SELECTED FINANCIAL DATA
The information below under the captions "Operating
Data","Balance Sheet Data" and "Per Share Data" for each of the
five years in the period ended December 31, 1994 has been
derived from the Consolidated Financial Statements of the
Corporation.
(dollars in thousands, except ratios and per share data)
1994 1993 1992 1991 1990
OPERATING DATA <F1>
for the year ended:
Total interest income $36,104 $35,311 $37,707 $39,151 $39,600
Total interest expense 15,424 15,263 17,887 22,172 24,042
Net interest income 20,680 20,048 19,820 16,979 15,558
Provision for loan losses 765 1,592 2,387 1,748 1,475
Other income 3,838 3,952 3,514 2,924 2,824
Other expenses 15,672 15,124 14,945 13,547 12,586
Net income 5,748 5,071 4,550 3,615 3,458
BALANCE SHEET DATA
at year end:
Total assets $498,006 $465,373 $468,562 $424,449 $412,789
Investments 99,419 103,349 112,556 99,963 102,244
Net loans 354,570 315,305 285,448 273,980 257,634
Total deposits 403,819 385,639 401,623 375,027 360,601
Term debt 23,787 20,331 15,506 6,836 7,275
Stockholders' equity 45,635 42,778 38,497 32,414 29,567
SIGNIFICANT RATIOS <F1> <F2>
Net income to:
Average total assets 1.20% 1.09% 1.01% 0.85% 0.85%
Average stockholders'
equity 12.9 11.9 11.8 11.7 12.0
Average stockholders'
equity to average
total assets 9.3 8.8 7.5 7.3 7.1
Average loans to
average deposits 85.5 78.4 70.2 71.4 70.6
Primary capital to
period end total
assets 10.1 10.1 8.9 8.6 8.2
Dividend payment ratio 29.3 29.8 28.0 29.2 28.8
PER SHARE DATA <F1> <F2> <F3>
Net income:
Primary $1.98 $1.81 $1.71 $1.50 $1.42
Fully diluted <F4> 1.97 1.79 1.59 1.30 1.23
Cash dividends paid 0.58 0.52 0.48 0.44 0.41
Book value at end
of period 15.74 14.71 13.82 13.29 12.30
[FN]
<F1> 1993 net income and per share information based upon net
income after adjustment for cumulative effect of accounting
changes.
<F2> Adjusted to reflect a two for one stock split issued on
April 29, 1994 and a 10% stock dividend issued on April 15, 1993.
<F3>
1994 1993 1992 1991 1990
Primary shares
outstanding 2,909,369 2,797,352 2,663,702 2,417,310 2,441,756
Fully diluted
shares
outstanding 2,912,241 2,841,990 2,939,822 2,955,158 3,002,142
<F4> Fully diluted net income per share is calculated as if the
Subordinated Convertible Debentures were converted as of the
issue date, with a corresponding increase in net income from
the after-tax reduction in interest expense.
[/FN]
SUMMARIZED QUARTERLY INFORMATION
A summary of selected quarterly financial information for 1994
and 1993 follows:
1994
--------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
---------- ---------- ---------- ----------
Interest income $8,497,000 $8,645,000 $9,146,000 $9,816,000
Interest expense 3,620,000 3,654,000 3,930,000 4,220,000
Net interest income 4,877,000 4,991,000 5,216,000 5,596,000
Provision for possible
loan losses 192,000 248,000 167,000 158,000
Investment securities
gains (losses) 81,000 45,000 0 (363,000)
Other income 1,029,000 951,000 970,000 1,125,000
Other expenses 3,911,000 3,871,000 3,919,000 3,971,000
Income taxes 578,000 556,000 628,000 571,000
Net income 1,306,000 1,312,000 1,472,000 1,658,000
Net income per fully
diluted common share $0.45 $0.45 $0.51 $0.56
1993
-------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
---------- ---------- ---------- ----------
Interest income $9,092,000 $8,833,000 $8,767,000 $8,619,000
Interest expense 3,917,000 3,861,000 3,794,000 3,691,000
Net interest income 5,175,000 4,972,000 4,973,000 4,928,000
Provision for possible
loan losses 450,000 450,000 375,000 317,000
Investment securities
gains 0 1,000 43,000 1,000
Other income 1,115,000 944,000 972,000 876,000
Other expenses 3,692,000 3,967,000 3,657,000 3,808,000
Income taxes 646,000 364,000 539,000 350,000
Cumulative effect of
accounting changes, net (314,000)
Net income 1,188,000 1,136,000 1,417,000 1,330,000
Net income per fully
diluted common share $0.45 $0.40 $0.48 $0.46
MARKET FOR COMMON STOCK AND DIVIDENDS
Prior to 1993, the Corporation's Common Stock was traded on a
limited basis in the over-the-counter market. On February 9,
1993, the Corporation commenced trading on the Nasdaq National
Stock Market (National Association of Securities Dealers
Automated Quotation). Nasdaq provides brokers and others with
immediate access to the best stock price for the Corporation and
thousands of other companies across the world. The Corporation
can be found under the symbol PEBO.
In 1994, 230,633 shares were traded through the Nasdaq system,
an average daily volume of 912 shares traded. The following
table sets forth for the indicated periods the high and low bid
quotations for, and the cash dividends declared, with respect to
the Corporation's Common Stock.
Prior to 1993, the bid quotations were obtained from the three
securities dealers which made a market in the Corporation's
Common Stock. These quotations are inter-dealer prices, without
retail markup, markdown, or commission, and may not represent
actual transactions. Currently seven companies serve as market
makers on the Nasdaq National Stock Market. Market prices since
February, 1993, have been obtained directly from the Nasdaq
quotation system. The bid quotations and per share dividends
have been adjusted for a two for one stock split issued on April
29, 1994 and a 10% stock dividend issued on April 15, 1993.
Peoples Bancorp had 1,025 shareholders at December 31, 1994.
QUARTERLY MARKET AND DIVIDEND INFORMATION
PER SHARE
-------------------------------
High Bid Low Bid Dividend
-------- ------- --------
1994
Fourth Quarter $25.50 $23.25 $.15
Third Quarter 24.50 22.00 .15
Second Quarter 24.00 20.00 .14
First Quarter 22.50 19.00 .14
1993
Fourth Quarter $22.00 $19.50 $.14
Third Quarter 23.25 19.00 .13
Second Quarter 23.50 17.50 .13
First Quarter 24.55 17.28 .12
1992
Fourth Quarter $20.00 $16.82 $.12
Third Quarter 18.64 15.00 .12
Second Quarter 16.37 12.96 .12
First Quarter 13.64 12.28 .12
The Corporation and its predecessor have paid cash dividends on
its Common Stock for over 38 consecutive years and have
increased the annual dividend in each of the last 29 years. The
Corporation plans to continue to pay quarterly cash dividends.
Cash dividends are subject to certain restrictions as described
in Note 14 to the audited financial statements.
THE ANNUAL MEETING OF STOCKHOLDERS OF PEOPLES BANCORP INC. WILL
BE HELD TUESDAY, APRIL 4, 1995 AT 10:00 A.M. IN THE PEOPLES BANK
CONFERENCE ROOM, 235 SECOND STREET, MARIETTA, OHIO. STOCKHOLDERS
ARE CORDIALLY INVITED TO ATTEND.
ON WRITTEN REQUEST, A COPY OF OUR ANNUAL REPORT TO THE
SECURITIES AND EXCHANGE COMMISSION ON FORM 10-K IS AVAILABLE TO
INTERESTED STOCKHOLDERS. REQUESTS SHOULD BE ADDRESSED TO RUTH
OTTO, SECRETARY, PEOPLES BANCORP INC., P.O. BOX 738, MARIETTA,
OHIO 45750.
CONSOLIDATED BALANCE SHEET
As of December 31, 1994 and 1993
1994 1993
ASSETS
Cash and due from banks (Note 1) $19,551,000 $15,275,000
Interest bearing deposits with banks 650,000 5,998,000
Federal funds sold 4,500,000 7,050,000
Investment securities (Notes 1 and 3):
Securities available-for-sale,
at fair value (amortized cost
of $91,783,000 at December 31, 1994) 90,172,000
Securities held-to-maturity,
at amortized cost (fair value
approximates $9,089,000 at
December 31, 1994) 9,247,000
Securities held for investment,
at amortized cost (fair value
approximates $108,105,000 at
December 31, 1993) 103,349,000
----------- -----------
Total investment securities 99,419,000 103,349,000
Loans (Notes 1, 4 and 12) 361,353,000 321,675,000
Reserve for possible loan
losses (Notes 1 and 4) (6,783,000) (6,370,000)
----------- -----------
Net loans 354,570,000 315,305,000
Bank premises and equipment (Notes 1 and 5) 10,807,000 10,767,000
Accrued interest 3,254,000 3,254,000
Prepaid expenses and other assets 5,255,000 4,375,000
------------ ------------
Total assets $498,006,000 $465,373,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing $48,121,000 $45,105,000
Interest bearing 355,698,000 340,534,000
----------- -----------
Total deposits 403,819,000 385,639,000
Short-term borrowings (Note 6):
Federal funds purchased,
Federal Home Loan Bank advances,
and securities sold under
repurchase agreements 19,767,000 12,260,000
Term debt (Note 7) 23,787,000 20,331,000
Accrued expenses and other liabilities 4,998,000 4,365,000
------------ ------------
Total liabilities 452,371,000 422,595,000
Commitments (Notes 8 and 9)
Stockholders' equity (Notes 14, 17 and 19):
Common stock, no par value,
6,000,000 and 4,000,000 shares authorized
in 1994 and 1993, respectively;
3,020,908 issued in 1994 and 1,509,540
issued in 1993 24,326,000 24,290,000
Net unrealized holding loss on
available-for-sale securities, net of
applicable taxes (1,030,000)
Retained earnings 24,078,000 20,012,000
---------- ----------
47,374,000 44,302,000
Treasury stock, 120,970 shares in 1994
and 55,241 shares in 1993, at cost (1,739,000) (1,524,000)
---------- ----------
Total stockholders' equity 45,635,000 42,778,000
------------ ------------
Total liabilities and stockholders' equity $498,006,000 $465,373,000
============ ============
The accompanying notes are an integral part of the financial statements.
