-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BcIOZWppYyvvfLv8ByZ/g9ek1JUmQyCG1OUciL/6rEmRr1zLGhxWPTJrWkSKpmUp 7yTpnlqxCbWDqMJ1auM8EA== 0000908834-99-000301.txt : 19991115 0000908834-99-000301.hdr.sgml : 19991115 ACCESSION NUMBER: 0000908834-99-000301 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PEOPLES BANK CORP OF INDIANAPOLIS CENTRAL INDEX KEY: 0000796322 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 351681096 STATE OF INCORPORATION: IN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-23130 FILM NUMBER: 99750483 BUSINESS ADDRESS: STREET 1: 130 EAST MARKET ST CITY: INDIANAPOLIS STATE: IN ZIP: 46204 BUSINESS PHONE: 3172378059 10-Q 1 PEOPLES BANK CORPORATION OF INDIANAPOLIS FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------- FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the period ended September 30, 1999 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES - --- EXCHANGE ACT OF 1934 For the transition period from ___________ to _____________ Commission File Number 0-23134 PEOPLES BANK CORPORATION OF INDIANAPOLIS (Exact name of registrant as specified in its charter) Indiana 35-1681096 - -------------------------------------------------------------------------------- (State of other jurisdiction (I.R.S. Employer of incorporation or organization) identification no.) 130 East Market Street Indianapolis, Indiana 46204 - -------------------------------------------------------------------------------- (Address of principal (Zip Code) executive offices) (317) 237-8121 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed 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 filing requirements for the past 90 days. X Yes ___ No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date. Common Shares, without par value Nonvoting - 2,838,011 shares as of November 12, 1999 Voting - 264,096 shares as of November 12, 1999 PEOPLES BANK CORPORATION OF INDIANAPOLIS INDEX PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets at September 30, 1999 and December 31, 1998........................................... 2 Consolidated Statements of Income for the nine months ended September 30, 1999 and 1998............................... 3 Consolidated Statements of Changes in Shareholders' Equity...... 4 Consolidated Statements of Cash Flows for the nine months ended September 30, 1999 and 1998........................ 5 Notes to Consolidated Financial Statements...................... 6-7 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition........................... 8-16 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders............ 17 Item 6. Exhibits and Reports on Form 8-K............................... 17 Signatures............................................................... 18 PEOPLES BANK CORPORATION OF INDIANAPOLIS CONSOLIDATED BALANCE SHEETS ================================================================================ (Dollar amounts in thousands)
Sept 30, December 31, 1999 1998 -------- -------- Assets Cash and due from banks $ 17,820 $ 30,336 Federal funds sold 3,900 4,800 -------- -------- Total cash and equivalents 21,720 35,136 Available-for-sale securities 132,281 132,216 Loans held for sale 187 2,346 Total loans 489,998 452,065 Allowance for loan losses (8,044) (7,684) -------- -------- Loans, net 481,954 444,381 Premises and equipment, net 6,866 8,105 Accrued income and other assets 15,550 12,321 -------- -------- Total assets $658,558 634,505 ======== ======== Liabilities Non interest-bearing deposits $107,806 98,851 Interest-bearing deposits 464,197 452,178 -------- -------- Total deposits 572,003 551,029 Borrowings 22,891 22,918 Accrued expenses and other liabilities 7,990 8,533 -------- -------- Total liabilities 602,884 582,480 Shareholders' equity Common shares, no par value: Authorized: Voting - 300,000 shares Nonvoting - 4,000,000 shares Issued: Voting - 264,096 shares (1999) - 264,096 shares (1998) 896 896 Nonvoting - 2,837,711 shares (1999) - 2,758,794 shares (1998) 11,761 11,384 Retained earnings 44,461 39,008 Accumulated other comprehensive income (1,444) 737 -------- -------- Total shareholders' equity 55,674 52,025 -------- -------- Total liabilities and shareholders' equity $658,558 $634,505 ======== ========
See accompanying notes. PEOPLES BANK CORPORATION OF INDIANAPOLIS CONSOLIDATED STATEMENTS OF INCOME ================================================================================ (Dollar amounts in thousands, except per share data)
