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 March 31, 1999
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Exchange Act
For the transition period from ______ to ______
Commission file number: 0-25217
PEOPLES BANKCORP, INC.
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(Exact Name of Small Business Issuer as Specified in its Charter)
New York 16-1560886
- ------------------------------- -----------------------
(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 [X ] No [ ]
As of May 10, 1999, the issuer had 134,390 shares of Common
Stock issued and outstanding.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Financial Condition
as of March 31, 1999 (unaudited)
and December 31, 1998 . . . . . . . . . . . . . . . 3
Consolidated Statements of Income for the Three
Months Ended March 31, 1999 and 1998
(unaudited) . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1999 and
1998 (unaudited). . . . . . . . . . . . . . . . . 5-6
Notes to Consolidated Financial Statements. . . . . . . 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations. . . . . . . . . . . . . . . . . . .8-10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . .11
Item 2. Changes in Securities. . . . . . . . . . . . . . . .11
Item 3. Defaults Upon Senior Securities. . . . . . . . . . .11
Item 4. Submissions 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 INFORMATION
PEOPLES BANKCORP, INC.
Consolidated Statements of Financial Condition
March 31, 1999 and December 31, 1998
(In thousands)
March 31, December 31,
1999 1998
--------- ------------
ASSETS (Audited)
------
Cash and Cash Equivalents:
Cash and due from banks $ 1,352 $ 1,194
Interest-bearing deposits with other banks 1,896 1,281
------- -------
Total Cash and Cash Equivalents 3,248 2,475
Securities available-for-sale, at fair value 0 0
Securities held-to-maturity (fair value of
$1,064 (unaudited) at March 31, 1999 and
$2,069 at December 31, 1998) 1,056 2,057
Loans, net of deferred fees 20,230 19,984
Less allowance for loan losses 170 169
------- -------
Net loans $20,060 $19,815
Premises and equipment, net 450 434
Federal Home Loan Bank stock, at cost
required by law 139 139
Accrued interest receivable 115 151
Real estate owned 0 0
Other assets 7 3
------- -------
TOTAL ASSETS $25,075 $25,074
======= =======
LIABILITIES AND EQUITY
Liabilities:
Deposits:
Demand accounts - non-interest bearing $ 540 $ 642
Savings and club accounts -interest
bearing 2,907 2,806
Time certificates -interest bearing 16,684 16,453
NOW and money market accounts -interest
bearing 1,958 2,293
------- -------
Total deposits $22,089 $22,194
======= =======
Advance payments by borrowers for property
taxes and insurance 3 3
Other liabilities 329 266
------- -------
Total liabilities $22,421 $22,463
======= =======
Commitments and contingencies
Stockholders' Equity:
Preferred stock $.01 par value per share,
500,000 shares authorized, no shares
issued or outstanding 0 0
Common stock of $.01 par value, 3,000,000
shares authorized, 134,390 shares issued
and outstanding at March 31, 1999 and
December 31, 1998 1 1
Additional paid-in capital 1,000 1,000
Retained earnings 1,760 1,717
Accumulated other comprehensive income 0 0
Loan to employee stock ownership plan (107) (107)
------- -------
Total stockholders' equity $ 2,654 $ 2,611
------- -------
Total liabilities and stockholders'
equity $25,075 $25,074
======= =======
See accompanying notes to consolidated financial statements.
3
PEOPLES BANKCORP, INC.
Consolidated Statements of Income
For the Three Months Ended March 31, 1999 and 1998
(In thousands)
Three Months Ended
March 31,
--------------------
1999 1998
------ ------
Interest income on:
Interest income:
Loans $ 411 $371
Securities 26 57
Other short-term investments 24 11
-------- ----
Total interest income 461 439
Interest expense:
Deposits 254 258
Borrowings 0 0
-------- ----
Total interest expense 254 258
Net interest income 207 181
Provision for loan losses 11 0
Net interest income after
provision for loan losses 196 181
-------- ----
Non-interest income:
Service charges 8 5
Other 7 8
-------- ----
Total non-interest income 15 13
Non-interest expenses:
Salaries and employee benefits 72 77
Directors fees 10 13
Building, occupancy and equipment 14 14
Data processing 8 8
Postage and supplies 5 3
Deposit insurance premium 3 3
Insurance 2 2
Other 33 17
-------- ----
Total non-interest expenses 147 137
Income before income tax expense 64 57
Income tax expense 21 14
-------- ----
Net income $ 43 $ 43
======== ====
Earnings per share
Basic and diluted $ .32 N/A
--------
Weighted average shares outstanding 134,390 N/A
--------
See accompanying notes to consolidated financial statements.
