063 $ 26,185
Interest-bearing balances with financial institutions............ 1,398 1,897
Available-for-sale securities.................................... 35,409 38,376
Held-to-maturity securities...................................... 26,698 25,218
Total loans...................................................... 215,354 196,963
Less: Allowances for loan losses........................ 1,803 2,000
-------- --------
Net loans 213,551 194,963
Premises and equipment, net 3,896 3,512
Accrued interest receivable and other assets 6,522 6,425
-------- --------
$299,537 $296,576
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits................................................. $273,315 $271,127
Notes payable............................................ 250 500
Accrued interest payable and other liabilities........... 3,040 3,296
-------- --------
Total liabilities 276,605 274,923
Shareholders' equity
Preferred stock, no par value; 1,000,000
shares authorized, no shares issued and outstanding
Common stock, $1 stated value; 2,000,000
shares authorized, 1,024,452 and 1,024,276 shares
issued and outstanding............................... 1,024 1,024
Additional paid-in capital............................... 10,415 10,413
Retained earnings........................................ 11,358 10,018
Net unrealized loss or gain on
available-for-sale securities.......................... 135 198
-------- --------
Total shareholders' equity 22,932 21,653
-------- --------
$299,537 $296,576
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE>
PTC BANCORP
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in Thousands Except Per Share Data)
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
June 30, June 30,
-------------------- -------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest income
Interest and fees on loans............ $ 4,783 $ 4,306 $ 9,299 $ 8,336
Interest on securities................ 892 881 1,803 1,750
Other interest........................ 89 123 217 325
------------- ------------- ------------- -------------
Total interest income 5,764 5,310 11,319 10,411
Interest expense
Interest on deposits.................. 2,909 2,697 5,677 5,322
Interest on notes payable............. 8 14 17 34
------------- ------------- ------------- -------------
Total interest expense 2,917 2,711 5,694 5,356
------------- ------------- ------------- -------------
Net interest income 2,847 2,599 5,625 5,055
Provision for loan losses............. (210) (257) (400) (389)
------------- ------------- ------------- -------------
Net interest income after
provision for loan losses................... 2,637 2,342 5,225 4,666
Non-interest income
Service charges and fees
on deposit accounts................. 315 301 613 588
Mortgage banking income............... 208 114 406 320
Gain/(loss) on securities............. - 99 - 99
Other income.......................... 53 59 94 146
------------- ------------- ------------- -------------
Total non-interest income 576 573 1,113 1,153
Non-interest expense
Salaries and benefits................. 1,136 1,002 2,190 2,072
Occupancy and equipment,
net................................. 313 220 589 452
FDIC insurance........................ 10 - 15 1
Data processing expense............... 97 85 191 178
Other operating expenses.............. 441 397 857 768
------------- ------------- ------------- -------------
Total non-interest
expense 1,997 1,704 3,842 3,471
------------- ------------- ------------- -------------
Income before income taxes.................... 1,216 1,211 2,496 2,348
Less: income taxes................... (367) (412) (756) (803)
------------- ------------- ------------- -------------
Net income $ 849 $ 799 $ 1,740 $ 1,545
============= ============= ============= =============
Earnings per share $ .83 $ .77 $ 1.70 $ 1.49
Average shares outstanding 1,024,452 1,043,695 1,024,393 1,035,301
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE>
PTC BANCORP
CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY (UNAUDITED)
(Dollars in Thousands Except Per Share Data)
<TABLE>
<CAPTION>
Six Months Six Months
Ended Ended
June 30, June 30,
1997 1996
---------- ----------
<S> <C> <C>
Balance January 1........................................ $ 21,653 $ 19,218
Net income............................................... 1,740 1,545
Issuance of stock........................................ 2 485
Redemption of stock...................................... - (356)
Cash dividends paid ($.39 and $.31 per share)............ (400) (321)
Change in net unrealized holding gain/(loss) on
available-for-sale securities.......................... (63) (358)
--------- ---------
Balance June 30.......................................... $ 22,932 $ 20,213
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
PTC BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in Thousands)
<TABLE>
<CAPTION>
Six Months Six Months
Ended Ended
June 30, June 30,
1997 1996
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income........................................................... $ 1,740 $ 1,545
Adjustments to reconcile net income to net cash
from operating activities
Depreciation................................................. 244 182
Provision for loan losses.................................... 400 389
(Gain)/loss on sale of securities............................ - (99)
Amortization of intangible assets............................ 115 108
Other adjustments............................................ (291) (695)
--------- ---------
Net cash from operating activities................... 2,208 1,430
Cash flows from investing activities