Three months ended Nine months ended September 30, September 30, 1999 1998 1999 1998 ------- ------ ------- ------- Interest income Loans, including related fees $10,236 $9,666 $29,610 $28,034 Federal funds sold 126 255 357 486 Securities 2,126 2,271 6,306 7,041 ------- ------ ------- ------- Total interest income 12,488 12,192 36,273 35,561 Interest expense Deposits 5,531 5,823 16,125 16,510 Borrowings 234 193 752 568 ------- ------ ------- ------- Total interest expense 5,765 6,016 16,877 17,078 ------- ------ ------- ------- Net interest income 6,723 6,176 19,396 18,483 Provision for loan losses 150 0 1,150 3,500 ------- ------ ------- ------- Net interest income after provision for loan losses 6,573 6,176 18,246 14,983 Non-interest income Trust and Investment Management 625 638 2,211 1,771 Service charges and fees 683 795 1,987 2,181 Mortgage banking revenue 34 114 313 471 Net gain/(loss) on securities 0 40 6 47 Other 242 260 1,408 694 ------- ------ ------- ------- Total non-interest income 1,584 1,847 5,925 5,164 Non-interest expense Salaries and employee benefits 3,087 2,830 8,760 8,305 Occupancy (net) 314 394 1,129 1,144 Equipment 404 445 1,244 1,273 Other 950 1,379 2,890 3,778 ------- ------ ------- ------- Total non-interest expense 4,755 5,048 14,023 14,500 ------- ------ ------- ------- Income before income taxes 3,402 2,975 10,148 5,647 Income tax expense 1,105 973 3,348 1,753 ------- ------ ------- ------- Net income $2,297 $2,002 $6,800 $3,894 ======= ====== ======= ======= Per share data Earnings per share $0.74 $0.65 $2.25 $1.27 ======= ====== ======= ======= Earnings per share, assuming dilution $0.73 $0.63 $2.19 $1.24 ======= ====== ======= =======
See accompanying notes. PEOPLES BANK CORPORATION OF INDIANAPOLIS CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY ================================================================================ (Dollar amounts in thousands)
1999 1998 -------- -------- Balance at January 1 $ 52,025 $ 48,817 Comprehensive income Net income 6,800 3,894 Change in net unrealized gain/(loss) (2,181) 341 -------- -------- Total comprehensive income 4,619 4,235 Cash dividends (1,340) (1,198) Exercise of stock options 2,106 3 Redemption of common stock (1,736) (811) -------- -------- Balance at September 30 $ 55,674 $ 51,046 ======== ========
PEOPLES BANK CORPORATION OF INDIANAPOLIS CONSOLIDATED STATEMENTS OF CASH FLOWS ================================================================================ (Dollar amounts in thousands)
Nine months ended September 30, 1999 1998 -------- -------- Cash flows from operating activities Net Income $ 6,800 $ 3,894 Adjustments to reconcile net income to net cash from operating activities Depreciation and amortization 863 902 Provision for loan losses 1,150 3,500 Net (gain)/loss on securities (6) (47) Net amortization/(accretion) on investments 68 (89) Net change in Interest receivable and other assets (1,797) (4,468) Interest payable and other liabilities (543) 1,648 Loans held for sale 2,159 186 -------- -------- Net cash from operating activities 8,694 5,526 Cash flows from investing activities Proceeds from sales of available-for-sale securities 0 5,068 Proceeds from maturities of available-for-sale securities 77,664 46,069 Purchase of available-for-sale securities (81,404) (40,462) Loans made to customers, net of principal collections thereon (38,723) (48,647) Property and equipment expenditures, net 376 (1,270) -------- -------- Net cash from investing activities (42,087) (39,242) Cash flows from financing activities Net change in deposits 20,974 29,693 Net change in borrowings (27) 472 Proceeds from exercise of stock options 2,106 3 Redemption of common shares (1,736) (1,195) Dividends paid (1,340) (811) -------- -------- Net cash from financing activities 19,977 28,162 -------- -------- Net change in cash and cash equivalents (13,416) (5,554) Cash and cash equivalents at beginning of year 35,136 25,462 -------- -------- Cash and cash equivalents at September 30 $ 21,720 $ 19,908 ======== ========