CONSOLIDATED STATEMENT OF INCOME
For the three years ended December 31, 1994
1994 1993 1992
INTEREST INCOME:
Interest and fees on loans $28,848,000 $26,645,000 $27,788,000
Interest and dividends on:
Obligations of U.S. Government
and its agencies 4,266,000 5,050,000 5,598,000
Obligations of states and
political subdivisions 1,613,000 2,022,000 2,126,000
Other interest income 1,377,000 1,594,000 2,195,000
------------ ------------ ------------
Total interest income 36,104,000 35,311,000 37,707,000
INTEREST EXPENSE:
Interest on deposits 13,616,000 13,855,000 17,186,000
Interest on short-term borrowings 337,000 203,000 262,000
Interest on term debt 1,471,000 1,205,000 439,000
---------- ---------- ----------
Total interest expense 15,424,000 15,263,000 17,887,000
Net interest income 20,680,000 20,048,000 19,820,000
Provision for loan losses 765,000 1,592,000 2,387,000
---------- ---------- ----------
Net interest income after
provision for loan losses 19,915,000 18,456,000 17,433,000
OTHER INCOME:
Income from fiduciary activities 1,607,000 1,475,000 1,342,000
Service charges on deposit accounts 1,456,000 1,295,000 964,000
Gain (loss) on sale of securities (237,000) 45,000 44,000
Other 1,012,000 1,137,000 1,164,000
--------- --------- ---------
Total other income 3,838,000 3,952,000 3,514,000
OTHER EXPENSES:
Salaries and benefits 7,576,000 7,429,000 6,991,000
Net occupancy expense of premises 1,040,000 924,000 834,000
Equipment expense 1,205,000 1,091,000 1,152,000
Insurance 1,038,000 1,057,000 1,054,000
Stationary and other supplies 619,000 543,000 534,000
Taxes other than income taxes 575,000 565,000 520,000
Amortization of excess of cost
over net assets acquired 159,000 159,000 159,000
Other 3,460,000 3,356,000 3,701,000
---------- ---------- ----------
Total other expenses 15,672,000 15,124,000 14,945,000
Income before federal income
taxes and cumulative effect of
accounting changes 8,081,000 7,284,000 6,002,000
Federal Income Taxes (Note 11):
Current 2,330,000 2,168,000 1,968,000
Deferred 3,000 (269,000) (516,000)
--------- --------- ---------
2,333,000 1,899,000 1,452,000
Income before cumulative effect
of accounting changes 5,748,000 5,385,000 4,550,000
Cumulative effect of accounting
changes, net of applicable
taxes (Notes 10 and 11) (314,000)
---------- ---------- ----------
Net Income $5,748,000 $5,071,000 $4,550,000
Earnings per share (Notes 12 and 17):
Income before cumulative effect
of accounting changes:
Primary $ 1.98 $1.92 $1.71
Assuming full dilution $1.97 $1.90 $1.59
Cumulative effect of accounting changes:
Primary $ 0.11
Assuming full dilution $ 0.11
Net income per share:
Primary $1.98 $1.81 $1.71
Assuming full dilution $1.97 $1.79 $1.59
Weighted average number of
shares outstanding:
Primary 2,909,369 2,797,352 2,663,702
Assuming full dilution 2,912,241 2,841,990 2,939,822
The accompanying notes are an integral part of the financial statements.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the three years ended December 31, 1994
Net
Unrealized
Capital Holding Loss
in on Available-
COMMON STOCK Excess Retained for-Sale Treasury
Shares Amount of Par Earnings Securities Stock Total
Balance, January 1, 1992 1,146,253 $1,147,000 $13,769,000 $18,365,000 $(867,000) $32,414,000
Net income 4,550,000 4,550,000
Purchase of treasury stock,
5,793 shares (159,000) (159,000)
Conversion of subordinated
debentures to common
stock 163,238 162,000 2,806,000 2,968,000
Cash dividends, at a rate
of $0.48 per share (1,276,000) (1,276,000)
--------- --------- ---------- ---------- ----------- ----------
Balance, December 31, 1992 1,309,491 1,309,000 16,575,000 21,639,000 (1,026,000) 38,497,000
Net income 5,071,000 5,071,000
Purchase of treasury stock,
12,316 shares (498,000) (498,000)
Conversion of subordinated
debentures to common
stock 73,532 74,000 1,144,000 1,218,000
10% stock dividend 126,517 126,000 5,062,000 (5,188,000)
Conversion from $1.00 par
value to no par value 22,781,000 (22,781,000)
Cash dividends, at a rate
of $0.52 per share (1,510,000) (1,510,000)
--------- ----------- -- ----------- ------------ -----------
Balance, December 31, 1993 1,509,540 $24,290,000 $0 $20,012,000 $(1,524,000) $42,778,000
Adjustment for change in
method of accounting,
net of taxes 3,048,000 3,048,000
Net income 5,748,000 5,748,000
Purchase of treasury stock,
10,488 shares (215,000) (215,000)
Two for one stock split 1,509,540
Exercise of common
stock options 520 5,000 5,000
Issuance of common stock
under dividend
reinvestment plan 1,308 31,000 31,000
Net change in unrealized
gain (loss) on
available-for-sale securities (4,078,000) (4,078,000)
Cash dividends, at a rate
of $0.58 per share (1,682,000) (1,682,000)
--------- ----------- -- ----------- ------------ ------------ -----------
Balance, December 31, 1994 3,020,908 $24,326,000 $0 $24,078,000 ($1,030,000) ($1,739,000) $45,635,000
========= =========== == =========== ============ =========== ===========
The accompanying notes are an integral part of the financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
For the three years ended December 31, 1994
1994 1993 1992
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $5,748,000 $5,071,000 $4,550,000
Adjustments to reconcile net income
to net cash provided by
operating activities:
Provision for loan losses 765,000 1,592,000 2,387,000
(Gain) loss on sale of investments 237,000 (45,000) (44,000)
Depreciation and amortization 1,884,000 1,584,000 1,746,000
Decrease (increase) in
interest receivable 466,000 (821,000)
Increase (decrease) in interest payable 185,000 (275,000) 391,000
Deferred income taxes 3,000 (565,000) (516,000)
Deferral of loan origination
fees and costs 410,000 (221,000) (172,000)
Accrual for postretirement benefits 867,000
Other, net (91,000) ( 698,000) 2,045,000
--------- ---------- ----------
Net cash provided by
operating activities 9,141,000 7,776,000 9,566,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease in term interest bearing
deposits with banks and federal
funds sold 7,468,000 5,409,000
Purchases of available-for-sale
securities (35,659,000)
Purchases of held-to-maturity
securities (4,409,000) (29,260,000) (34,685,000)
Proceeds from sales of
available-for-sale securities 23,072,000
Proceeds from maturities of
available-for-sale securities 16,479,000
Proceeds from maturities of
held-to-maturity securities 2,025,000
Proceeds from sales of securities
held for investment 4,558,000 72,000
Proceeds from maturities of
securities held for investment 33,402,000 21,323,000
Net increase in loans (40,576,000) (31,166,000) (13,617,000)
Expenditures for premises and
equipment (1,142,000) (3,566,000) (2,771,000)
Proceeds from sales of other
real estate owned 137,000 56,000 826,000
----------- ----------- -----------
Net cash applied to
investing activities (40,073,000) (18,508,000) (23,443,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in
noninterest-bearing deposits 3,016,000 (608,000) 9,314,000
Net increase (decrease) in
interest-bearing deposits 15,164,000 (15,376,000) 17,282,000
Net increase in short-term borrowings 7,507,000 2,559,000 1,785,000
Proceeds from long-term debt 7,700,000 8,000,000 12,000,000
Payments on long-term debt (4,244,000) (1,956,000) (360,000)
Cash dividends paid (1,623,000) (1,510,000) (1,276,000)
Purchase of treasury stock (215,000) (498,000) (159,000)
Proceeds from issuance of common stock 5,000
---------- ----------- ----------
Net cash provided by (applied to)
financing activities 27,310,000 (9,389,000) 38,586,000
Net increase (decrease) in cash
and cash equivalents (3,622,000) (20,121,000) 24,709,000
Cash and cash equivalents at
beginning of year 28,323,000 48,444,000 23,735,000
----------- ----------- -----------
Cash and cash equivalents at end
of year $24,701,000 $28,323,000 $48,444,000
=========== =========== ===========
Supplemental disclosures of cash
flow information and
non-cash transactions:
Interest paid $15,239,000 $15,538,000 $18,276,000
Income taxes paid $2,383,000 $2,754,000 $1,461,000
Conversion of subordinated
debentures to common stock $0 $1,218,000 $2,968,000
Dividends declared not paid $435,000 $407,000 $329,000
The accompanying notes are an integral part of the financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SELECTED ACCOUNTING POLICIES:
The following is a summary of significant accounting policies
followed in the preparation of the financial statements. Certain
amounts in the 1993 and 1992 financial statements have been
reclassified to conform to the 1994 presentation.
PRINCIPLES OF CONSOLIDATION: The consolidated financial
statements include the accounts of Peoples Bancorp Inc. (the
Corporation) and its wholly-owned subsidiaries. Significant
intercompany accounts and transactions have been eliminated.
INCOME RECOGNITION: The principal areas of operation of the
Corporation are reported on the accrual basis of accounting.
Subsidiary banks suspend the accrual of interest when, in
management's opinion, collection of all or a portion of future
interest has become doubtful. When deemed uncollectible,
previously accrued and unpaid interest on loans placed on
nonaccrual status is charged against the allowance for loan
losses or reversed from current year's interest income depending
on the year the accrued interest was recorded. Interest is
included in income to the extent received only if complete
principal recovery is reasonably assured.
INVESTMENT SECURITIES: Effective January 1, 1994 the Corporation
adopted Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity
Securities" (SFAS No. 115). Under the provisions of SFAS No.
115, investment securities should be classified upon acquisition
into one of three categories: held-to-maturity,
available-for-sale, or trading.
Held-to-maturity securities are those securities that the
Corporation has the positive intent and ability to hold to
maturity and are recorded at amortized cost. Available-for-sale
securities are those securities that would be available to be
sold in the future in response to the Corporations's liquidity
needs, changes in market interest rates, and asset-liability
management strategies, among others. Available-for-sale
securities are reported at fair value, with unrealized holding
gains and losses excluded from earnings and reported as a
separate component of shareholders' equity, net of applicable
income taxes. At December 31, 1994 and 1993, the Corporation and
its subsidiary banks did not maintain trading accounts.
Prior to adoption of SFAS No. 115, securities purchased, where
the Corporation had both the intent and ability to hold for the
foreseeable future, were recorded at cost adjusted for
accumulated amortization of premium and accretion of discount.
Gains and losses on the disposition of investment securities are
accounted for on the completed transaction basis using the
specific identification method.
RESERVE FOR POSSIBLE LOAN LOSSES: The provision for possible
loan losses for financial reporting purposes is based upon past
experience and an evaluation of potential losses in the current
loan portfolio. In management's opinion, the provision is
considered sufficient to maintain the loan loss reserve at a
level adequate to absorb all anticipated losses existing in the
loan portfolios at the balance sheet dates.
BANK PREMISES AND EQUIPMENT: The cost of Bank premises and
equipment is depreciated over the estimated useful lives of the
related assets on the straight-line method. Maintenance and
repairs are charged to operations as incurred. Additions and
betterments are capitalized.
The cost of assets sold or retired and the related amounts of
accumulated depreciation are eliminated from the accounts in the
year of sale or retirement. Any resulting gain or loss is
reflected in the consolidated statement of income.
OTHER REAL ESTATE: Other real estate owned, included in other
assets on the consolidated balance sheet, represents properties
acquired by the Corporation's subsidiary banks through
customers' loan defaults. Real estate is stated at an amount
equal to the loan balance prior to foreclosure plus cost
incurred for improvements to the property, but not more than the
fair value less estimated costs to sell the property.
EXCESS OF COST OVER NET ASSETS ACQUIRED: The excess of cost over
net assets of subsidiary banks acquired is being amortized over
a ten to twenty-year period using the straight-line and
sum-of-the-months digits methods.
CONSOLIDATED STATEMENT OF CASH FLOWS: Cash and cash equivalents
include cash and amounts due from banks, interest bearing
deposits with banks and federal funds sold, all with original
maturities of ninety days or less. These balances at December
31, 1994, 1993 and 1992 are as follows:
1994 1993 1992
Cash and due from banks $19,551,000 $15,275,000 $17,427,000
Interest bearing deposits
with other banks 650,000 5,998,000 5,117,000
Federal funds sold 4,500,000 7,050,000 25,900,000
----------- --------- ----------
$24,701,000 $28,323,000 $48,444,000
=========== =========== ===========
2. FAIR VALUES OF FINANCIAL INSTRUMENTS:
The following methods and assumptions were used by the
Corporation in estimating its fair value disclosures for
financial instruments in accordance with Statement of Financial
Accounting Standards No. 107:
CASH AND DUE FROM BANKS, INTEREST BEARING DEPOSITS WITH BANKS,
AND FEDERAL FUNDS SOLD: The carrying amounts reported in the
balance sheet for these captions approximate those assets' fair
values.
INVESTMENT SECURITIES: Fair values for investment securities are
based on quoted market prices, where available. If quoted market
price is not available, fair value is estimated using quoted
market prices of comparable securities.
LOANS: For performing variable rate loans that reprice
frequently and performing demand loans, with no significant
change in credit risk, fair values are based on carrying values.
The fair values for certain mortgage loans are based on quoted
market prices of similar loans sold in conjunction with
securitization transactions, adjusted for differences in loan
characteristics. The fair value of other performing loans (e.g.,
commercial real estate, commercial and consumer loans) are
estimated using discounted cash flow analyses, using interest
rates currently being offered for loans with similar terms to
borrowers of similar credit quality.