Proceeds from paydowns and maturities of
held-to-maturity securities........................................ 1,936 4,009
Proceeds from sales of available-for-sale securities................. - 2,234
Proceeds from paydowns and maturities of
available-for-sale securities...................................... 4,949 11,136
Purchases of held-to-maturity securities............................. (3,416) (9,021)
Purchases of available-for-sale securities........................... (1,982) (10,627)
Net change in loans.................................................. (18,988) (11,101)
Net change in deposits with other financial institutions............. 499 195
Property and equipment expenditures.................................. (628) (363)
--------- ---------
Net cash from investing activities........................... (17,630) (13,538)
Cash flows from financing activities
Net change in deposits............................................... (4,600) 8,854
Deposits assumed in branch acquisition, net of premium paid.......... 6,548 -
Dividends paid....................................................... (400) (321)
Payments on note payable............................................. (250) (300)
Proceeds from issuance of stock...................................... 2 485
Redemption of stock.................................................. - (356)
--------- ---------
Net cash from financing activities........................... 1,300 8,362
--------- ---------
Net change in cash and cash equivalents...................................... (14,122) (3,746)
Cash and cash equivalents at beginning of period............................. 26,185 24,474
--------- ---------
Cash and cash equivalents at end of period................................... $ 12,063 $ 20,728
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
PTC BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The consolidated financial statements include the accounts of PTC Bancorp (the
"Company") and its wholly owned subsidiary, Peoples Trust Company (the
"Bank"). All significant intercompany accounts and transactions have been
eliminated.
These financial statements were prepared in accordance with the instructions
for Form 10-QSB and, therefore, do not include all of the disclosures
necessary for a complete presentation of financial position, results of
operations and cash flows in conformity with generally accepted accounting
principles. Except for the adoption of the required accounting changes
described in Note 2, these financial statements have been prepared on a basis
consistent with the annual financial statements and include, in the opinion of
management, all adjustments, consisting of only normal recurring adjustments,
necessary for a fair presentation of the results of operations and financial
position at the end of and for the periods presented.
NOTE 2 - ACCOUNTING CHANGES
Effective January 1, 1997, the Company adopted Financial Accounting Standard
No. 125, Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities, which was issued by the Financial Accounting
Standards Board in 1996. It revised the accounting for transfers of financial
assets, such as loans and securities, and for distinguishing between sales and
secured borrowings. It is effective for some transactions in 1997 and others
in 1998. Adoption of the Standard did not significantly impact the Company's
financial position or results of operations.
NOTE 3 - EARNINGS PER SHARE
Earnings per share have been computed based upon the weighted average number
of shares outstanding during the periods presented, adjusted for a 10% stock
dividend in December 1996.
NOTE 4 - PENDING BUSINESS COMBINATION
On June 2, 1997, the Company agreed in principle to merge with Indiana United
Bancorp (IUB). IUB is a $340 million bank and thrift holding company located
in Greensburg, Indiana. Under terms of the agreement, each outstanding common
share of PTC Bancorp, including shares reserved under option plans, will be
converted into 1.075 common shares of IUB. The proposed transaction requires
a definitive agreement and approval by regulatory authorities and shareholders
of both companies. The proposed transaction is expected to be consummated by
the end of 1997. It is expected to be accounted for as a pooling-of-interests.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
EARNINGS.
Net income for the six month period ended June 30, 1997 was $1,740 compared to
$1,545 for the same six month period ended June 30, 1996, which represented a
$195 or 12.6% increase. Earnings per share also increased from $1.49 per share
to $1.70 per share in the same period. Higher net interest income, which was
partially offset by higher non-interest expense, accounted for most of the
increase in net income. Net income and earnings per share for the second
quarter of 1997 were $849 and $.83 compared with $799 and $.77 for the second
quarter of 1996. This increase was primarily due to higher net interest
income, offset by higher non-interest expenses.
Net interest income increased by $570 or 11.3% for the six month period ended
June 30, 1997 compared to the same period in 1996. A similar proportional
increase also occurred during the second quarter of 1997 compared with the
second quarter of 1996. Higher volumes (average balances) of financial assets
and liabilities, rather than changes in underlying interest rates, were the
main reason for increased interest income and interest expense. Average loans
were about $25.7 million higher for the six month period ended June 30, 1997,
compared to the same period in 1996. Average deposits were about $24.5
million higher.
