UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the Quarterly Period Ended December 31, 2001
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the Transition Period
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Commission File Number 0-49619
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PEOPLES OHIO FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Ohio 31-1795575
------------------------------- ---------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
635 South Market Street, Troy, Ohio 45373
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(Address of Principal Executive Offices) (Zip Code)
Issuer's Telephone Number, including Area Code (937) 339-5000
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(Former name, former address and former fiscal year, if changed since
last report)
INDICATED BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILLED ALL
REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILLING REQUIREMENTS FOR THE PAST 90 DAYS.
YES X NO
-------------- ---------------
Applicable Only to Corporate Issuers
As of February 8, 2002, there were 7,439,650 common shares of the registrant
issued and outstanding.
On January 31, 2002, Peoples Ohio Financial Corporation ("Peoples Ohio") became
the holding company of Peoples Savings Bank of Troy ("Peoples Savings"). Prior
to that time, Peoples Ohio had no substantial assets or liabilities. As a
result, Peoples Ohio is filing the Peoples Savings 10-Q for the quarter ended
December 31, 2001 as its own. The following financial information relates solely
to Peoples Savings and its subsidiary.
PEOPLES SAVINGS BANK AND SUBSIDIARY
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INDEX
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PART I. FINANCIAL INFORMATION
-----------------------------
ITEM I. Financial Statements
Consolidated Balance Sheets as of December
31, 2001 and June 30, 2001.
Consolidated Statements of Income for the
three and Six months ended December 31, 2001
and 2000.
Consolidated Statement of Shareholders'
Equity for the six months ended December 31,
2001.
Consolidated Statements of Cash Flows for the six
months ended December 31, 2001 and 2000
Notes to Consolidated Financial Statements.
ITEM II. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
ITEM III. Quantitative and Qualitative Disclosures about Market Risk
PART II. OTHER INFORMATION
Item I. Legal Proceedings
Item II. Changes in Securities and Use of Proceeds
Item III. Defaults upon Senior Securities
Item IV. Submission of Matters to a Vote of Security Holders
Item V. Other Information
Item VI. Exhibits and Reports on Form 8-K
SIGNATURE PAGE
INDEX TO EXHIBITS
2
PEOPLES SAVINGS BANK AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DEC 31
2001 JUNE 30
ASSETS (UNAUDITED) 2001
------ --------------- ---------------
Cash on hand and in other financial institutions $ 3,608,917 $ 5,118,227
Investment securities, held to maturity, (fair value of 1,242,934 and
$1,503,000 at December 31 and June 30, 2001) 1,238,225 1,484,294
Loans, net of allowance for loan losses of 843,909 and 843,081 201,162,290 197,482,915
Office properties and equipment 4,373,008 4,193,858
Federal Home Loan Bank stock 4,937,800 4,785,900
Interest receivable 1,064,682 1,026,513
Other assets 513,199 749,118
--------------- ---------------
Total assets $ 216,898,122 $ 214,840,825
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits $ 112,251,979 $ 108,398,334
Federal Home Loan Bank (FHLB) advances 80,414,632 83,521,561
Interest payable 357,199 259,813
Other liabilities 1,425,430 1,277,946
--------------- ---------------
Total liabilities 194,449,241 193,457,654
--------------- ---------------
Commitments and Contingent Liabilities -- --
Equity for ESOP Shares 509,685 381,498
Shareholders' equity:
Preferred stock, $1.00 par value, 10,000,000 shares
authorized; none issued or outstanding -- --
Common stock, $1.00 par value, 90,000,000 shares
authorized; 7,439,650 and 7,439,650 shares issued less
ESOP shares of 135,916 and 127,166 7,303,734 7,312,484
Additional paid-in capital 203,084 203,084
Retained earnings 14,432,378 13,486,105
--------------- ---------------
Total shareholders' equity 21,939,196 21,001,673
--------------- ---------------
$ 216,898,122 $ 214,840,825
=============== ===============
See notes to Consolidated Financial Statements
3
PEOPLES SAVINGS BANK AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
DEC 31 DEC 31
2001 2000 2001 2000
---- ---- ---- ----
INTEREST INCOME
Interest and fees on loans $3,961,725 $3,955,700 $7,890,276 $7,845,700
