FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to _______________
Commission File No. 0-25217
PEOPLES BANKCORP, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 16-1560886
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
825 State Street
Ogdensburg, New York 13669
- --------------------------------------------------------------------------------
(Address of principal (Zip Code)
executive office)
Issuer's telephone number, including area code: (315) 393-4340
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports) and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
As of November 13, 2000, the latest practicable date, 132,390 shares of the
registrant's common stock, $.01 par value per share, were issued and
outstanding.
Transitional small business disclosure format (check one):
Yes [X] No [ ]
PART I. FINANCIAL STATEMENTS
Item 1. Financial Statements
Consolidated Statements of Financial Condition as of
September 30, 2000 (unaudited) and December 31, 1999................3
Consolidated Statements of Income for the Three and Nine
Months Ended September 30, 2000 and 1999 (unaudited)..................4
Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 2000 and 1999 (unaudited).........................5
Notes to Consolidated Financial Statements............................7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.............................................8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................................11
Item 2. Changes in Securities and Use of Proceeds.........................11
Item 3. Defaults Upon Senior Securities...................................11
Item 4. Submission of Matters to a Vote of Security Holders...............11
Item 5. Other Information.................................................11
Item 6. Exhibits and Reports on Form 8-K..................................11
SIGNATURES
2
PART I FINANCIAL STATEMENTS
PEOPLES BANKCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
SEPTEMBER 30, 2000 AND DECEMBER 31, 1999
(In thousands, except per share data)
September 30, December 31,
ASSETS 2000 1999
------------ -----------
(Audited)
Cash and Cash Equivalents:
Cash and due from banks $ 550 $ 847
Interest-bearing deposits in other banks 167 610
--------- ---------
Total cash and cash equivalents 717 1,457
Securities held-to-maturity (fair value of $4,184 (unaudited)
at September 30, 2000 and $3,829 at December 31, 1999) 4,179 3,865
Loans, net of deferred fees 20,998 20,942
Less allowance for loan losses 180 176
--------- ---------
Net loans 20,818 20,766
Premises and equipment, net 450 463
Federal Home Loan Bank stock, at cost required by law 155 139
Accrued interest receivable 171 163
Other assets 6 7
--------- ---------
Total assets $ 26,496 $ 26,860
========= =========
LIABILITIES AND EQUITY
Liabilities:
Deposits:
Demand accounts - non-interest bearing $ 879 $ 594
Savings and club accounts - interest bearing 3,185 3,025
Time certificates - interest bearing 17,787 16,963
NOW and money market accounts - interest bearing 1,609 1,862
--------- ---------
Total deposits $ 23,460 $ 22,444
========= =========
Advance payments by borrowers for property taxes and insurance 2 3
Other liabilities 149 125
Borrowed money -- 1,500
--------- ---------
Total liabilities $ 23,611 $ 24,072
========= =========
Commitments and contingencies
Stockholders' Equity:
Preferred stock $.01 par value per share,
500,000 shares authorized, no shares
issued or outstanding -- --
Common stock of $.01 par value, 3,000,000
shares authorized, 132,390 and 134,390 shares issued and
outstanding at September 30, 2000 and December 31, 1999 1 1
Additional paid-in capital 1,002 1,002
Retained earnings 2,005 1,882
Accumulated other comprehensive income -- --
Common stock held in treasury at cost (26) --
Loan to employee stock ownership plan (97) (97)
--------- ---------
Total stockholders' equity 2,885 $ 2,788
--------- ---------
Total liabilities and stockholders' equity $ 26,496 $ 26,860
========= =========
See accompanying notes to consolidated financial statements.
