FORM 10-Q
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ____ to ____
Commission file number 0-16772
PEOPLES BANCORP INC.
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(Exact name of Registrant as specified in its charter)
Ohio 31-0987416
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
138 Putnam Street, P. O. Box 738, Marietta, Ohio 45750
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (614) 373-3155
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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
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Indicate the number of shares outstanding of each of the
issuer's class of Common Stock, as of November 2, 1996: 3,443,465.
PART I - FINANCIAL INFORMATION
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ITEM 1
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The following Condensed Consolidated Balance Sheets,
Consolidated Statements of Income, and Consolidated Statements
of Cash Flow of Peoples Bancorp Inc. (the "Company") and
subsidiaries, reflect all adjustments (which include 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 nine months
ended September 30, 1996, are not necessarily indicative of the
results that may be expected for the year ending December 31,
1996. Complete audited consolidated financial statements with
footnotes thereto are included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1995.
The consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries. Significant
intercompany accounts and transactions have been eliminated.
PEOPLES BANCORP INC. AND SUBSIDIARIES
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CONDENSED CONSOLIDATED BALANCE SHEETS
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September 30, December 31,
1996 1995
ASSETS
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Cash and cash equivalents:
Cash and due from banks $ 27,315,000 $ 17,251,000
Interest-bearing deposits in other banks 193,000 243,000
Federal funds sold 0 3,500,000
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Total cash and cash equivalents 27,508,000 20,994,000
Investment securities (all classified as
available-for-sale, amortized cost of
$153,102,000 at September 30, 1996 and
$128,021,000 at December 31, 1995) 153,709,000 131,762,000
Loans, net of unearned interest 417,072,000 379,526,000
Allowance for loan losses (6,906,000) (6,726,000)
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Net loans 410,166,000 372,800,000
Bank premises and equipment, net 11,132,000 10,575,000
Other assets 14,726,000 7,299,000
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Total assets $617,241,000 $543,430,000
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Deposits:
Non-interest bearing $ 59,374,000 $ 50,067,000
Interest bearing 447,429,000 379,010,000
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Total deposits 506,803,000 429,077,000
Short-term borrowings:
Federal funds purchased and securities
sold under repurchase agreements 14,978,000 12,060,000
Federal Home Loan Bank term advances 3,500,000 21,216,000
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Total short-term borrowings 18,478,000 33,276,000
Long-term borrowings 31,455,000 23,142,000
Accrued expenses and other liabilities 6,797,000 6,461,000
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Total liabilities 563,533,000 491,956,000
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Stockholders' Equity
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Common stock, no par value, 12,000,000
shares authorized - 3,438,934 shares
issued at September 30, 1996 and 3,332,598
issued at December 31, 1995, including
shares in treasury 34,263,000 30,898,000
Net unrealized holding gain on
available-for-sale securities, net of
deferred income taxes 401,000 2,469,000
Retained earnings 19,088,000 21,786,000
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53,752,000 55,153,000
Treasury stock, at cost,
2,000 shares at September 30, 1996
and 220,406 shares at December 31, 1995 (44,000) (3,679,000)
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Total stockholders' equity 53,708,000 51,474,000
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Total liabilities and
stockholders' equity $617,241,000 $543,430,000
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PEOPLES BANCORP INC. AND SUBSIDIARIES
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME
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Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
Interest income $12,155,000 $11,086,000 $35,365,000 $31,965,000
Interest expense 5,539,000 5,476,000 16,322,000 15,320,000
----------- ----------- ----------- -----------
Net interest income 6,616,000 5,610,000 19,043,000 16,645,000
Provision for loan losses 585,000 360,000 1,380,000 955,000
----------- ----------- ----------- -----------
Net interest income
after provision for
loan losses 6,031,000 5,250,000 17,663,000 15,690,000
Other income 1,195,000 1,103,000 3,459,000 3,137,000
Gain on sale of securities 0 17,000 26,000 17,000
Other expenses 4,578,000 4,038,000 12,890,000 12,187,000
----------- ----------- ----------- -----------
Income before income
taxes 2,648,000 2,332,000 8,258,000 6,657,000
Federal income taxes 818,000 722,000 2,576,000 2,027,000
----------- ----------- ----------- -----------
Net income $ 1,830,000 $ 1,610,000 $ 5,682,000 $ 4,630,000
=========== =========== =========== ===========
Earnings per share $0.53 $0.46 $1.64 $1.32
----------- ----------- ----------- -----------
Weighted average shares
outstanding (primary) 3,430,840 3,489,575 3,469,541 3,504,282
----------- ----------- ----------- -----------
Cash dividends declared $593,000 $488,000 $1,654,000 $1,413,000
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Cash dividend per share $0.17 $0.14 $0.48 $0.41
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PEOPLES BANCORP INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF CASH FLOWS
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Nine Months Ended
September 30,
1996 1995
Cash flows from operating activities:
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Net income $ 5,682,000 $ 4,630,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 1,380,000 955,000
Gain on sale of investment securities (26,000) (17,000)
Depreciation, amortization, and accretion 2,241,000 1,145,000
(Increase) decrease in interest receivable (228,000) 711,000
Increase in interest payable 406,000 80,000
Deferred income tax benefit (140,000) (75,000)
Deferral of loan origination fees and costs 123,000 (37,000)
Other, net (1,139,000) (597,000)
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Net cash provided by operating activities 8,299,000 6,795,000
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Cash flows from investing activities:
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Purchases of available-for-sale securities (43,786,000) (48,633,000)
Purchases of held-to-maturity securities 0 (1,230,000)
Proceeds from sales of available-for-sale
securities 4,528,000 1,066,000
Proceeds from maturities of available-for-sale
securities 14,091,000 14,351,000
Proceeds from maturities of held-to-maturity
securities 0 651,000
Net increase in loans (38,869,000) (10,209,000)
Expenditures for premises and equipment (2,311,000) (716,000)
Proceeds from sales of other real estate owned 0 69,000
Acquisition of branches, net of cash received (5,354,000) 0
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Net cash used in investing activities (71,701,000) (44,651,000)
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Cash flows from financing activities:
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Net increase (decrease) in non-interest
bearing deposits 9,307,000 (1,216,000)
Net increase in interest-bearing deposits 68,419,000 38,800,000
Net (decrease) increase in short-term
borrowings (14,798,000) 11,886,000
Proceeds from long-term borrowings 10,500,000 0
Payments on long-term borrowings (2,187,000) (2,279,000)
Cash dividends paid (1,429,000) (1,252,000)
Purchase of treasury stock (278,000) (765,000)
Proceeds from issuance of common stock 382,000 110,000
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Net cash provided by financing activities 69,916,000 45,284,000
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Net increase in cash and cash equivalents 6,514,000 7,428,000
Cash and cash equivalents at beginning of period 20,994,000 24,701,000
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Cash and cash equivalents at end of period $27,508,000 $32,129,000
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NOTES TO FINANCIAL STATEMENTS
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BASIS OF PRESENTATION
The accounting and reporting policies of Peoples Bancorp Inc.
and Subsidiaries (the "Company") conform to generally accepted
accounting principles and to general practices within the
banking industry. The Company considers all of its principal
activities to be banking related. The preparation of the
financial statements in conformity with generally accepted
accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ
from those estimates.
The consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries. Significant
intercompany accounts and transactions have been eliminated.
1. ACQUISITIONS
On August 19, 1996, the Company announced the signing of a
definitive agreement with the Russell Federal Savings Bank (OTC
Bulletin Board: "RLSF"). In the proposed transaction, the
Company will acquire the Russell Federal Savings Bank ("Russell
Federal") for approximately $9.25 million in cash. The Company
plans to continue to operate Russell Federal as a federal
savings bank subsidiary with continuity of management, officers
and directors. The transaction is subject to the approval of
shareholders of Russell Federal and regulatory approval.
Russell Federal, with one full service office located in
Russell, Kentucky, had total assets of $28.5 million, deposits
of $19.8 million and shareholders' equity of $8.2 million at
June 30, 1996. The acquisition is expected to be completed in
the first quarter of 1997.
On April 26, 1996, The Peoples Banking and Trust Company
("Peoples Bank"), one of the Company's subsidiaries, acquired
three full-service banking offices and assumed approximately
$73.9 million in deposits from an unaffiliated institution
(referred hereafter as "Acquisition") for a total cash
consideration of $5.4 million.
The offices are located in southeastern Ohio in the cities of
Gallipolis, Pomeroy, and Rutland, Ohio, and serve the counties
of Meigs (Ohio), Gallia (Ohio) and Mason (West Virginia). The
Gallipolis office is located downtown in Gallipolis and
currently operates a full-service office, Motor Bank, and an
automated teller machine. A full-service office and separate
Motor Bank are located in downtown Pomeroy. An automated teller
machine is also located in Pomeroy outside a local convenience
store. The Rutland office is a full-service and Motor Bank facility.
2. STOCK DIVIDEND
On August 1, 1996, the Company issued a 10% stock dividend to
shareholders of record on July 15, 1996. All references to per
share amounts included in the consolidated financial statements
have been adjusted to reflect this stock dividend.
3. NEW ACCOUNTING PRONOUNCEMENTS
In June 1996, the Financial Accounting Standards Board
("FASB") issued Statement on Financial Accounting Standards No. 125,
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities" ("SFAS No. 125") that provides
accounting and reporting standards for transfers of financial
assets and extinguishments of liabilities. SFAS No. 125 will
significantly change the accounting rules for determining
whether a transfer represents a sale and, if so, the calculation
of the gain or loss resulting from the sale. Management does
not expect SFAS No. 125 to have a material effect on the
Company's future financial statements.
On October 30, 1996, the FASB agreed to defer the effective
date for one year for the following transactions: securities
lending, repurchase agreements, dollar rolls, and other similar
secured transactions. In general, these are the transactions
addressed by SFAS No. 125 that apply specifically to the
Company's current operations but will not be effective for
transfers of assets until beginning after December 31, 1997.
In October 1995, the FASB approved SFAS No. 123, "Accounting
for Stock-Based Compensation". SFAS No. 123 defines a fair
value based method of accounting for an employee stock option or
similar equity instrument or allows an entity to continue to
measure compensation cost for those plans using the intrinsic
value based method prescribed by APB Opinion No. 25, "Accounting
for Stock Issued to Employees" ("Opinion No. 25"). SFAS No. 123
is effective for transactions entered into in fiscal years that
begin after December 15, 1995.
As permitted by SFAS No. 123, the Company will continue to
account for stock-based compensation under Opinion No. 25, and
accordingly, will disclose in the future pro forma net income
and earnings per share as if the fair value based method of
accounting, as defined in SFAS No. 123, had been applied.
ITEM 2
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
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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.
For the Three For the Nine
Months Ended Months Ended
September 30, September 30,
1996 1995 1996 1995
SIGNIFICANT RATIOS
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Net income to:
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Average assets* 1.21% 1.20% 1.29% 1.18%
Average shareholders' equity* 13.84% 12.85% 14.49% 12.75%
Net interest margin* 4.88% 4.64% 4.81% 4.73%
Efficiency ratio* 54.23% 61.84% 54.04% 60.85%
Average shareholders' equity to
average assets 8.74% 9.31% 8.93% 9.29%
Loans net of unearned interest to
deposits (end of period) 82.29% 83.88% 82.29% 83.88%
Allowance for loan losses to loans
net of unearned interest (end
of period) 1.66% 1.83% 1.66% 1.83%
Capital ratios:
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Tier I capital ratio 11.27% 12.88% 11.27% 12.88%
Risk-based capital ratio 12.52% 14.13% 12.52% 14.13%
Leverage ratio 7.80% 8.75% 7.80% 8.75%
Cash dividends to net income 32.40% 30.31% 29.11% 30.52%
PER SHARE DATA
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Book value per share $15.62 $14.56 $15.62 $14.56
Earnings per share $ 0.53 $ 0.46 $ 1.64 $ 1.32
Cash dividends per share $ 0.17 $ 0.14 $ 0.48 $ 0.41
* Net income to average assets, net income to average
shareholders' equity, net interest margin, and efficiency ratio
are presented on an annualized basis.
Net interest margin is calculated using fully tax equivalent net
interest income as a percentage of average earning assets.
Efficiency ratio is a ratio of non-interest expense (less
amortization of intangibles) as a percentage of fully tax
equivalent net interest income plus non-interest income
(excluding gains). Non-recurring tiems are excluded from this
calculation.
RESULTS OF OPERATIONS
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Overview of the Income Statement
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For the nine months ended September 30, 1996, the Company
earned $5,682,000 in net income, a 22.7% increase from
$4,630,000 in the same period last year. For the quarter ended
September 30, 1996, the Company recorded net income of
$1,830,000, a 13.7% increase from $1,610,000 in third quarter
1995. In the third quarter, earnings per share increased 15.2%
from $0.46 last year to $0.53 in 1996. All references to per
share amounts have been adjusted to reflect a 10% stock dividend
issued to shareholders of record on July 15, 1996.
Net income increased in the third quarter for several reasons.