Peoples Bank Corporation of Indianapolis Notes to Consolidated Financial Statements September 30, 1999 1. Accounting Policies The significant accounting policies followed by Peoples Bank Corporation of Indianapolis ("The Corporation") for interim financial reporting are consistent with the accounting policies followed for annual financial reporting. The consolidated interim financial statements have been prepared in accordance with instructions to Form 10-Q and may not include all information and footnotes normally shown for full annual financial statements. All adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the periods reported have been included in the accompanying unaudited consolidated financial statements and all such adjustments are of a normal recurring nature. 2. Earnings Per Share The following table presents share data used to compute earnings per share:
Nine months ended September 30, 1999 1998 --------- --------- Weighted average shares outstanding 3,028,037 3,071,429 Dilutive effect of potential shares 75,454 86,696 --------- --------- Shares used to compute diluted earnings per share 3,103,491 3,158,125 Three months ended September 30, 1999 1998 --------- --------- Weighted average shares outstanding 3,091,439 3,061,738 Dilutive effect of potential shares 40,912 77,286 --------- --------- Shares used to compute diluted earnings per share 3,132,351 3,139,024
3. Segment Reporting Subsequent to announcing the merger of the Company with Fifth Third Bancorp, as discussed below, the Company discontinued internal reporting by business segments. PART I. FINANCIAL INFORMATION Item 2. Management's Discussion and Analysis (Dollar amounts in thousands, except per share data) General The business of Peoples Bank Corporation of Indianapolis ("The Company") consists of holding and administering its interest in Peoples Bank & Trust Company ("Peoples"). The principal business of Peoples consists of attracting deposits from consumer and commercial customers and making loans to individuals and businesses. Peoples offers various products for depositors including checking and savings accounts, certificates of deposit and safe deposit boxes. Loans consist principally of loans to individuals secured by mortgage liens on residential properties, consumer loans generally secured by personal property and loans to businesses generally secured by liens on business assets. Peoples also offers trust and investment management services to individuals, businesses and institutions. The Company operates 8 branch locations, a twelve-story office in downtown Indianapolis, and an operations center. Peoples occupies six floors of the downtown office building and leases five floors to tenants. The top floor houses the boardroom and a training area. Leased tenant space at the downtown office remains at near capacity. The book value per share of The Company's nonvoting common shares at September 30, 1999, was $17.95. For the third quarter, the low trading price per share was $39.75, and the high trading price per share was $73.125. On September 17, 1999, The Company declared a cash dividend in the amount of $.155 per share, payable October 15, 1999, to shareholders of record September 30, 1999. This dividend represents a 14.81% increase over the third quarter 1998 dividend and is the thirteenth consecutive quarter in which The Company has declared an increase in dividends. Recent Developments On July 12, 1999, Fifth Third Bancorp (Fifth Third) and the Company entered into an Affiliation Agreement (Merger Agreement), pursuant to which The Company will merge with and into Fifth Third through a tax-free, stock-for-stock exchange, with Fifth Third as the surviving corporation (Merger). Under the terms of the Merger Agreement, upon consummation of the Merger each share of The Company's voting and non-voting common stock shall be converted into the right to receive 1.09 share of Fifth Third common stock The Merger, which would be accounted for as a pooling of interests, is expected to close during the fourth quarter of 1999. The Merger Agreement has been approved by the board of directors of both companies. Consummation of the Merger is subject to certain customary conditions, including, among others, the adoption of the Merger Agreement by The Company's shareholders and receipt of regulatory approvals. The Company's shareholders approved the Merger Agreement at a shareholder meeting on October 27, 1999 at 10:30 AM in Indianapolis, Indiana. The merger of the Company with and into Fifth Third is expected to close on November 19, 1999. Selected ratios and summary data.