Fair value significant nonperforming loans is based on
either the estimated fair value of underlying collateral or
estimated cash flows discounted at a rate commensurate with the
risk. Assumptions regarding credit risk, cash flows, and
discount rates are determined using available market information
and specific borrower information.
DEPOSITS: The carrying amounts of demand deposits, savings
accounts and certain money market deposits approximate fair
value. The fair value of fixed maturity certificates of deposit
is estimated using the rates currently offered for deposits of
similar remaining maturities.
SHORT-TERM BORROWINGS: The carrying amounts of federal funds
purchased, Federal Home Loan Bank advances, and securities sold
under repurchase agreements approximate their fair values.
TERM DEBT: Rates currently available to the Corporation for debt
with similar terms and remaining maturities are used to estimate
fair value of existing debt.
LOAN COMMITMENTS AND STANDBY LETTERS OF CREDIT: The fair value
of commitments is estimated using the fees currently charged to
enter into similar agreements taking into account the remaining
terms of the agreements and the present creditworthiness of the
counterparties.
The estimated fair values of the Corporation's on-balance sheet
financial instruments are as follows:
1994 1993
Carrying Fair Carrying Fair
Amount Value Amount Value
Financial assets:
Cash and due from banks,
interest bearing deposits
with banks, and federal
funds sold $24,701,000 $24,701,000 $28,323,000 $28,323,000
Investment securities 99,419,000 99,261,000 103,349,000 108,105,000
Loans,net 354,570,000 350,817,000 315,305,000 322,670,000
Financial liabilities:
Deposits 403,819,000 402,949,000 385,639,000 401,015,000
Short-term borrowings 19,767,000 19,767,000 12,260,000 12,260,000
Term debt 23,787,000 22,098,000 20,331,000 20,331,000
The fair value of the Corporation's off-balance sheet financial instruments are
disclosed in Note 9.
3. INVESTMENT SECURITIES:
Effective January 1, 1994, the Corporation adopted the
provisions of Statement on Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity
Securities" (SFAS No. 115). SFAS No. 115 requires that debt and
equity securities be classified in three categories and
accounted for as follows:
1. Debt securities that the Corporation has the positive intent
to hold to maturity are classified as held-to-maturity
securities and reported at amortized cost.
2. Debt and equity securities that are bought and held
principally for the purpose of selling them in the near term
are classified as trading securities and reported at fair value,
with unrealized gains and losses included in earnings.
3. Debt and equity securities notclassified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported as a separate component of
stockholders' equity.
The effect of this change in accounting principle resulted in an
unrealized holding gain, net of tax effect, of $3,048,000, for
securities classified as available-for-sale effective January 1,
1994, and has been reflected as a separate component of
stockholders' equity. The expected maturities presented in the
tables below may differ from the contractual maturities because
borrowers may have the right to call or prepay obligations
without call or prepayment penalties. Rates are calculated on a
taxable equivalent basis using a 34% federal income tax rate.
The portfolio contains no single issue (excluding U.S.
Government and U. S. Agency securities) which exceeds 10% of
shareholders' equity.
Securities classified as available-for-sale
As of December 31, 1994:
Gross Gross
Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
U.S. Treasury securities $30,138,000 $157,000 $(577,000) $29,718,000
U.S. Agency mortgage-backed
securities. 10,873,000 16,000 (391,000) 10,498,000
Other U.S. Agency securities 2,223,000 24,000 (8,000) 2,239,000
---------- ------ --------- ----------
Total U.S. Treasury and
Agency securities 43,234,000 197,000 (976,000) 42,455,000
Obligations of states
and political subdivisions 21,624,000 312,000 (233,000) 21,703,000
Other mortgage-backed
securities. 12,557,000 0 (1,144,000) 11,413,000
Other securities 14,368,000 554,000 (321,000) 14,601,000
---------- ------- ----------- ----------
Total securities
available-for-sale $91,783,000 $1,063,000 $(2,674,000) $90,172,000
=========== ========== ============ ===========
Maturity distribution of securities available-for-sale
Contractual maturities at December 31, 1994
Obligations
U.S. of states Total
Agency Total U.S. and Other securities
U. S. mortgage- Other U.S. Treasury poltical mortgage-Other available
Treasury backed Agency and agency subdivisions backed securities for sale
-------- --------- ---------- ---------- ------------ -------- ---------- ---------
Within one year
Amortized cost $11,511,000 $635,000 $12,146,000 $5,811,000 $396,000 $1,902,000 $20,255,000
Fair value $11,579,000 $606,000 $12,185,000 $5,873,000 $388,000 $1,915,000 $20,361,000
Yield 8.06% 6.49% 7.98% 9.80% 7.20% 7.98% 8.49%
1 to 5 years
Amortized cost 16,097,000 7,456,000 $2,223,000 25,776,000 11,070,000 7,969,000 6,856,000 51,671,000
Fair value 15,734,000 7,164,000 $2,239,000 25,137,000 11,236,000 7,309,000 6,655,000 50,337,000
Yield 7.01% 7.31% 7.99% 7.18% 8.83% 6.24% 6.83% 7.34%
5 to 10 years
Amortized cost 2,530,000 2,457,000 4,987,000 3,146,000 2,075,000 1,361,000 11,569,000
Fair value 2,405,000 2,398,000 4,803,000 3,055,000 1,830,000 1,279,000 10,967,000
Yield 6.75% 6.94% 6.84% 8.65% 6.30% 6.90% 7.24%
Over 10 years
Amortized cost 325,000 325,000 1,597,000 2,117,000 4,249,000 8,288,000
Fair value 330,000 330,000 1,539,000 1,886,000 4,752,000 8,507,000
Yield 9.36% 9.36% 8.72% 7.05% 5.67% 6.76%
Total amortized
cost $30,138,000 $10,873,000 $2,223,000 $43,234,000 $21,624,000 $12,557,000 $14,368,000 $91,783,000
Total fair value $29,718,000 $10,498,000 $2,239,000 $42,455,000 $21,703,000 $11,413,000 $14,601,000 $90,172,000
Total yield 7.39% 7.24% 7.99% 7.57% 9.06% 6.42% 6.65% 7.53%
Securities classified as held-to-maturity
As of December 31, 1994:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- ---------
U.S. Agency mortgage-backed
securities $992,000 $0 $(38,000) $954,000
Other U.S. Agency securities 4,683,000 5,000 (35,000) 4,653,000
--------- ------ --------- ----------
Total U.S. Treasury
and Agency securities 5,675,000 5,000 (73,000) 5,607,000
Obligations of states
and political subdivisions 3,414,000 40,000 (123,000) 3,331,000
Other securities 158,000 0 (7,000) 151,000
---------- -------- ---------- ----------
Total securities
held-to-maturity $9,247,000 $45,000 $(203,000) $9,089,000
========== ======= ========== ==========
Maturity distribution of securities held-to-maturity
Contractal matrities at December 31, 1994
Obligations
U.S. of states Total
Agency Total U.S. and securities
mortgage- Other U.S. Treasury political Other held to
backed Agency and Agency subdivisions securities maturity
--------- ---------- ---------- ------------ ---------- --------
Within one year
Amortized cost $248,000 $10,000 $258,000
Fair value $252,000 $ 9,000 $261,000
Yield 10.05% 5.50% 9.87%
1 to 5 years
Amortized cost $939,000 $1,428,000 $2,367,000 $736,000 $3,103,000
Fair value $904,000 $1,415,000 $2,319,000 $758,000 $3,077,000
Yield 7.62% 6.58% 6.99% 10.21% 7.76%
5 to 10 years
Amortized cost 3,255,000 3,255,000 1,221,000 148,000 4,624,000
Fair value 3,238,000 3,238,000 1,167,000 142,000 4,547,000
Yield 7.15% 7.15% 8.22% 7.34% 7.44%
Over 10 years
Amortized cost 53,000 53,000 1,209,000 1,262,000
Fair value 50,000 50,000 1,154,000 1,204,000
Yield 8.21% 8.21% 8.72% 8.70%
Total amortized
cost $992,000 $4,683,000 $5,675,000 $3,414,000 $158,000 $9,247,000
Total fair value $954,000 $4,653,000 $5,607,000 $3,331,000 $151,000 $9,089,000
Total yield 7.65% 6.98% 7.10% 8.96% 7.20% 7.79%
Securities classified as held for investment
Gross Gross
Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
----------- ----------- ---------- ----------
As of December 31, 1993:
Obligations of U.S.
Government $48,790,000 $2,244,000 $(12,000) $51,022,000
Obligations of U.S.
Government agencies 4,809,000 56,000 (3,000) 4,862,000
Government mortgage-
backed securities 13,589,000 149,000 (17,000) 13,721,000
Obligations of states
and political
subdivisions 26,183,000 1,648,000 27,831,000
Other bonds and
securities 9,978,000 701,000 (10,000) 10,669,000
------------ ---------- --------- ------------
$103,349,000 $4,798,000 $(42,000) $108,105,000
============ ========== ========= ============
As of December 31, 1992:
Obligations of U.S.
Government $60,317,000 $3,034,000 $(6,000) $63,345,000
Obligations of U.S.
Government agencies 915,000 43,000 958,000
Government mortgage-
backed securities 10,163,000 222,000 (73,000) 10,312,000
Obligations of states
and political
subdivisions 31,284,000 1,534,000 (33,000) 32,785,000
Other bonds and
securities 9,877,000 339,000 (45,000) 10,171,000
----------- ---------- --------- ------------
$112,556,000 $5,172,000 $(157,000) $117,571,000
============ ========== ========== ============
Proceeds from sales of available-for-sale securities during 1994
were $23,072,000. Proceeds from sales of investments in debt
securities were $4,558,000 and $0, in 1993 and 1992,
respectively. Gross realized gains and realized losses were
$126,000 and $363,000, respectively, in 1994. Gross gains on
sales of investments in debt securities of $45,000 and $0 were
realized in 1993 and 1992, respectively. As of December 31, 1994
and 1993, investment securities having a par value of
$55,570,000 and $42,985,000, respectively were pledged to
collateralize government and trust department deposits in
accordance with federal and state requirements.
4. LOANS AND RESERVE FOR POSSIBLE LOAN LOSSES:
Loans are comprised of the following at December 31:
1994 1993
Carrying Value Carrying Value
-------------- --------------
Commercial $46,880,000 $47,299,000
Real estate, construction 3,231,000 3,391,000
Real estate, mortgage 217,512,000 189,866,000
Consumer 93,730,000 81,119,000
------------ ------------
$361,353,000 $321,675,000
============ ============
Activity in the reserve for loan losses is summarized as follows:
1994 1993 1992
Balance, beginning of year $6,370,000 $5,687,000 $4,273,000
Provision for loan losses 765,000 1,592,000 2,387,000
Reserve of acquired branch 721,000
Losses charged to the reserve,
net of recoveries of
$772,000, $294,000 and $623,000,
respectively (352,000) (909,000) (1,694,000)
----------- ----------- ----------
Balance, end of year $6,783,000 $6,370,000 $5,687,000
=========== =========== ==========
In May 1993, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 114 "Accounting
by Creditors for Impairment of a Loan" (SFAS No. 114). The
statement applies to financial statements for fiscal years
beginning after December 15, 1994, and requires that certain
impaired loans be recorded at the present value of expected
future cash flows discounted at the loan's effective interest
rate, the loan's market price, or the fair value of the
collateral for collateral dependent loans. The Corporation will
adopt this accounting statement effective January 1, 1995. It
is anticipated that the adoption of this standard will not have
a material effect on the Corporation's financial position or
results of operations.
5. BANK PREMISES AND EQUIPMENT:
The cost of Bank premises and equipment and the related
accumulated depreciation as of December 31, 1994 and 1993 are
summarized as follows:
1994 1993
Land $1,069,000 $1,069,000
Building and premises 10,601,000 10,329,000
Furniture, fixtures and equipment 6,856,000 6,037,000
---------- ----------
18,526,000 17,435,000
Accumulated depreciation 7,719,000 6,668,000
---------- ----------
Net book value $10,807,000 $10,767,000
=========== ===========
Depreciation expense was $1,110,000, $906,000 and $798,000 for
the years ended December 31, 1994, 1993 and 1992, respectively.
