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, 2003
--------------
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 May 12, 2003, the latest practicable date, 136,912 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, 2003 (unaudited) and December 31, 2002..................... 3
Consolidated Statements of Income for the Three Ended
March 31, 2003 and 2002 (unaudited).................................. 4
Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 2003 and 2002 (unaudited).................................. 5
Notes to Consolidated Financial Statements........................... 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................ 8
Item 3. Controls and Procedures..............................................10
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, 2003 AND DECEMBER 31, 2002
(In thousands, except per share data)
March 31, December 31,
2003 2002
---------- -----------
ASSETS (Audited)
Cash and Cash Equivalents:
Cash and due from banks $ 5,302 $ 2,652
Interest-bearing deposits with other banks 2,324 1,739
---------- ---------
Total Cash and Cash Equivalents 7,626 4,391
Securities available-for-sale -- at fair value 4,238 6,051
Securities held-to-maturity (fair value of $253 at (unaudited)
March 31, 2003 and $877 at December 31, 2002) 250 865
Loans, net of deferred fees 16,560 17,070
Less - allowance for loan losses 380 380
---------- ---------
Net Loans 16,180 16,690
Premises and equipment, net 388 394
Federal Home Loan Bank stock, at cost - required by law 184 184
Accrued interest receivable 116 154
Other assets 5 39
---------- ---------
TOTAL ASSETS $ 28,987 $ 28,768
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Demand accounts - non-interest bearing $ 817 $ 801
Savings and club accounts - interest bearing 3,257 3,148
Time certificates - interest bearing 17,806 17,914
NOW and money market accounts - interest bearing 2,744 2,553
Total Deposits 24,624 24,416
Borrowed money 1,000 1,000
Advance payments by borrowers for property taxes and insurance 2 3
Other liabilities 138 121
---------- ---------
Total Liabilities 25,825 25,540
---------- ---------
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, 136,912 issued and 133,442 shares
outstanding at March 31, 2003 and December 31, 2002 1 1
Additional paid-in capital 1,041 1,041
Retained earnings - substantially restricted 2,221 2,206
Accumulated other comprehensive income 73 93
Loan to Employee Stock Ownership Plan (65) (65)
Common stock in treasury, at cost (3,470 shares at
March 31, 2003 and 3,470 shares December 31, 2002) (48) (48)
---------- ---------
Total Stockholders' Equity 3,223 3,228
---------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 28,987 $ 28,768
========== =========
See accompanying notes to consolidated financial statements.
3
PEOPLES BANKCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002
(In thousands, except per share data)
Three Months Ended
March 31,
---------------------
2003 2002
------ ------
Interest income
Loans $ 309 $ 361
Securities 69 120
Other short-term investments 14 8
------ ------
Total interest income 392 489
------ ------
Interest expense:
Deposits 163 238
Borrowings 8 9
------ ------
Total interest expense 171 247
------ ------
Net interest income 221 242
Provision for loan losses 2 9
------ ------
Net interest income after provision
for loan losses 219 233
Non-interest income:
Gain on sale of available for sale securities -- 11
Service charges 4 7
Other 8 4
------ ------
Total non-interest income 12 22
------ ------
Non-interest expense:
Salaries and employee benefits 97 85
Director fees 21 18
Building, occupancy and equipment 18 16
Data processing 12 11
Postage and supplies 5 5
Deposit insurance premium 2 1
Insurance 4 3
Other 53 22
------ ------
Total non-interest expense 212 161
------ ------
Income before income tax expense 19 94
Income tax expense 4 25
------ ------
Net income $ 15 $ 69
====== ======
Earnings per share
Basic $ .12 $ .56
Diluted $ .11 $ .52
Weighted average shares outstanding 133 132
See accompanying notes to consolidated financial statements.
4
PEOPLES BANKCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2003 AND 2002
(In thousands)
Three Months Ended
March 31,
--------------------------
2003 2002
-------- ---------
Cash flows from operating activities:
Net income $ 15 $ 69
Adjustment to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 6 6
(Increase) decrease in accrued interest receivable 38 (5)
Provision for loan losses 2 9
Net amortization (accretion) of premium/discounts 54 (5)
Increase (decrease) in other liabilities (3) 24
Increase (decrease) in other assets 34 (6)
-------- ---------
Net cash provided by operating activities 146 92
-------- ---------
Cash flows from investing activities:
Net decrease in loans 508 1,339
Purchases of securities available-for-sale (1,250)
Proceeds from maturities and principal reductions
of securities available-for-sale 1,774 983
Purchases of securities held-to-maturity (600)
Proceeds from maturities and principal reductions
of securities held-to-maturity 600 500
Purchase of FHLB stock -- (21)
Purchase of fixed assets --
Sale of foreclosed real estate 45
-------- ---------
Net cash provided (used) by investing activities 2,882 996
-------- ---------
Cash flows from financing activities:
Increase in deposits 268 577
Borrowings from FHLB -- --
Repayments to FHLB -- --
Decrease in advance payments and borrowers for
property taxes and insurance (1) --
Cash dividends paid on common stock --
Payments to acquire treasury stock -- (10)
Issuance of common stock upon exercise of options -- --
-------- ---------
Net cash provided by financing activities 207 567
Net increase in cash and cash equivalents 3,235 1,655
Cash and cash equivalents at beginning of period 4,391 2,048
-------- ---------
Cash and cash equivalents at end of period $ 7,626 $ 3,703
======== =========
(continued)
5
PEOPLES BANKCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
Three months ended March 31, 2003 and 2002
(In thousands)
Three Months Ended
March 31,
--------------------------
2003 2002
-------- --------
Supplemental Disclosure of Cash Flow Information:
Non-cash investing activities:
Loans transferred to real estate owned through foreclosure $ -- $ 39
Additions to real estate owned -- --
Treasury stock utilized for MRP -- --
Cash paid during the period for:
Interest 171 247
Income taxes -- 26
======== =======
6
PEOPLES BANKCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the three months ended March 31, 2003 and 2002
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
Item 2. 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, 2003 AND DECEMBER 31, 2002
Total assets at March 31, 2003 amounted to $29.0 million, a $219,000 or 0.76%
increase from December 31, 2002's level of $28.8 million. The increase in total
assets was centered in a $3.2 million or 73.67% increase in cash and cash
equivalents, partially offset by a $510,000 or 3.06% decrease in net loans and a
$615,000 or 71.10% decrease in securities held to maturity. Total liabilities at
March 31, 2003 increased from $25.5 million at December 31, 2002 to $25.8
million. Deposits, which comprise the majority of total liabilities, amounted to
$24.6 million at March 31, 2003, up from $24.4 million at December 31, 2002 for
an increase of $208,000, or 0.85% with increases in all categories of deposits
other than time certificates. Total stockholders' equity at March 31, 2003
amounted to $3.2 million as compared to $3.2 million at December 31, 2002.