At or for the Nine months Ended September 30, 1999 1998 -------- -------- Assets $658,558 $632,518 Loans (includes loans held for sale) 490,185 453,972 Deposits 572,003 538,005 Shareholders' Equity 55,674 51,046 Book value per share 17.95 16.73 Earnings per share (basic) $2.25 $1.27 Earnings per share (diluted) $2.19 $1.24 Dividends per share $0.45 $0.39 Net Interest Margin (FTE) 4.24% 4.29% Return on Average Assets 1.37% 0.83% Return on Average Equity 17.23% 10.73% Average Shares Outstanding - Basic 3,028,037 3,071,429 - Diluted 75,454 3,158,125 Total Shares Outstanding 3,101,807 3,051,730
Net Income Net income for the third quarter of 1999 was $2,297 compared to $2,002 for the third quarter of 1998, an increase of 14.74% or $295. Basic net income per share for the third quarter of 1999 was $0.74, an increase of $0.09 or 13.85% from $0.65 for the third quarter of 1998. Net income for the first nine months of 1999 was $6,800 compared to $3,894 for the same period of 1998, an increase of 74.63% or $2,906. Basic net income per share for the first nine months of 1999 was $2.25, an increase of $0.98 or 77.17% from $1.27 for the first nine months of 1998. Peoples took a $3,500 provision for loan losses during the first nine months of 1998 as compared to a $1,150 provision during the first nine months of 1999. Another significant explanation for the increase in net income was the recovery of $648,000 associated with an investment in a low-income housing partnership. Peoples invested $648,000 as a limited partner in a low-income housing partnership during 1997. The project was projected to generate significant tax credits over a ten-year period following renovation of the property. During 1997 and 1998, the project incurred losses equaling the original investment. Therefore, management of Peoples properly took expenses against the investment during 1997 and 1998 to reduce the book value of the investment to zero. When the project's Developer and General Partners were unable to secure tax credits from the Indiana Housing Finance Authority, the General Partners became obligated to repurchase Peoples interests. Since the investment had been carried at a book value of zero, The Company experienced recovery of $648,000, which is shown as Other Income. Net Interest Income Net interest income is the principal component of net income for the Company and represents the difference between interest earned on loans and investments and the interest cost of deposits and other borrowed funds. For the three months ended September 30, net interest income was $6,723 and $6,176 for 1999 and 1998, respectively. This reflects an increase of $547, or 8.86%. For the nine months ended September 30, net interest income was $19,396 and $18,483 for 1999 and 1998, respectively. This reflects an increase of $913, or 4.94%. Interest income on loans, including related fees, increased from $9,666 for the third quarter of 1998 to $10,236 for that period in 1999, an increase of $570 or 5.90%. Interest income on loans, including related fees, increased from $28,034 for the first nine months of 1998 to $29,610 for that period in 1999, an increase of $1,576 or 5.62%. These increases are attributable to an increase in loans outstanding. Total loans were $490,185 at September 30, 1999, compared to $453,972 at September 30, 1998, an increase of $36,213 or 7.98%. Offsetting the increase in loans outstanding was a decrease in the level of interest rates in the economy. The Prime rate averaged approximately 0.64% lower during the first nine months of 1999 as compared to the same period in 1998. Total interest expense was $5,765 and $6,016 for the three months ended September 30, 1999 and 1998, respectively, a decrease of $251, or 4.17%. Total interest expense was $16,877 and $17,078 for the nine months ended September 30, 1999 and 1998, respectively, a decrease of $201, or 1.18%. The decrease in interest expense was attributable to lower interest rates in the economy, partly offset by an increase in deposits outstanding. The Company's net interest margin, or margin on earning assets, decreased from 4.18% for the third quarter of 1998 to 4.16% for the third quarter of 1999. On a tax equivalent basis, the Company's net interest margin decreased from 4.29% for the third quarter of 1998 to 4.24% for the third quarter of 1999. The primary reason for this decrease in the net interest margin in 1999 was lower yields on loan growth funded by growth in deposits resulting in a thinner net interest margin on new business. Provision & Allowance for Loan Losses The provision for loan losses was $150 for the third quarter of 1999 and $0 for the third quarter of 1998. The provision for loan losses was $1,150 for the first nine months of 1999 as compared to $3,500 for the third quarter of 1998, a decrease of $2,350 or 67.14%. The allowance for loan losses at September 30, 1999, was $8,044 or 1.64% of total loans compared to $7,684 or 1.69% of total loans at December 31, 1998. Gross charge-offs during the third quarter of 