U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(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, 1998
[ ] Transition Report Pursuant to Section 13 or 15(d) of
the Exchange Act
For the transition period from ______ to ______
Commission file number: 333-63625
PEOPLES BANKCORP, INC.
-------------------------------
(Exact Name of Small Business Issuer
as Specified in its Charter)
New York [Application Pending]
--------- ---------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
825 State Street, Ogdensburg, New York 13669
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(Address of Principal Executive Offices)
(315) 393-4340
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Registrant's Telephone Number, Including Area Code
Check whether the issuer (1) 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 [ ] No [X] The
issuer has not been subject to such filing requirements for the
past 90 days.
As of December 24, 1998, the issuer had no shares of Common
Stock issued and outstanding.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
On November 12, 1998, the Registrant's Registration
Statement on Form SB-2 was declared effective by the Securities
and Exchange Commission. The Registration Statement and the
related Prospectus which formed a part thereof related to the
offering of the Registrant's common stock in connection with the
conversion from mutual to stock form (the "Conversion") of
Ogdensburg Federal Savings and Loan Association (the
"Association"). Upon consummation of the Conversion, the
Association will become a wholly owned subsidiary of the
Registrant, and the Registrant will close the public offering of
its common stock. The Registrant has not engaged in any
business to date and is not expected to engage in any business
until the consummation of the Conversion. The Registrant will
not have any material assets or liabilities prior to the
consummation of the Conversion. The information presented in
this Form 10-QSB therefore relates solely to the business
conducted by the Association.
CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Statements of Financial Condition as of
September 30, 1998 (unaudited) and
December 31, 1997 . . . . . . . . . . . . . . . . . . .3
Statements of Income for the Three and Nine Months Ended
September 30, 1998 and 1997 (unaudited). . . . . . . . 4
Statements of Cash Flows for the Nine Months Ended
September 30, 1998 and 1997 (unaudited). . . . . . . . 5
Notes to 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. . . . . . . . . . . . . . . . . . .10
Item 2. Changes in Securities. . . . . . . . . . . . . . . . .10
Item 3. Defaults Upon Senior Securities. . . . . . . . . . . .10
Item 4. Submissions of Matters to a Vote of Security Holders .10
Item 5. Other Information. . . . . . . . . . . . . . . . . . .10
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . .10
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . .11
2
PART I - FINANCIAL INFORMATION
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
Statements of Financial Condition
September 30, 1998 and December 31, 1997
(In thousands)
September 30, December 31,
1998 1997
------------- -------------
(Unaudited)
ASSETS
------
Cash and due from banks $ 609 $ 674
Interest-bearing deposits with other banks 710 553
Securities available-for-sale, at fair value 0 737
Securities held-to-maturity (fair value of
$2,571(unaudited) in 1998 and $4,038
in 1997) 2,542 4,031
Loans, net of deferred fees 20,038 16,832
Less allowance for loan losses 170 164
-------- --------
Net loans 19,868 16,668
Premises and equipment, net 422 434
Federal Home Loan Bank stock, at cost 139 137
Accrued interest receivable 133 125
Real estate owned 0 40
Other assets 99 9
-------- --------
Total assets $ 24,522 $ 23,402
======== ========
LIABILITIES AND EQUITY
Liabilities:
Deposits:
Demand accounts $ 772 $ 638
Savings and club accounts 3,265 2,733
Time certificates 16,514 16,306
NOW and money market accounts 2,062 2,088
-------- --------
Total deposits $ 22,613 $ 21,765
-------- --------
Advance payments by borrowers for property
taxes and insurance 3 3
Other liabilities 225 57
-------- --------
Total liabilities $ 22,841 $ 21,825
Commitments and contingencies
Equity:
Retained earnings $ 1,681 $ 1,576
Accumulated other comprehensive income 0 1
-------- --------
Total equity $ 1,681 $ 1,577
-------- --------
Total liabilities and equity $ 24,522 $ 23,402
======== ========
See accompanying notes to financial statements.
