FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended Commission File
March 31, 1995 Number 0-16772
PEOPLES BANCORP INC.
Incorporated - Ohio I.R.S. Identification
No. 31-0987416
235 Second Street
P. O. Box 738
Marietta, Ohio 45750
Telephone: (614) 373-3155
Indicate by check mark whether the registrant (1) has filed all
reports required by Section 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
------- -------
Indicate the number of shares outstanding of each of the
issuer's class of Common Stock, as of May 1, 1995: 2,887,493.
PART I - FINANCIAL INFORMATION
ITEM 1
The following Condensed Consolidated Balance Sheets, Consolidated
Income Statements, and Consolidated Statements of Cash Flow of
Peoples Bancorp Inc. (the "Corporation") and subsidiaries, reflect
all adjustments (which include only normal recurring accruals)
necessary to present fairly such information for the periods and
dates indicated. Since the following condensed unaudited financial
statements have been prepared in accordance with instructions to
Form 10-Q, they do not contain all information and footnotes
necessary for a fair presentation of financial position in conformity
with generally accepted accounting principles. Operating results for
the three months ended March 31, 1995 are not necessarily indicative
of the results that may be expected for the year ending December 31,
1995. Complete audited consolidated financial statements with
footnotes thereto are included in the Corporation's Annual
Report on Form 10-K for the year ended December 31, 1994.
PEOPLES BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
March 31, 1995 Dec. 31, 1994
-------------- -------------
ASSETS
Cash and cash equivalents:
Cash and due from banks $20,387,000 $19,551,000
Interest-bearing deposits in other banks 1,659,000 650,000
Federal funds sold 10,275,000 4,500,000
------------ ------------
Total cash and cash equivalents 32,321,000 24,701,000
Securities:
Available-for-sale, at estimated fair value
(amortized cost of $97,506,000 and
$91,783,000 at March 31, 1995 and
December 31, 1994) 97,793,000 90,172,000
Held-to-maturity, at amortized cost (fair
value approximates $10,251,000 and
$9,089,000 at March 31, 1995
and December 31, 1994, respectively) 10,229,000 9,247,000
----------- -----------
Total securities 108,022,000 99,419,000
Loans, net of unearned interest 365,304,000 361,353,000
Reserve for possible loan losses (6,752,000) (6,783,000)
----------- -----------
Net loans 358,552,000 354,570,000
Bank premises and equipment, net 10,613,000 10,807,000
Other assets 7,454,000 8,509,000
------------ ------------
Total assets $516,962,000 $498,006,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing $46,057,000 $48,121,000
Interest bearing 381,839,000 355,698,000
------------ -------------
Total deposits 427,896,000 403,819,000
Short-term borrowings:
Federal funds purchased and securities
sold under repurchase agreements 9,613,000 9,267,000
Federal Home Loan Bank term advances 4,216,000 10,500,000
---------- ----------
Total short-term borrowings 13,829,000 19,767,000
Long-term borrowings 23,081,000 23,787,000
Accrued expenses and other liabilities 4,499,000 4,998,000
----------- -----------
Total liabilities 469,305,000 452,371,000
STOCKHOLDERS' EQUITY
Common stock, no par value, 6,000,000
shares authorized. 3,022,361 shares
issued and 2,890,461 shares outstanding
as of March 31, 1995; and 3,020,908
shares issued and 2,899,938 shares
outstanding as of December 31, 1994 24,360,000 24,326,000
Net unrealized holding gain (loss) on
available-for-sale securities, net of
deferred taxes 189,000 (1,030,000)
Retained earnings 25,101,000 24,078,000
---------- ----------
49,650,000 47,374,000
Treasury stock, at cost, 131,900 shares
as of March 31, 1995 and 120,970 shares
as of December 31, 1994 (1,993,000) (1,739,000)
----------- -----------
Total stockholders' equity 47,657,000 45,635,000
----------- -----------
Total liabilities and
stockholders' equity $516,962,000 $498,006,000
============ ============
PEOPLES BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
March 31,
1995 1994
----------- ----------
Interest income $10,099,000 $8,497,000