6. SHORT-TERM BORROWINGS:
Short-term borrowings consisted of the following at December 31:
1994 1993
Federal Funds Purchased and Repurchase Agreements $9,267,000 $9,260,000
Short-term Federal Home Loan Bank Advances 10,500,000 3,000,000
---------- ----------
Total short-term borrowings $19,767,000 $12,260,000
=========== ===========
Weighted average interest rate 3.08% 2.21%
7. TERM DEBT:
Term debt consisted of the following at December 31:
1994 1993
Carrying Carrying
Value Value
---------- ----------
Term note payable, at prime
(8.5% at December 31, 1994) $1,820,000 $2,080,000
Federal Home Loan Bank advances, bearing
interest at rates ranging from 4.15% to 7.00% 21,967,000 18,251,000
----------- -----------
$23,787,000 $20,331,000
=========== ===========
The Term Note payable is due on December 31, 1996, with interest
payable quarterly. The Note Agreement is collateralized by all
of the common stock of a consolidated subsidiary and places
certain restrictive covenants on the Corporation, including the
maintenance of tangible net worth equal to the greater of 6% of
total assets or $29,880,000, and the incurrence of additional
indebtedness.
Federal Home Loan Bank (FHLB) advances consist of various
borrowings with maturities ranging from 10 to 15 years. The
advances are collateralized by the Corporation's real estate
mortgage portfolio and all of the FHLB common stock owned by the
banking subsidiaries. The most restrictive requirement of the
debt agreement requires the Corporation to provide real estate
mortgage loans as collateral at an amount not less than 150% of
advances outstanding.
The aggregate minimum annual retirements of term debt in the
next five years and thereafter are as follows:
1995 $3,145,000
1996 4,611,000
1997 2,372,000
1998 2,021,000
1999 2,145,000
Thereafter 9,493,000
-----------
$23,787,000
===========
8. COMMITMENTS:
The Corporation leases a banking facility and equipment under
various agreements with original terms providing for fixed
monthly payments over periods ranging from two to ten years.
The future minimum rental payments required under operating
leases are as follows:
Year ending December 31, Operating Leases
------------------------ ----------------
1995 $118,000
1996 119,000
1997 119,000
1998 112,000
1999 64,000
Thereafter 8,000
------------
Total minimum lease payments $540,000
============
Rent expense amounted to $181,000, $149,000 and $224,000 in 1994, 1993
and 1992, respectively.
9. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK:
In the normal course of business, the Corporation is party to
financial instruments with off-balance sheet risk necessary to
meet the financing needs of customers. These financial
instruments include loan commitments, standby letters of credit,
and unused credit card limits. The instruments involve, to
varying degrees, elements of credit and interest rate risk in
excess of the amount recognized in the consolidated financial
statements.
The Corporation's exposure to credit loss in the event of
nonperformance by the other party to the financial instrument
for loan commitments, standby letters of credit and unused
credit card limits is represented by the contractual amount of
those instruments. The Corporation uses the same credit policies
in making commitments and conditional obligations as it does for
on-balance sheet instruments. The total amounts of financial
instruments with off-balance sheet risk are as follows:
1994 1993
---------------------- ---------------------
Contract Fair Contract Fair
Amount Value Amount Value
----------- ------- ----------- -------
Loan commitments $30,966,000 $77,000 $24,895,000 $62,000
Standby letters of credit 2,083,000 26,000 2,132,000 27,000
Unused credit card limits 13,408,000 N/A 11,872,000 N/A
Since many of the loan commitments may expire without being
drawn upon, the total commitment amount does not necessarily
represent future cash requirements. The Corporation evaluates
each customer's credit worthiness on a case-by-case basis. The
amount of collateral obtained, if deemed necessary by the
Corporation upon extension of credit, is based on management's
credit evaluation of the counter-party. Collateral held varies
but may include accounts receivable, inventory, property, plant,
and equipment, and income-producing commercial properties. The
credit risk involved in issuing letters of credit is essentially
the same as that involved in extending loan commitments to
customers. The Corporation's average commitment for credit card
loans is $2,720. As a result, collateral is not required on
credit card loans.
The Corporation's lending is primarily focused in the local
southeastern Ohio market and consists principally of
single-family residential mortgages. The Corporation's largest
group of business loans consist of Automobile Dealer Floor
Plans, which totaled $19,238,000 and $13,782,000 at December 31,
1994 and 1993, respectively. It is the Corporation's policy to
obtain the underlying inventory as collateral on these loans.
The Corporation does not extend credit to any single borrower or
group of related borrowers in excess of $7,576,000, the legal
lending limit.
10. EMPLOYEE BENEFIT PLANS:
The Corporation has a noncontributory pension plan which covers
substantially all employees. The plan provides benefits based on
an employee's years of service and compensation. The
Corporation's funding policy is to contribute annually an amount
that can be deducted for federal income tax purposes using a
different actuarial cost method and different assumptions from
those used for financial reporting.
Net pension cost for 1994, 1993 and 1992 included the following
components:
1994 1993 1992
---- ---- ----
Service cost-benefits earned during the year $260,000 $243,000 $201,000
Interest cost on projected benefit obligations 401,000 388,000 370,000
Actual return on plan assets (414,000) (411,000) (405,000)
Net amortization and deferral of initial
transition credit and subsequent gains
and losses (13,000) (11,000) (29,000)
-------- -------- --------
Net pension cost $234,000 $209,000 $137,000
======== ======== ========
The funded status of the plan and accrued pension cost
recognized at December 31, 1994 and 1993 were as follows:
1994 1993
---- ----
Actuarial present value of benefit obligations:
Vested benefits $3,958,000 $4,479,000
Nonvested benefits 142,000 155,000
---------- ----------
Accumulated benefit obligation 4,100,000 4,634,000
Impact of future salary increases 1,105,000 873,000
---------- ----------
Projected benefit obligation 5,205,000 5,507,000
Plan assets at fair value, primarily U.S. Government
obligations and collective investment stock
and bond funds 4,693,000 5,026,000
--------- ---------
Projected benefit obligations in excess
of plan assets (512,000) (481,000)
Items not recognized in income:
Unrecognized prior service cost (92,000) (78,000)
Unrecognized net gain from past experience
different from that assumed and effects of
changes in assumptions (404,000) (211,000)
Initial transition credit which is being
amortized over 21 years (62,000) (66,000)
---------- ---------
Accrued pension cost included in
other liabilities $(1,070,000) $(836,000)
============ ==========
Assumptions used for the plan at December 31, 1994 and 1993 are as follows:
1994 1993
----- -----
Discount rate 8.50% 7.25%
Rate of increase in compensation levels 5.00% 4.50%
Long-term rate of return on assets 8.50% 8.50%
Prior to 1992, the Corporation maintained an informal
contributory health care and life insurance benefits program for
substantially all employees and retirees. During 1992,
this Plan was amended to provide these benefits only to existing
retirees and their dependents at increased contributory levels.
Prior to 1993, the Corporation accounted for the costs of
providing these benefits as the health care costs were incurred
and premiums were paid. The Corporation's cost of providing
these benefits to retirees was approximately $90,000 in 1992.
On January 1, 1993, the Corporation adopted Statement of
Financial Accounting Standards No. 106 "Employers' Accounting
for Postretirement Benefits Other Than Pensions" (SFAS No. 106)
which requires the accrual of the expected costs of providing
postretirement benefits during the period of employee service.
The net periodic postretirement benefit cost, which was due
primarily to interest cost, was $68,000 and $74,000 for 1994 and
1993, respectively. The Corporation recognized the cumulative
effect of its transition obligation of $583,000, net of taxes,
as a decrease in income in 1993.
The status of the plan as of December 31, 1994 and 1993 was as
follows:
1994 1993
---- ----
Accumulated postretirement benifit
obligation for retirees and beneficiaries
eligible for benefits $875,000 $950,000
Unrecognized net gain (9,000) (83,000)
-------- --------
Net postretirement benefit liability $866,000 $867,000
======== ========
Assumptions used for the plan at December 31, 1994 and 1993 are as follows:
1994 1993
---- ----
Weighted average discount rate 8.50% 7.25%
Effect of a 1% increase in assumed trend rate on:
Service and interest cost +9.00% +10.00%
Accumulated postretirement benefit obligation +9.00% +9.00%
In the table above, the assumed health care costs trend rate
used in measuring the accumulated benefit obligation at December
31, 1994 was 10%, grading down 1% per year to an ultimate rate
of 5%. At December 31, 1993, the assumed health care costs
trend rate used in measuring the accumulated benefit obligation
was 11%, grading down 1% per year to an ultimate rate of 5%.
On January 1, 1994, the Corporation adopted Statement of
Financial Accounting Standard No. 112, "Employer's Accounting
for Postemployment Benefits" (SFAS No. 112), which requires
accrual accounting for benefits provided to former or inactive
employees after employment, but before retirement. The adoption
of this accounting standard did not have a material impact on
the Corporation's financial position or results of operations.
11. FEDERAL INCOME TAXES:
The Corporation and its banking affiliates file a consolidated
federal income tax return and income tax expense is allocated
among all companies based upon their federal taxable income or
loss and tax credits.
On January 1, 1993 the Corporation adopted Financial Accounting
Standards No. 109, "Accounting for Income Taxes" (SFAS No. 109),
which requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events
that have been included in the financial statements or tax
returns. Deferred income taxes are recognized at prevailing tax
rates for temporary differences between financial statement and
income tax bases of assets and liabilities. The Corporation
recognized the cumulative effect of this change in accounting of
$269,000 as an increase in income in 1993.
The effective federal income tax rate in the consolidated
statement of income is less than the statutory corporate tax
rate due to the following:
December 31
------------------------
1994 1993 1992
---- ---- ----
Statutory corporate tax rate 34.0% 34.0% 34.0%
Differences in rate resulting from:
Interest on obligations of state and
political subdivisions (5.8) (7.9) (10.2)
Other 0.7 0.4
------ ------ ------
28.9% 26.1% 24.2%
====== ====== ======
The components of the net deferred tax asset were as follows:
December 31 December 31
1994 1993
----------- -----------
Deferred tax assets arising from:
Loan loss reserve $1,784,000 $1,427,000
Pension expense 364,000 317,000
Unrealized holding loss on investment securities 531,000
Postretirement benefits other than pensions 295,000 297,000
Deferred loan fees and costs 328,000 289,000
Other 257,000 242,000
---------- ----------
Total deferred tax asset 3,559,000 2,572,000
========== ==========
Deferred tax liabilities arising from:
Depreciation 468,000 367,000
Other 511,000 153,000
--------- ---------
Total deferred tax liabilities 979,000 520,000
========= =========
Net deferred tax assets $2,580,000 $2,052,000
========== ==========
The Corporation has not recorded a valuation allowance, as the
deferred tax assets are presently considered to be realizable
upon the level of anticipated future taxable income. Net
deferred tax assets and federal income tax expense in future
years can be significantly affected by changes in the enacted
tax rates or by unexpected adverse events that would impact
management's conclusions as to the ultimate realizability of
deferred tax assets.
Deferred federal income tax expense in 1992 was attributable to
the following sources:
Difference in tax and book provision for loan losses $(303,000)
Deferral of nonrefundable loan fees for book (59,000)
Other (154,000)
----------
$(516,000)
==========
The related federal income tax expense (benefit) on securities
transactions approximated $(81,000) in 1994, $15,000 in 1993 and
$13,000 in 1992.
12. EARNINGS PER SHARE:
Fully-diluted earnings per share are calculated for 1993 and
1992 as if the Subordinated Debentures were converted as of the
issue date, with a corresponding increase in net income from the
after-tax reduction in interest expense. For purposes of the
primary and fully-diluted earnings per share calculation,
options granted under the 1993 stock option plan are considered
common stock equivalents.