1999 were $175 and recoveries were $65. The adequacy of the allowance for loan loss is evaluated at least quarterly by management based upon the review of identified loans with more than a normal degree of risk, historical loan loss percentages, and present and forecasted economic conditions. Management's analysis indicated that the allowance for loan losses at September 30,1999, was adequate to cover potential losses on identified loans with credit problems and potential losses on the remaining loan portfolio based on historical percentages. Non-interest Income Non-interest income totaled $1,584 for the third quarter of 1999, compared to $1,847 for that period of 1998, a decrease of $263 or 14.24%. Non-interest income totaled $5,925 for the first nine months of 1999, compared to $5,164 for that period of 1998, an increase of $761 or 14.74%. Decreases in the third quarter of 1999 were due to lower mortgage revenues and lower revenues for overdrawn deposit accounts. Trust and investment management income was $625 and $638 for the third quarter of 1999 and 1998, respectively, a decrease of $13 or 2.04%. Trust and investment management income was $2,211 and $1,771 for the first nine months of 1999 and 1998, respectively, an increase of $440 or 24.84%. The increase in revenue from Peoples' Trust and Investment Management Group in 1999 reflected continuing growth in traditional trust sales and service as well as growth in revenues from the sale of investment products, which began in 1997. For the three month periods ending September 30, 1999, and 1998, service charges and fees income were $683 and $795 respectively, a decrease of $112 or 14.09%. For the nine-month periods ending September 30, 1999, and 1998, service charges and fees declined from $2,181 to $1,987, a decrease of $194 or 8.90%. The decrease in service charges and fees is primarily associated with a reduction in charges for insufficient funds. Mortgage banking revenue includes net gains and losses realized when mortgage loans are sold into the secondary market and service fee revenue earned from servicing those loans after they are sold. Mortgage banking revenue for the third quarter of 1999 was $34, reflecting a decrease of $80 or 70.18%, compared to $114 for the same period in 1998. Mortgage banking revenue for the first nine months of 1999 was $313, reflecting a decrease of $158 or 33.55%, compared to $471 for the same period in 1998. The decrease in revenues from mortgage banking reflects the very strong activity experienced in 1998 that has not been replicated during 1999. Other Non-interest income decreased during the third quarter of 1999 to $242 from $260 for the same period in 1998, a decrease of $18 or 6.92%. Other Non-interest income increased during the first nine months of 1999 to $1,408 from $694 for the same period in 1998, an increase of $714 or 102.88%. This increase was associated primarily with a recovery during the third quarter of 1999 of $648 from a low income housing investment. Non-interest Expense Total Non-interest expense was $4,755 for the three months ended September 30,1999, compared with $5,048 for that period in 1998. This represents a decrease of $293, or 5.80%. Total Non-interest expense was $14,023 for the nine months ended September 30,1999, compared with $14,500 for that period in 1998. This represents a decrease of $477, or 3.29%. Salary and employee benefits expense was $3,087 for the three months ended September 30, 1999, an increase of $257 or 9.08% from $2,830 for the same period of 1998. Salary and employee benefits expense was $8,760 for the nine months ended September 30,1999, an increase of $455 or 5.48% from $8,305 for the same period of 1998. This increase was primarily associated with salary and wage rate increases and an increased accrual for year-end bonuses. Occupancy expense was $314 for the third quarter of 1999, a decrease of $80, or 20.30% from $394 for the third quarter of 1998. Occupancy expense was $1,129 for the first nine months of 1999, a decrease of $15 or 1.31% from $1,144 for the same period of 1998. Equipment expense was $404 and $445, respectively, for the third quarter of 1999 and 1998, a decrease of $41 or 9.21%. Equipment expense was $1,244 and $1,273, respectively, for the first nine months of 1999 and 1998, a decrease of $29 or 2.28%. These expense reductions are associated with the closure of three branches during the second quarter of 1999. Other non-interest expense was $950 and $1,379 for the third quarters of 1999 and 1998, respectively, a decrease of $429 or 31.11%. Other non-interest expense was $2,890 and $3,778 for the first nine months of 1999 and 1998, respectively, a decrease of $888 or 23.50%. During the third quarter of 1998, The largest reason for the expense reductions was the additional expenses taken in 1998 to write down the Low-Income Housing Investment which was subsequently recovered. Income Taxes Income tax expense was $3,348 and $1,753 for the first nine months of 1999 and 1998, respectively. The increase