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 June 30, 2001
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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.
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(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
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(Address of principal (Zip Code)
executive office)
Issuer's telephone number, including area code: (315) 393-4340
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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 August 14, 2001, the latest practicable date, 132,979 shares of the
registrant's common stock, $.01 par value per share, were issued and
outstanding.
Transitional small business disclosure format (check one):
Yes [ ] No [X]
PART I. FINANCIAL STATEMENTS
Item 1. Financial Statements
Consolidated Statements of Financial Condition as of
June 30, 2001 (unaudited) and December 31, 2000.......................3
Consolidated Statements of Income for the Three and Six Months
Ended June 30, 2001 and 2000 (unaudited)..............................4
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 2001 and 2000 (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
JUNE 30, 2001 AND DECEMBER 31, 2000
(In thousands, except per share data)
June 30, December 31,
ASSETS 2001 2001
------------- ------------
(Audited)
Cash and Cash Equivalents:
Cash and due from banks $ 1,247 $ 605
Interest-bearing deposits in other banks 772 204
--------- ---------
Total cash and cash equivalents 2,019 809
Securities available-for-sale - at fair value 2,643 1,017
Securities held-to-maturity (fair value of $3,563 (unaudited)
at June 30, 2001 and $4,192 at December 31, 2000) 3,476 4,126
Loans, net of deferred fees 20,030 20,688
Less allowance for loan losses 176 176
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Net loans 19,854 20,512
Premises and equipment, net 431 444
Federal Home Loan Bank stock, at cost-required by law 162 155
Accrued interest receivable 166 179
Other assets 55 19
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TOTAL ASSETS $ 28,806 $ 27,261
========= =========
LIABILITIES AND EQUITY
Liabilities:
Deposits:
Demand accounts - non-interest bearing $ 703 $ 813
Savings and club accounts - interest bearing 2,958 2,930
Time certificates - interest bearing 18,265 18,075
NOW and money market accounts - interest bearing 2,501 1,927
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Total deposits 24,427 23,745
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Borrowed money 1,000 500
Advance payments by borrowers for property taxes and insurance 2 2
Other liabilities 376 86
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Total liabilities 25,805 24,333
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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, 132,979 and 132,390 shares issued and
outstanding at June 30, 2001 and December 31, 2000 1 1
Additional paid-in capital 1,002 1,003
Retained earnings - substantially restricted 2,103 2,036
Accumulated other comprehensive income -- --
Loan to employee stock ownership plan (86) (86)
Common stock in treasury, at cost (1,431 shares at June 30, 2001
and 2,000 shares at December 31, 2000) (19) (26)
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Total stockholders' equity 3,001 $ 2,928
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 28,806 $ 27,261
========= =========
See accompanying notes to consolidated financial statements.
3
PEOPLES BANKCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2001 AND 2000
(In thousands, except per share data)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
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2001 2000 2001 2000
-------- --------- -------- --------
(In thousands)
Interest income
Loans $ 412 $ 418 $ 833 $ 831
Securities 107 71 217 136
Other short-term investments 14 22 31 42
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Total interest income 533 511 1,081 1,009
--------- --------- --------- ---------
Interest expense:
Deposits 315 274 627 531
Borrowings 17 16 35 36
--------- --------- --------- ---------
Total interest expense 332 290 662 567
--------- --------- --------- ---------
Net interest income 201 221 419 442
Provision for loan losses 15 11 21 19
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Net interest income after provision
for loan losses 186 210 398 423
--------- --------- --------- ---------
Non-interest income:
Service charges 9 11 19 19
Other 13 7 15 9
--------- --------- --------- ---------
Total non-interest income 22 18 34 28
--------- --------- --------- ---------
Non-interest expense:
Salaries and employee benefits 83 75 167 151
Director fees 17 16 30 28
Building, occupancy and equipment 16 14 32 29
Data processing 10 9 19 18
Postage and supplies 7 10 17 16
Deposit insurance premium 1 1 2 2
Insurance 3 5 6 10
Other 31 35 58 67
--------- --------- --------- ---------
Total non-interest expense 168 165 331 321
--------- --------- --------- ---------
Income before income tax expense 40 63 101 130
Income tax expense 14 24 35 48
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Net income $ 26 $ 39 $ 66 $ 82
========= ========= ========= =========
Earnings per share
Basic $ .20 $ .29 $ .50 $ .61
Diluted $ .19 $ .29 $ .48 $ .61
Weighted average shares outstanding 132 134 132 134
See accompanying notes to consolidated financial statements.