13. RELATED PARTY TRANSACTIONS:
In the normal course of its business, the subsidiary banks have
granted loans to certain executive officers and directors and
their interests. The following is an analysis of activity of
related party loans for the year ended December 31, 1994:
Balance, January 1, 1994 $9,615,000
New loans 15,672,000
Repayments (13,913,000)
-----------
Balance, December 31, 1994 $11,374,000
===========
Such amounts do not include loans to members of immediate
families other than spouses of persons who are executive
officers or directors. Such amounts include $2,696,000 of loans
to one of the Corporation's directors which are considered by
management to be potential problem loans. The credit risk
associated with these loans has been considered by management in
the Corporation's determination of the overall loan loss reserve.
14. REGULATORY MATTERS:
The payment of dividends by banking subsidiaries is subject to
various Regulatory restrictions. Laws provide that dividends in
any calendar year generally shall not exceed the total net
profits of that year plus the retained net profits of the
preceding two years. As of December 31, 1994 approximately
$9,000,000 of retained earnings of the banking subsidiaries were
available for the payment of dividends to the parent corporation.
The Corporation's banking subsidiaries are required to maintain
minimum amounts of capital to total "risk weighted" assets, as
defined by the banking regulators. At December 31, 1994 the
banking subsidiaries are required to have minimum Tier 1 and
total capital ratios of 4% and 8%, respectively. The banking
subsidiaries' actual ratios at that date were in excess of these
stated minimums.
15. FEDERAL RESERVE REQUIREMENTS:
The Federal Reserve requires that certain average reserve
balances be maintained in the subsidiary banks' cash and due
from banks account. The Reserve requirement is calculated on a
percentage of total deposit liabilities and amounted to
$6,091,000 and $5,010,000 at December 31, 1994 and 1993,
respectively.
16. BRANCH ACQUISITIONS:
During 1992, the Corporation acquired approximately $32 million
of assets and assumed $32 million of deposit and other liabilities
from two unaffiliated institutions.
17. CHANGES IN CAPITAL STRUCTURE:
On March 24, 1994, the Corporation declared a two for one stock
split issued on April 29, 1994 to shareholders of record as of
April 15, 1994. On January 25, 1993, the Corporation declared a
ten percent stock dividend issued on April 15, 1993 to
shareholders of record as of April 1,1993. All per share
information in the accompanying consolidated financial
statements has been adjusted to give retroactive effect to the
stock split and stock dividend.
During 1994, the Corporation's stockholders adopted an amendment
to increase the authorized number of common shares to 6,000,000
from 4,000,000. Common stock and capital in excess of par value
have been combined and presented as a single caption on the
accompanying consolidated balance sheet.
18. STOCK OPTIONS:
The Corporation is authorized under provisions of the 1993 Stock
Option Plan to grant options to purchase 220,000 shares of the
Corporation's Common Stock to key employees and directors at a
price not less than the fair market value of the shares on the
dates the options are granted. Options granted may be either
"Incentive Options" or "Non-qualified Options" as defined by the
Internal Revenue Code. The options expire 10 years from the date
of grant.
Activity in the Plan for 1994 and 1993 is summarized as follows:
1994 1993
--------------------- ------------------
Number Option Number Option
of Shares Price of Shares Price
--------- ------- --------- --------
NON-QUALIFIED STOCK OPTIONS
Outstanding at beginning of year 16,100 $20.50
Granted 2,600 19.50-22.00 16,100 $20.50
Exercised 220 20.50
Cancelled 1,980 20.50
------- --------
Outstanding at end of year 16,500 19.50-22.00 16,100 $20.50
Exercisable at end of year 6,280 $19.50-22.00 3,220 $20.50
======= ============ ====== =======
INCENTIVE STOCK OPTIONS
Outstanding at beginning of year 38,000 $17.50
Granted 136,500 23.375 38,000 $17.50
Exercised 1,000 17.50
Cancelled 2,000 17.50
-------- -------
Outstanding at end of year 171,500 17.50-23.375 38,000 17.50
======== ============ ======= ======
Exercisable at end of year 35,000 $17.50 38,000 $17.50
======= ============ ======= ======
All options reflect the effect of a two for one stock split
effective April 15, 1994. At December 31, 1994, 32,000
non-qualified options remained available for future grants under
the 1993 Plan. Outstanding stock options are considered common
stock equivalents in the computation of earnings per share.
19. PARENT COMPANY ONLY FINANCIAL INFORMATION:
BALANCE SHEET, DECEMBER 31 1994 1993
---------- ----------
Assets:
Cash $656,000 $128,000
Receivable due from subsidiary 2,012,000 1,606,000
Investment securities:
Securities available-for-sale (amortized cost
of $757,000 at December 31, 1994) 1,261,000
Securities held for investment (fair value
approximates $1,009,000 at December 31, 1993) 569,000
--------- --------
Total investment securities 1,261,000 569,000
Capital note receivable due from subsidiary 3,000,000 3,000,000
Investments in subsidiaries, at equity 40,627,000 38,269,000
Excess cost over net assets acquired 1,104,000 1,241,000
Other 709,000 599,000
----------- -----------
Total assets $49,369,000 $45,412,000
=========== ===========
Liabilities:
Accrued interest payable and accrued expenses $409,000 $116,000
Pension accrual 1,070,000 31,000
Dividends payable 435,000 407,000
Term debt (Note 7) 1,820,000 2,080,000
----------- -----------
Total liabilities 3,734,000 2,634,000
Stockholders' Equity 45,635,000 42,778,000
----------- -----------
Total liabilities and stockholders' equity $49,369,000 $45,412,000
=========== ===========
STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1994 1993 1992
------------ ------------ -----------
Income:
Dividends from subsidiaries $2,320,000 $5,130,000 $1,810,000
Interest ($287,000, $40,000, and
$55,000 from subsidiaries,
respectively) 301,000 58,000 60,000
Management fees from subsidiaries 818,000 770,000 698,000
Other 123,000 110,000 39,000
---------- ---------- ----------
Total income 3,562,000 6,068,000 2,607,000
Expenses:
Interest 141,000 169,000 333,000
Salaries and benefits 948,000 848,000 660,000
Other 549,000 709,000 630,000
---------- ---------- ----------
Total expenses 1,638,000 1,726,000 1,623,000
---------- ---------- ----------
Income before federal income taxes
and equity in undistributed earnings
of subsidiaries 1,924,000 4,342,000 984,000
Applicable income tax benefit 100,000 231,000 237,000
Equity in undistributed earnings of
subsidiaries 3,724,000 498,000 3,329,000
---------- ---------- ----------
Net income $5,748,000 $5,071,000 $4,550,000
========== ========== ==========
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1994 1993 1992
------------ ------------ -----------
Cash flows from operating activities:
Net income $5,748,000 $5,071,000 $4,550,000
Adjustments to reconcile net income
to cash provided by operations:
Amortization and depreciation 134,000 265,000 281,000
Equity in undistributed
earnings of subsidiaries (3,724,000) (498,000) (3,329,000)
Other, net 1,103,000 115,000 (159,000)
----------- ----------- ----------
Net cash provided by
operating activities 3,261,000 4,953,000 1,343,000
Cash flows from investing activities:
Net decrease in short-term investments 40,000
Purchase of investment securities (188,000) (50,000)
Expenditures for premises and equipment (46,000) (20,000) (4,000)
Proceeds from sale of
premises to subsidiary 362,000
Purchase of capital note
receivable due from subsidiary (3,000,000)
--------- ------------ --------
Net cash provided by
investing activities (234,000) (3,020,000) 348,000
Cash flows from financing activities:
Cash dividends paid (1,623,000) (1,510,000) (1,276,000)
Payments on long-term debt (260,000) (276,000) (292,000)
Purchase of treasury stock (215,000) (498,000) (159,000)
Change in receivable from subsidiary (406,000) 159,000 (184,000)
Proceeds from issuance of common stock 5,000
----------- ------------ -----------
Net cash used in
financing activities (2,499,000) (2,125,000) (1,911,000)
----------- ------------ -----------
Net (decrease) increase in cash 528,000 (192,000) (220,000)
Cash at the beginning of the year 128,000 320,000 540,000
--------- ---------- ---------
Cash at the end of the year $656,000 $128,000 $320,000
======== ======== ========
The parent company paid interest totaling $141,000, $185,000 and $371,000
during the years ended December 31, 1994, 1993 and 1992, respectively.
The Corporation's investment in subsidiaries is reflected at an
amount equivalent to the underlying fair value of the
subsidiaries at the date of acquisition adjusted to reflect the
changes in equity of such subsidiaries since acquisition.
Stockholders' equity reflected in the Parent Company Only
balance sheet includes undistributed earnings of subsidiaries
which are restricted from transfer to the Corporation in the
form of dividends. Such amounts approximated $20,000,000 and
$16,300,000 at December 31, 1994 and 1993, respectively.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of Peoples Bancorp Inc.
We have audited the accompanying consolidated balance sheets of
Peoples Bancorp Inc. and Subsidiaries as of December 31, 1994
and 1993 and the consolidated statements of income,
stockholders' equity, and cash flows for each of the years in
the three-year period ended December 31, 1994. These financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Peoples Bancorp Inc. and Subsidiaries as
of December 31, 1994 and 1993 and the consolidated results of
their operations and their cash flows for each of the years in
the three-year period ended December 31, 1994 in conformity with
generally accepted accounting principles.
As discussed in Note 3 to the consolidated financial statements,
the Corporation changed its method of accounting for investment
securities in 1994. As discussed in Notes 10 and 11, the
Corporation changed its methods of accounting for postretirement
benefits other than pensions and income taxes in 1993.
/s/ COOPERS & LYBRAND L.L.P.
Coopers & Lybrand L.L.P.
Columbus, Ohio
January 26, 1995
AVERAGE BALANCES & ANALYSIS OF NET INTEREST INCOME
(dollars in thousands)
1994 1993 1992
----------------------------- ----------------------------- -----------------------------
Average Income/ Average Average Income/ Average Average Income/ Average
Balance Expense Yield/Rate Balance Expense Yield/Rate Balance Expense Yield/Rate
------- ------- ---------- ------- ------- ---------- ------- ------- ----------
Securities<F1>:
Taxable $77,811 $5,229 6.7% $79,086 $5,959 7.5% $81,607 $6,378 7.8%
Nontaxable<F2> 23,647 2,278 9.6% 26,895 2,608 9.7% 29,363 2,874 9.8%
------- ----- ---- ------- ----- ---- ------- ----- ----
Total 101,458 7,507 7.4% 105,981 8,567 8.1% 110,970 9,252 8.3%
Loans:
Commercial 43,782 3,773 8.6% 45,024 3,590 8.0% 40,250 3,543 8.8%
Real estate 206,157 16,481 8.0% 184,014 15,319 8.3% 178,025 16,415 9.2%
Consumer (net) 87,536 8,598 9.8% 77,244 7,736 10.0% 72,758 7,830 10.8%
Valuation
reserve (6,680) (6,095) (5,298)
------- ------ ---- -------- ------ ---- ------- ------ ----
Total 330,795 28,852 8.7% 300,187 26,645 8.9% 285,735 27,788 9.7%
Money Market:
Interest-bearing
deposits 1,734 66 3.8% 8,562 209 2.4% 6,894 452 6.6%
Federal funds
sold 10,615 422 4.0% 17,706 623 3.5% 21,462 1,035 4.8%
------ --- ---- ------ --- ---- ------ ----- ----
Total 12,349 488 4.0% 26,268 832 3.2% 28,356 1,487 5.2%
Total
earning
assets 444,602 36,847 8.3% 432,436 36,044 8.3% 425,061 38,527 9.1%
Other assets 35,422 32,580 27,263
-------- -------- --------
Total
assets $480,024 $465,016 $452,324
======== ======== ========
Deposits:
Savings $75,422 2,106 2.8% $72,999 2,107 2.9% $61,660 2,195 3.6%
Interest-
bearing
demand
deposits 85,326 2,212 2.6% 80,100 1,998 2.5% 73,830 2,310 3.1%
Time 187,842 9,298 4.9% 196,374 9,750 5.0% 224,898 12,681 5.6%
------- ----- ---- ------- ----- ---- ------- ------ ----
Total 348,590 13,616 3.9% 349,473 13,855 4.0% 360,388 17,186 4.8%
Borrowed Funds:
Short term 10,953 337 3.1% 9,186 203 2.2% 9,398 262 2.8%
Long term 24,614 1,471 6.0% 19,611 1,205 6.1% 6,549 439 6.7%
------ ----- ---- ------ ----- ---- ------ --- ----
Total 35,567 1,808 5.1% 28,797 1,408 4.9% 15,947 701 4.4%
Total
interest-
bearing
liabilities 384,157 15,424 4.0% 378,270 15,263 4.0% 376,335 17,887 4.8%
Noninterest-
bearing
deposits 46,224 41,621 38,403
Other
liabilities 5,029 4,320 3,485
------- -------- --------
Total
liabilities 435,410 424,211 418,223
Stockholders'
equity 44,614 40,805 34,101
-------- --------- ---------
Total
liabilities
and
stockholders'
equity $480,024 $465,016 $452,324
======== ======== ========
Interest rate spread $21,423 4.3% $20,781 4.4% $20,640 4.4%
======= ==== ======= ==== ======= ====
Interest revenue/
earning assets 8.3% 8.3% 9.1%
Interest expense/
earning assets 3.5% 3.5% 4.2%
---- ---- ----
Net yield on earnings assets 4.8% 4.8% 4.9%
==== ==== ====
<FN>
<F1> Average balances of investment securities based on historical cost.