Interest expense 4,616,000 3,620,000
----------- ----------
Net interest income 5,483,000 4,877,000
Provision for loan losses 285,000 192,000
----------- ----------
Net interest income after provision
for loan losses 5,198,000 4,685,000
Other income 1,006,000 1,029,000
Gain on sale of securities --- 81,000
Other expenses 4,067,000 3,911,000
Income before income taxes 2,137,000 1,884,000
Federal income taxes 651,000 578,000
----------- ----------
Net income $1,486,000 $1,306,000
=========== ==========
Net income per share $0.51 $0.45
=========== ==========
Weighted average shares outstanding (primary) 2,907,013 2,909,538
=========== ==========
Cash dividends declared $463,000 $406,000
=========== ==========
Cash dividend per share $0.16 $0.14
=========== ==========
PEOPLES BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
March 31,
1995 1994
---------- -----------
Cash flows from operating activities:
Net income $1,486,000 $1,306,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 285,000 192,000
Gain on sale of investment securities --- (81,000)
Depreciation and amortization 425,000 648,000
(Increase) decrease in interest receivable (209,000) 200,000
Increase in interest payable 95,000 16,000
Deferred income taxes (25,000) ---
Deferral of net loan origination (fees) costs (22,000) 56,000
Other, net 466,000) (359,000)
---------- ----------
Net cash provided by operating activities 1,569,000 1,978,000
Cash flows from investing activities:
Purchases of available-for-sale securities (8,696,000) (6,242,000)
Purchases of held-to-maturity securities (1,230,000) ---
Proceeds from sales of available-for-sale
securities --- 4,016,000
Proceeds from maturities of available-
for-sale securities 2,997,000 7,109,000
Proceeds from maturities of held-to-maturity
securities 283,000 103,000
Net decrease in credit card receivables 216,000 329,000
Net increase in loans (3,822,000) (1,886,000)
Expenditures for premises and equipment (133,000) (82,000)
Proceeds from sales of other real estate owned --- 22,000
----------- -----------
Net cash (used in) provided by
investing activities (10,385,000) 3,369,000
Cash flows from financing activities:
Net increase (decrease) in non-interest
bearing deposits (2,064,000) (4,637,000)
Net increase (decrease) in interest-bearing
deposits 26,141,000 5,679,000
Net decrease in short-term borrowings (6,284,000) (3,421,000)
Proceeds from long-term borrowings --- 5,000,000
Payments on long-term borrowings (706,000) (1,788,000)
Cash dividends paid (431,000) (406,000)
Purchase of treasury stock (254,000) (200,000)
Proceeds from issuance of common stock 34,000 ---
------------- ----------
Net cash provided by financing activities 16,436,000 227,000
Net increase in cash and cash equivalents 7,620,000 5,574,000
Cash and cash equivalents at beginning of year 24,701,000 28,323,000
------------ -----------
Cash and cash equivalents at end of period $32,321,000 $33,897,000
============ ===========
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
SELECTED FINANCIAL DATA
The following data should be read in conjunction with the
unaudited consolidated financial statements and the management
discussion and analysis that follows.
Three Months Ended
March 31,
1995 1994
SIGNIFICANT RATIOS --------- ---------
Net income to:
Total assets (end of period)* 1.15% 1.11%
Shareholders' equity (end of period)* 12.47% 11.58%
Net interest margin* 4.25% 4.19%
Shareholders' equity to total assets
(end of period) 9.22% 9.60%
Loans net of unearned interest to deposits
(end of period) 85.37% 83.72%
Reserve for loan losses to loans net of
unearned interest (end of period) 1.85% 2.03%
Capital ratios:
Tier I capital ratio 13.13% 13.56%
Risk-based capital ratio 14.38% 14.81%
Leverage ratio 9.00% 9.03%
Cash dividends to net income 31.16% 31.09%
PER SHARE DATA
Book value per share $16.49 $15.56
======= =======
Net income per share:
Primary $0.51 $0.45
======= =======
Fully diluted $0.51 $0.45
======= =======
Cash dividends per share $0.16 $0.14
======= =======
* Net income to total assets, net income to shareholders' equity, and
net interest margin are presented on an annualized basis.