3
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
Statements of Income
For the Three and Nine Months Ended September 30, 1998 and 1997
(In thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- ---------------------
1998 1997 1998 1997
------- ------ ------ ------
Interest income:
Loans $ 400 $ 356 $1,127 $1,001
Securities 41 57 168 189
Other short-term investments 12 10 40 45
------ ------- ------ ------
Total interest income 453 423 1,335 1,235
------ ------- ------ ------
Interest expense:
Deposits 269 258 791 735
Borrowings 0 0 0 0
------ ------- ------ ------
Total interest expense 269 258 791 735
------ ------- ------ ------
Net interest income 184 165 544 500
Provision for loan losses 5 1 8 1
------ ------- ------ ------
Net interest income after
provision for loan losses 179 164 536 499
------ ------- ------ ------
Non-interest income:
Service charges 13 1 27 12
Net gain on sale of securities 0 0 1 0
Other 4 15 11 24
------ ------- ------ ------
Total non-interest income 17 16 39 36
------ ------- ------ ------
Non-interest expenses:
Salaries and employee benefits 72 66 212 194
Directors fees 10 9 32 29
Building, occupancy and equipment 15 15 42 47
Data processing 10 7 25 21
Postage and supplies 7 5 19 13
Deposit insurance premium 3 3 10 7
Insurance 2 5 7 12
Other 32 20 85 57
------ ------- ------ ------
Total non-interest expenses 151 130 432 380
------ ------- ------ ------
Income before income
tax expense 45 50 143 155
Income tax expense 12 11 38 39
------ ------- ------ ------
Net income $ 33 $ 39 $ 105 $ 116
====== ======= ====== ======
See accompanying notes to financial statements.
4
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
Statements of Cash Flows
Nine Months Ended September 30, 1998 and 1997
(In thousands)
Nine Months Ended
September 30,
--------------------
1998 1997
------ ------
Cash flows from operating activities:
Net income $ 105 $ 116
Adjustment to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 12 16
(Increase)decrease in accrued interest
receivable (7) (36)
Provision for loan losses 8 1
Net gains on sales of securities (1) 0
Losses on sale - REO 10 0
Net amortization (accretion of
premium/discounts) (74) (202)
Increase in other liabilities 163 54
Deferred income taxes 6 5
(Increase) decrease in other assets (98) 10
------- -------
Net cash provided (used) by
operating activities 124 (36)
------- -------
Cash flows from investing activities:
Net increase in loans (3,208) (998)
Proceeds from sales of securities
available-for-sale 712 0
Proceeds from maturities and principal
reductions of securities available-
for-sale 18 53
Purchases of securities held-to-maturity (2,957) (4,861)
Proceeds from maturities and principal
reductions of securities held-to-
maturity 4,527 4,105
Purchase of FHLB stock (2) 0
Proceeds from sale of REO 30 0
------- -------
Net cash provided (used) by
investing activities (880) (1,701)
------- -------
Cash flows from investing activities:
Increase in deposits 848 1,177
Decrease in advance payments by borrowers
for property taxes and insurance 0 (3)
Borrowing from FHLB 0 0
Repayment to FHLB 0 0
------- -------
Net cash provided by
financing activities 848 1,174
------- -------
Net increase (decrease) in cash and
cash equivalents 92 (563)
Cash and cash equivalents at beginning of
period 1,227 1,571
------- -------
Cash and cash equivalents at end of period $ 1,319 $ 1,008
======= =======
See accompanying notes to financial statements.
5
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
Statements of Cash Flows, Continued
(In thousands)
Nine Months Ended
September 30,
--------------------
1998 1997
------ ------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Non-cash investing activities:
Additions to real estate owned $ 0 $ 40
Cash paid during the period for:
Interest 791 998
Income taxes 35 0
====== =======
See accompanying notes to financial statements.
6
OGDENSBURG FEDERAL SAVINGS AND LOAN ASSOCIATION
NOTES TO FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
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 14,
1998. A total of 134,390 shares were sold at $10.00 per share.
Prior to consummation of the conversion, the Company had no
assets or liabilities and as of September 30, 1998 and no shares
had been issued.
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 Association'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 - EARNINGS PER SHARE
As of September 30, 1998, neither the Company nor the
Association had issued any shares of common stock. As such the
statements of operations do not disclose earnings per share as
would otherwise be required.
NOTE 4 - 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.
Conversion costs at September 30, 1998 were deferred and were
deducted from the gross offering proceeds upon consummation of
the conversion.
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 int he 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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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The Company has recently been formed and accordingly, has
no results of operations. The following discussion relates only
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.
COMPARISON OF FINANCIAL CONDITION AT SEPTEMBER 30, 1998 AND
DECEMBER 31, 1997
The Association's total assets at September 30, 1998 were
$24.5 million, an increase of 4.7% from December 31, 1997's
level of $23.4 million. The increase in assets for the period
was due to increased lending activity. Net loans receivable
increased by $3.2 million or 13.67% during the nine months ended
September 30, 1998. Total liabilities increased by $1 million,
or 4.6%, from $21.8 million at December 31, 1997 to $22.8
million at September 30, 1998. At September 30, 1998, total
deposits amounted to $22.6 million, an increase of $800,000, or
3.7%, from December 31, 1998's level of $21.8 million. The
deposit growth consisted primarily of savings and club accounts
and time certificates.