3
PEOPLES BANKCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(In thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- ---------------------------
2000 1999 2000 1999
-------- -------- -------- --------
(In thousands)
Interest income
Loans $ 433 $ 435 $ 1,264 $ 1,249
Securities 76 36 212 77
Other short-term investments 13 12 55 70
--------- --------- --------- ---------
Total interest income 522 483 1,531 1,396
--------- --------- --------- ---------
Interest expense:
Deposits 293 256 824 764
Borrowings 6 10 42 10
--------- --------- --------- ---------
Total interest expense 299 266 866 774
--------- --------- --------- ---------
Net interest income 223 217 665 622
Provision for loan losses 6 7 25 18
--------- --------- --------- ---------
Net interest income after provision
for loan losses 217 210 640 604
--------- --------- --------- ---------
Non-interest income:
Service charges 9 8 28 23
Other 3 10 12 22
--------- --------- --------- ---------
Total non-interest income 12 18 40 45
--------- --------- --------- ---------
Non-interest expense:
Salaries and employee benefits 84 83 228 229
Director fees 12 10 40 34
Building, occupancy and equipment 15 15 44 42
Data processing 9 8 27 24
Postage and supplies 7 7 23 18
Deposit insurance premium 1 3 3 9
Insurance 5 2 15 6
Other 32 23 106 86
--------- --------- --------- ---------
Total non-interest expense 165 151 486 448
--------- --------- --------- ---------
Income before income tax expense 64 77 194 201
Income tax expense 24 24 72 71
--------- --------- --------- ---------
Net income $ 40 $ 53 $ 122 $ 130
========= ========= ========= =========
Earnings per share
Basic and diluted $ .30 $ .39 $ .91 $ .96
--------- -------- --------- --------
Weighted average shares outstanding 133 134 134 134
--------- --------- --------- ---------
See accompanying notes to consolidated financial statements.
4
PEOPLES BANKCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(In thousands)
Nine Months Ended
September 30,
--------------------------
2000 1999
-------- --------
(In thousands)
Cash flows from operating activities:
Net income $ 122 $ 130
Adjustment to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 19 11
Decrease in accrued interest receivable (8) --
Provision for loan losses 25 18
Net gains on sales of securities -- --
Increase (decrease) in other liabilities 24 (126)
Deferred income taxes -- --
Decrease in other assets 1 (5)
-------- ---------
Net cash provided by operating activities 183 28
-------- ---------
Cash flows from investing activities:
Net increase (decrease) in loans (77) (3,003)
Proceeds from sales of securities available-for-sale -- --
Proceeds from maturities and principal reductions
of securities available-for-sale -- --
Purchase of securities held-to-maturity (750) (1,125)
Purchases of securities available-for-sale -- (743)
Proceeds from maturities and principal reductions
of securities held-to-maturity 437 1,001
Purchase of FHLB stock (16) --
Purchase of fixed assets (6) (46)
-------- ---------
Net cash provided (used) by investing activities (412) (3,916)
-------- ---------
Cash flows from financing activities:
Increase (decrease) in deposits 1,016 488
Decrease in advance payments and borrowers for
property taxes and insurance (1) (1)
Purchase of treasury stock (26) --
Borrowings from FHLB -- 1,800
Repayments to FHLB (1,500) --
-------- ---------
Net cash provided by financing activities (511) 2,287
Net increase (decrease) in cash and cash equivalents (740) (1,601)
Cash and cash equivalents at beginning of period 1,457 2,475
-------- ---------
Cash and cash equivalents at end of period $ 717 $ 874
======== =========
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PEOPLES BANKCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(In thousands)
Nine Months Ended
September 30,
----------------------------
2000 1999
-------- --------
(In thousands)
-
Supplemental Disclosure of Cash Flow Information:
Non-cash investing activities:
Additions to real estate owned $ -- $ --
Cash paid during the period for:
Interest 866 764
Income taxes 58 72
======== =========
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PEOPLES BANKCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the nine months ended September 30, 2000 and 1999
NOTE 1 - PEOPLES BANKCORP, INC.
- ------------------------------
Peoples Bankcorp, Inc. (the "Company") was incorporated under the laws of the
State of New York for the purpose of becoming the holding company of Ogdensburg
Federal Savings and Loan Association (the "Association") in connection with the
Association's conversion from a federally chartered mutual savings and loan
association to a federally chartered capital stock savings and loan association.
On November 22, 1998, the Company commenced a subscription offering of its
shares in connection with the Association's conversion. The Company's offering
and the Association's conversion closed on December 28, 1998. A total of 134,390
shares were sold at $10.00 per share.
NOTE 2 - BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
- --------------------------------------------------------------
The accompanying unaudited financial statements have been prepared in accordance
with the instructions to Form 10-QSB and on the same basis as the Company's
audited financial statements. In the opinion of management, all adjustments,
consisting of normal recurring accruals, necessary to present fairly the
financial position, results of operations, and cash flows for the interim
periods presented have been included. The results of operations for such interim
periods are not necessarily indicative of the results expected for the full
year.
NOTE 3 - PLAN OF CONVERSION
- ---------------------------
On July 23, 1998, the Association's Board of Directors formally approved a plan
("Plan") to convert from a federally chartered mutual savings and loan
association to a federally chartered stock savings and loan association subject
to approval by the Association's members and the Office of Thrift Supervision.