4
PEOPLES BANKCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended June 30, 2001 and 2000
(In thousands)
Six Months Ended
June 30,
-------------------------
2001 2000
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(In thousands)
Cash flows from operating activities:
Net income $ 66 $ 82
Adjustment to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 13 13
Decrease in accrued interest receivable 13 (8)
Provision for loan losses 21 19
Net amortization (accretion) of premium/discounts (59) --
Increase in other liabilities 297 --
Deferred income taxes -- 105
Increase in other assets (12) --
-------- ---------
Net cash provided by operating activities 339 211
-------- ---------
Cash flows from investing activities:
Net (increase) decrease in loans 613 (106)
Purchases of securities available-for-sale (1,996) --
Proceeds from maturities and principal reductions
of securities available-for-sale 428 --
Purchases of securities held-to-maturity -- (750)
Proceeds from maturities and principal reductions
of securities held-to-maturity 651 40
Purchase of FHLB stock (7) (16)
Purchase of fixed assets -- (5)
-------- ---------
Net cash provided (used) by investing activities (311) (837)
-------- ---------
Cash flows from financing activities:
Increase in deposits 682 625
Borrowings from FHLB 2,000 --
Repayments to FHLB (1,500) (500)
-------- ---------
Net cash provided by financing activities 1,182 125
Net increase in cash and cash equivalents 1,210 (501)
Cash and cash equivalents at beginning of period 809 1,457
-------- ---------
Cash and cash equivalents at end of period $ 2,019 $ 956
======== =========
5
PEOPLES BANKCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
Six months ended June 30, 2001 and 2000
(In thousands)
Six Months Ended
June 30,
------------------------
2001 2000
-------- -------
(In thousands)
Supplemental Disclosure of Cash Flow Information:
Non-cash investing activities:
Loans transferred to real estate owned through foreclosure $ -- $ --
Additions to real estate owned 24 --
Treasury stock utilized for MRP 7 --
Cash paid during the period for:
Interest 650 570
Income taxes 29 40
======== =======
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PEOPLES BANKCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended june 30, 2001 and 2000
NOTE 1 - PEOPLES BANKCORP, INC.
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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.
7
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 JUNE 30, 2001 AND DECEMBER 31, 2000
Total assets at June 30, 2001 amounted to $28.8 million, a $1.5 million, or
5.67%, increase from December 31, 2000's level of $27.3 million. The increase in
total assets was centered in a $1.6 million increase in securities classified as
available for sale and a $1.2 million increase in cash and cash equivalents.
These increases were funded by a combination of a $682,000 increase in total
deposits and a $500,000 increase in FHLB advances along with a $650,000
reduction in securities held to maturity. Net loans at June 30, 2001 amounted to
$19.2 million which represented as decrease of $655,000 from $20.5 million at
December 31, 2000. Total liabilities at June 30, 2001 increased from $24.3
million at December 31, 2000, to $25.8 million at June 30, 2001. Deposits, which
comprise the majority of total liabilities, amounted to $24.4 million at June
30, 2001, up from $23.7 million at December 31, 2000 for an increase of
$682,000, or 2.87%, with increases in all categories of deposits other than
demand deposits. Total stockholders' equity at June 30, 2001 amounted to $3.0
million as compared to $2.9 million at December 31, 2000 with the $73,000
increase attributable to the retention of earnings from the period. At June 30,
2001 the Association was in compliance with all applicable regulatory capital
requirements with total core and tangible capital of $2.7 million (9.27% of
adjusted total assets) and total risk-based capital of $2.8 million (19.6%) of
risk weighted assets).
RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2001 AND 2000
NET INCOME. Net income for the three months ended June 30, 2001 and the three
months ended June 30, 2000 amounted to $26,000 and $39,000, respectively. The
$13,000 or 33.33% decrease was due primarily to a $20,000 decrease in net
interest income, partially offset by a $10,000 decrease in income tax expense.
