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 March 31, 2002
[ ] 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
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Applicable Only to Corporate Issuers
As of April 17, 2002, there were 7,439,650 common shares of the registrant
issued and outstanding.
PEOPLES OHIO FINANCIAL CORPORATION
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INDEX
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PART I. FINANCIAL INFORMATION
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ITEM I. Financial Statements
Condensed Balance Sheets as of March 31,
2002 and June 30, 2001.
Condensed Statements of Income for the three
and Nine months ended March 31, 2002 and
2001.
Condensed Statement of Shareholders' Equity
for the nine months ended March 31, 2002.
Condensed Statements of Cash Flows for the nine
months ended March 31, 2002 and 2001
...
Notes to Condensed 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
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INDEX TO EXHIBITS
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2
PEOPLES OHIO FINANCIAL CORPORATION
CONDENSED BALANCE SHEETS
MARCH 31 JUNE 30
2002 2001
ASSETS (Unaudited)
------ ------------ ------------
Cash on hand and in other financial institutions $ 5,254,483 $ 5,118,227
Investment securities, held to maturity, (fair value of $1,164,301 and
$1,503,000 at March 31, 2002 and June 30, 2001) 1,127,903 1,484,294
Loans, net of allowance for loan losses of $831,246 and $843,081 201,149,107 197,482,915
Office properties and equipment 4,575,099 4,193,858
Federal Home Loan Bank stock 4,992,500 4,785,900
Interest receivable 1,134,443 1,026,513
Other assets 688,485 749,118
------------ ------------
Total assets $218,922,020 $214,840,825
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Liabilities:
Deposits $118,271,971 $108,398,334
Federal Home Loan Bank (FHLB) advances 75,859,912 83,521,561
Interest payable 220,463 259,813
Other liabilities 1,651,701 1,277,946
------------ ------------
Total liabilities 196,004,047 193,457,654
------------ ------------
Commitments and Contingent Liabilities -- --
Equity for ESOP Shares 472,360 381,498
Shareholders' equity:
Preferred stock, $1.00 par value, 1,000,000 shares
authorized; none issued or outstanding -- --
Common stock, $1.00 par value, 14,000,000 shares
authorized; 7,439,650 and 7,439,650 shares issued less
ESOP shares of 136,916 and 127,166 7,302,734 7,312,484
Additional paid-in capital 203,084 203,084
Retained earnings 14,939,795 13,486,105
------------ ------------
Total shareholders' equity 22,445,613 21,001,673
------------ ------------
$218,922,020 $214,840,825
============ ============
See Notes to Condensed Financial Statements
3
PEOPLES OHIO FINANCIAL CORPORATION
CONDENSED STATEMENTS OF INCOME
(Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED
MAR 31 MAR 31
2002 2001 2002 2001
---------- ----------- ----------- -----------
Interest income
Interest and fees on loans $3,834,695 $ 3,966,972 $11,724,971 $11,834,450
Interest on mortgage-backed securities and other securities 20,662 26,161 66,918 80,490
Other interest and dividend income 56,902 101,566 216,721 308,745
---------- ----------- ----------- -----------
Total interest income 3,912,259 4,094,699 12,008,610 12,223,685
---------- ----------- ----------- -----------
Interest expense
Deposits 768,212 1,023,000 2,613,620 3,120,744
Borrowings 1,011,640 1,373,271 3,241,022 4,050,380
---------- ----------- ----------- -----------
Total interest expense 1,779,852 2,396,271 5,854,642 7,171,124
---------- ----------- ----------- -----------
Net interest income 2,132,407 1,698,428 6,153,968 5,052,561
Provision for loan losses 18,000 -- 26,000 --
---------- ----------- ----------- -----------
Net interest income after
provision for loan losses 2,114,407 1,698,428 6,127,968 5,052,561
---------- ----------- ----------- -----------
Other income
Service charges on deposit accounts and other 151,457 123,197 449,979 377,081
Fiduciary activities 193,288 200,953 579,142 616,319
Other income 41,967 33,211 140,039 101,127
---------- ----------- ----------- -----------
Total other income 386,712 357,361 1,169,160 1,094,527
---------- ----------- ----------- -----------
Other expenses
Salaries and employee benefits 667,224 522,758 1,960,639 1,599,376
Net occupancy expenses 95,586 95,178 299,097 255,343
Equipment expenses 36,687 29,930 111,248 90,473
Data processing fees 103,239 106,484 295,657 301,990
State of Ohio franchise taxes 60,404 56,301 172,904 152,530
Other expenses 424,743 322,919 1,377,520 992,821
---------- ----------- ----------- -----------
Total other expenses 1,387,883 1,133,570 4,217,065 3,392,534
---------- ----------- ----------- -----------
Income before Federal income tax 1,113,236 922,219 3,080,063 2,754,554
Federal income tax expense 383,756 315,086 1,061,683 941,116
---------- ----------- ----------- -----------
Net income $ 729,480 $ 607,133 $ 2,018,380 $ 1,813,438
========== =========== =========== ===========
Basic Earnings Per Share $ 0.10 $ 0.08 $ 0.27 $ 0.24
Diluted Earnings Per Share $ 0.09 $ 0.08 $ 0.26 $ 0.23
Dividends Per Share $ 0.035 $ 0.065 $ 0.030
See notes to Condensed Financial Statements
4
PEOPLES OHIO FINANCIAL CORPORATION
CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED MARCH 31, 2002