4
PEOPLES BANKCORP, INC.
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1999 and 1998
(In thousands)
Three Months Ended
March 31,
---------------------
1999 1998
-------- -------
Cash flows from operating activities:
Net income $ 43 $ 43
Adjustment to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization (16) 4
(Increase)decrease in accrued interest
receivable 36 (22)
Provision for loan losses 1 1
Net gains on sales of securities 0 (1)
Net amortization (accretion of
premium/discounts) 0 (97)
Increase in other liabilities 63 60
Deferred income taxes 0 0
(Increase) decrease in other assets (4) (5)
------ -------
Net cash provided (used) by
operating activities 123 (17)
Cash flows from investing activities:
Net increase in loans (246) 106
Proceeds from sales of securities
available-for-sale 0 718
Proceeds from maturities and principal
reductions of securities available-for-sale 0 19
Purchases of securities held-to-maturity 0 (2,957)
Proceeds from maturities and principal
reductions of securities held-to-maturity 1,001 1,981
Purchase of FHLB stock 0 0
Purchase of fixed assets (18) 0
------ -------
Net cash provided (used) by
investing activities 737 (132)
Cash flows from investing activities:
Increase in deposits (105) 247
------ -------
Net cash provided by
financing activities (105) 247
Net increase (decrease) in cash and cash equivalents 773 98
Cash and cash equivalents at beginning of period 2,475 1,227
------ -------
Cash and cash equivalents at end of period $3,248 $ 1,325
====== =======
5
PEOPLES BANKCORP, INC.
Consolidated Statements of Cash Flows, Continued
(In thousands)
March 31, March 31,
1999 1998
-------- -------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Non-cash investing activities:
Additions to real estate owned $ 0 $ 0
Cash paid during the period for:
Interest 254 258
Income taxes 20 42
===== =====
See accompanying notes to consolidated financial statements.
6
PEOPLES BANKCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
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 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.
7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
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.
COMPARISON OF FINANCIAL CONDITION AT MARCH 31, 1999 AND DECEMBER
31, 1998
Total assets at March 31, 1999 amounted to $25.1 million, a
$1,000 increase from December 31, 1998's level of $25.1 million.
The composition of the Company's balance sheet had changed
somewhat with cash and cash equivalents increasing by $773,000
from $2.5 million at December 31, 1998 to $3.2 million at March
31, 1998, an increase of 31.23%. In addition, net loans rose by
$245,000, or 1.23%, from $19.8 million at December 31, 1998 to
$20.1 million at March 31, 1999. The growth in the loan
portfolio consisted primarily of consumer loans. The growth in
cash and cash equivalents and the loan portfolio was financed by
the funds received from maturing securities and principal
payments thereon. Total liabilities at March 31, 1999 were
essentially unchanged from December 31, 1998, decreasing by
$42,000 to $22.4 million. Deposits, which comprise the majority
of total liabilities, amounted to $22.1 million at March 31,
1999, down from $22.2 million at December 31, 1998 for a
decrease of $105,000 with decreases in demand and NOW accounts
being partially offset by increases in savings accounts and
certificates of deposit. Total stockholders' equity at March
31, 1998 amounted to $2.7 million as compared to $2.6 million at
December 31, 1998 with the increase attributable to the
retention of earnings from the period. At March 31, 1999 the
Association was in compliance with all applicable regulatory
capital requirements with total core and tangible capital of
$2.2 million (9.2% of adjusted total assets) and total
risk-based capital of $2.4 million (16.8% of risk weighted
assets).