Interest on mortgage-backed securities and other securities 21,509 29,986 46,256 61,675
Other interest and dividend income 69,800 103,004 159,819 207,194
---------- ---------- ---------- ----------
Total interest income 4,053,034 4,088,690 8,096,351 8,114,569
---------- ---------- ---------- ----------
INTEREST EXPENSE
Deposits 883,146 1,028,337 1,845,408 2,097,744
Borrowings 1,085,947 1,419,370 2,229,382 2,677,108
---------- ---------- ---------- ----------
Total interest expense 1,969,093 2,447,707 4,074,790 4,774,852
---------- ---------- ---------- ----------
Net interest income 2,083,941 1,640,983 4,021,561 3,339,717
PROVISION FOR LOAN LOSSES 6,000 8,000 --
---------- ---------- ---------- ----------
Net interest income after
provision for loan losses 2,077,941 1,640,983 4,013,561 3,339,717
---------- ---------- ---------- ----------
OTHER INCOME
Service charges on deposit accounts and other 156,491 131,340 298,522 253,884
Fiduciary activities 197,318 208,802 385,854 415,366
Other income 44,806 47,742 98,072 82,336
---------- ---------- ---------- ----------
Total other income 398,615 387,884 782,448 751,585
---------- ---------- ---------- ----------
OTHER EXPENSES
Salaries and employee benefits 660,036 531,321 1,293,415 1,076,618
Net occupancy expenses 102,848 74,211 203,511 160,165
Equipment expenses 38,476 31,772 74,561 60,543
Data processing fees 87,675 103,855 192,418 195,506
State of Ohio franchise taxes 56,250 48,115 112,500 96,230
Other expenses 524,091 351,223 952,777 669,901
---------- ---------- ---------- ----------
Total other expenses 1,469,376 1,140,497 2,829,182 2,258,964
---------- ---------- ---------- ----------
INCOME BEFORE FEDERAL INCOME TAX 1,007,181 888,370 1,966,826 1,832,338
FEDERAL INCOME TAX EXPENSE 347,167 303,530 677,927 626,030
---------- ---------- ---------- ----------
NET INCOME $ 660,015 $ 584,840 $1,288,899 $1,206,308
========== ========== ========== ==========
BASIC EARNINGS PER SHARE $ 0.09 $ 0.08 $ 0.17 $ 0.16
DILUTED EARNINGS PER SHARE $ 0.09 $ 0.08 $ 0.17 $ 0.16
DIVIDENDS PER SHARE $ 0.030 $ 0.015
See notes to Consolidated Financial Statements
4
PEOPLES SAVINGS BANK AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED DECEMBER 31, 2001
(Unaudited)
Additional Total
Common paid-in Retained shareholders'
stock capital earnings equity
----------------- -------------- ---------------- -----------------
BALANCE AT JUNE 30, 2001 $ 7,312,484 $ 203,084 $ 13,486,105 $ 21,001,673
Net income -- -- 1,288,899 1,288,899
Cash dividend declared
on common stock ($.030 per share) -- -- (223,190) (223,190)
Net change in equity from ESOP (8,750) (119,437) (128,187)
shares
------------
BALANCE AT DECEMBER 31, 2001 $ 7,303,734 $ 203,084 $ 14,432,378 $ 21,939,196
============ ============ ============ ============
See Notes to Consolidated Financial Statements
5
PEOPLES SAVINGS BANK AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
SIX MONTHS ENDED
DEC 31
2001 2000
---- ----
OPERATING ACTIVITIES
Net income $ 1,288,899 $ 1,206,307
Adjustments to reconcile net income
to net cash provided by operating activities
Provision for loan losses 8,000 0
Depreciation and amortization 173,792 162,811
Amortization of deferred loan fees (29,723) (19,999)
Investment securities amortization (accretion), net (1,948) -98
Federal Home Loan Bank stock dividends 151,900 (161,200)
Net change in other assets/ other liabilities 142,717 (982,247)
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Net cash provided by operating activites 1,733,637 205,574
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INVESTING ACTIVITIES
Net change in loans (3,657,652) (6,610,924)
Federal Home Loan Bank stock purchased 0 (478,200)
Proceeds from maturities of securities held to maturity 244,121 144,662
Purchases of premises and equipment (352,942) (671,230)
------------- -------------
Net cash used
by investing activities (3,766,473) (7,615,692)
------------- -------------
FINANCING ACTIVITIES
Net change in
Interest-bearing demand and savings deposits 3,552,204 1,536,802
Certificates of deposit 301,441 (7,752,215)
Proceeds from FHLB advances 134,000,000 148,000,000
Repayment of FHLB advances (137,106,929) (134,100,502)
Cash dividends (223,190) (111,595)
Puchase of stock 0 (304,906)
Proceeds from issuance of common stock -- 186,600
------------- -------------
Net cash provided by
financing activities 523,526 7,454,184
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Net Change in Cash and Cash Equivalents (1,509,310) 44,066
Cash and cash equivalents, Beginning of Period 5,118,227 4,082,300
------------- -------------
Cash and cash equivalents, End of Period $ 3,608,917 $ 4,126,366
