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 March 31, 2002
--------------
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
- --------------------------------------------------------------------------------
(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 March 31, 2002, the latest practicable date, 131,509 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
March 31, 2002 (unaudited) and December 31, 2001.....................3
Consolidated Statements of Income for the Three Months
Ended March 31, 2002 and 2001 (unaudited)............................4
Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 2002 and 2001 (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
MARCH 31, 2002 AND DECEMBER 31, 2001
(In thousands, except per share data)
March 31, December 31,
ASSETS 2002 2001
--------- -----------
(Audited)
Cash and Cash Equivalents:
Cash and due from banks $ 970 $ 1,403
Interest-bearing deposits in other banks 2,733 645
--------- ---------
Total cash and cash equivalents 3,703 2,048
Securities available-for-sale - at fair value 5,252 5,034
Securities held-to-maturity (fair value of $1,637 (unaudited)
at March 31, 2002 and $1,568 at December 31, 2001) 1,624 1,525
Loans, net of deferred fees 17,633 19,015
Less allowance for loan losses 176 179
--------- ---------
Net loans 17,457 18,836
Real estate owned 31 45
Premises and equipment, net 412 418
Federal Home Loan Bank stock, at cost-required by law 184 163
Accrued interest receivable 150 145
Other assets 9 3
--------- ---------
TOTAL ASSETS $ 28,822 $ 28,217
========= =========
LIABILITIES AND EQUITY
Liabilities:
Deposits:
Demand accounts - non-interest bearing $ 1,009 $ 735
Savings and club accounts - interest bearing 3,238 3,215
Time certificates - interest bearing 18,338 18,126
NOW and money market accounts - interest bearing 2,011 1,943
--------- ---------
Total deposits 24,596 24,019
--------- ---------
Borrowed money 1,000 1,000
Advance payments by borrowers for property taxes and insurance 2 2
Other liabilities 155 131
--------- ---------
Total liabilities 25,753 25,152
--------- ---------
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, 131,509 and 131,979 shares issued and
outstanding at March 31, 2002 and December 31, 2001 1 1
Additional paid-in capital 1,007 1,007
Retained earnings - substantially restricted 2,336 2,167
Accumulated other comprehensive income (52) 3
Loan to employee stock ownership plan (75) (75)
Common stock in treasury, at cost (2,881 shares at March 31, 2002 and
2,411 shares at December 31, 2001) (48) (38)
Total stockholders' equity 3,069 $ 3,065
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 28,822 $ 28,217
========= =========
See accompanying notes to consolidated financial statements.
3
PEOPLES BANKCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001
(In thousands, except per share data)
Three Months Ended
March 31,
------------------------
2002 2001
-------- -------
Interest income
Loans $ 361 $ 421
Securities 120 110
Other short-term investments 8 17
-------- -------
Total interest income 489 548
-------- -------
Interest expense:
Deposits 238 312
Borrowings 9 18
-------- -------
Total interest expense 247 330
-------- -------
Net interest income 242 218
Provision for loan losses 9 6
-------- -------
Net interest income after provision
for loan losses 233 212
Non-interest income:
Gain on sale of available for sale securities 11 --
Service charges 7 10
Other 4 2
-------- -------
Total non-interest income 22 12
-------- -------
Non-interest expense:
Salaries and employee benefits 85 84
Director fees 18 13
Building, occupancy and equipment 16 16
Data processing 11 9
Postage and supplies 5 10
Deposit insurance premium 1 1
Insurance 3 3
Other 22 27
-------- -------
Total non-interest expense 161 163
-------- -------
Income before income tax expense 94 61
Income tax expense 25 21
-------- -------
Net income $ 69 $ 40
======== =======
Earnings per share
Basic $ .56 $ .30
Diluted $ .52 $ .29
Weighted average shares outstanding 132 132
See accompanying notes to consolidated financial statements.