Net interest income totaled $6,616,000, up $1,006,000 (or 17.9%)
compared to last year. The increase is due primarily to growth
in the Company's earning asset base and enhanced net interest
margin. Third quarter provision for loan losses reached
$585,000 compared to $360,000 in 1995's third quarter, in
response to loan growth.
Non-interest income increased $92,000 (or 8.3%) to $1,195,000.
Non-interest expense totaled $4,578,000, up $540,000 (or 13.4%)
from last year. Included in third quarter non-interest expense
is an estimated non-recurring expense of $42,000 (pre-tax)
related to the special BIF-SAIF bill passed into law on
September 30, 1996 (due to the "Oakar" deposits held by the
Company). Also, 1995 third quarter non-interest expense was
reduced by $260,000, due to the Company's receipt of a refund of
$260,000 from previously paid insurance premiums to the Bank
Insurance Fund ("BIF").
Interest Income and Expense
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Interest rates in 1996 have modestly fluctuated. Long-term
interest rates have increased approximately 1% while short-term
interest rates have remained relatively stable. The Company's
interest earning assets and interest-bearing liabilities were
positioned to generate strong third quarter net interest income
streams.
As a result, net interest income continued its 1996 growth in
the third quarter, reaching $6,616,000 compared to $5,610,000
last year, up $1,006,000 or 17.9%. Continued growth in
higher-yielding assets such as loans provided increased interest
income, while the Acquisition provided a lower cost of funds
compared to the borrowings recently utilized by the Company.
For the nine months ended September 30, 1996, net interest
income totaled $19,043,000, up $2,398,000 (or 14.4%) compared to
the same period one year earlier.
Due to the investment in higher-yielding assets, net interest
margin on a fully-tax equivalent basis reached 4.88% in third
quarter 1996, up from 4.64% in third quarter 1995. Increased
balances in higher-yielding assets such as loans have caused net
interest margin to increase throughout 1996. Opportunities to
satisfy loan demand continue in many of the markets the Company
serves, and as a result, management expects to continue to
aggressively offer special time deposit prices over the next
several months to fund the growth in loans. As a result,
management anticipates net interest margin will remain
relatively stable for the remainder of 1996. Management will
continue to monitor the effects of net interest margin on the
performance of the Company.
Please refer to the "Consolidated Average Balance Sheet and
Analysis of Net Interest Income" table included on page 18 for a
complete quantitative evaluation of the Company's net interest
margin.
Provision for Loan Losses
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In the third quarter, the Company recorded a provision for loan
losses of $585,000, up from $360,000 in third quarter 1995.
Increased loan volume and continued high volume in consumer loan
delinquencies prompted the increase in the provision for loan
losses in the third quarter. Management intends to continue the
current provision for loan losses through the remainder of 1996
and into early next year. Additional provisions will be
considered if delinquencies increase.
Over the past several years, the Company has been very active
in indirect lending. At September 30, 1996, indirect loans
comprised approximately 16.8% of the Company's total loan
portfolio. Due to unsatisfactory results, management has taken
initiatives to refocus the indirect lending goals of the
Company, including tighter underwriting standards and more
aggressive collection of past due accounts. Management will
continue to monitor the entire loan portfolio to maintain loan
quality and high underwriting standards.
Non-Interest Income
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Several categories of non-interest income reflect increases
compared to 1995. Income generated from fiduciary activities
increased $80,000 (or 6.1%) to $1,390,000, due primarily to
increased volume of assets managed by the Investment and Trust
Division of Peoples Bank. Third quarter fiduciary fee income
totaled $449,000. The Investment and Trust Division of Peoples
Bank manages over $410 million in assets (market value) and
continues to be a leader in fiduciary services for the Company's
market area.
Deposit account service charge income has also increased in
1996. The Company's fee income generated from deposits is based
on cost recoveries associated with services provided. In the
third quarter, account service charge income reached $520,000,
up $128,000 (or 32.7%) over last year's third quarter. For the
nine months ended September 30, 1996, account service charge
income totaled $1,396,000, an increase of $231,000 (or 19.8%)
over 1995. These increases in fee income were based primarily
on the growth in number of customers and related deposit
accounts assumed in the Acquisition. Revenues were also
enhanced through an increase in certain fees effective in early
1996.
In late 1995, First National Bank's subsidiaries, Northwest
Territory Life Insurance Agency, Inc. and Northwest Territory
Property and Casualty Insurance Agency, Inc. (the "Agencies"),
were awarded insurance agency powers in the State of Ohio. The
Agencies received Certificates of Qualification to provide full
life and property insurance product lines to consumers in Ohio.
These Agencies were the first in Ohio to be affiliated with a
financial institution. Although the Agencies' results of
operations did not have a material impact on results of third
quarter or year-to-date operations, they are anticipated to
produce income growth and long-term value to the Company through
internal development as well as external affiliation and
acquisition. Currently the Agencies are generating fee income
on sales of annuities, mutual funds, and other similar
investment products, as well as life insurance policies.
Management intends to develop the Agencies' property and
casualty insurance product lines through both internal
development and acquisition of existing independent agencies.
In addition to traditional deposit products generating
non-interest income for the Company, an agreement with an
unaffiliated securities dealer has also generated non-interest
income through the receipt of lease payments. Management
expects this non-traditional revenue source to continue to
provide incremental earnings for the Company in the future.
Non-Interest Expense
- --------------------
Maintaining acceptable levels of non-interest expense is vital
to the Company's operating performance. For the nine months
ended September 30, 1996, non-interest expense was $12,890,000,
an increase of $703,000 (or 5.8%) compared to the same period
last year. In 1996's third quarter, non-interest expense
totaled $4,578,000, up $540,000 (or 13.4%) compared to the same
period a year earlier.
When comparing 1996 to 1995, several non-operational items
contributed to the increase in third quarter non-interest
expense. Amortization of intangibles totaled $211,000 in third
quarter 1996, compared to $53,000 in 1995, an increase of
$158,000. This increased expense can be attributed directly to
the amortization of intangibles associated with the Acquisition.
Also in last year's third quarter, non-interest expense was
reduced by the Company's receipt of a refund of $260,000 from
previously paid insurance premiums to the Bank Insurance Fund
("BIF"). BIF expense is the annual premium financial
institutions pay for deposit insurance. In addition, BIF
premiums were substantially lower in the fourth quarter of 1995
and for the first three quarters of 1996, improving the
Company's efficiency ratios.
Recently legislators have been under pressure to combine the
BIF and the Savings Association Insurance Fund ("SAIF"), the
fund established to insure the deposits of thrift institutions.
On September 30, 1996, legislation was passed to recapitalize
the SAIF fund, which affects the Company due to small balances
of "Oakar" deposits held at Peoples Bank. As mandated by the
regulations to recapitalize the SAIF fund, the Company
recognized an expense of $42,000 in the third quarter as an
accrual for the special one-time assessment to be paid in fourth
quarter 1996.