Non-interest income was relatively stable for the six month periods ended June
30, 1997 and 1996; however, certain components of non-interest income did
change significantly. Mortgage banking income, which consists of gains
(losses) on loan sales and service fee income, was $94 higher for the second
quarter of 1997 compared to the same period in 1996, and $86 higher for the
six month period ended June 30, 1997 compared to the same period in 1996.
Increased mortgage origination activity began during the first quarter of 1997
and manifested itself during the second quarter. During this period of time,
the long-term interest rates charged on mortgages eased and the Company
experienced significant refinancings and new originations. Gains on
securities during the second quarter of 1996 included a $99 net gain on sale
of common stock and other securities. There were no securities sold in 1997.
Non-interest expense increased from $3,471 for the six month period ended June
30, 1996 to $3,842 for the same period in 1997, a $371 increase. Most of this
increase occurred during the second quarter of 1997 compared to 1996, and was
primarily related to higher salaries and benefits, and higher occupancy and
equipment expense. Higher salary and benefit costs were directly attributable
to a revised management structure implemented January 1, 1997, which provided
for the hiring of several new commercial lenders, a financial controller, an
executive vice president, and several regional sales managers. The Company
believes that the revised structure will enable the Company to generate
additional growth and loan production activity in the future.
Higher occupancy and equipment expenses in the first six months of 1997
compared to the same period in 1996 were directly attributed to the Company's
expansion of its current ATM
8
<PAGE>
program which included the refurbishing of four existing ATM's, the addition
of four new ATM's and the addition of one cash dispenser at a local
convenience store. The Company also converted to a new network and service
provider in order to attain long term cost reductions in driving the ATM
network.
FINANCIAL CONDITION.
Total assets increased slightly, $2,970 or 1.0%, from December 31, 1996 to
June 30, 1997. Gross loans increased by $18,391 or 9.3% during the same
period. Approximately $14,122 in cash equivalents was used to fund the
increase in loans, along with maturities of securities. Loan demand continued
to be strong in 1997. The Company believes that it is in a position to grow
its loan portfolio by having added employees to increase originations. This
management restructuring began in January 1997 and began to manifest itself in
the second quarter of the year. Farm land mortgage financing grew 31.8% from
December 31, 1996 to June 30, 1997. Residential (1-4 family) mortgage
financing increased more than $6.6 million during the first six months of
1997, which represents an increase of over 8.3%. From December 31, 1996 to
June 30, 1997, tax-exempt loans to local school districts and municipalities
increased approximately 39% and commercial real estate loans increased by more
than 31%.
As of June 30, 1997, the Company had a 78.8% loan to deposit ratio. A
detailed presentation of loans by category follows:
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
-------- ------------
<S> <C> <C>
Construction loans.................................. $ 12,780 $ 13,650
Real estate - farmland.............................. 10,948 8,302
Real estate - 1-4 family residential................ 86,422 79,808
Real estate - non-farm, non-residential............. 46,262 35,068
Commercial and industrial........................... 18,832 22,986
Consumer loans...................................... 22,302 24,543
Tax-exempt loans.................................... 11,664 8,390
Other loans......................................... 6,144 4,216
-------- --------
Total loans......................................... $215,354 $196,963
======== ========
</TABLE>
ASSET QUALITY.
Provision for loan losses was relatively stable for the six month period ended
June 30, 1997 compared to the same period in 1996. An analysis of activity in
the allowance for loan losses follows:
<TABLE>
<CAPTION>
Six months Six months
ended ended
June 30, 1997 June 30, 1996
------------- -------------
<S> <C> <C>
Balance at January 1............................... $ 1,722 $ 2,000
Provision for loan losses.......................... 389 400
Losses charged to allowance........................ (234) (681)
Recoveries credited to allowance................... 84 84
------- -------
Balance at June 30................................. $ 1,961 $ 1,803
======= =======
</TABLE>
9
<PAGE>
The Company maintains a watch list and performs an ongoing loan review
function. The Company determines its loan loss allowance quarterly.
Management believes that the allowance is adequate as of June 30, 1997, but
expects to continue to increase the provision during the second half of 1997
in anticipation of continued loan growth.