in tax expense can be primarily attributed to increased income recognized during the first nine months of 1999. Balance sheet Total assets were $658,558 at September 30, 1999, and $634,505 at December 31, 1998, an increase of $24,053, or 3.79%. The portfolio of available-for-sale securities increased from $132,216 at December 31, 1998, to $132,281 at September 30, 1999, an increase of $65 or 0.05%. Total loans, excluding loans held for sale, increased during the first nine months of 1999 from $452,065 at December 31, 1998, to $489,998 at September 30, 1999. This reflects an increase of $37,933 or 8.39%. Commercial and commercial real estate loans increased $33,789 or 16.01% from $211,115 at December 31, 1998, to $244,904 at September 30, 1999. Residential mortgage loans decreased $3,238 or 3.31 from $97,755 at December 31, 1998, to $94,517 at September 30, 1999. Construction loans increased $6,780 or 19.46% from $34,840 at December 31, 1998 to $41,620 at December 31, 1999. Consumer loans decreased $41 or 0.04% from $106,431 at December 31, 1998, to $106,390 at September 30, 1999. Loans held for sale consist of conforming fixed rate mortgage loans that Peoples sells in the secondary market (having retained servicing rights with respect to such loans) and that are pending funding. Loans held for sale were $2,346 at December 31,1998, compared to $187 at September 30, 1999. The amount of loans outstanding (excluding loans held for sale) is reflected in the following table.
September 30, December 31, September 30, 1999 1998 1998 ------------- ------------ ------------- Commercial and Commercial Real Estate $244,904 $211,115 $211,872 Residential Mortgage 94,517 97,755 100,473 Construction 41,620 34,840 31,962 Consumer 106,390 106,431 107,332 Tax-exempt 2,567 1,924 1,960 -------- -------- -------- Gross loans 489,998 452,065 453,599 Less: Allowance for Loan Losses 8,044 7,684 7,075 -------- -------- -------- $481,954 $444,381 $446,524 ======== ======== ========
Deposits represent the primary source of funds for the Company. Total deposits increased $20,974 or 3.81%, from $551,029 at December 31,1998, to $572,003 at September 30, 1999. Non-interest-bearing deposits increased $8,955 or 9.06%, from $98,851 at December 31, 1998, to $107,806 at September 30, 1999. Interest-bearing deposits increased $12,019 or 2.66% from $452,178 at December 31, 1998, to $464,197 at September 30, 1999. The Company's deposit balances are reflected in the following table.
September 30, December 31, September 30, 1999 1998 1998 ------------- ------------ ------------- Deposits: Non-interest-bearing $107,806 $ 98,851 $ 80,045 Interest-bearing 464,197 452,178 457,960 -------- -------- -------- Total deposits $572,003 $551,029 $538,005 -------- -------- -------- Total deposits/total assets 86.86% 86.84% 85.05%
Borrowings in the form of Federal funds, Federal Home Loan advances, and repurchase agreements are acquired, as needed, to satisfy temporary liquidity needs. Overnight repurchase agreements continue to be a source of funds for Peoples. These funds are from businesses with large cash balances. Borrowings were $22,891 at September 30, 1999, as compared to $22,918 at December 31, 1998. This represents a decrease of $27 or 0.12%. At September 30, 1999, the bank had $9,491 in overnight repurchase agreements, $0 in federal funds purchased, $6,000 in Federal Home Loan Bank advances, and $7,400 in borrowings through the Treasury Tax and Loan Note Option program. Total shareholders' equity increased $3,649 or 7.01% for the nine months ended September 30, 1999, to $55,674 from $52,025 at December 31, 1998. The increase in shareholders' equity was the result of net income of $6,800, reduced by dividends paid of $1,340, net unrealized holding losses on available-for-sale securities of $2,181, the repurchase of common stock of $1,736, and the exercise of stock options of $2,106. Credit Quality Nonaccrual loans are loans on which the Company no longer accrues interest. Management places a loan on nonaccrual status when the collection of additional interest is unlikely and the loan is not considered to be well secured and in the process of collection. Nonperforming loans consist of loans that are on nonaccrual status, that are 90 days or more past due as to principal or interest, or that are restructured. If a loan is designated as a nonperforming loan, management, as a result of delinquent status or significant concern about the ultimate collectibility of the loan, typically ceases to recognize interest income with respect to such loan and places it on nonaccrual status. At September 30, 1999, Management designated $0 in loans as "impaired" for the purpose of FAS No. 114. Management has further determined that all loans with outstanding balances exceeding $500,000 and rated as "Doubtful" will be considered impaired. Further, the Company evaluates all Substandard Loans with balances exceeding $500,000 for classification as impaired. The following table shows the composition of nonperforming loans.