The legislation also mandated future assessments for insurance
premiums. In years 1997 to 1999, the Company must pay an annual
rate of 1.29 cents for every $100 of domestic deposits. In
addition, the Company will also pay 6.44 basis points annually
for its balance of "Oakar" deposits. For the years 2000 to
2017, both banks and thrifts will pay 2.43 basis points.
Although future expense to insure the Company's deposit base
will increase, management does not expect the BIF-SAIF
combination to have a material impact on the Company's future
results of operations.
For the quarter ended September 30, 1996, salaries and benefits
expense decreased $63,000 (or 3.2%) to $1,924,000 compared to
last year's third quarter. On a year-to-date basis, salaries
and benefits expense total $5,544,000, down $60,000 (or 1.1%)
compared to 1995. At September 30, 1996, the Company had 289
full-time equivalent employees, up from 272 employees (an
increase of 6%) one year ago. Twenty-one associates retired in
the fourth quarter 1995 early retirement plan, while in 1996
several employees were added in the Acquisition. Management
will continue to strive to find new ways of increasing
efficiencies.
Depreciation expense for the quarter ended September 30, 1996,
totaled $365,000, up $34,000 (or 10.3%) from last year's third
quarter. This increase can be attributed primarily to the
depreciation of the assets purchased in the Acquisition as well
as increased depreciation of additional computer technology
acquired in 1996.
Return on Assets
- ----------------
For the quarter ended September 30, 1996, return on average
assets ("ROA") totaled 1.21%, up from 1.20% in the same period a
year earlier. For the nine months ended September 30, 1996, ROA
reached 1.29% compared to 1.18% in 1995.
Increased ROA can be attributed to improved net interest
margin. Management anticipates that ROA levels will remain
relatively steady for the remainder of 1996.
Return on Equity
- ----------------
Management believes return on average stockholders' equity
("ROE") is an important indicator of an organization's financial
strength and continues to monitor the performance of the Company
relative to this ratio. The Company's ROE in the third quarter
was 13.84%, compared to 12.85% for the same period last year.
On a year-to-date basis, ROE was 14.49% in 1996 compared to
12.75% in 1995.
This increase in ROE compared to 1995 can be attributed
primarily to increased net income as well as a reduction in
total equity due to the adjustment in the net unrealized holding
gain, net of deferred income taxes, on available-for-sale
securities. The adjustment of equity related to the net
unrealized holding gain on investment securities decreased from
$2,469,000 at year-end 1995 to $401,000 at September 30, 1996.
This decrease is the result of an increase in long-term interest
rates since December 31, 1995. Total equity was also reduced in
1995 through the Company's significant purchases of treasury
shares.
Management will emphasize improvement in ROE through the
remainder of 1996 and into 1997. The Acquisition and its $73.9
million in deposits provided increased revenue potential without
increasing stockholder's equity. The Company's capital is
adequate under regulatory and industry standards.
The Company is currently authorized to purchase treasury shares
at market price. The newly purchased treasury shares will be
used in the Company's stock option programs.
Federal Income Tax Expense
- --------------------------
Federal income taxes increased from $722,000 in third quarter
1995 to $818,000 in 1996. For the nine months ended September
30, 1996, federal income taxes totaled $2,576,000, an increase
of $549,000 (or 27.1%) compared to the same period a year
earlier. This increase can be attributed to the Company's
higher pre-tax income and a modest decrease in tax-exempt
income. The Company's effective tax rate remained at
approximately 31%.
FINANCIAL CONDITION
- -------------------
Overview of Balance Sheet
- -------------------------
Total assets increased from $543,430,000 at December 31, 1995
to $617,241,000 at September 30, 1996, a growth rate of 13.6%.
The increase in assets can be attributed primarily to the
assumption of approximately $74 million in deposits related to
the second quarter Acquisition. The Company invested the
Acquisition funds in two primary categories: investment
securities, up $21,947,000 (or 16.7%) since year-end 1995, and
loans, which increased $37,546,000 (or 9.9%) in the same time
period. Total deposits increased $77,726,000 (or 18.1%) in the
nine months ended September 30, 1996, while total borrowings
decreased $6,485,000 (or 11.5%) to $49,933,000. For the nine
months ended September 30, stockholders' equity increased
$2,234,000 (or 4.3%) to $53,708,000.
Cash and Cash Equivalents
- -------------------------
Cash and cash equivalents totaled $27,508,000 at September 30,
1996, as increased loan activity caused cash equivalents such as
federal funds sold to decrease near the end of the third
quarter. Management believes the liquidity needs of the Company
are satisfied by the current balance of cash and cash
equivalents, readily available access to traditional and
non-traditional funding sources, and the portion of the
investment and loan portfolios that matures within one year.
These sources will enable the Company to meet funding
obligations and off-balance sheet commitments as they come due.
Investment Securities
- ---------------------
Significant asset growth in 1996 has occurred in investment
securities, which increased $21,947,000 (or 16.7%) to
$153,709,000 since year-end 1995. All of the Company's
investment securities are classified as available-for-sale.
As a result of the second quarter Acquisition (and its
associated deposits), management initiated a program designed to
increase investment in the securities portfolio. Since December
31, 1995, investments in US government agencies grew $25,198,000
to September 30, 1996's balance of $78,421,000. The additional
purchases of investment securities were designed to position the
portfolio for future earnings while maintaining adequate
liquidity.
Balances in other investment categories have remained
relatively unchanged in 1996. Since all of the Company's
investment securities are classified as available-for-sale, the
carrying value of the investments is more susceptible to market
fluctuations. At December 31, 1995, the Company had
appreciation of $2,469,000 on its investment portfolio, compared
to appreciation of $607,000 at September 30, 1996. Management
believes securities classified as available-for-sale provide
greater flexibility in meeting liquidity needs and other funding
obligations as they arise.
Management monitors the earnings performance and the
effectiveness of the liquidity of the investment portfolio on a
regular basis through Asset/Liability Committee ("ALCO")
meetings. The ALCO also monitors net interest income, sets
pricing guidelines, and manages interest rate risk for the
Company. Through active balance sheet management and analysis
of the investment securities portfolio, the Company maintains
sufficient liquidity to satisfy depositor requirements and the
various credit needs of its customers.
Loans
- -----
The Company's loan volume continues to grow and reflects the
additional credit opportunities in the markets served. The
Company's lending is primarily focused in the southeastern Ohio
and northern West Virginia markets, and consists principally of
retail lending, which includes single-family residential
mortgages and other consumer lending. Since 1993, the Company
has generated additional loans in central Ohio (Licking County)
through its loan production office. The Company's market area
grew in the second quarter through the Acquisition and at
September 30, 1996, nearly $8 million of new loans were
attributable to the offices purchased in the Acquisition.