1. CHANGES IN ACCOUNTING
Effective January 1, 1995, the Corporation adopted Statement on
Financial Accounting Standards No. 114, "Accounting by Creditors
for Impairment of a Loan" (SFAS No. 114), which establishes new
rules for all creditors for measuring for the impairment of
certain loans. The effect of adopting SFAS No. 114 was not
material to the Corporation's financial statements. Impaired
loans at March 31, 1995 approximated $1,700,000.
2. LOANS
Loans are comprised of the following categories:
March 31, 1995 December 31, 1994
Carrying Value Carrying Value
-------------- ----------------
Commercial $46,001,000 $46,880,000
Real estate, construction 3,887,000 3,231,000
Real estate, mortgage 220,638,000 217,512,000
Consumer 94,778,000 93,730,000
------------ ------------
Total $365,304,000 $361,353,000
============ ============
Activity in the reserve for loan losses is summarized as follows:
Three Twelve
Months Ended Months Ended
March 31, 1995 Dec. 31, 1994
-------------- ---------------
Balance at January 1 $6,783,000 $6,370,000
Provision for loan losses 285,000 765,000
Chargeoffs (389,000) (1,124,000)
Recoveries 73,000 772,000
------------ -----------
Balance at end of period $6,752,000 $6,783,000
============ ============
At March 31, 1995, the Corporation had nonaccrual loans of
$581,000, of which all are considered impaired under SFAS No.
114) and restructured loans of $630,000. The Corporation
recorded $30,000 of interest income on these loans in the first
quarter of 1995. Interest income in the amount of $47,000 would
have been recorded on these loans according to their original
terms.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
The following should be read in conjunction with the attached
condensed consolidated financial statements and with the
company's audited consolidated financial statements and notes
thereto for the year ended December 31, 1994.
RESULTS OF OPERATIONS
Peoples Bancorp continued growth in earnings for the quarter
ended March 31, 1995. Net income for the first three months of
1995 was $1,486,000, a 13.8% increase from $1,306,000 in the
first quarter of 1994. As a result of the increased income,
earnings per share increased from $0.45 in 1994 to $0.51 in
1995, or 13.3%.
The increase in net income can be attributed primarily to
increased net interest income. First quarter net interest
income totaled $5,483,000 in 1995 compared to $4,877,000 in
1994, a 12.4% rise. Net interest margin increased from 4.19% in
last year's first quarter to 4.25% in 1995. An increase in loan
balances contributed to the increased net interest income, as
the Corporation expanded efforts to grow higher-yielding assets.
The first quarter provision for loan loss totaled $285,000,
compared to $192,000 for the same period in 1994. The quality
of the Corporation's loans continues to directly impact the
provision for loan losses, as nonperforming assets totaled just
0.35% of total assets at March 31, 1995. During the first
quarter, loan chargeoffs totaled $389,000 while recoveries on
loans were $73,000, which resulted in a net chargeoffs of
$316,000. Management will continue to monitor the loan
portfolio to maintain appropriate reserves for all potential
loan losses.
Due to the volatility and uncertainty of the interest rate
environment, the Corporation continues to focus on areas other
than net interest income as methods for increasing net income.
Non-interest income totaled $1,006,000 for the first quarter of
1995, a modest decline of $23,000 from last year's first
quarter. Several areas continue to enhance income, as both
trust revenue and cost recovery-based service charges on deposit
accounts provide the foundation for the Corporation's
non-interest income. Since 1993, the Corporation has generated
non-interest income through the receipt of lease payments from
an unaffiliated annuities and life insurance company. In first
quarter 1995, the Corporation entered an agreement with a
different unaffiliated company to provide the same types of
service. As a result of this transition, the Corporation
recorded a total of $30,000 of non-interest income from the
different unaffiliated companies, compared to $49,000 for the
first quarter of 1994. The Corporation expects this source of
revenue to produce level or slightly increased revenues through
the remainder of 1995 and beyond.