September 30, December 31, September 30, 1999 1998 1998 ------------- ------------ ------------- Nonperforming loans: Total nonaccrual loans $3,674 $ 356 $1,879 Loans past due more than 10 ninety days and still accruing 0 105 ------ ------ ------ Total $3,674 $ 461 $1,889 ====== ====== ======
At September 30, 1999, nonperforming loans were comprised of $3,674 of commercial loans, $0 of real estate loans and $0 of consumer loans. Nonperforming loans were comprised of $144 of commercial loans, $315 of real estate loans and $2 of consumer loans at December 31, 1998. At September 30, 1998, nonperforming loans consisted of $1,562 of commercial loans, $327 of real estate loans and $0 of consumer loans. Asset quality continues to be an important area of focus for the Company. Nonperforming loans as a percent of assets were 0.56% at September 30,1999, and 0.07% at December 31, 1998. The Company maintains asset quality through the use of well-defined policies, underwriting criteria, and review processes. During the second quarter of 1999, the bank experienced a $750,000 charge-off on a single commercial loan. This customer also had a loan of approximately $3.5 million secured by commercial real estate that has been placed on non-accrual. Capital The Company and Peoples are required to comply with capital requirements promulgated by their primary regulators that affect their ability to pay dividends and that can affect their operations. Those regulations require the maintenance of specified levels of capital to total assets (leverage ratio) and to risk weighted assets (the risk-based capital ratios). These regulations require the maintenance of a leverage ratio of at least 3.00% and a total risk-based capital ratio of at least 8.00%. A financial institution's deposit insurance assessment and, in certain circumstances, operations will be affected by its capital level. Institutions with leverage ratios of 5.00% or more and total risk-based capital ratios of 10.00% or more are deemed to be "well capitalized," and accordingly, pay the lowest deposit insurance assessment and are not subject to operational restrictions as outlined within the regulation. As of September 30, 1999, the Company's Tier I and total risk-based capital ratios were 10.82% and 12.07%, respectively. The Company's leverage ratio was 8.41% at September 30, 1999. As of September 30, 1999, Peoples was in excess of the minimum capital and leverage requirements necessary to be considered a "well capitalized" banking company as defined by Federal regulators. The Company and Peoples were in full compliance with all regulatory capital requirements at September 30, 1999. The following table provides the capital ratios for the entities.