Retained earnings increased $15,000, while accumulated other comprehensive
income decreased $20,000 and paid in capital remained the same. At March 31,
2003 the Association was in compliance with all applicable regulatory capital
requirements with core and tangible capital of $2.7 million (9.53% of adjusted
total assets) and total risk based capital of $2.9 million (23.99% of risk
weighted assets).
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002
NET INCOME. Net income for the three months ended March 31, 2003 amounted to
$15,000 as compared to $69,000 for the three months ended March 31, 2002. The
$54,000 or 78.26% decrease was due to the combined effects of an $76,000
decrease in total interest expense, a decrease in total non-interest income of
$10,000 and a $97,000 decrease in total interest income due to prepayment on
GNMA and calls of securities available for sale and securities held to maturity.
NET INTEREST INCOME. Net interest income before provision for loan losses
decreased by $21,000, or 8.68%, from $242,000 for the three months ended March
31, 2002 to $221,000 for the three months ended March 31, 2003. The decrease in
net interest income was primarily due to a $76,000 decrease in interest expense
as compared to the three months ended March 31, 2002, offset by a $97,000
decrease in total interest income. The decrease in interest expense was due to a
$75,000 decrease in interest on deposits which reflected the decrease in
interest rates during the first quarter of 2003 as compared to the same period
in 2002. The decrease in interest income was primarily due to a $51,000 decrease
in interest from securities due to prepayment of securities available for sale
and securities held to maturity.
8
PROVISION FOR LOAN LOSSES. For the three months ended March 31, 2003, the
Company made a $2,000 provision for loan losses as compared to a provision of
$9,000 or the same period in 2002. The lower provision in 2003 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,
2003 amounted to $12,000 as compared to $22,000 for the three months ended March
31, 2002 with the decrease attributable to the sale of a GNMA security during
the three months ended March 31, 2002, which did not occur for the same period
in 2003.
NON-INTEREST EXPENSES. Non-interest expenses for the first quarter of 2003
totaled $212,000, up from $161,000 for the first quarter of 2002 with the
increase primarily due to the combined effects of a $12,000 increase in salaries
and employee benefits, a $3,000 increase in directors' fees and a $31,000
increase in miscellaneous expenses, which was mainly due to the balance paid for
environmental cleanup on banking premises.
INCOME TAX EXPENSE. Income tax expense for the three months ended March 31, 2003
amounted to $4,000, a $21,000 decrease from the same period in 2002 with the
decrease primarily attributable to an decrease in pre-tax income. The Company's
effective tax rates for the respective periods were 23.0% and 27.0%.
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.
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 activities that are 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 imposed 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, are required to comply with
state law if it is more protective of customer privacy than the G-L-B Act.
9
The G-L-B Act contained significant revisions to the FHLB System. The G-L-B Act
imposed 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 deleted the 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 expanded 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 made membership in the FHLB voluntary for federal
savings associations.
The G-L-B Act contained 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 reduced the frequency of
Community Reinvestment Act examinations for smaller institutions and imposed
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 eliminated the SAIF special reserve and authorized 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.
Item 3 CONTROLS AND PROCEDURES
The Company's Chief Executive Officer and Chief Financial Officer have evaluated
the Company's disclosure controls and procedures (as such term is defined in
Rule 13a-14 (c) under the Exchange Act) as of a date within 90 days of the date
of filing of this Form 10-QSB. Based upon such evaluation, the Company's Chief
Executive Officer and Chief Financial Officer have concluded that such controls
and procedures are effective to ensure that the information required to be
disclosed by the Company in the reports it files under the Exchange Act is
gathered, analyzed and disclosed with adequate timeliness.
There have been no significant changes in the Company's internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of the evaluation described above.
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:
Exhibit 99 - Certification of Chief Executive Officer and
Chief Financial Officer
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 __, 2003 By: /s/ Robert E. Wilson
---------------------------------------
Robert E. Wilson
President and Chief Executive Officer
(Duly Authorized and Principal Executive,
Accounting and Financial Officer)
12
CERTIFICATION
I, Robert E. Wilson, President and Chief Executive Officer and Chief Financial
Officer of Peoples Bankcorp, Inc., certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Peoples Bankcorp,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
(a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
(c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
the registrant's board or directors (or persons fulfilling the equivalent
functions):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: May __, 2003
/s/ Robert E. Wilson
-----------------------------------------------
Robert E. Wilson
President and Chief Executive Officer and Chief
Financial Officer
13