<F2> Computed on a fully tax equivalent basis by dividing
nontaxable income by 66% and reducing the result by the
municipal interest limitation. The interest income was increased
by $739,000, $733,000 and $820,000 for 1994, 1993 and 1992,
respectively.
<F3> Nonaccrual loans are included in the average balances
listed. Related income on nonaccrual loans through the date the
loan was put on accrual status is included in loan income. As of
December 31, 1994, 1993 and 1992, nonaccrual loans outstanding
were $902,000, $1,416,000 and $1,279,000, respectively.
<F4> Loan fees included in income for 1994, 1993 and 1992 were
$773,000, $558,000, and $512,000, respectively.
</FN>
RATE VOLUME ANALYSIS/MATURITIES TABLES
Rate Volume Analysis
(dollars in thousands)
Change in Income/Expense<F1> Rate Effect Volume Effect
---------------------------- ----------------------- ---------------------
1994 1993 1992 1994 1993 1992 1994 1993 1992
Investment income:
Taxable $(730) $(419) $224 $(635) $(225) $(447) $(95) $(194) $671
Nontaxable (330) (266) (85) (17) (26) (89) (313) (240) 4
------ ------ ----- ------ ------ ------ ----- ------ ----
Total (1,060) (685) 139 (652) (251) (536) (408) (434) 675
Loan income:
Commercial 183 47 (544) 284 (351) (575) (101) 398 31
Real estate 1,162 (1,096) (513) (626) (1,634) (2,485) 1,788 538 1,972
Consumer 862 (94) (8) (151) (561) (144) 1,013 467 136
----- ------- ----- ----- ------- ------- ------ --- -----
Total 2,207 (1,143) (1,065) (493) (2,546) (3,204) 2,700 1,403 2,139
Money market funds (344) (655) (506) 151 (583) (599) (495) (72) 93
Total interest
income 803 (2,483) (1,432) (994) (3,380) (4,339) 1,797 897 2,907
===== ======= ======= ===== ======= ======= ===== === =====
Interest expense:
Savings (1) (88) (144) (70) (454) (714) 69 366 570
Interest-bearing
demand deposits 214 (312) (784) 80 (496) (1,192) 134 184 408
Time (452) (2,931) (2,995) (30) (1,422) (2,943) (422) (1,509) (52)
Short-term
borrowings 134 (59) (233) 90 (53) (231) 44 (6) (2)
Long-term
borrowings 266 766 (129) (34) (40) (87) 300 806 (42)
---- ------ ------- ---- ------- ------- ----- ------- ----
Total interest
expense 161 (2,624) (4,285) 366 (2,465) (5,167) 125 (159) 882
--- ------- ------- --- ------- ------- --- ----- ---
$642 $141 $2,853 $(1,030) $(915) $828 $1,672 $1,056 $2,025
==== ==== ====== ======== ====== ==== ====== ====== ======
<FN>
<F1> The change in interest due to both rate and volume has been
allocated to volume and rate changes in proportion to the
relationship of the dollar amounts of the change in each.
</FN>
LOAN MATURITIES
At December 31, 1994:
Due in One Year Due
One Year Through After
or Less Five Years Five Years Total
---------- ------------ ------------ --------
Loan Type
Commercial loans:
Fixed $1,520 $1,445 $2,443 $5,408
Variable 32,879 4,391 4,202 41,472
------ ------ ------ ------
34,399 5,836 6,645 46,880
Real estate loans:
Fixed 84 4,408 39,872 44,364
Variable 37 10,958 165,384 176,379
-- ------ ------- -------
121 15,366 205,256 220,743
Consumer loans:
Fixed 2,843 76,835 4,039 83,717
Variable 206 8,110 1,697 10,013
----- ------ ----- ------
3,049 84,945 5,736 93,730
TOTAL $37,569 $106,147 $217,637 $361,353
======= ======== ======== ========
MATURITIES SCHEDULE OF LARGE CERTIFICATES OF DEPOSIT OVER $100,000
As of December 31,
(dollars in thousands)
1994 1993 1992 1991
---- ---- ---- ----
Under 3 months $5,657 $5,761 $7,810 $15,099
3 to 6 months 2,149 2,241 5,957 *
6 to 12 months 5,868 2,859 2,109
----- ----- ----- ------
3 to 12 months 8,017 5,100 8,066 7,674
Over 12 months 12,695 6,939 7,291 4,198
------ ------ ------ -------
TOTAL $26,369 $17,800 $23,167 $26,971
======= ======= ======= =======
* The maturity schedule of large certificates of deposit prior
to 1992 is in accordance with regulatory guidelines for
preparation of quarterly Call Reports. The accounting system did
not provide a split of the 3 to 12 months category into
categories of 3 to 6 months and 6 to 12 months.
LOAN PORTFOLIO ANALYSIS
(dollars in thousands)
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
Year-end balances:
Commercial $46,880 $47,299 $40,253 $42,557 $39,818
Real estate 217,512 189,866 176,119 163,670 151,242
Real estate
construction 3,231 3,391 1,965 3,073 1,400
Consumer (net) 88,307 76,977 69,030 65,168 65,680
Credit card 5,423 4,142 3,768 3,785 3,580
-------- ------- ------- ------- -------
Total $361,353 $321,675 $291,135 $278,253 $261,720
======== ======== ======== ======== ========
Average loans $330,795 $300,187 $285,735 $266,268 $257,214
======== ======== ======== ======== ========
Reserve for possible
loan losses,
January 1 $6,370 $5,687 $4,273 $4,086 $3,765
Reserve for losses
of acquired branch 721
Loans charged off:
Commercial 39 193 1,163 572 576
Real estate 189 143 295 401 91
Consumer 842 816 826 1,002 753
Credit card 54 51 33 62 43
--- --- ----- ----- ---
Total 1,124 1,203 2,317 2,037 1,463
Recoveries:
Commercial 392 60 241 91 12
Real estate 61 65 110 25 48
Consumer 304 157 267 354 243
Credit card 15 12 5 6 6
--- --- --- --- ---
Total 772 294 623 476 309
=== === === === ===
Net chargeoffs:
Commercial (353) 133 922 481 564
Real estate 128 78 185 376 43
Consumer 538 659 559 648 510
Credit card 39 39 28 56 37
----- --- --- --- ---
Total 352 909 1,694 1,561 1,154
=== === ===== ===== =====
Charged to operations 765 1,592 2,387 1,748 1,475
Reserve for loan
losses December 31 $6,783 $6,370 $5,687 $4,273 $4,086
====== ====== ====== ====== ======
Reserve for possible loan losses as of December 31:
Commercial $3,281 $3,185 $2,651 $1,797 $2,145
Real estate 1,828 2,000 1,189 1,108 510
Consumer 1,096 987 602 454 425
Credit card 89 166 45 45 41
Unallocated 489 32 1,200 869 965
------ ------ ------ ------ ------
Total $6,783 $6,370 $5,687 $4,273 $4,086
====== ====== ====== ====== ======
Percentage of loans to total loans at December 31:
Commercial 13.0% 14.7% 13.8% 15.3% 15.2%
Real estate 61.1 60.1 61.2 59.9 58.3
Consumer 24.4 23.9 23.7 23.4 25.1
Credit card 1.5 1.3 1.3 1.4 1.4
----- ----- ----- ----- -----
Total 100.0% 100.0% 100.0% 100.0% 100.0%
Ratio: Net chargeoffs/average loans:
Commercial (0.11)% 0.05% 0.32% 0.18% 0.22%
Real estate 0.04 0.02 0.06 0.14 0.02
Consumer 0.16 0.22 0.20 0.24 0.20
Credit card 0.01 0.01 0.01 0.02 0.01
------- ----- ----- ----- -----
Total 0.10% 0.30% 0.59% 0.58% 0.45%
======= ===== ===== ===== =====
Nonperforming loans:
Nonaccrual loans $902 $1,416 $1,279 $1,301 $1,769
Loans 90+ days
past due 1,082 896 1,284 1,706 1,844
Other real
estate owned 97 38 49 779 144
Troubled debt
restructuring 3
------ ------ ------ ------ ------
Total $2,081 $2,350 $2,612 $3,786 $3,760
====== ====== ====== ====== ======
Nonperforming loans
as a percent of total
loans 0.6% 0.7% 0.9% 1.4% 1.4%
---- ---- ---- ---- ----
The provision for possible loan losses for financial reporting
purposes is based upon past experience and an evaluation of
potential losses in the current loan portfolio. In management's
opinion, the provision is considered sufficient to maintain the
loan loss reserve at a level adequate to absorb all anticipated
losses existing in the loan portfolios at the balance sheet
dates. Loans are classified as nonaccrual when, in the opinion
of management, the collection of principal or interest is
unlikely. No interest is taken into income on nonaccrual loans
until such time as the borrower demonstrates the ability to pay
principal and interest. Interest income on nonaccrual loans
which would have been recorded under the original terms of the
loans for 1994, 1993 and 1992 was $48,000 (of which $36,000 was
actually recorded), $149,000 (of which $41,000 was actually
recorded) and $205,000 (of which $111,000 was actually
recorded), respectively.
MANAGEMENT'S DISCUSSION AND ANALYSIS
INTRODUCTION
The following discussion and analysis of the consolidated
financial statements of Peoples Bancorp Inc. is presented to
give the reader insight into management's assessment of the
financial results. It also recaps the significant events that
led to the results. Our subsidiaries, The Peoples Banking and
Trust Company (Peoples Bank), The First National Bank of
Southeastern Ohio (First National), and The Northwest Territory
Life Insurance Company, provide financial services to
individuals and businesses within our market area. Peoples Bank
is chartered by the State of Ohio and subject to regulation,
supervision, and examination by the Federal Deposit Insurance
Corp-oration (FDIC) and the Ohio Division of Banks. First
National is a member of the Federal Reserve System and subject
to regulation, super-vision, and examination by the Office of
the Comptroller of the Currency. This discussion and analysis
should be read in conjunction with the audited financial
statements and footnotes and with the ratios, statistics and
discussions contained elsewhere in the Annual Report.
OVERVIEW OF THE INCOME STATEMENT
Net income increased by $677,000 or 13.4% to $5,748,000 in 1994.