Maintaining acceptable levels of non-interest expense is
important to the success of the Corporation. For the three
months ended March 31, 1995, total non-interest expense was
$4,067,000, a 4.0% increase from the prior year's first quarter.
Costs for employee wages and benefits totaled $2,136,000, which
reflects a modest increase of 1.5% compared to 1994's first
quarter. Recently the Corporation has focused on controlling
salaries and benefit expense while raising the level of assets
managed by its employees. Due to improvements in technology and
other efficiencies, the Corporation has reduced full-time
equivalent employees to 266 at March 31, 1995, compared to 270
full-time equivalent employees at December 31, 1994.
Depreciation expense for the first quarter of 1995 totaled
$563,000 compared to $553,000 last year, reflecting the
scheduled depreciation of assets acquired during the
construction of a $5 million addition to the downtown Marietta
banking facility in 1993 and the significant investment in
technology in 1994. The Corporation and its subsidiaries will
continue to focus on opportunities for operational efficiencies.
Income tax expense for the first quarter of 1995 reached
$651,000, compared to $578,000 for the same period last year.
This increase can be attributed to higher pre-tax income and the
Corporation's decrease in tax-exempt income from $392,000 in
first quarter 1994 to $359,000 this year.
Several ratios reflect the strong first quarter performance of
the Corporation. Return on average assets for the first quarter
of 1995 reached 1.18%, a rise of six basis points from 1994's
first quarter. Return on average stockholders' equity increased
from 12.10% to 12.78%. The net unrealized holding gain on
available-for-sale securities, net of deferred taxes, was
$189,000 at March 31, 1995, an increase of $1,219,000 since
December 31, 1994, reflecting a solid increase in the fair value
of these securities.
On March 16, 1995, the Board of Directors of the Corporation
authorized the additional purchase of up to $250,000 of treasury
stock at prices not to exceed $23.25. In the first quarter, the
Corporation purchased 10,930 treasury shares for $254,000. From
January 1 to May 1, 1995, 15,530 treasury shares had been
purchased for $361,000.
On April 1, 1995, the Corporation paid a quarterly dividend of
$0.16 per share, an increase of 6.7% compared to 1994's fourth
quarter per share dividend of $0.15. Total cash dividends
declared were $463,000 at March 31, 1995, compared to $406,000
for the same period last year.
The performance of the Corporation through March 31, 1995 has
slightly exceeded expectations. The interest rate environment
will play an important role in the future earnings of the entire
financial services industry and pressures on net interest income
and margin are expected to intensify throughout 1995. The first
quarter experience of the Corporation reflects aggressive
pricing of funding products, such as certificates of deposit, to
reflect the changing interest rate environment and more
competitive market for customer deposits. Successful management
of the effect of these increased interest rates will be vital to
the overall performance of the Corporation in 1995 and beyond.
While past results are not an indication of future earnings,
management feels the Corporation is positioned to maintain
performance through the remainder of 1995 and into next year.
FINANCIAL CONDITION
Total assets increased from $498,006,000 at December 31, 1994
to $516,962,000 at March 31, 1995, a growth rate of 3.8%. Cash
and cash equivalents reached $32,321,000 by the end of the first
quarter, an increase of $7,620,000 since year-end 1994.
Management feels the liquidity of the Corporation is satisfied
by the increased balance of cash and cash equivalents, readily
available access to non-traditional funding sources, and the
portion of the investment and loan portfolios that mature within
one year. These sources of liquid funds should enable the
Corporation to meet cash obligations and off-balance sheet
commitments as they come due.
The most significant area of asset growth during the first
quarter occurred in securities, which grew 8.7% to $108,022,000.
Securities classified as held-to-maturity totaled $10,229,000
at March 31, compared to $9,247,000 at December 31, 1994.