Management expects the new markets to continue to provide future
loan growth.
The following table details total outstanding loans at the
specified dates:
September 30, December 31,
1996 1995
------------- ------------
Commercial, financial, and agricultural $128,286,000 $117,306,000
Real estate, construction 8,681,000 5,919,000
Real estate, mortgage 176,118,000 154,469,000
Consumer 103,987,000 101,832,000
------------- -------------
Total loans $417,072,000 $379,526,000
============= =============
In the third quarter, mortgage loan balances grew 7.3% from
$164,100,000 to $176,118,000. Significant growth occurred in 1
to 4 family residential loans. Also, real estate loan activity
continued to be strong in the third quarter due to the Company's
special home equity credit line ("Equiline") program, designed
to respond to the growing credit needs of the Company's markets
during the first half of 1996. The special program offered
5-year, fixed rate Equilines at competitive interest rates and
no loan closing costs.
As a direct result of the special program, the Company
increased Equiline balances to $14,585,000 at September 30,
1996, up $4,311,000 (or 42.0%) since year-end 1995. The program
reached its intended goals near the end of the second quarter
and, as expected, outstanding balances have increased in the
third quarter. Management is pleased with the response to the
special Equiline promotion and will continue to strive for
quality loan programs designed to meet the needs of the
Company's markets.
Commercial, financial, and agricultural loan activity also
increased in the third quarter of 1996. The respective
economies in the Company's markets have provided quality credit
opportunities, in particular, through the business production
office located in Licking County, Ohio. This office is designed
to meet the growing credit needs of central Ohio and had loans
totaling over $20 million at September 30, 1996. Management is
pleased with the performance and growth of this office and will
continue to focus on the enhancement and growth of the loan
portfolio while maintaining high underwriting standards.
Loan Concentration
- ------------------
The Company does not have a concentration of its loan portfolio
in any one industry. Real estate lending (both mortgage and
construction loans) continues to be the largest component of the
loan portfolio, representing $184,799,000 (or 44.3%) of total
loans, while commercial, financial, and agricultural loans
totaled $128,286,000 (or 30.8%). The Company's lending is
primarily focused in the local southeastern Ohio market and
consists principally of retail lending, which includes
single-family residential mortgages and other consumer loan
products. One of the Company's largest group of commercial
loans consists of automobile dealer floor plans, which totaled
$12,194,000 at September 30, 1996. It is the Company's policy
to obtain the underlying inventory as collateral on these loans.
The Company does not extend credit to any single borrower in
excess of the combined legal lending limits of its subsidiary
banks.
Allowance for Loan Losses
- -------------------------
The allowance for loan losses as a percentage of loans modestly
decreased from 1.69% at June 30, 1996, to 1.66% at September 30,
1996. The total dollar amount of the reserve increased $183,000
while total loans grew over $18 million in the third quarter,
causing a decrease in the loan loss ratio as a percentage of
total loans. In the third quarter, the provision for loan
losses totaled $585,000, while gross chargeoffs were $569,000
and recoveries amounted to $167,000. The Company's provision
for loan losses has increased steadily through the first three
quarters of 1996 due to the combination of loan growth, loan
delinquencies, and chargeoff activity in the consumer loans
portfolio. Management expects the fourth quarter loan loss
provision to be comparable to third quarter's expense, due
mostly to anticipated loan growth.
Chargeoffs in the first three quarters of 1996 continue to
outpace 1995's first three quarters. Consumer credit problems
have recently increased credit concerns of the financial
services industry and the Company has experienced the majority
of its chargeoffs in the consumer loan portfolio. The following
table presents changes in the Company's allowance for loan
losses for the period ended September 30, 1996, and 1995,
respectively:
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
----------------------- -------------------------
Balance, beginning
of period $6,723,000 $6,681,000 $6,726,000 $6,783,000
Chargeoffs (569,000) (369,000) (1,578,000) (1,285,000)
Recoveries 167,000 109,000 378,000 328,000
---------- ---------- ---------- ----------
Net chargeoffs (402,000) (260,000) (1,200,000) (957,000)
Provision for
loan losses 585,000 360,000 1,380,000 955,000
---------- ---------- ---------- ----------
Balance, end of period $6,906,000 $6,781,000 $6,906,000 $6,781,000
========== ========== ========== ==========
Industry reports indicate outstanding consumer credit has been
on the rise, and consequently, consumer credit delinquencies
have increased. Unlike many other financial institutions, where
consumer credit problems have occurred in the credit card
segment, a significant portion of the Company's recent
chargeoffs have occurred in the consumer loan category and in
particular, indirect lending, which experienced increased loan
activity in prior years. In the third quarter, the Company had
gross chargeoffs in the consumer loan category of $555,000 and
recoveries of $153,000. Consumer loan delinquencies and
chargeoffs through the first nine months of 1996 were higher
than anticipated. Management expects consumer net chargeoffs to
stabilize in the near future.
Net chargeoffs in both the real estate and commercial loan
categories were lower than expected and demonstrate the quality
of these segments of the loan portfolio. Management will
continue to monitor the entire loan portfolio to determine the
adequacy of the allowance.
Nonperforming loans (those loans classified as nonaccrual, 90
days or more past due, and other real estate owned) as a
percentage of outstanding loans were 0.40% at September 30,
1996. Nonaccrual loans and those loans 90 days past due totaled
$644,000 and $1,008,000 at September 30, 1996, compared to
$482,000 and $1,236,000, respectively, at December 31, 1995.
Other real estate owned totaled $28,000 at September 30, 1996,
down from year-end 1995's amount of $45,000. Nonperforming
loans have decreased since year-end 1995 while total loans grew
as a result of increased loan activity. Management believes the
current nonperforming loan ratio is acceptable and reflects the
overall quality of the Company's loan portfolio.
At September 30, 1996, the recorded investment in loans that
were considered to be impaired under Statement of Financial
Accounting Standards No. 114, "Accounting by Creditors for
Impairment of a Loan" ("SFAS No. 114"), as amended by SFAS No.
118, was $3,076,000, all of which were accruing interest.
Included in this amount is $516,000 of impaired loans for which
the related allowance for loan losses is $263,000. The
remaining impaired loan balances of $2,560,000 do not have a
related allocation of the allowance for loan losses as a result
of write-downs, being well-secured, or possessing
characteristics demonstrating ability to repay the loan. The
average recorded investment in impaired loans during the nine
months ended September 30, 1996, was approximately $2,250,000.
For the nine months ended September 30, 1996, the Company
recognized interest income on impaired loans of approximately
$93,000.