============= =============
See notes to Consolidated Financial Statements
6
Peoples Savings Bank and Subsidiary
Notes to Unaudited Consolidated Financial Statements
For the six months ended December 31, 2001
(1) Basis of Presentation
The consolidated balance sheet as of December 31, 2001 and the related
consolidated statements of income and cashflows for the six months ended
December 31, 2001 and 2000 and the consolidated statement of shareholders'
equity for the six months ended December 31, 2001 are unaudited. In the opinion
of management, all adjustments necessary for a fair presentation of such
financial statements have been included. Such adjustments consisted only of
recurring items. Interim results are not necessarily indicative of results for a
full year. The Bank's 2001 Annual Report should be read as a supplement to this
quarterly report. The statements were prepared in accordance with accounting
principles generally accepted in the United States of America for interim
financial statements and with the instructions to Form 10-Q and do not include
all of the information and footnotes required by accounting principles generally
accepted in the United States of America for complete financial statements.
(2) Loans
Loans are net of loan loss allowances of $843,909 at December 31, 2001 and
$843,081 as of June 30, 2001.
(3) Common Stock
As of December 31, 2001, the Bank had 7,439,650 shares of stock issued less ESOP
shares of 135,916. As of December 31, 2001, the Bank had 959,686 stock options
outstanding. From June 30, 2001 to December 31, 2001 no options were exercised.
(4) Cash Dividend
A cash dividend of $.03 per common share was declared on September 25, 2001, to
shareholders of record on October 5, 2001, payable on October 16, 2001.
(5) Earnings Per Share
The following table is for the three and six-month periods ending December 31,
2001 and 2000 and reflects the weighted average number of shares of common stock
for both basic and diluted EPS as well as the dilutive effect of stock options.
Three Months Ended Six Months Ended
December 31, December 31,
2001 2000 2001 2000
---- ---- ---- ----
Weighted average number of common shares
outstanding (basic EPS) 7,439,650 7,439,650 7,439,650 7,438,807
Dilutive effect of stock options 319,710 267,881 283,788 295,689
--------- --------- --------- ---------
Weighted average number of common shares
and equivalents outstanding (diluted EPS) 7,759,360 7,707,531 7,723,438 7,734,496
========= ========= ========= =========
7
Peoples Savings Bank and Subsidiary
Notes to Unaudited Consolidated Financial Statements
For the six months ended December 31, 2001
(6) Segment Information
The Bank uses differences in products as the basis for defining its reportable
segments. The Bank reports one product segment: Bank operations.
The Bank operations segment consists of the business of offering savings
deposits through issuance of savings accounts, money market accounts and
certificates of deposit and lending or utilizing funds primarily for the
purchase, construction and improvement of real estate. The largest percentage of
the mortgage loans are fixed-rate mortgages. The Bank also attempts to originate
as many adjustable-rate mortgages as feasible. Mortgage loans are generally made
for up to thirty years in length. The Bank's principal sources of income are
interest on mortgage loans and fees for service charges, as well as interest and
dividends on investments.
In addition to the product segment, the Bank reports on personal trust services
in an Other segment. The Bank began trust operations in July 1995 and derives
revenue from management fees charged by the Trust Department for serving as
trustee, custodian of IRA accounts, and agent for personal investment accounts.
Fees are based on market values of each account and are charged quarterly as a
percentage of market value based on a published fee schedule. The Trust
Department sponsors no common, mutual, or proprietary funds.
The accounting policies of the segments are the same as those described in the
summary of the significant accounting policies of the Bank's 2001 Annual report.
There have been no changes since the 2001 Annual Report in the basis of
segmentation or on the basis of measurement of segment profit or loss. The Bank
evaluates performance of the segments based on net income. The Bank does not
evaluate assets by segment; therefore assets are not included in the table
below.
The following table summarizes the financial results of the Bank's business
segments for the six months ending December 31, 2001 and 2000.