Fully tax equivalent net interest income increased $642,000 in
1994 compared to 1993, an increase of 3.1%. The yield on
interest-earning assets decreased by five basis points to 8.29%
while the rate paid on interest-bearing liabilities decreased by
one basis point to 4.02%. Excluding the gains and losses from
sales of investment securities, non-interest income increased
4.3% to $4,075,000 in 1994 compared to $3,907,000 last year.
Non-interest expense increased 3.6% from $15,124,000 in 1993 to
$15,672,000 this year.
During 1993, Peoples Bancorp adopted Statements of Accounting
Standards No. 106, "Employers Accounting for Postretirement
Benefits other than Pensions" and No. 109, "Accounting for
Income Taxes", which resulted in a reduction of net income of
$314,000.
INTEREST INCOME AND EXPENSE
Net interest income after provision for loan losses increased by
7.9% or $1,459,000 to $19,915,000 for 1994. Interest income
increased by $793,000. Interest and fees on loans increased by
$2,203,000 while all other interest income categories decreased
$1,410,000. Growth in balances accounted for the increased
interest and fees on loans. The average balance of loans
increased from $300,187,000 to $330,795,000. Interest expense
increased modestly, $161,000 or 1.1%, to $15,424,000. Average
deposit balances remained at about the same level as last year
while the average balance of borrowed funds increased from
$28,797,000 to $35,567,000. Overall, the net yield on earning
assets (please see Average Balances and Analysis of Net Interest
Income schedule) remained the same as last year, 4.8%.
Management anticipates a modest decline in the net yield on
earning assets in 1995.
NON-INTEREST INCOME
Several categories of non-interest income reported increases
over 1993. Income from fiduciary activities increased 8.9%, or
$132,000 to $1,607,000. This increase came due to increases in
the number of accounts served and assets under management.
Account service charge income increased 12.4%, or $161,000 to
$1,456,000 as emphasis was placed on recovering costs associated
with services provided. Total Visa fees more than doubled to
$356,000 as the Corporation started a new Gold card program and
added electronic capture for many of our merchants.
During 1994 management elected to sell some of the lower
yielding investments in its available for sale portion of the
portfolio and replace them with higher yielding securities. This
opportunity to improve the overall yield of the portfolio was
available due to the dramatic increases in market interest rates
during 1994. Net losses on the sale of securities were $237,000
this year compared to net gains in 1993 of $45,000. Management
does not expect to generate gains and losses on the sale of
securities in the normal course of business.
NON-INTEREST EXPENSE
The most significant reduction in non-interest expenses was
gained in the provision for loan losses. In 1994 the provision
for loan losses was $765,000, down 51.9% from 1993. Overall loan
quality has improved and net charge-offs were down significantly
from 1993 (please see additional discussion under Reserve for
Possible Loan Losses). Other categories within non-interest
expenses did not experience dramatic changes over 1993. Of note,
however, was an increase in salaries and benefits of $147,000 or
2.0%. Management emphasis on efficiency within its operating
units resulted in this modest increase. Building depreciation
increased from $333,000 in 1993 to $418,000 in 1994, an increase
of 25.5%. 1994 was the first full year of depreciation on the
major improvements to Peoples Bank's downtown Marietta facility.
These improvements give the Corporation the facilities necessary
for future expansion.
RETURN ON ASSETS (ROA)
Return on average assets has increased from 1.09% in 1993 to
1.20% in 1994. ROA has increased in each of the last three
years. Since 1991, ROA has increased an average of 12.3% per
year. In 1994 average total assets increased by approximately
$15 million or 3.2% while net income increased by 13.35%. Since
net income increased faster than average assets, ROA improved.
Management has developed an operating plan for 1995 that
anticipates ROA remaining at current levels.
RETURN ON EQUITY (ROE)
Peoples Bancorp's return on average equity has remained
relatively constant over the past several years. Since 1989 the
high has been 12.9% in 1994 and the low has been 11.7% in 1991.
The increase in ROE this year is mainly due to increased net
income. Total stockholders' equity was impacted by Financial
Accounting Standards Board (FASB) Statement No. 115, Accounting
for Certain Investments in Debt and Equity Securities.
Unrealized losses in the investment portfolio are recognized as
reductions in the equity section of the balance sheet as a
separate line item. The reduction in equity for the unrealized
losses in the investment portfolio is $1,030,000, net of taxes,
as of December 31, 1994. Management believes that ROE is an
important measure of an organization's financial strength. In
1995, management expects modest improvement in ROE.
FEDERAL INCOME TAX EXPENSE
Federal income taxes increased from $1,899,000 in 1993 to
$2,333,000 this year. The effective tax rate increased from
26.1% to 28.9%. In 1994 the Corporation had less interest on
obligations of state and political subdivisions (this interest
is not taxable for federal purposes) and thus had less of an
adjustment in its taxable income. As funds are available for
investment, management determines whether the financial result
would be better on taxable or tax-exempt obligations and invests
accordingly.
OVERVIEW OF BALANCE SHEET
Total assets have increased by $32,633,000, or 7% to
$498,006,000 as of December 31, 1994. Growth on the asset side
of the statement has been almost exclusively with loans. Net
loans increased by $39,265,000 to $354,570,000 during 1994.
Deposits increased by $18,180,000 or 4.7% to $403,819,000.
Short-term borrowings increased from $12,260,000 to $19,767,000
and term debt increased $3,456,000 to $23,787,000.
LOANS
Loan demand has been strong in Peoples Bancorp's market area.
Total loans have increased by $39,678,000 or 12.3% to
$361,353,000. Real estate mortgage loans to individuals and
businesses increased 14.6%, $27,646,000, to $217,512,000.
Individuals actively looked to refinance home mortgages during
1994 and Peoples Bancorp was successful in capturing many of
these loans. Business real estate loans were a significant part
of the growth in this category. Much of this loan growth came
from our loan production office in Newark, Ohio. 1994 was the
first full year of operation for this office. Total loans
outstanding at December 31, 1994 that were generated by the
Newark office were $7,160,000. Consumer loans were also up
significantly from $81,119,000 last year to $93,730,000 as of
December 31, 1994. During the summer of 1994, a new risk-based
pricing schedule was introduced. This was particularly effective
in our indirect lending area. Indirect lending means that the
customer deals with a non-bank employee (usually a car dealer)
and that person helps with the paperwork in exchange for a fee.
The risk-based pricing coupled with a tiered interest rate
structure in indirect deals gained widespread acceptance.
Commercial loans, other than those backed by real estate,
declined slightly to $46,880,000. The mix of loans has changed
slightly. More loans are real estate mortgage loans (60.2%
versus 59.0% last year) and less are commercial loans (13.0%
versus 14.7% last year). The change in loan mix is not expected
to have a major impact on the Corporation's future income
statements.
LOAN CONCENTRATION
Peoples Bancorp does not have a concentration of its loan
portfolio in any one industry. Real estate lending continues to
be the most significant part of our loan portfolio representing
61.1% of total loans.
RESERVE FOR POSSIBLE LOAN LOSSES
The reserve for loan losses as a percentage of loans decreased
from 1.98% at December 31, 1993 to 1.88% at this year end. The
total dollar amount of the reserve increased 6.5% to $6,783,000.
The provision for loan losses (this is the amount of expense on
the income statement) was $765,000, down significantly from last
year. A key reason for the reduction was the decline in net
loans charged off from $909,000 in 1993 to $352,000 this year.
Net loan chargeoffs as a percentage of average loans outstanding
declined from 0.3% last year to 0.1% for 1994. The reserve had
been higher in 1993 due to uncertainty regarding loans acquired
in an acquisition from the Resolution Trust Company in 1992.
Management has been able to reduce the reserve specifically
allocated to those loans as the quality of the loans was proven
over time. Non-performing loans as a percentage of loans
outstanding has improved. At December 31, 1994 non-performing
loans were 0.58% of outstanding loans, as compared to 0.73% last
year. Overall loan quality, as indicated by these benchmarks,
has improved and thus justifies the reserve for possible loan
losses. Management believes that the reserve is adequate.
FUNDING SOURCES
Peoples Bancorp considers deposits, short-term borrowings, and
term debt when evaluating funding sources. In today's high-tech
world, the cost of funds should not be considerably different in
southeastern Ohio as it is elsewhere in the country. Markets are
not totally efficient so one will observe pockets of higher or
lower costs from area to area. Because of the improvements in
market efficiency management of Peoples Bancorp looks at a much
broader array of funding sources than in the past. Deposits
continue to be the most significant source of funds for Peoples
Bancorp. Noninterest bearing deposits increased 6.7% to
$48,121,000 and interest bearing deposits increased 4.5% to
$355,698,000 as of December 31, 1994. Federal Funds Purchased
and Repurchase Agreements remained constant at $9,267,000.
Short-term Federal Home Loan Bank Advances increased from
$3,000,000 at December 31, 1993 to $10,500,000 this year. The
average balance in these short-term funds was $1,537,000,
reflecting Peoples Bancorp's ability to utilize these funds as
needed to support funding needs. Longer term Federal Home Loan
Bank advances increased $3,716,000 to $21,967,000. Total funding
sources increased $29,143,000 or 7.0% to $447,373,000 as of
December 31, 1994. Management expects deposits to continue to be
the dominant source of funds in the immediate future. However,
efforts will continue in the pursuit of alternative funding
sources.
CAPITAL / STOCKHOLDERS' EQUITY
The capital position of Peoples Bancorp remains strong. Total
stockholders' equity has increased by 6.7% to $45,635,000 at
December 31, 1994. The increase came through retention of net
income as the Corporation earned $5,748,000. Dividends paid were
$1,682,000, up 11.4% over 1993. Dividends paid were 29.3% of net
income for the year. Stockholders' Equity was reduced for an
adjustment to market value on available-for-sale securities of
$1,030,000 as of December 31, 1994. This adjustment was required
due to implementation of FASB Statement No. 115, Accounting for
Certain Investments in Debt and Equity Securities, in the first
quarter of 1994.
During 1994 the Corporation purchased $215,000 of its own shares
for the treasury. Purchases were made in accordance with
guidelines established by the Board of Directors. Treasury
shares may be used for future acquisitions. Management
anticipates purchasing additional shares in accordance with
established guidelines.
Banking regulators have established risk-based capital
guidelines for measuring capital adequacy. The guidelines
establish various levels of risk to each category of assets.
Peoples Bancorp's core risk-based capital was 12.9% at December
31, 1994 compared to 13.5% last year and total risk-based
capital was 14.1% at December 31, 1994 compared to 14.7% last
year. The regulatory guidelines require minimum core and total
risk-based capital of 4% and 8%. Management expects to maintain
capital in excess of regulatory guidelines.
LIQUIDITY
Liquidity measures an organization's ability to meet cash
obligations as they come due. The Consolidated Statement of Cash
Flows presented on page 15 of the accompanying financial
statements provides analysis of the Corporation's cash and cash
equivalents. Additionally, management considers that portion of
the loan portfolio that matures within one year and maturities
within one year in the investment portfolio as part of our
liquid assets. The Corporation's liquidity is monitored by the
Asset/Liability Committee (ALCO), which establishes ranges of
acceptable liquidity and monitors compliance. No violations of
policy have occurred during the reporting period. The current
liquidity position is adequate to fund off-balance sheet
commitments. See additional discussion of off-balance sheet
commitments in Note 9 of the accompanying financial statements.
EFFECTS OF INFLATION ON FINANCIAL STATEMENTS
Substantially all of the Corporation's assets relate to banking
and are monetary in nature. Therefore, they are not impacted by
inflation to the same degree as companies in capital intensive
industries. During a period of rising prices, a net monetary
asset position results in loss in purchasing power and
conversely a net monetary liability position results in an
increase in purchasing power. In banks, monetary assets exceed
monetary liabilities, therefore, as prices have increased over
the past year the financial institutions experienced a decline
in the purchasing power of their net assets.