(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 -- -- 2,018,380 2,018,380
Cash dividend declared
on common stock ($.065 per share) -- -- (483,578) (483,578)
Exercise of stock options 0 -- -- 0
Tax benefit from exercise of stock 0
options -- -- 0 0
Purchase of stock 0
Net change in equity from ESOP (9,750) (81,112) (90,862)
shares
----------- --------- ------------ ------------
BALANCE AT MARCH 31, 2002 $ 7,302,734 $ 203,084 $ 14,939,795 $ 22,445,613
=========== ========= ============ ============
See Notes to Condensed Financial Statements
5
PEOPLES OHIO FINANCIAL CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
NINE MONTHS ENDED
MAR 31
2002 2001
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OPERATING ACTIVITIES
Net income $ 2,018,380 $ 1,813,438
Adjustments to reconcile net income
to net cash provided by operating activities
Provision for loan losses 26,000 0
Depreciation and amortization 253,717 246,532
Amortization of deferred loan fees (67,377) (16,115)
Investment securities amortization (accretion), net 1,852 -146
Federal Home Loan Bank stock dividends (206,600) (243,700)
Net change in other assets/ other liabilities 287,104 (759,629)
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Net cash provided by operating activites 2,313,076 1,040,380
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INVESTING ACTIVITIES
Net change in loans (3,624,809) (7,823,208)
Federal Home Loan Bank stock purchased 0 (478,200)
Proceeds from maturities of securities held to maturity 354,539 156,825
Purchases of premises and equipment (634,959) (817,535)
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Net cash used
by investing activities (3,905,229) (8,962,118)
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FINANCING ACTIVITIES
Net change in
Interest-bearing demand and savings deposits 13,631,055 1,581,984
Certificates of deposit (3,757,419) (8,107,533)
Proceeds from FHLB advances 180,000,000 255,591,027
Repayment of FHLB advances (187,661,649) (241,742,960)
Cash dividends (483,578) (223,190)
Puchase of stock 0 (304,906)
Proceeds from issuance of common stock -- 186,600
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Net cash provided by
financing activities 1,728,409 6,981,022
------------- -------------
Net Change in Cash and Cash Equivalents 136,256 (940,716)
Cash and cash equivalents, Beginning of Period 5,118,227 4,082,300
------------- -------------
Cash and cash equivalents, End of Period $5,254,483 $3,141,584
========== ==========
See notes to Condensed Financial Statements
6
Peoples Ohio Financial Corporation
Notes to Unaudited Condensed Financial Statements
For the nine months ended March 31, 2002
(1) Basis of Presentation
The condensed balance sheet as of March 31, 2002 and the related condensed
statements of income and cashflows for the nine months ended March 31, 2002 and
2001 and the condensed statement of shareholders' equity for the nine months
ended March 31, 2002 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 $831,246 at March 31, 2002 and $843,081
as of June 30, 2001.
(3) Common Stock
As of March 31, 2002, the Bank had 7,439,650 shares of stock issued less ESOP
shares of 136,916. As of March 31, 2002, the Bank had 959,686 stock options
outstanding. From June 30, 2001 to March 31, 2002 no options were exercised.
(4) Cash Dividend Payable
A cash dividend of $.035 per common share was declared on March 29, 2002, to
shareholders of record on April 8, 2002, payable on April 29, 2002.
(5) Earnings Per Share
The following table is for the three and nine-month periods ending March 31,
2002 and 2001 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 Nine Months Ended
March 31, March 31,
2002 2001 2002 2001
---- ---- ---- ----
Weighted average number of common shares
outstanding (basic EPS) 7,439,650 7,439,650 7,439,650 7,439,084
Dilutive effect of stock options 259,107 250,186 275,456 280,418
--------- --------- --------- ---------
Weighted average number of common shares
and equivalents outstanding (diluted EPS) 7,698,757 7,689,836 7,715,106 7,719,502
========= ========= ========= =========
7
Peoples Ohio Financial Corporation
Notes to Unaudited Condensed Financial Statements
For the nine months ended March 31, 2002
(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 another 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 nine months ending March 31, 2002 and 2001.
Bank Operations Other Total
2002 --------------- ----- -----
----
Interest income $12,008,610 - $12,008,610
Interest expense 5,854,642 - 5,854,642
----------- ------- -----------
Net interest income 6,153,968 - 6,153,968
----------- ------- -----------
Non-interest income 590,018 579,142 1,169,160
Federal income tax expense 1,007,096 54,587 1,061,683
Net income 1,914,744 103,636 2,018,380
Bank Operations Other Total
2001 --------------- ----- -----
----
Interest income $12,223,685 - $12,223,685
Interest expense 7,171,124 - 7,171,124
----------- ------- -----------
Net interest income 5,052,561 - 5,052,561
----------- ------- -----------
Non-interest income 478,208 616,319 1,094,527
Federal income tax expense 867,577 73,539 941,116
Net income 1,670,685 142,753 1,813,438
8
Peoples Ohio Financial Corporation
March 31, 2002
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.