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1999
AND 1998
NET INCOME. Net income for the three months ended March
31, 1999 amounted to $43,000 as compared to $43,000 for the
first three months of fiscal 1998 with an increase in net
interest income offset by an increase in non-interest expenses.
NET INTEREST INCOME. Net interest income before provision
for loan losses increased from $181,000 for the first three
months of 1998 to $207,000 for the first three months of 1999.
The increase in net interest income was primarily due to a
$40,000 increase in interest income from loans, partially offset
by a decrease of $31,000 in interest income from securities due
to a reduction in the securities portfolio. Interest expense
for the first three months of 1999 amounted to $254,000, a
$4,000 decrease from the first three months of 1998.
PROVISION FOR LOAN LOSSES. For the first three months of
1999, the Company recorded a provision for loan losses of
$11,000 as compared to no provision for the first three months
of 1998. The higher provision in the current period was due to
charge-offs during the 1999 period.
8
NON-INTEREST INCOME. Non-interest income for the first
three months of 1999 amounted to $15,000 as compared to $13,000
for the first three months of 1998 with the increase
attributable to an increase in service charges.
NON-INTEREST EXPENSES. Non-interest expenses for the first
quarter of 1999 totaled $147,000 for a $10,000 or 7.29% increase
as compared to the first quarter of 1998. The increased expense
level was attributable to a $16,000 increase in other expenses
consisting mainly of additional legal and SEC filing fees during
1999 due to the Company's status as a public company. These
increases were partially offset by a $5,000 reduction in
salaries and employee benefits and $3,000 decline in directors'
fees. The reduction in salaries was attributable to a lesser
number of pay periods during the 1999 period, partially offset
by normal salary adjustments. The decrease in directors' fees
in the 1999 period as compared to the prior year was due to the
change in timing of the Annual Meeting. During 1998, the
Association held its Annual Meeting of Members (for which
directors receive fees) during the first quarter.
INCOME TAX EXPENSE. Income tax expense for the first three
months of 1999 amounted to $21,000, a $7,000 increase from the
first three months of 1998's level of $14,000 with the increase
primarily attributable to an increase in pre-tax income. The
Company's effective tax rates for the first three months of 1999
and 1998 were 32.8% and 24.6%, respectively.
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 Company 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 its board of directors. The Company
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 Company
operates is providing it with periodic updates of its compliance
progress. The Company has participated in the first and second
phases of testing with the provider satisfactorily prior to
December 31, 1998. The service bureau has indicated that it
will be compliant by such date. With respect to the Company's
teller/platform computer system, it is converting to a new
system that is year 2000 compliant which will be completed by
April 30, 1999. The Company 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. The
Company 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 Company 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 Company estimates that
its expenses related to year 2000 compliance will be
approximately $5,000.
The Company has also evaluated its non-information
technology systems (for example, its alarm system, its 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 Company has determined that the only system of
this type that could be affected is its alarm system. The
Company has been informed, however, by the vendor that the
system is year 2000 compliant and has been fully tested.
The Company is in the process of installing a new
teller/platform computer system. The costs of the new system
will be approximately $60,000. The installation of the new
system is not a result of Year 2000 compliance. As a result,
such costs will be capitalized.
Computer problems experienced by the Company'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.
9
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 March 31, 1999 was 4%. For the month ended March 31,
1999 the Association was in compliance.
The Association's primary sources of funds are deposits,
repayment of loans and mortgage-backed securities, maturities of
investments and interest-bearing deposits, funds provided from
operations. The Association is also able to obtain advances
from the Federal Home Loan Bank of New York, 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.
10
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
March 31, 1999, the registrant filed a current report on Form
8-K to report the change in independent accountants. A current
report on Form 8-K/A was also filed to file the predecessor's
accountant's response thereto.
11
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: May 10, 1999 By: /s/ Robert E. Wilson
---------------------------------
Robert E. Wilson
President and Chief Executive
Officer
(Duly Authorized and Principal
Executive, Accounting and
Financial Officer)
12