The Company will continue to monitor the status of impaired
loans, as well as performing loans, in order to determine the
appropriate level of the allowance for loan losses. Management
believes the allowance for loan losses of 1.66% of total loans
at September 30, 1996, to be adequate to absorb inherent losses
in the portfolio.
Funding Sources
- ---------------
The Company considers deposits, short-term borrowings, and term
debt when evaluating funding sources. Traditional deposits
continue to be the most significant source of funds for the
Company, reaching $506,803,000 at September 30, 1996, a
quarterly increase of 2.6% and growth of 15.2% since year-end
1995. Deposit growth in 1996 occurred primarily through the
Acquisition.
Growth occurred in all major categories of traditional deposits
in 1996's third quarter. Quarterly growth in average interest
bearing deposits totaled $14,012,000 (or 3.3%) rising to an
average of $438,456,000 for the third quarter. Average time
deposits in the third quarter totaled $241,540,000, up
$7,255,000 (or 3.1%) over the prior quarter 's average.
Compared to second quarter 1996, average non-interest bearing
deposit account balances increased $1,767,000 (or 3.2%) to
$56,500,0000, representing management's focus on increasing
non-interest bearing balances. Management feels the deposit
base remains the most significant funding source for the Company
and will continue to concentrate on deposit growth and
maintaining adequate net interest margin to meet the Company's
strategic goals.
After utilizing short-term borrowings in early 1996 in
anticipation of the Acquisition, the Company has decreased total
short-term borrowings to below those at year-end 1995. At
September 30, 1996, the Company had $18,478,000 in total
short-term borrowings, down $4,136,000 since June 30, 1996. The
Company will continue to access short-term FHLB borrowings as
necessary.
Second quarter growth in deposits was achieved primarily
through external growth, specifically the Acquisition. Internal
growth occurred in the third quarter in all major deposit
categories, particularly certificates of deposit ("CD's"), which
totaled nearly $246 million at September 30, 1996, up 3.1% since
June 30, 1996. The Company continues to offer special CD's for
11-month and 27-month terms to remain competitive in its market
area. Management expects existing CD balances to remain level
or increase slightly through the remainder of 1996. In the
third quarter, the Company also replaced a matured $5 million
brokered CD with a combination of lower cost short-term and
long-term Federal Home Loan Bank ("FHLB") borrowings.
Management expects deposit balances to remain at current levels
for the remainder of 1996.
In addition to traditional deposits, the Company continues to
maintain long-term borrowings from the FHLB. This allows the
Company to obtain reliable 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 similar funding source. Total long-term FHLB advances were
$30,025,000 at September 30, 1996, a net increase of $9,947,000
since June 30, 1996 (new advances totaled $10.5 million and
scheduled principal paydowns were $553,000). Management plans
to maintain access to long-term FHLB borrowings as an
appropriate funding source.
Regarding the acquisition of the Russell Federal Savings Bank
("Russell Federal") in the first quarter of 1997, management
expects to primarily fund the purchase with internally generated
sources. The Company also has additional borrowing capacity
with the FHLB.
Capital/Stockholders' Equity
- ----------------------------
The Company's capital continues to provide a strong base for
profitable growth. Total stockholders' equity was $53,708,000
at September 30, 1996, compared to $51,474,000 at year-end 1995,
an increase of $2,234,000 (or 4.3%). Equity growth was tempered
in the first nine months of 1996 by the adjustment for the net
unrealized holding gain on available-for-sale securities, net of
deferred income taxes, which decreased $2,068,000 to a net gain
of $401,000 at September 30, 1996.
Since all of the investment securities in the Company's
portfolio are classified as available-for-sale, both the
investment and equity sections of the Company's balance sheet
are more sensitive to the changing market values of investments.
In the first nine months of 1996, interest rates modestly
increased, causing a corresponding decrease in the market value
of the investment portfolio.
In the first nine months of 1996, the Company earned
$5,682,000 and declared dividends of $1,654,000, a dividend
payout ratio of 29.11% of net income. In the third quarter, net
income and dividends declared totaled $1,830,000 and $593,000,
respectively, a dividend payout ratio of 32.40%. Management
feels this is an acceptable payout ratio for the Company and
anticipates similar payout ratios in future periods.
The Company has also 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 Company's risk-based capital ratio of 12.52%
at September 30, 1996 is well above the minimum standard of 8%.
The Company's Tier 1 capital ratio of 11.27% also exceeded the
regulatory minimum of 4%. The Leverage ratio at September 30,
1996 was 7.80% and also above the minimum standard of 3%. These
ratios provide quantitative data demonstrating the strength and
future opportunities for use of the Company's capital base.
Management continues to evaluate risk-based capital ratios and
the capital position of the Company as part of its strategic
decision process.
On August 1, 1996, the Company issued a 10% stock dividend to
shareholders of record at July 15, 1996. This marks the third
time in the last four years that the Company has issued a 10%
stock dividend. The Company also declared a two-for-one stock
split in 1994. The Company retired all treasury shares as part
of the issuance of the 10% stock dividend in August.
Subsequently, the Board of Directors of the Company authorized
the Company to purchase up to 10,000 additional treasury shares
at market prices for use in conjunction with employee benefit
plans. During the third quarter, the Company purchased 2,000 of
the treasury shares allowed under the Board of Director's
authorization.
Liquidity and Interest Rate Sensitivity
- ---------------------------------------
Liquidity measures an organization's ability to meet cash
obligations as they come due. The Consolidated Statement of
Cash Flows presented on page 5 of the accompanying financial
statements provide analysis of the Company's cash and cash
equivalents. Additionally, management considers that portion of
the loan portfolio that matures within one year and the
maturities within one year in the investment portfolio as part
of the Company's liquid assets. The Company's liquidity is
monitored by the ALCO, which establishes and monitors ranges of
acceptable liquidity. Management feels the Company's current
liquidity position is acceptable.
At September 30, 1996, the Company's interest rate sensitivity
position, based on static gap analysis, was liability sensitive
in the short-term and asset sensitive for periods longer than
one year. The Company's liability sensitivity has slightly
decreased since June 30, 1996. Management uses simulation
modeling and forecasting to determine the impact of a changing
interest rate environment. Management believes the Company's
current mix of assets and liabilities provides a reasonable
level of insulation to significant fluctuations in net interest
income and the resulting volatility of the Company's earnings
base.
In the long-term, the Company is in a moderately asset
sensitive position, which means if interest rates increase, the
Company's net interest income will increase over time. If
interest rates decline, net interest income will correspondingly
decrease. As expected, the Acquisition did not negatively
impact the Company's liquidity or interest rate sensitivity
positions. The Company's liquidity position has remained
relatively unchanged since year-end 1995. Management continues
to monitor the Company's interest rate sensitivity and liquidity
through the ALCO and uses this data to make appropriate
strategic decisions.