Item II. Management Discussion and Analysis of the Financial Condition and
Results of Operations.
General
During the quarter ended March 31, 2002, the Bank earned $729,480.
Compared to the same quarter of fiscal 2001, net income increased by $122,348,
or 20.2%. 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 $4,081,195 from June 30, 2001 to March
31, 2002. 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 March 31, 2002, were
10.59% of Total Assets. As of March 31, 2002, the Bank's Risk-based Capital
Ratio was 16.22% of total risk-adjusted assets. The percentage of nonperforming
loans to gross loans was .32% on March 31, 2001 and .82% on March 31, 2002. The
percentage of nonperforming loans to gross loans was .22% at June 30, 2001.
At March 31, 2002 the Bank had no impaired loans.
Changes in the allowance for loan losses are as follows:
March 31
2002 2001
---------------------------
Allowance at beginning of period, June 30, $843,081 $887,882
Provision charged to income 26,000 -
Recoveries of amounts previously charged off 10,168 2,745
Losses charged to allowance (48,003) (10,572)
---------------------------
Allowance at end of period $831,246 $880,055
===========================
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.
MARCH 31
2002 2001
---- ----
Past due 90+ on non-accrual $1,093,642 $241,000
Past due 90+ and still accruing 533,155 312,682
---------- --------
Total loans 90+ past due $1,626,797 $553,682
========== ========
The bank re-evaluated the loan grading system in the third quarter
2002. This change resulted in 12 loans being placed on non-accrual. Management
feels that loans are adequately collateralized.
The Trust Department had $145,975,432 in assets under management as of
March 31, 2002 compared to $143,652,185 as of March 31, 2001. At June 30, 2001
assets under management were $143,567,000.
9
Three and Nine Months Ended March 2002 Compared to March 2001
Overall
The Bank earned $729,480 for the third quarter of fiscal 2002
compared to $607,133 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 $215,075 for the nine-month
period ended March 31, 2002 over the same period in 2001. Although loan balances
increased by approximately $3.4 million from March 31, 2001 to March 31, 2002 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
March 31, 2002 compared to March 31, 2001, was due to a decrease in interest
expense on both deposits and borrowings. The Bank's cost of savings decreased by
137 basis points for the period ended March 31, 2002, relative to March 31,
2001. Higher rate long-term CD's converted to lower rate short-term deposits.
FHLB borrowings reduced due to deposit growth.
Net Interest Income
The Bank's net interest income increased by $433,979 for the
three-month period ended March 31, 2002 over the same period in 2001. 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 $18,000 provision for loan loss in the third
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 $29,351 for the three months ended
March 31, 2002 from the same period in 2001. Service charges and other
miscellaneous income increased by $37,016 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 March 2002, increased by
$254,313 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 $68,670 during the
period ended March 31, 2002, compared to the same period ended 2001, 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 March 31, 2002. At
that date, the Bank had tangible capital of $23,178,361 or 10.59% of total
assets, which was $19,894,531 in excess of the tangible requirement of 1.5% of
total assets or $3,283,830. The Bank's capital exceeded the core leverage
requirement of 3% of total assets or $6,567,661 by $16,610,701 with core capital
of $23,178,361 or 10.59% of total assets. The Bank had risk-based capital of
$24,009,607 or 16.22% of risk-adjusted assets, as defined by FIRREA, which was
$12,164,115 in excess of the requirement of $11,845,493 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 March 31, 2002.
Liquidity
Total liquidity (consisting of cash and amounts due from deposit
institutions, interest-bearing deposits in other banks, and investments
securities) was $6.2 million at March 31, 2002, which is a decrease of $300
thousand from December 31, 2001. The regulatory liquidity of the Bank was 4.54%
at March 31, 2002 and 5.25% at December 31, 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
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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
(a) Exhibits
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 Form 8-A,
Amended and Restated Code of Regulations Exhibit 2(b)
(b) Reports on Form 8-K
(i) Peoples Ohio Financial Corporation filed a Form 8-K on January 31, 2002, announcing the
completion of the acquisition of Peoples Savings Bank of Troy, an Ohio chartered savings
and loan association, on January 31, 2002.
(ii) Peoples Ohio Financial Corporation filed a Form 8-K on March 14, 2002, announcing approval
of a semi-annual dividend of $.035 per share to be paid on April 29, 2002, to shareholders
of record on April 8, 2002, and also announcing the successful completion of the reorganization
of Peoples Savings Bank of Troy into a holding company structure.
(iii) Peoples Ohio Financial Corporation filed a Form 8-K on March 29, 2002, correcting information
contained in the news release dated March 14, 2002, attached to its Form 8-K filed March 14, 2002.
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: May 10, 2002 By /s/ Ronald B. Scott
------------------------------
Ronald B. Scott
President
By /s/ Charlotte A. Stephenson
------------------------------
Charlotte A. Stephenson
Chief Accounting Officer
13