INTEREST RATE SENSITIVITY_MATURITY OR REPRICING
The following Interest Rate Sensitivity Table presents Peoples
Bancorp's Interest Rate Sensitivity Position at December 31,
1994:
At December 31, 1994 (thousands)
---------------------------------------------------
0 - 3 4 - 12 Over
Months Months 1 - 5 Yrs 5 Yrs Total
------ ------ --------- ----- -----
Interest earning assets:
Investment Securities:
Securities classified
as available-for-sale
Taxable $2,260 $12,228 $39,588 $14,394 $68,470
Tax-exempt 1,495 4,377 15,542 288 21,702
------ ------- ------- ------- -------
Total 3,755 16,605 55,130 14,682 90,172
====== ======= ======= ======= =======
Securities classified
as held-to-maturity
Taxable $10 $2,368 $3,455 $5,833
Tax-exempt 248 736 2,430 3,414
------ ------ ------ ------ ------
Total 10 248 3,104 5,885 9,247
====== ====== ===== ====== ======
Total investment
securities 3,765 16,853 58,234 20,567 99,419
Federal funds sold 4,500 4,500
Loans 113,992 113,398 86,256 47,707 361,353
Interest-bearing
deposits with banks 650 650
------- ------- ------ ------ -------
Total 122,907 130,251 144,490 68,274 465,922
======= ======= ======= ====== =======
Interest-bearing liabilities:
Deposits 183,581 86,245 85,872 355,698
Federal funds purchased,
Federal Home Loan Bank
advances, and securities
sold under agreements to
repurchase 19,767 19,767
Other borrowings 1,820 21,967 23,787
------ ------ ------ ------ ------
Total 205,168 86,245 85,872 21,967 399,252
======= ====== ====== ====== =======
Interest sensitivity $(82,261) $44,006 $58,618 $46,307 $66,670
========= ======= ======= ======= =======
The Interest Rate Sensitivity table above shows that Peoples
Bancorp is in a net asset sensitivity position. This means that
if interest rates increase, the Corporation's net income will
increase over time. Conversely, if interest rates decline, so
too will net income. The table breaks down interest rate
sensitivity within various time frames. Within zero to three
months the Corporation is liability sensitive and all other
categories are asset sensitive. Management monitors the asset
and liability sensitivity through the Asset/Liability Committee
and uses this data to set pricing strategies.
OUTLOOK FOR 1995
1995 has started with the Federal Reserve raising short term
interest rates by one half percent in late January. Movements in
interest rates had major implications for financial institutions
in 1994, and 1995 will continue to be impacted by changing
rates. Peoples Bancorp anticipates a more stable interest rate
environment in 1995. Long term interest rates should remain
within one percent of current levels throughout the year. Short
term rates could go up another one half to one percent. Peoples
Bancorp does not manage its balance sheet based upon interest
rate forecasts. Instead management, through its Asset/Liability
Committee, evaluates the balance sheet and monitors the asset
and liability sensitivity. Peoples Bancorp management works
toward achieving balance in its assets and liabilities to avoid
significant impact due to volatile interest rates.
The business plan for 1995 anticipates a continued narrowing of
the net interest margin. Other areas will be counted on to
provide revenues or cost savings to allow continued growth in
net income. Management expects continued earnings growth through
more efficient use of technology and facilities to control
non-interest expenses. Non-interest income is expected to
continue to grow at rates above inflation as management
continues to focus on cost recovery. New emphasis will be placed
on non-traditional products and services for our customers in
1995. Peoples Bancorp has over fifty employees trained and
licensed to sell annuities. We are utilizing an outside firm to
provide products to meet our customers' insurance needs.
Peoples Bancorp has invested in facilities and qualified staff
to grow into the future. Management looks forward with
anticipation to the opportunities that await Peoples Bancorp in
the years ahead.
COMPARISON OF 1993 TO 1992
Peoples Bancorp achieved an increase in net income of 11.5% to
$5,071,000 in 1993. Primary and fully diluted earnings per share
were $1.81 and $1.79 for the year ended December 31, 1993
compared to $1.71 and $1.59 for 1992. Net income to average
assets improved from 1.01% in 1992 to 1.09% in 1993. Net income
to stockholders' equity for 1993 was 11.9% compared to 11.8% in
1992.
Total assets remained nearly the same in 1993. Total assets
decreased $3,189,000 or 0.7% to $465,373,000. Interest-earning
assets decreased from $442,176,000 to $438,072,000 while
interest-bearing liabilities decreased from $381,116,000 to
$373,125,000. The result was an increase in net interest-earning
assets. The mix of assets and liabilities also changed.
Interest-earning deposits with banks and federal funds sold
decreased by $25,437,000 while loans increased by $30,540,000.
This shift from lower yielding to higher yielding assets helped
the Corporation maintain its net interest margin.
DIRECTORS AND OFFICERS
PEOPLES BANCORP INC.
====================
OFFICERS
--------
ROBERT E. EVANS, President and Chief Executive Officer
CAROL A. SCHNEEBERGER, Vice President/Operations
JOHN T. UNDERWOOD, Vice President/Business Development
ROLLAND B. SWART, Vice President/Business Development
CHARLES R. HUNSAKER, General Counsel
JOHN W. CONLON, Chief Financial Officer
JEFFREY D. WELCH, Treasurer
RUTH I. OTTO, Secretary
KAREN V. CLARK, Auditor
JOHANNA BURKE, Assistant Auditor
DIRECTORS
---------
JEWELL BAKER, Co-Owner, B & N Coal Co.
DENNIS D. BLAUSER, President, Blauser Energy Corp.
GEORGE W. BROUGHTON, Executive Vice President and Director of Marketing,
Broughton Foods Company
WILFORD D. DIMIT, Owner, First Settlement Square
ROBERT E. EVANS, President and Chief Executive Officer
BARTON S. HOLL, Chairman of the Board, Logan Clay Products
NORMAN J. MURRAY, Retired, The Airolite Company
JAMES B. STOWE, Chairman of the Board, Stowe Truck and Equipment Company
PAUL T. THEISEN, Attorney, Theisen, Brock, Frye, Erb & Leeper Co., L.P.A.
THOMAS C. VADAKIN, President, Vadakin, Inc.
JOSEPH H. WESEL, Chairman, President, Marietta Automotive Warehouse, Inc.
DIRECTORS EMERITUS
------------------
CARL L. BROUGHTON
NEIL CHRISTY
WILLIAM K. HAMER
WILLIAM E. MCKINNEY
R. HOBART MORRIS
FRED R. PRICE
THE PEOPLES BANKING AND TRUST COMPANY
=====================================
EXECUTIVE OFFICERS
------------------
ROBERT E. EVANS, President and Chief Executive Officer
DAVID B. BAKER, President, Investment and Trust Division
JOHN W. CONLON, Chief Financial Officer and Treasurer
LARRY E. HOLDREN, Executive Vice President, Director of Human Resources
ROBERT A. MCKNIGHT, Executive Vice President Lending
ROBERT W. MINGUS, Executive Vice President, President, Athens/Meigs Division
JOSEPH S. YAZOMBEK, Executive Vice President, Mortgage Lending
BANKING AND LENDING
-------------------
KATHALEEN R. BROWN, Vice President/Marketing and Secretary to the Board
JOHN A. KING, Vice President and Executive Officer, Nelsonville Office
WILLIAM MALSTER, Vice President
DAVID M. REDROW, Vice President/Newark
JERALD L. POST, Vice President
ROBROY WALTERS, Controller
JENNIE M. ALTIER, Assistant Vice President
DAVID L. BATTEN, Assistant Vice President
SUSAN L. CORCORAN, Assistant Vice President, Operations
ROGER E. CUNION, Assistant Vice President
JOSEPH P. FLINN, Assistant Vice President, Personal Loan Manager
PAUL A. HUFFMAN, Assistant Vice President, Operations
MARY ANN MITCHELL, Assistant Vice President
BETTY L. REYNOLDS, Assistant Vice President
LARRY P. SMITH, Assistant Vice President
RUTH I. OTTO, Assistant Secretary
RICHARD J. FLANAGAN, Accounting Manager
RODNEY A. CUNNINGHAM, Collections Officer
CHARLES R. BARNES, Loan Officer
JULIE L. GIFFIN, Manager, Account Services
CATHLEEN S. KNOX, Loan Officer/Loan Analyst
CATHY J. LINSCOTT, Loan Officer
BEVERLY C. MELLINGER, Loan Officer
CHARLES V. ROBINSON, JR., Loan Officer/Credit Administration Officer
JONATHAN T. SCHENZ, Loan Officer
INFORMATION SYSTEMS
-------------------
R. JOE COWDERY, Vice President/Manager, Information Systems
INVESTMENT AND TRUST DIVISION
-----------------------------
DAVID B. BAKER, President, Investment and Trust Division
ROSE N. HAAS, Vice President and Investment Officer
JEFFREY D. WELCH, CPA, Vice President/Pension Services and Operations
BETH ANN WORTHINGTON, Vice President/Personal Trust Officer
RONALD L. CLOSE, Financial Planning Officer
LEGAL AND COMPLIANCE
--------------------
CHARLES R. HUNSAKER, Vice President and Counsel
CHARLES SNODGRASS, Assistant Vice President
ROBERT L. STEALEY, Assistant Vice President Compliance Officer
TERESA A. PYLES, Assistant Compliance Officer and Security Officer
DIRECTORS
---------
DAVE M. ARCHER, President, Pioneer Pipe, Inc.
DENNIS D. BLAUSER, President, Blauser Energy Corp.
GEORGE W. BROUGHTON, Executive Vice President and Director of Marketing,
Broughton Foods Company
WILFORD D. DIMIT, Owner, First Settlement Square
ROBERT E. EVANS, President and Chief Executive Officer
BRENDA F. JONES, M.D., Medical Director, Marietta Opthalmology
Associates, Inc.
HAROLD D. LAUGHLIN, Owner, Laughlin Music and Vending Service
REX E. MAIDEN, President, Maiden & Jenkins Construction Co.
NORMAN J. MURRAY, Chairman, Retired, The Airolite Company
T. PAT SAUBER, Owner, McDonald's Restaurants
JAMES B. STOWE, Chairman of the Board, Stowe Truck and Equipment Company
PAUL T. THEISEN, Attorney, Theisen, Brock, Frye, Erb & Leeper Co., L.P.A.
THOMAS C. VADAKIN, President, Vadakin, Inc.
JOSEPH H. WESEL, President, Marietta Automotive Warehouse, Inc.
DIRECTORS EMERITUS
------------------
CARL L. BROUGHTON
R. NEIL CHRISTY
WILLIAM K. HAMER
WILLIAM E. MCKINNEY
R. HOBART MORRIS
THE FIRST NATIONAL BANK OF SOUTHEASTERN OHIO
============================================
OFFICERS
--------
RICK D. TURNER, President and Chief Executive Officer
KENNETH E. SHAFER, Executive Vice President and Cashier
CATHERINE R. OGLE, Vice President/Lending
THOMAS D. HESSON, Assistant Vice President and Controller
KRISTI A. SCHAFER, Assistant Vice President/Marketing and Business Development
MICHAEL J. SCHRAMM, Assistant Vice President, Manager McConnelsville Office
and Security Officer
CHERYL HANSON, Loan Officer, Manager Chesterhill Office
RUTH I. OTTO, Secretary
KAREN MILLS, Assistant Secretary
CHARLES R. HUNSAKER, General Counsel
DIRECTORS
---------
LARRY J. ARMSTRONG, Armstrong and Smith
CARL BAKER, JR., Co-Owner, B & N Coal Company
ROBERT E. EVANS, President and Chief Executive Officer, Peoples Bancorp Inc.
H. CLAYTON JOHN, Vice Chairperson
WILFRED O. HILL, Oil and Gas, Retired
CHARLES R. HUNSAKER, General Counsel
JAMES D. MCKINNEY, Morgan County School Superintendent-Retired
CAROL A. SCHNEEBERGER, Board Chairperson, Vice President/Operations,
Peoples Bancorp Inc.
PAUL T. THEISEN, Attorney, Theisen, Brock, Frye, Erb & Leeper Co., L.P.A.
RICK D. TURNER, President and Chief Executive Officer
DIRECTORS EMERITUS
------------------
MARCUS GANT
ARTHUR W. GILCHRIST