Available-for-sale securities totaled $97,793,000 at March 31,
1995, an increase of $7,621,000 since year-end. The fair values
of these securities also grew as the available-for-sale balance
was increased by $287,000 at March 31, 1995, compared to
December 31, 1994's unrealized losses of $1,611,000. This
change in position is a result of more favorable interest rates
in various investment markets as well as actions by the
Corporation taken during the fourth quarter of 1994, when
Peoples Bancorp repositioned its investment portfolio to take
advantage of other investment opportunities.
Continuing a trend that occurred throughout 1994, total loan
balances grew to meet the expanding needs of the markets served
by the Corporation. Total loans net of unearned interest at
March 31, 1995 increased nearly $4 million in the first three
months of 1995 to $365,304,000, reflecting the Corporation's
commitment to reinvesting in the communities and markets it
serves. The Corporation's loan officers consistently monitor
the well-diversified portfolio while maintaining high
underwriting standards. Non-performing assets as a percentage
of total assets were 0.35% at March 31, 1995, compared to 0.42%
at December 31, 1994. Non-accrual loans decreased from $902,000
at year-end to $581,000 at March 31, 1995.
On January 1, 1995, the Corporation adopted Statement on
Financial Accounting Standards No. 114, "Accounting by Creditors
for Impairment of a Loan" (SFAS No. 114), which establishes new
rules for all creditors when accounting for the impairment of
certain loans. SFAS No. 114 requires that certain impaired
loans be measured based on the present value of expected future
cash flows, discounted at the effective interest rate of the
loan, or, as a practical expedient, the loan may be valued at
the fair value of the collateral if the loan is collateral
dependent. SFAS No. 114 does not apply to large groups of
smaller-balance homogeneous loans, such as mortgage and consumer
loans, which are evaluated collectively for impairment. Because
over 86% of the Corporation's loan portfolio is comprised of
these types of homogeneous loans, adoption of SFAS No. 114 was
not material to the Corporation's financial statements. The
Corporation will continue to monitor the status of any impaired
loans, as well as performing loans, in order to determine the
appropriate reserve for potential loan loss. Management
considers the allowance for loan loss of 1.85% of total loans at
March 31, 1995 to be adequate.
Asset growth during the first quarter was funded primarily
through the expanded deposit base of the Corporation. Total
deposits grew over $24 million to $427,896,000. The majority of
growth was experienced in interest bearing deposit products,
where balances increased 7.3% to $381,839,000. Total
certificates of deposits and Individual Retirement Accounts
(IRA's) increased 13.7% to over $214 million at the end of the
first quarter. This balance includes $10 million in brokered
certificates of deposit. The Corporation experienced a change
in the mix of its deposit base, as many customers found the
higher interest rates offered for certificates of deposits to be
favorable. Customers shifted their deposits from non-interest
bearing deposits and lower interest bearing deposits (such as
saving deposits) to higher interest bearing deposits. As a
result, non-interest deposits experienced a 4.3% decline to
$46,057,000 at March 31, 1995.
At March 31, 1995, the Corporation's loan to deposit ratio was
85.37%, down from December 31, 1994's ratio of 89.48%. Although
loan demand continued to grow, this ratio decreased due to the
significant increase in deposits experienced by the Corporation
during the first quarter. In addition to traditional deposits,
the Corporation continues to use borrowings from the Federal
Home Loan Bank (FHLB), which allows Peoples Bancorp to obtain
funds at fixed and indexed rates for longer periods of time than
other traditional deposit products, creating the opportunity to
match longer term fixed rate mortgages and other
extended-maturity asset commitments against a long term funding
source. Long term advances from the FHLB at March 31, 1995,
totaled $21,261,000, a 3.2% decrease from December 31, 1994.
Management plans to maintain access to FHLB borrowings as an
appropriate funding source.
The Corporation's Asset/Liability Management (ALM) Committee
meets monthly to address liquidity issues, including the
management of the investment securities portfolio. The group
also monitors net interest income, sets pricing guidelines, and
manages interest rate risk for the Corporation. Through this
ALM Committee, the Corporation maintains sufficient liquidity to
satisfy depositor requirements and the various credit needs of
its customers.