4
PEOPLES BANKCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2002 AND 2001
(In thousands)
Three Months Ended
March 31,
------------------------
2002 2001
-------- -------
Cash flows from operating activities:
Net income $ 69 $ 40
Adjustment to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 6 7
Decrease (increase) in accrued interest receivable (5) 8
Provision for loan losses 9 6
Net amortization (accretion) of premium/discounts (5) (58)
Increase in other liabilities 24 166
Increase in other assets (6) (33)
-------- -------
Net cash provided by operating activities 92 136
-------- -------
Cash flows from investing activities:
Net (increase) decrease in loans 1,339 180
Purchases of securities available-for-sale (1,250) (1,996)
Proceeds from maturities and principal reductions
of securities available-for-sale 983 96
Purchases of securities held-to-maturity (600) --
Proceeds from maturities and principal reductions
of securities held-to-maturity 500 582
Purchase of FHLB stock (21) (7)
Purchase of fixed assets -- --
Sale of foreclosed real estate 45 --
-------- -------
Net cash provided (used) by investing activities 996 (1,145)
-------- -------
Cash flows from financing activities:
Increase in deposits 557 1,587
Borrowings from FHLB -- 2,000
Repayments to FHLB -- (500)
Loan payment received from Employee Stock Ownership Plan -- --
Decrease in advance payments from borrowers for property
Taxes and insurance -- --
Cash dividends paid on common stock -- --
Payments to acquire treasury stock (10) --
-------- -------
Net cash provided by financing activities 567 3,087
Net increase in cash and cash equivalents 1,655 2,078
Cash and cash equivalents at beginning of period 2,048 809
-------- -------
Cash and cash equivalents at end of period $ 3,703 $ 2,887
======== =======
(continued)
5
PEOPLES BANKCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
THREE MONTHS ENDED MARCH 31, 2002 AND 2001
(In thousands)
Three Months Ended
March 31,
------------------------
2002 2001
-------- -------
Supplemental Disclosure of Cash Flow Information:
Non-cash investing activities:
Loans transferred to real estate owned through foreclosure $ 39 $ --
Treasury stock utilized for MRP -- --
Cash paid during the period for:
Interest 247 318
Income taxes 26 4
======== =======
6
PEOPLES BANKCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001
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.
7
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 MARCH 31, 2002 AND DECEMBER 31, 2001
Total assets at March 31, 2002 amounted to $28.8 million, a $600,000 or 2.1%
increase from December 31, 2001's level of $28.2 million. The increase in total
assets was centered in a $1.7 million increase in cash and cash equivalents,
partially offset by a $1.4 million decrease in net loans. Total liabilities at
March 31, 2002 increased from $25.2 million at December 31, 2001 to $25.8
million. Deposits, which comprise the majority of total liabilities amounted to
$24.6 million at March 31, 2002, up from $24.0 million at December 3, 2001 for
an increase of $600,000, or 2.5% with increases in all categories of deposits.
Total stockholders' equity at March 31, 2002 amounted to $3.1 million as
compared to $3.1 million at December 31, 2001. The increase in retained earnings
of $69,000 was offset by a $56,000 decrease in accumulated other comprehensive
income and a $10,000 increase in treasury stock. At March 31, 2002 the
Association was in compliance with all applicable regulatory capital
requirements with core and tangible capital of $2.8 million (9.81% of adjusted
total assets) and total risk base capital of $3.0 million (22.7% of risk
weighted assets).
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 30, 2002 AND 2001
NET INCOME. Net income for the three months ended March 31, 2002 amounted to
$69,000 as compared to $40,000 for the three months ended March 31, 2001. The
$29,000 or 72% increase was due to the combined effects of an $83,000 decrease
in total interest expense and an increase in other non-interest income of
$13,000 mainly due to the sale of a GNMA security. These improvements were
partially offset by a $59,000 decrease in total interest income.
NET INTEREST INCOME. Net interest income before provision for loan losses
increased by $24,000, or 11%, from $218,000 for the three months ended March 31,
2001 to $242,000 for the three months ended March 31, 2002. The increase in net
interest income was primarily due to an $83,000 decrease in interest expense as
compared to the three months ended March 31, 2001, offset by a $59,000 decrease
in total interest income. The decrease in interest expense was due to a $74,000
decrease in interest on deposits which reflected the decrease in interest rates
during the first quarter of 2002 as compared to the same period in 2001. The
decrease in interest income was primarily due to a $60,000 decrease in interest
from loans due to the decreases in the loan portfolio
8
PROVISION FOR LOAN LOSSES. For the three months ended March 31, 2002, the
Company made a $9,000 provision for loan losses as compared to a provision of
$6,000 or the same period in 2001. The higher provision in 2002 reflected the
level of charge-offs during that 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 March 31,
2002 amounted to $22,000 as compared to $12,000 for the three months ended March
31, 2001 with the increase attributable to the sale of a GNMA security.
NON-INTEREST EXPENSES. Non-interest expenses for the first quarter of 2002
totaled $161,000, down from $163,000 for the first quarter of 2001 with the
decrease primarily due to the combined effects of a $5,000 increase in
directors' fees, a $5,000 decrease in postage and supplies and a $5,000 decrease
in miscellaneous expenses.
INCOME TAX EXPENSE. Income tax expense for the three months ended March 31, 2002
amounted to $25,000, a $4,000 increase from the same period in 2001 with the
increase primarily attributable to an increase in pre-tax income. The Company's
effective tax rates for the respective periods were 26.60% and 34.42%.
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.
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 became
effective in July 2001.
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
PART II. OTHER INFORMATION
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
-----------------
None.
ITEM 6. Exhibits and Reports on Form 8-K
--------------------------------
Exhibits: None.
Reports on Form 8-K: None.
11
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.
PEOPLES BANKCORP, INC.
Date: May 14, 2002 By:/s/ Robert E. Wilson
-----------------------------------------
Robert E. Wilson
President and Chief Executive Officer
(Duly Authorized and Principal Executive,
Accounting and Financial Officer)
12