The Plan called for the common stock of the Association to be purchased by the
Company and the common stock of the Company to be offered to various parties in
a subscription offering at a price based upon an independent appraisal of the
Association. All requisite approvals were obtained and the conversion and the
Company's offering were consummated effective December 28, 1998.
Upon consummation of the conversion, the Association established a liquidation
account in an amount equal to its retained earnings as reflected in the latest
statement of financial condition used in the final conversion prospectus. The
liquidation account will be maintained for the benefit of certain depositors of
the Association who continue to maintain their deposit accounts in the
Association after conversion. In the event of a complete liquidation of the
Association, such depositors will be entitled to receive a distribution from the
liquidation account before any liquidation may be made with respect to the
common stock.
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PEOPLES BANKCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Company's assets consist primarily of its ownership of the Association. As
such, the following discussion relates primarily to the Association's financial
condition and results of operations. The Association's results of operations
depend primarily on net interest income, which is determined by (i) the
difference between rates of interest it earns on its interest-earning assets and
the rates it pays on interest-bearing liabilities (interest rate spread), and
(ii) the relative amounts of interest-earning assets and interest-bearing
liabilities.
The Association's results of operations are also affected by non-interest
expense, including primarily compensation and employee benefits, federal deposit
insurance premiums and office occupancy costs. The Association's results of
operations also are affected significantly by general and economic and
competitive conditions, particularly changes in market interest rates,
government policies and actions of regulatory authorities, all of which are
beyond its control.
FORWARD-LOOKING STATEMENTS
In addition to historical information contained herein, the following discussion
contains forward-looking statements that involve risks and uncertainties.
Economic circumstances, the Company's operations and the Company's actual
results could differ significantly from those discussed in the forward-looking
statements. Some of the factors that could cause or contribute to such
differences are discussed herein but also include changes in the economy and
interest rates in the nation and the Company's market area generally. Some of
the forward-looking statements included herein are the statements regarding
management's determination of the amount and adequacy of the allowance for
losses on loans and the effect of certain recent accounting pronouncements.
COMPARISON OF FINANCIAL CONDITION AT SEPTEMBER 30, 2000 AND DECEMBER 31, 1999
Total assets at September 30, 2000 amounted to $26.5 million, a $364,000, or
1.36%, decrease from December 31, 1999's level of $26.9 million. The composition
of the Company's balance sheet had changed somewhat with cash and cash
equivalents decreasing by $740,000 from $1.5 million at December 31, 1999 to
$717,000 at September 30, 2000, a decrease of 50.79%. Partially offsetting this
decrease was a $314,000 increase in securities held to maturity from $3.9
million at December 31, 1999 to $4.2 million at September 30, 2000 for an
increase of 8.12%. Cash balances at December 31, 1999 reflected higher than
normal liquidity to be prepared for any higher than expected cash needs as a
result of any Year 2000 concerns. Net loans at September 30, 2000 were
essentially unchanged as compared to December 31, 1999 increasing by $52,000 or
0.25% to $20.8 million. Total liabilities at September 30, 2000 had decreased by
$461,000, or 1.92% from $24.1 million at December 31, 1999, to $23.6 million at
September 30, 2000. Deposits, which comprise the majority of total liabilities,
amounted to $23.5 million at September 30, 2000, up from $22.4 million at
December 31, 1999 for an increase of $1.0 million, or 4.53%, with decreases in
NOW and money market accounts being offset by increases in all other deposit
categories. Total stockholders' equity at September 30, 2000 amounted to $2.9
million as compared to $2.8 million at December 31, 1999 with the $97,000
increase attributable to the retention of earnings from the period, partially
offset by the $26,000 cost of repurchasing shares of treasury stock during the
period. At September 30, 2000 the Association was in compliance with all
applicable regulatory capital requirements with total core and tangible capital
of $2.5 million (9.7% of adjusted total assets) and total risk-based capital of
$2.7 million (17.8%) of risk weighted assets).
RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND
1999
NET INCOME. Net income for the three months ended September 30, 2000 and the
three months ended September 30, 1999 amounted to $40,000 and $53,000
respectively. The $13,000 decrease in net income for the 2000 period as compared
to fiscal year 1999 was attributable to increased levels of non interest expense
and, to a lesser extent, a decrease in non-interest income, partially offset by
an increase in net interest income. For the nine months ended September 30,
2000, net income amounted to $122,000 as compared to $130,000 for the nine
months ended September 30, 1999 with the $8,000 or 6.15% decrease attributable
to the aforementioned factors.