In the future, management intends to analyze interest rate risk
utilizing a complete risk management model. Currently interest
rate risk parameters are being reviewed for implementation in
early 1997. Management reviews interest rate risk in relation
to its effect on net interest income, net interest margin, and
the volatility of the earnings base of the Company.
Effects of Inflation on Financial Statements
- --------------------------------------------
Substantially all of the Company'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 in a replacement cost environment. 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 the
banking industry, typically monetary assets exceed monetary
liabilities. Therefore as prices have recently increased,
financial institutions experienced a decline in the purchasing
power of their net assets.
Future Outlook
- --------------
Third quarter results represent management's commitment to
improved financial performance. The consistent earnings record
has positioned the Company to achieve established goals and
enhance investor return. Management feels the current
combination of people and technology has positioned the Company
for future customer service challenges. The Company's workforce
is consistently challenged to identify and re-engineer critical
banking processes to provide the customer with the highest
quality products and services. Investments in technology
provide the opportunity to compete at higher levels than other
financial institutions of similar size.
The Acquisition of three full-service offices and associated
deposits provided increased funding sources and new markets for
the Company. As expected, the transition of combining the new
offices with existing offices went smoothly and customers in
these markets responded favorably to the change. Although
virtually no loans were assumed, the Acquisition markets have
produced nearly $8 million in new loans. In addition, the
Company has retained nearly all of the deposits purchased in the
Acquisition, one of the main strategic goals of the purchase.
Management looks forward to continuing the development of the
Acquisition markets and is confident the performance of the new
offices is an enhancement to the performance of the Company.
The final phase of an investment in a PC-based system for the
Company's customer service representatives ("CSR's") was
completed late in the third quarter. These technological
advances represent the Company's commitment to technology and
allows each CSR to be connected to the Company-wide electronic
network that provides a faster, more efficient method of serving
our customers. The system expands the integration of the
Company's financial information and enhances customer service
through readily available product information. Management
believes electronic communication is necessary to be a
competitive business, and through recent investments in
technology, the Company is prepared for an electronic
distribution system.
The Company's balance sheet growth continues to be a focus of
management. The Acquisition fueled the majority of balance
sheet growth in the first half of 1996 and contributed to
management's intent to add higher-yielding assets such as loans.
Loan growth in the third quarter represents the Company's
ability to serve both the Company's markets and selected
customers outside those traditional geographic markets. Third
quarter loan demand was highlighted by growth in all major
categories, including the origination of new construction loans
in the Company's markets through low-income housing projects in
southeastern Ohio. An expanded opportunity to provide loans for
construction of model homes outside of the Company's
geographical markets occurred in the third quarter and should
provide strong future revenue streams. Also, lending activity
in the Acquisition markets has been quite strong and should
continue to provide a source for quality loans. Management also
expects commercial loan activity to provide additional income
sources for the Company for the remainder of 1996. Management
is comfortable with the current loan to deposit ratio of 82.29%
and expects the loan to deposit ratio to increase slightly in
the future due to anticipated loan growth.
Consumer loan chargeoffs in the third quarter continued to
comprise the majority of the Company's recent chargeoffs, but
reflect a decline from second quarter 1996. In the third
quarter, total net chargeoffs were $402,000, down 11.6% compared
to prior quarter's total chargeoffs of $455,000. Consumer net
chargeoffs decreased 2.7% compared to prior quarter's consumer
net chargeoffs. Management believes consumer net chargeoffs
have stabilized. Delinquencies in other loans such as
commercial loans have increased modestly in the past quarter and
as a result, future net chargeoffs in this category may
increase. However, management feels the current allowance for
loan losses is adequate to cover potential chargeoffs as they
occur. Future provision for loan losses will remain at third
quarter levels for the near term and may be affected by the
delinquencies in all loan categories.
Enhanced non-interest income and controlled non-interest
expense are critical to the success of the Company and is
measured in the financial services industry by the efficiency
ratio, calculated according to the following: non-interest
expense (less goodwill amortization) as a percentage of fully
tax equivalent net interest income and non-interest income (less
any gains or non-recurring income). All non-recurring items are
removed from the efficiency ratio calculation. For the nine
months ended September 30, 1996, the Company's efficiency ratio
was 54.04%, compared to 60.85% for the same period last year.
Management analyzes salaries and benefits expense on a regular
basis to identify greater possible efficiencies and continues to
focus on its efficiency ratio as a method of enhancing
profitability and return on equity. Management will continue to
strive to increase future efficiencies through income growth and
leveraging of technology and existing delivery resources.
The interest rate environment will play an important role in
the future earnings of the Company. Management is pleased with
the improvement in net interest margin in the third quarter but
expects pressures on net interest income and margin to intensify
in the future. Management has implemented several pricing
strategies to generate new deposits and effectively retain the
new deposits assumed through the Acquisition, including offering
special 11-month and 27-month CD's. These special CD rates were
designed to price the Company's products at rates slightly
higher than the average comparable CD rates in the markets
served by the Company. These products have generated additional
funding sources for the Company as well as additional financial
service opportunities to customers.
Management will continue to evaluate a wide variety of
alternative methods as means of leveraging capital, enhancing
profitability, and increasing return to shareholders. Growth
strategies designed to add incremental net interest income
revenue streams are reviewed on a periodic basis. Similar
strategies were implemented in 1995 and have increased net
interest income in 1996.
Management continues to strive for both traditional and
non-traditional methods to increase the Company's earnings. In
the third quarter, Peoples Bank entered into an agreement to
fund a low-income housing project in a historic district of
Marietta, Ohio. As a part of the agreement, Peoples Bank agreed
to fund the construction of the project (expected to be
completed in mid-1997) and participate as an equity contributor
to the project. In general terms, the Company can anticipate
historic tax credits in 1997 once the structure is certified as
a historically rehabilitated building (estimated mid-1997 if
construction occurs as planned). In addition, low-income
housing tax credits can be expected over future periods. This
project will significantly lower the Company's effective tax
rate in 1997.
External acquisitions continue to play a major role in the
Company's strategic plans. In August, the Company announced the
execution of a definitive agreement with the Directors of
Russell Federal Savings Bank ("Russell Federal") to acquire all
of Russell Federal's outstanding shares for a cash consideration
of approximately $9.25 million. The Company plans to continue
to operate Russell Federal as a federal savings bank subsidiary
with continuity of management, officers and directors. Russell
Federal has over $28 million in assets and deposits exceeding
$20 million, and operates one full-service office in
northeastern Kentucky along the Ohio River.