A summary of non-performing loans follows:
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
--------- ------------
<S> <C> <C>
Non-accrual loans.................................. $ 1,553 $ 1,794
Restructured loans................................. - -
Accruing loans 90 days or more past due............ 67 34
------- -------
Total non-performing loans..................... $ 1,620 $ 1,828
======= =======
Allowance for loan losses.......................... $ 1,803 $ 2,000
Allowance/total loans.............................. 0.84% 1.02%
Allowance/non-performing loans..................... 111.3% 109.4%
Non-performing loans/total loans................... 0.75% 0.93%
</TABLE>
The allowance for loan losses declined from $2,000 at December 31, 1996 to
$1,803 at June 30, 1997. Net charge offs and recoveries were $597 for the six
months ended June 30, 1997. Gross charge offs were $681, of which $550 was
related to the Bennett Funding loan relationship. As of June 30, 1997 and
December 31, 1996, the carrying value of loans to Bennett Funding was $750 and
$1,300 respectively, which is included in non-accrual loans. It is believed
that the remaining $750 will be recovered from the Bennett Funding loans and
no additional loss will result. An agreed settlement has been approved
through the bankruptcy courts and payment is expected before year end.
CAPITAL.
Shareholders' equity increased from $21,653 at December 31, 1996 to $22,932 at
June 30, 1997. The increase of $1,279 was almost solely due to retained
earnings - net income less cash dividends.
The Company and Bank are subject to regulatory capital requirements
administered by the federal banking agencies. "Consolidated" actual and
minimum required capital ratios for capital adequacy and prompt corrective
action purposes are presented below. ("Bank only" ratios are substantially
the same as "consolidated"). The Company and Bank are both considered "well
capitalized" for prompt corrective action purposes.
10
<PAGE>
<TABLE>
<CAPTION>
Minimum Required
Minimum Required To Be "Well
For Capital Capitalized" Under
Adequacy Prompt Corrective
Actual Purposes Action Regulations
------ ---------------- ------------------
<S> <C> <C> <C>
As of June 30, 1997
- -------------------
Tier 1 Capital to Average Assets.................. 7.17% 4.0% 5.0%
Tier 1 Capital to Risk Based Assets............... 10.43% 4.0% 6.0%
Total Capital to Risk Based Assets................ 11.32% 8.0% 10.0%
As of December 31, 1996
- -----------------------
Tier 1 Capital to Average Assets.................. 6.73% 4.0% 5.0%
Tier 1 Capital to Risk Based Assets............... 10.54% 4.0% 6.0%
Total Capital to Risk Based Assets................ 11.60% 8.0% 10.0%
</TABLE>
Part II -- Other Information
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
The Registrant held its annual meeting of shareholders on April 29,
1997 at which the following persons were reelected to the Board of Directors
for a one year term and the selection of Crowe Chizek as the Registrant's
independent auditors for 1997 was ratified and approved. 821,127 shares were
represented at the meeting and all were cast for all of the persons elected
and for the ratification of auditors. There were no abstentions or votes
withheld.
11
<PAGE>
Robert S. Dunevant
James L. Saner, Sr.
Dale E. Smith
John E. Back
Dale J. Deffner
Item 5. Other Information
None
Item 6. Exhibits and reports on Form 8-K
(a) Exhibit 27.1 Financial Data Schedule
(b) Reports on Form 8-K
None
Signatures
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
PTC BANCORP
Date: August 27, 1997 /s/ James L. Saner, Sr.
------------------- -------------------------------------
James L. Saner, Sr.
President
53483
12
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 12,063
<INT-BEARING-DEPOSITS> 1,398
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 35,409
<INVESTMENTS-CARRYING> 26,698
<INVESTMENTS-MARKET> 26,698
<LOANS> 215,354
<ALLOWANCE> 1,803
<TOTAL-ASSETS> 299,537
<DEPOSITS> 273,315
<SHORT-TERM> 0
<LIABILITIES-OTHER> 3,040
<LONG-TERM> 0
0
0
<COMMON> 1,024
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 299,537
<INTEREST-LOAN> 9,299
<INTEREST-INVEST> 1,803
<INTEREST-OTHER> 217
<INTEREST-TOTAL> 11,319
<INTEREST-DEPOSIT> 0
<INTEREST-EXPENSE> 5,694
<INTEREST-INCOME-NET> 5,625
<LOAN-LOSSES> 400
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 857
<INCOME-PRETAX> 2,496
<INCOME-PRE-EXTRAORDINARY> 1,740
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 849
<EPS-PRIMARY> .83
<EPS-DILUTED> .83
<YIELD-ACTUAL> 3.915
<LOANS-NON> 1,553
<LOANS-PAST> 67
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,000
<CHARGE-OFFS> 681
<RECOVERIES> 84
<ALLOWANCE-CLOSE> 1,803
<ALLOWANCE-DOMESTIC> 1,803
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