NET INTEREST INCOME. Net interest income before provision for loan losses
increased by $6,000, or 2.77%, from $217,000 for the three months ended
September 30, 1999 to $223,000 for the three months ended September 30, 2000.
The increase in net interest income was primarily due to a $39,000 increase in
interest income, partially offset by a $33,000
8
increase in interest expense as compared to the three months ended September 30,
1999. The increase in interest income was primarily due to a $40,000 increase in
interest from the securities portfolio due to the purchase of a GNMA security.
Interest expense for the quarter ended September 30, 2000 amounted to $299,000,
a $33,000 increase from the same period in 1999 with the increase attributable
to a $37,000 increase in interest expense from deposits, partially offset by a
$4,000 reduction in interest expense due to FHLB borrowings. For the nine months
ended September 30, 2000, net interest income before provision for loan losses
amounted to $665,000, up from $622,000 for the first nine months of fiscal year
1999 for an increase of $43,000 with the change due to the aforementioned
factors.
PROVISION FOR LOAN LOSSES. For the three months ended September 30, 2000, the
Company made a $6,000 provision for loan losses as compared to a $7,000
provision for the same period in 1999. The provision in 2000 reflected the level
of charge-offs during that period. For the nine months ended September 30, 2000
the Company made a $25,000 provision for loan losses as compared to a $18,000
provision for the same period in 1999. The increased provision in the first
three quarters of fiscal year 2000 as compared to fiscal year 1999 was due to a
higher level of charge-offs during the period.
A provision for losses on loans is charged to earnings to bring the total
allowance for loan losses to a level considered appropriate by management based
on historical experience, the volume and type of lending conducted by the
Association, the status of past due principal and interest payments, general
economic conditions, particularly as such conditions relate to the Association's
market area, and other factors related to the collectibility of the
Association's loan portfolio. There can be no assurance that the loan loss
allowance of the Association will be adequate to cover losses on nonperforming
assets in the future.
NON-INTEREST INCOME. Non-interest income for the three months ended September
30, 2000 amounted to $12,000 as compared to $18,000 for the three months ended
September 30, 1999 with the decrease attributable to decreases in appraisal fees
and miscellaneous operating income. For the nine months ended September 30,
2000, non-interest income amounted to $40,000 as compared to $45,000 for the
nine months ended September 30, 1999 with the decrease due to a $10,000
reduction in other non-interest income.
NON-INTEREST EXPENSES. Non-interest expenses for the third quarter of 2000
totaled $165,000, up from $151,000 for the third quarter of 1999 with the
increase primarily due to a $9,000 increase in other non-interest expenses due
to miscellaneous expenses, a $3,000 increase in insurance expense, a $2,000
increase in directors' fees and a $1,000 increase in salaries and employee
benefits, offset by $2,000 decrease in FDIC insurance premiums. The decrease in
this item was due to the decreased assessment rate paid by institutions in
connection with the FICO bonds. For the nine months ended September 30, 2000,
non-interest expenses totaled $486,000 which represented a $38,000 increase as
compared to the first three quarters of fiscal year 1999. The increase for the
first three quarters of fiscal year 2000 was primarily attributable to the
combined effects of a $20,000 increase in other non-interest expense, a $9,000
increase in insurance expense, a $5,000 increase in postage and supplies and a
$6,000 increase in directors fees, partially offset by a $6,000 reduction in
FDIC insurance premiums. This reduction was due to the aforementioned reduction
in the assessment rate for premiums paid in connection with the FICO bonds.
INCOME TAX EXPENSE. Income tax expense for the three months ended September 30,
2000 amounted to $24,000 which was comparable to the same period in 1999. The
Company's effective tax rates for the respective periods were 37.5% and 31.2%.
For the nine months ended September 30, 2000, income tax expense amounted to
$72,000, up from $71,000 for the same period in 1999. The Company's effective
tax rates for the first three quarters of fiscal years 2000 and 1999 were 37.1%
and 35.3%, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Association is required to maintain minimum levels of liquid assets as
defined by OTS regulations. This requirement, which varies from time to time
depending upon economic conditions and deposit flows, is based upon a percentage
of the Association's deposits and short-term borrowings. The required ratio at
September 30, 2000 was 4%. For the month ended September 30, 2000 the
Association was in compliance.