The transaction is subject to the approval of shareholders of
Russell Federal and regulators and is expected to be completed
in early 1997. Russell Federal represents the first
thrift-chartered subsidiary of the Company. As a recently
converted mutual savings bank, Russell Federal has a substantial
capital base. The Company's management anticipates leveraging
this substantial capital base to increase Russell Federal's
earnings potential.
Russell Federal represents the Company's intention to continue
to expand its geographic customer service area in the Ohio
Valley. Future acquisitions, if they occur, may not be limited
to geographic location or proximity to current markets, rather
they will depend upon financial service opportunities that
strengthen the core competencies developed by the Company.
Management considers mergers and acquisitions to be a viable
method of enhancing the Company's earnings potential and will
continue to pursue appropriate business opportunities as they
develop.
Management concentrates on return on equity and earnings per
share objectives, plus other methods, to measure and direct the
performance of the Company. While past results are not an
indication of future earnings, management feels the Company is
positioned to maintain performance of normal operations through
the remainder of 1996 and into 1997.
"Safe Harbor" Statement under the Private Securities Litigation
Reform Act of 1995
- ---------------------------------------------------------------
The statements in this Form 10-Q which are not historical fact
are forward looking statements that involve risks and
uncertainties, including, but not limited to, the interest rate
environment, the effect of federal and state banking and tax
regulations, the effect of economic conditions, the impact of
competitive products and pricing, and other risks detailed in
the Company's Securities and Exchange Commission filings.
PEOPLES BANCORP INC. AND SUBSIDIARIES
- -------------------------------------
CONSOLIDATED AVERAGE BALANCE SHEET AND ANALYSIS OF NET INTEREST INCOME
- ----------------------------------------------------------------------
For the Three For the Nine
Months Ended Months Ended
September 30, September 30,
1996 1995 1996 1995
Average Yield/ Average Yield/ Average Yield/ Average Yield/
Balance Rate Balance Rate Balance Rate Balance Rate
<C. <C
ASSETS
- ------
Securities:
Taxable $131,156 6.82% $ 97,765 7.00% $127,866 6.76% $ 89,579 7.08%
Tax-exempt 22,514 8.49% 24,915 8.78% 22,747 8.46% 23,415 8.98%
-------- ------ -------- ------ -------- ------ -------- ------
Total 153,670 7.04% 122,680 7.35% 150,613 7.02% 112,994 7.47%
Loans:
Commercial 126,879 9.60% 110,330 9.65% 122,426 9.55% 113,403 9.50%
Real estate 178,202 8.35% 157,612 8.67% 168,553 8.47% 155,568 8.61%
Consumer 102,145 10.90% 97,970 10.71% 101,807 10.80% 96,061 10.38%
-------- ------ -------- ------ -------- ------ -------- ------
Total loans 407,226 9.38% 365,912 9.51% 392,785 9.41% 365,032 9.35%
Less: Allowance
for loan loss (6,726) (6,725) (6,726) (6,720)
-------- ------ -------- ------ -------- ------ -------- ------
Net loans 400,500 9.54% 359,187 9.69% 386,059 9.58% 358,312 9.53%
Interest-bearing
deposits 241 4.25% 1,452 5.75% 765 4.81% 1,286 5.78%
Federal funds sold 2,961 5.35% 20,179 5.82% 6,180 5.34% 14,289 5.93%
-------- ------ -------- ------ -------- ------ -------- ------
Total earning
assets 557,372 8.84% 503,498 8.96% 543,617 8.82% 486,881 8.94%
Other assets 47,583 35,987 41,946 35,362
-------- -------- -------- --------
Total assets $604,955 $539,485 $585,563 $522,243
======== ======== ======== ========
LIABILITIES AND EQUITY
- ----------------------
Interest-bearing
deposits:
Savings $ 78,869 3.03% $ 69,014 3.39% $ 75,526 3.03% $ 69,289 3.37%
Interest-bearing
demand deposits 118,047 3.25% 96,104 3.66% 109,097 3.29% 91,080 3.48%
Time 241,540 5.42% 229,014 5.88% 229,484 5.54% 222,731 5.74%
-------- ------ -------- ------ -------- ------ -------- ------
Total 438,456 4.41% 394,132 4.91% 414,107 4.49% 383,100 4.78%
Borrowed funds:
Short-term 19,184 4.25% 20,575 5.18% 33,499 4.97% 16,060 4.97%
Long-term 30,754 6.20% 22,016 6.04% 25,274 6.11% 22,746 6.09%
-------- ------ -------- ------ -------- ------ -------- ------
Total 49,938 5.45% 42,591 5.64% 58,773 5.46% 38,806 5.63%
-------- ------ -------- ------ -------- ------ -------- ------
Total interest
bearing
liabilities 488,394 4.51% 436,723 4.98% 472,880 4.61% 421,906 4.85%
Non-interest
bearing deposits 56,500 46,602 53,380 46,438
Other liabilities 7,185 6,039 7,012 5,484
-------- -------- -------- --------
Total liabilities 552,079 489,364 533,272 473,828
Stockholders' equity 52,876 50,121 52,291 48,415
-------- -------- -------- --------
Total liabilities
and equity $604,955 $539,485 $585,563 $522,243
======== ======== ======== ========
Interest income to
earning assets 8.84% 8.96% 8.82% 8.94%
Interest expense to
earning assets 3.96% 4.32% 4.01% 4.21%
-------- -------- -------- --------
Net interest margin 4.88% 4.64% 4.81% 4.73%
======== ======== ======== ========
Interest income and yields presented on a fully tax-equivalent basis
using a 34% tax rate.
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.
None.
ITEM 5: Other Information.
None.
ITEM 6: Exhibits and Reports on Form 8-K.
a) Exhibits:
EXHIBIT INDEX
Exhibit Number Description Exhibit Location
- -------------- ------------------------------------ ----------------
11 Computation of Earnings Per Share. Page 22.
27 Financial Data Schedule. EDGAR electronic
filing only.
b) Reports on Form 8-K: None.
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: November 8, 1996 By: /s/ ROBERT E. EVANS
Robert E. Evans
President and Chief Executive Officer
Date: November 8, 1996 By: /s/ JOHN W. CONLON
John W. Conlon
Chief Financial Officer
EXHIBIT INDEX
-------------
PEOPLES BANCORP INC. QUARTERLY REPORT ON FORM 10-Q
FOR PERIOD ENDED SEPTEMBER 30, 1996
-------------- -----------------------------------
Exhibit Number Description Exhibit Location
- -------------- ------------------------------------ ----------------
11 Computation of Earnings Per Share. Page 22.
27 Financial Data Schedule. EDGAR electronic
filing only.