Bank Operations Other Total
--------------- ----- -----
2001
----
Interest income $8,096,351 -- $8,096,351
Interest expense 4,074,790 -- 4,074,790
---------- ---------- ----------
Net interest income 4,021,561 -- 4,021,561
---------- ---------- ----------
Non-interest income 396,594 385,854 782,448
Federal income tax expense 639,091 38,836 677,927
Net income 1,215,167 73,732 1,288,899
Bank Operations Other Total
--------------- ----- -----
2000
----
Interest income $8,114,569 -- $8,114,569
Interest expense 4,774,852 -- 4,774,852
---------- ---------- ----------
Net interest income 3,339,717 -- 3,339,717
---------- ---------- ----------
Non-interest income 336,220 415,366 751,586
Federal income tax expense 574,728 51,302 626,030
Net income 1,106,721 99,587 1,206,308
5
Peoples Savings Bank and Subsidiary
December 31, 2001
Note Regarding 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 Bank's operations and the Bank'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 Bank's market area.
Management Discussion and Analysis of the Financial Condition and Results of
Operations.
General
During the quarter ended December 31, 2001, the Bank earned $660,015.
Compared to the same quarter of fiscal 2001, net income increased by $75,175, or
12.9%. The increase in income was due to an increase in net interest income as
well as non-interest income, partially offset by an increase in non-interest
expenses and Federal income taxes.
The asset size of the Bank grew by $2,057,297 from June 30, 2001 to
December 31, 2001. The asset growth was due to the growth in loan balances as a
result of the continued strong origination market in the Miami Valley area. The
Bank funded this loan growth primarily through an increase in deposits.
The Bank's Core and Tangible Capital Ratios, as of December 31, 2001, were
10.35% of Total Assets. As of December 31, 2001, the Bank's Risk-based Capital
Ratio was 14.83% of total risk-adjusted assets. The percentage of nonperforming
loans to gross loans was .19% on December 31, 2000 to .63% on December 31, 2001.
The percentage of nonperforming loans to gross loans was .22% at June 30, 2001.
At December 31, 2001 the Bank had no impaired loans.
Changes in the allowance for loan losses are as follows:
December 31,
2001 2000
-----------------------------
Allowance at beginning of period, June 30, $ 843,081 $ 887,882
Provision charged to income 8,000 --
Recoveries of amounts previously charged off 8,825 226
Losses charged to allowance (15,998) (8,001)
Allowance at end of period $ 843,909 $ 880,147
=============================
The following table compares loans greater than 90 days past due and on
non-accrual and those loans greater than 90 days and still accruing.
December 31,
2001 2000
---- ----
Past due 90+ on non-accrual $ 149,828 $ 178,439
Past due 90+ and still accruing 1,148,000 109,820
---------- ----------
Total loans 90+ past due $1,297,828 $ 288,259
========== ==========
The Trust Department had $144,355,765 in assets under management as of
December 31, 2001 compared to $147,262,065 as of December 31, 2000. At June 30,
2001 assets under management were $143,567,000.
9
Three Months Ended December 2001 Compared to December 2000
Overall
The Bank earned $660,015 for the second quarter of fiscal 2002 compared
to $584,840 for the same period last year. The increase was primarily
due to the increase in net interest income as well as non-interest
income partially offset by an increase in non-interest expenses and
Federal income tax expense.
Interest Income
The Bank's interest income increased by $35,656 for the six-month
period ended December 31, 2001 over the same period in 2000. Although loan
balances increased by approximately $4.7 million from December 31, 2000 to
December 31, 2001 a corresponding interest income increase was partially offset
by lower interest rates on the loan growth.
Interest Expense
The decrease in interest expense during the three-month period ended
December 31, 2001 compared to December 31, 2000 of $478,614, was due to a
decrease in interest expense on both deposits and borrowings. The Bank's cost of
savings decreased by 126 basis points for the period ended December 31, 2001,
relative to December 31, 2000.
Net Interest Income
The Bank's net interest income increased by $442,958 for the
three-month period ended December 31, 2001 over the same period in 2000. The net
interest rate spread increased by 82 basis points for the period, and loans
increased by $2.19 million in the quarter. Management believes that the net
interest margin may increase somewhat in fiscal 2002 as a result of expected
stable loan originations and a decrease in interest rates of the Bank's
liabilities.
Provision for Loan Losses
Management recorded a $6,000 provision for loan loss in the second
quarter of fiscal 2002. This was a result of management's analysis of the
allowance accounts in relation to the current quality of the loan portfolio and
a decrease in the level of allowance during the fiscal year ended June 30, 2001.