The Association's primary sources of funds are deposits, repayment of loans and
mortgage-backed securities, maturities of investments and interest-bearing
deposits, funds provided from operations. The Association is also able to obtain
advances from the Federal Home Loan Bank of New York. While scheduled repayments
of loans and mortgage-backed securities and maturities of investment securities
are predicable sources of funds, deposit flows and loan prepayments are greatly
influenced by the general level of interest rates, economic conditions and
competition. The Association uses its liquidity
9
resources principally to fund existing and future loan commitments, to fund
maturing certificates of deposit and demand deposit withdrawals, to invest in
other interest-earning assets, to maintain liquidity, and to meet operating
expenses.
FINANCIAL MODERNIZATION LEGISLATION.
On November 12, 1999, President Clinton signed legislation which could have a
far-reaching impact on the financial services industry. The Gramm-Leach-Bliley
("G-L-B") Act authorizes affiliations between banking, securities and insurance
firms and authorizes bank holding companies and national banks to engage in a
variety of new financial activities. Among the new activities that will be
permitted to bank holding companies are securities and insurance brokerage,
securities underwriting, insurance underwriting and merchant banking. The Board
of Governors of the Federal Reserve System (the "Federal Reserve Board"), in
consultation with the Secretary of the Treasury, may approve additional
financial activities. The G-L-B Act, however, prohibits future acquisitions of
existing unitary savings and loan holding companies, like the Company, by firms
which are engaged in commercial activities and limits the permissible activities
of unitary holding companies formed after May 4, 1999.
The G-L-B Act imposes new requirements on financial institutions with respect to
customer privacy. The G-L-B Act generally prohibits disclosure of customer
information to non-affiliated third parties unless the customer has been given
the opportunity to object and has not objected to such disclosure. Financial
institutions are further required to disclose their privacy policies to
customers annually. Financial institutions, however, will be required to comply
with state law if it is more protective of customer privacy than the G-L-B Act.
The G-L-B Act directs the federal banking agencies, the National Credit Union
Administration, the Secretary of the Treasury, the Securities and Exchange
Commission and the Federal Trade Commission, after consultation with the
National Association of Insurance Commissioners, to promulgate implementing
regulations within six months of enactment. The privacy provisions will become
effective six months thereafter.
The G-L-B Act contains significant revisions to the FHLB System. The G-L-B Act
imposes new capital requirements on the FHLBs and authorizes them to issue two
classes of stock with differing dividend rates and redemption requirements. The
G-L-B Act deletes the current requirement that the FHLBs annually contribute
$300 million to pay interest on certain government obligations in favor of a 20%
of net earnings formula. The G-L-B Act expands the permissible uses of FHLB
advances by community financial institutions (under $500 million in assets) to
include funding loans to small businesses, small farms and small
agri-businesses. The G-L-B Act makes membership in the FHLB voluntary for
federal savings associations.
The G-L-B Act contains a variety of other provisions including a prohibition
against ATM surcharges unless the customer has first been provided notice of the
imposition and amount of the fee. The G-L-B Act reduces the frequency of
Community Reinvestment Act examinations for smaller institutions and imposes
certain reporting requirements on depository institutions that make payments to
non-governmental entities in connection with the Community Reinvestment Act. The
G-L-B Act eliminates the SAIF special reserve and authorizes a federal savings
association that converts to a national or state bank charter to continue to use
the term "federal" in its name and to retain any interstate branches.
The Company is unable to predict the impact of the G-L-B Act on its operations
at this time. Although the G-L-B Act reduces the range of companies with which
the Company may affiliate, it may facilitate affiliations with companies in the
financial services industry.
10
PEOPLES BANKCORP, INC.
PART II
ITEM 1. Legal Proceedings
-----------------
None.
ITEM 2. Changes in Securities and Use of Proceeds
-----------------------------------------
Not applicable
ITEM 3. Defaults Upon Senior Securities
-------------------------------
Not applicable
ITEM 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None.
ITEM 5. Other Information
-----------------
During the quarter ended September 30, 2000, the Company adopted a
stock repurchase plan pursuant to which the Board authorized the repurchase of
up to 5% of the Company's outstanding shares of Common Stock. In the quarter
ended September 30, 2000, 2,000 shares were repurchased under this plan.
ITEM 6. Exhibits and Reports on Form 8-K
--------------------------------
Reports on Form 8-K: None.
Exhibit 27: Financial Data Schedule for the nine months ended September
30, 2000.
11
PEOPLES BANKCORP, INC.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
has caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
Date: November 14, 2000 By: /s/ Robert E. Wilson
------------------------------------
Robert E. Wilson
President and Chief
Executive Officer
(Duly Authorized and Principal
Executive, Accounting and Financial Officer)
12