The Corporation's capital continues to provide a strong base
for profitable growth. Stockholders' equity reached $47,657,000
at March 31, 1995, a 4.4% increase in the first quarter. The
primary reason for the increase in stockholders' equity during
the first quarter was the adjustment for net unrealized holding
gain on available-for-sale securities, net of deferred taxes,
which totaled $189,000. The fair value of available-for-sale
securities increased during the first three months of 1995,
providing the $1,219,000 rise in equity from December 31, 1994
to March 31, 1995. Since the majority of securities in the
Corporation's portfolio are classified as available-for-sale,
both the investment and equity sections of the Corporation's
balance sheet are more sensitive to the changing fair values of
investments, as experienced in the first quarter of 1995.
Management feels the status of the investment markets do not
substantially affect the Corporation's equity, as it continues
to provide a strong base for diversity of operations as well as
potential for growth in both new and existing markets.
The Corporation has complied with the standards of capital
adequacy mandated by the banking industry. Bank regulators have
established "risk-based" capital requirements designed to
measure capital adequacy. Risk-based capital ratios reflect the
relative risks of various assets banks hold in their portfolios.
A weight category of either 0% (lowest risk assets), 20%, 50%,
or 100% (highest risk assets) is assigned to each asset on the
balance sheet. The Corporation's risk-based capital ratio of
14.38% at March 31, 1995 was well above the minimum standard of
8%. The Corporation's Tier 1 capital ratio of 13.13% also
exceeded the regulatory minimum of 4%. The Leverage ratio at
March 31, 1995 was 9.00%, well above the minimum standard of
3%. All of these ratios have improved slightly since December
31, 1994. These ratios provide quantitative data demonstrating
the strength of the Corporation's capital base.
PART II
ITEM 1: Legal Proceedings.
None.
ITEM 2: Changes in Securities.
None.
ITEM 3: Defaults upon Senior Securities.
None.
ITEM 4: Submission of Matters to a Vote of Security Holders.
On April 4, 1995, the Peoples Bancorp Inc. Annual Meeting of
Stockholders was held in The Peoples Banking and Trust Company
Conference Room in Marietta, Ohio. The meeting was
well-attended and over 85% of the outstanding shares were
represented by proxy. No votes were placed in person. For
detailed information concerning the proposed items for business
at the Peoples Bancorp 1995 Annual Meeting, please refer to the
Proxy Statement filed on the Corporation's behalf on Form 10-K
for the year ended December 31, 1994. All items of business on
the agenda were approved by the shareholders and the results are
as follows:
1) Three Peoples Bancorp Directors were re-elected to serve
terms of three years each (expiring in 1998): Robert E. Evans,
Paul T. Theisen, and Thomas C. Vadakin.
2) The Peoples Bancorp Inc. 1995 Stock Option Plan (the "Plan")
was approved by the shareholders. The adoption of the Plan
made available an additional 100,000 common shares available
for issuance.
SHAREHOLDER VOTING RESULTS
==========================
ISSUE FOR WITHHELD AGAINST ABSTAIN
------------------ --------- -------- ------- -------
Robert E. Evans 2,472,344 0 996 0
Paul T. Theisen 2,472,506 0 834 0
Thomas C. Vadakin 2,471,599 0 1,741 0
Peoples Bancorp
Inc. 1995 Stock
Option Plan 2,365,627 0 88,848 18,865
ITEM 5: Other Information.
None.
ITEM 6: Exhibits and Reports of Form 8-K.
Exhibit 11 - Statement regarding computation of Earnings Per Share.
(b) Reports on Form 8-K filed April 11, 1995.
Change in certifying accountants.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunder duly authorized.
PEOPLES BANCORP INC.
Date: May 12, 1995 By: /s/ ROBERT E. EVANS
Robert E. Evans
President and Chief Executive Officer
Date: May 12, 1995 By: /s/ JEFFREY D. WELCH
Jeffrey D. Welch
Treasurer