Total equity increased by $104,000, or 6.6%, due to net
income from the period. At September 30, 1998, the Association
was in compliance with all applicable regulatory capital
requirements with total core and tangible capital of $1.7
million (6.86% of adjusted total assets) and total risk-based
capital of $1.8 million (12.4% of risk-weighted assets).
RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 1998 AND 1997
The Association earned net income of $105,000 for the nine
months ended September 30, 1998 as compared to $116,000 for the
nine month period ended September 30, 1997. Net income for the
three months ended September 30, 1998 amounted to $33,000 as
compared to $39,000 for the three months ended September 30,
1997. The $11,000 reduction in net income for the first nine
months of fiscal year 1998 was due primarily to the $52,000
increase in non-interest expenses during the most recent period,
partially offset by the $44,000 increase in net interest income.
The $6,000 reduction in net income for the three months ended
September 30, 1997 was due to the same factors. The primary
components of the increase in non-interest expense were
increases in compensation and related expenses, deposit
insurance and postage, supplies and other miscellaneous
expenses. In addition, during the quarter ended September 30,
1998, the Association sold a piece of real estate owned which
resulted in a loss of $10,000.
Net interest income during the three and nine months ended
September 30, 1998 increased by $19,000 and $44,000,
respectively as compared to the same periods in 1997. During
the nine months ended September 30, 1998, net loans averaged
$17.9 million for the period as compared to $15.6 million during
the first nine months of fiscal year 1997.
Year 2000 Compliance
A great deal of information has been disseminated about the
global computer problem that may occur in the year 2000 which
would affect the speed and accuracy of the data processing that
is essential to its operations. The Association is conducting a
thorough review of its internal systems as well as the efforts
of its outside data processing service provider. The progress
of the plan is monitored by the Association's board of
directors. The Association does not expect to incur significant
costs to replace existing hardware or software. The greatest
potential for problems, however, concerns the data processing
provided by its third party service bureau. The service bureau
with which the Association operates is providing the Association
with periodic updates of its compliance progress. The
Association
8
has participated in the first phase of testing with the provider
satisfactorily with the second phase to be completed prior to
December 31, 1998. The service bureau has indicated that it
will be compliant by such date. With respect to the
Association's teller/platform computer system, we are converting
to a new system that is year 2000 compliant which will be
completed by April 30, 1999. The Association is in the process
of developing a contingency plan to deal with the potential that
its service bureau is unable to bring its systems into
compliance by September 30, 1998. The Association believes that
it would use manual systems as a contingency plan if its current
provider is unable to resolve this problem in time. There can
be no assurance in this regard, however, and it is possible that
as a result the Association could experience data processing
delays, errors or failures, all of which could have a material
adverse impact on its financial condition and results of
operations. The Association estimates that its expenses related
to year 2000 compliance will be approximately $5,000.
The Association has also evaluated our non-information
technology systems (for example, the alarm system, heating and
air conditioning system) to determine if such systems may have
embedded technology that could also be affected by the year 2000
problem. The Association has determined that the only system of
this type that could be affected is its alarm system. The
Association has been informed, however, by the vendor that the
system is year 2000 compliant and has been fully tested.
The Association is in the process of installing a new
teller/platform computer system. The costs of the new system
will be approximately $50,000. The installation of the new
system us not a result of year 2000 compliance. As a result,
such costs will be capitalized.
Computer problems experienced by the Association's
commercial borrowers could have an adverse effect on their
business operations and their ability to repay their loans when
due. The Company has recently begun evaluating year 2000
readiness of its commercial loan applicants as part of the loan
underwriting process and is calling upon major existing
borrowers to assess their readiness and identify potential
problems.
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, 1998 was 4%. For the month ended
September 30, 1998 the Association was in compliance. As a
result of its mutual to stock conversion, the Association's
liquidity will increase due to the additional funds it received.
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, although
historically the Association has done this rarely. 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
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security-Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K. During the quarter ended
September 30, 1998, the registrant did not file any current
reports on Form 8-K.
10
SIGNATURES
In accordance with the requirements of the Securities
Exchange Act of 1934, the registrant caused this report to be
signed on its behalf by the undersigned, thereunto duly
authorized.
PEOPLES BANKCORP, INC.
Date: December 28, 1998 By: /s/ Robert E. Wilson
---------------------------------
Robert E. Wilson
President and Chief Executive
Officer
(Duly Authorized and Principal
Executive, Accounting and
Financial Officer)
/s/ Todd R. Mashaw
---------------------------------
Todd R. Mashaw
Accounting Officer
11