If the quality of the portfolio diminishes or as the level of allowance
decreases, management may deem it necessary to provide for loan losses in future
periods.
Non-interest Income
Non-interest income increased by $10,731 for the period ended December
31, 2001 from the same period in 2000. Service charges and other miscellaneous
income increased by $22,215 for the period. This increase was partially offset
by a decrease in revenue from the Trust Department due to a decrease in the
market value of assets under management.
Non-interest Expenses
Non-interest expenses, for the three-month period ended December 2001, increased
by $328,879 as compared to the same period last year. The increase resulted
primarily from increases in compensation, advertising, professional and legal
expenses and State of Ohio franchise taxes. The Bank opened a full service
banking center in Clayton, Ohio in January 2001. In addition the Bank announced
its intentions in June 2001 to form a savings and loan holding company. While
initial startup expenses are expected to exceed revenues, management believes
the branch and the holding company will add to the long-term profitability of
the organization.
10
Federal Income Tax Expense
The Bank's federal income tax expense increased by $43,637 during the
period ended December 31, 2001, compared to the same period ended 2000,
principally as a result of the increase in earnings.
Regulatory Capital Requirements
Savings and loans are subject to regulatory capital requirements. The
Bank met all three tiers of the capital requirements as of December 31, 2001. At
that date, the Bank had tangible capital of $22,448,881 or 10.35% of total
assets, which was $19,195,409 in excess of the tangible requirement of 1.5% of
total assets or $3,253,472. The Bank's capital exceeded the core leverage
requirement of 3% of total assets or $6,506,944 by $15,941,937 with core capital
of $22,448,881 or 10.35% of total assets. The Bank had risk-based capital of
$23,292,790 or 14.83% of risk-adjusted assets, as defined by FIRREA, which was
$10,731,082 in excess of the requirement of $12,561,708 or 8% of risk-adjusted
assets. By meeting all three of these standards, Management believes it will not
be subject to any OTS restrictions as of December 31, 2001.
Liquidity
Total liquidity (consisting of cash and amounts due from deposit
institutions, interest-bearing deposits in other banks, and investments
securities) was $6.5 million at December 31, 2001, which is an increase of $450
thousand from September 30, 2001. The regulatory liquidity of the Bank was 5.25%
at December 31, 2001 and 4.38% at September 30, 2001. Funds are available
through FHLB advances to meet the Bank's liquidity needs.
Recent Accounting Pronouncements
In July 2001, the FASB (Financial Accounting Standards Board) issued
Statements (SFAS) No. 141, "Accounting for Business Combinations" and No. 142,
"Accounting for Goodwill and Intangible Assets". These Statements will have no
material effect on the Company at this time since it has not been involved in a
"business combination" subject to SFAS No. 141 and does not have goodwill or
other intangible assets subject to SFAS No. 142.
Item III. Quantitative and Qualitative Disclosures about Market Risk
There has been no significant change in the Bank's market risk since
June 30, 2001, except as discussed in the Management Discussion and Analysis.
Part II. OTHER INFORMATION
Item I. Legal Proceedings
The Bank is not engaged in any legal proceedings of a material nature at
the present time. From time to time the Bank is a party to legal proceedings in
the ordinary course of business wherein it enforces its security interest in
loans made by it.
Item II. Changes in Securities and Use of Proceeds
Not Applicable
Item III. Defaults upon Senior Securities
Not Applicable
Item IV. Submission of Matters to a Vote of Security Holders
Not Applicable
11
Item V. Other Information
Not Applicable
Item VI. Exhibits and Reports on Form 8-K
3(i) Peoples Ohio Financial Corporation Articles of Incorporation,
as amended
3(ii) Peoples Ohio Financial Corporation Amended and Restated Code
of Regulations
12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
Peoples Ohio Financial Corporation
Dated: February 4, 2002 By /s/ Ronald B. Scott
------------------------------------
Ronald B. Scott
President
By /s/ Mark A. Douglas
------------------------------------
Mark A. Douglas
Treasurer
13
Index to Exhibits
Item Description
3(i) Peoples Ohio Financial Corporation Incorporated by reference to the
Articles of Incorporation Form 8-A filed by Peoples Ohio
Financial Corporation with the
Securities Exchange Commission
on February 8, 2002 (the "Form
8-A"),Exhibit 2(a)
3(ii) Peoples Ohio Financial Corporation Incorporated by reference to the
Amended and Restated Code of Form 8-A, Exhibit 2(b)
Regulations
14