For the six months ended June 30, 2001, net income amounted to $66,000 as
compared to $82,000 for the six months ended June 30, 2000 with the $16,000 or
19.51% decrease attributable to the aforementioned factors.
NET INTEREST INCOME. Net interest income before provision for loan losses
decreased by $20,000, or 9.05%, from $221,000 for the three months ended June
30, 2000 to $201,000 for the three months ended June 30, 2001. The decrease in
net interest income was due to a $42,000 increase in interest expense as
compared to the three months ended June 30, 2000, offset by a $22,000 increase
in total interest income. The increase in interest expense was due to a $41,000
increase in interest on deposits which reflected the increase in the average
balance of interest-bearing deposits during the three months ended June 30, 2001
as compared to the same period in 2000. The increase
8
in interest income was primarily due to a $36,000 increase in interest from the
securities portfolio due to the purchase of two GNMA securities. For the six
months ended June 30, 2001, net interest income before provision for loan losses
amounted to $419,000, down from $442,000 for the first half of fiscal year 2000
for a decrease of $23,000 with the change due to the aforementioned factors.
PROVISION FOR LOAN LOSSES. For the three months ended June 30, 2001, the Company
made a $15,000 provision for loan losses as compared to a provision of $11,000
for the same period in 2000. The provision in 2001 reflected the level of
charge-offs during that period. For the six months ended June 30, 2001 the
Company made a $21,000 provision for loan losses as compared to an $19,000
provision for the same period in 2000. The increased provision in the first half
of fiscal year 2001 as compared to fiscal year 2000 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 June 30,
2001 amounted to $22,000 as compared to $18,000 for the three months ended June
30, 2000 with the increase attributable to increased other income. For the six
months ended June 30, 2001, non-interest income amounted to $34,000 as compared
to $28,000 for the six months ended June 30, 2000 with the increase due to a
$6,000 increase in other non-interest income.
NON-INTEREST EXPENSES. Non-interest expenses for the second quarter of 2001
totaled $168,000, up from $165,000 for the second quarter of 2000 with the
increase primarily due to an $8,000 increase in salaries and employee benefits,
partially offset by a $4,000 decrease in miscellaneous expenses and a $3,000
decrease in postage and supplies. For the six months ended June 30, 2001,
non-interest expenses totaled $331,000 which represented a $10,000 increase as
compared to the first half of fiscal year 2000. The increase in the first half
of fiscal year 2001 was primarily attributable to a $16,000 increase in salaries
and employee benefits, partially offset by a $9,000 decrease in miscellaneous
expenses.
INCOME TAX EXPENSE. Income tax expense for the three months ended June 30, 2001
amounted to $14,000, a $10,000 decrease from the same period in 2000 with the
decrease primarily attributable to a decrease in pre-tax income. The Company's
effective tax rates for the respective periods were 35.00% and 38.10%. For the
six months ended June 30, 2001, income tax expense amounted to $35,000, up from
$48,000 for the same period in 2000 with the increase primarily due to the
increased level of pre-tax income. The Company's effective tax rates for the
first half of fiscal years 2001 and 2000 were 34.65% and 36.93%, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Association is required to maintain levels of liquid assets consistent with
its safe and sound operation. The Association believes its level of liquid
assets are sufficient for its needs.
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 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.
9
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
---------------------------------------------------
On May 15, 2001, the Company held its Annual Meeting of Stockholders
for the purpose of electing one director. The nominee for director was elected.
The results of voting were as follows:
PROPOSAL I - ELECTION OF DIRECTORS
George E. Silver
For: 105,177 Withheld: 150
ITEM 5. Other Information
-----------------
None.
ITEM 6. Exhibits and Reports on Form 8-K
--------------------------------
Reports on Form 8-K: None.
11
PEOPLES BANKCORP, INC.
SIGNATURES
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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: August 14, 2001 By: /s/ Robert E. Wilson
-------------------------------------------
Robert E. Wilson
President and Chief
Executive Officer
(Duly Authorized and Principal
xecutive, Accounting and Financial Officer)
12