At September 30, 1999 Consolidated Bank Only Company Total assets $657,039 $658,558 Risked-based assets 526,834 527,411 Tier I capital 52,525 57,067 Total risk-based capital 59,128 63,678 Leverage ratio 7.76% 8.41% Tier I risk-based capital ratio 9.97% 10.82% Total risk-based capital 11.22% 12.07%
Year 2000 Compliance Because computer memory was so expensive on early mainframe computers, some computer programs used only the final two digits for the year in the date field and assumed that the first two digits were "19". As a result, some computer applications may be unable to interpret the change from year 1999 to year 2000. In 1997, the Company established a Year 2000 ("Y2K") initiative to address the issues associated with the Year 2000 date change. The Company relies on third party data processing servicers or purchased applications software and hardware for its technology needs. The Company's initiative involves five separate and distinct steps - awareness, assessment, renovation, validation and implementation. The awareness phase defined the Y2K problem for management, and gained support for the resources needed to successfully complete the project. During this phase, Peoples installed a risk assessment system, established a Y2K project team, and began gathering vendor information. The awareness phase, which was completed in January 1998, involved a complete inventory of all systems including software, hardware. firmware, and environmental. Each item in the inventory was assigned a system significance rating. Corporate clients were also contacted to assess their program Year 2000 compliance. The assessment phase was completed in April 1998. The renovation phase consisted of ongoing discussions and monitoring of vendor progress toward Y2K compliance. As of December 31, 1998, all of the Company's systems and applications are Year 2000 compliant. The final two phases, validation and implementation, are substantially completed, with over 90% of Peoples' mission-critical technology solutions tested and accepted by their respective business units. Management has completed business resumption plans for all systems and applications to address any potential system failures caused by actions or influences, such as the failure of power or communications technologies outside the control of the Company. Estimated costs associated with the Y2K initiative total slightly over $100,000. Most of these expenses represent capital expenditures for software and hardware that will be amortized over five years. Therefore, management believes that the financial impact of the Y2K initiative is immaterial. On the other hand, the risks for the Company in the event that either certain mission-critical systems are not Year 2000 compliant or outside influences prevent Peoples' systems from being fully operational are substantial. As a financial institution, Peoples' largest volume of transactions involve loan-related matters (such as loan origination, the acceptance of loan payments, escrow-handling, and related matters) and deposit accounts (new account openings, additions and withdrawals from accounts, interest crediting, checking account transactions and related matters). Peoples' inability to process these transactions in an efficient and timely manner would greatly impact its operations. No estimate is available concerning possible lost revenue in the event of a material Year 2000 problem. However, such loss of revenue would likely be a material amount which could have a materially adverse effect on the Company's financial performance and operations. Federal and state bank regulators have reviewed the Company's plans and progress in 1998 and early 1999 to verify that critical computer systems are modified and tested, and that they will run smoothly when the year 2000 arrives. PART II. OTHER INFORMATION Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On October 27, 1999, a special meeting of the holders of the Company's voting and non-voting shares of common stock was held to consider and vote upon a proposal to adopt and approve the Affiliation Agreement, dated as of July 12, 1999, by and between Fifth Third Bancorp and the Company, and the transactions contemplated thereby, including the merger of the Company with and into Fifth Third Bancorp upon the terms and subject to the conditions set forth in the Affiliation Agreement. The Proposal was approved by the following votes:
% of Total % of Total % of Total Voting Shares: For Voting Shares Against Voting Shares Abstain Voting Shares ------- ------------- ------- ------------- ------- ------------- 230,305 87.21% % of Total % of Total % of Total Nonvoting Shares: For Nonvoting Shares Against Nonvoting Shares Abstain Nonvoting Shares --------- ---------------- ------- ---------------- ------- ---------------- 1,799,511 63.45% 172,143 6.07% 3,650 0.13%
Item 6. EXHIBITS AND REPORTS ON FORM 8-K A. Exhibits - 27 Financial Data Schedule B. Form 8-K was filed on July 12, 1999 to report the affiliation agreement between Fifth Third Bancorp and Peoples Bank Corporation of Indianapolis. 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 BANK CORPORATION OF INDIANAPOLIS By: /s/ William. E. McWhirter ---------------------------------------- William E. McWhirter Chairman and Chief Executive Officer By: /s/ Charles R. Hageboeck ---------------------------------------- Charles R. Hageboeck Senior Vice President and Chief Financial Officer DATE: November 12, 1999 EX-27 2 FDS FOR PEOPLES BANK CORP. OF INDIANAPOLIS
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE REGISTRANT'S UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 0000796322 Peoples Bank Corp. of Indianapolis 1,000 U.S. Dollars 9-MOS DEC-31-1999 JAN-1-1999 SEP-30-1999 1.000 17,820 0 3,900 0 132,281 0 0 490,185 8,044 658,558 572,003 16,891 7,990 6,000 12,657 0 0 43,017 658,558 29,610 6,306 357 36,273 16,125 16,877 19,396 1,150 6 14,023 10,148 10,148 0 0 6,800 2.25 2.19 7.73 3,674 0 0 32,945 7,684 975 185 8,044 5,427 0 2,617
-----END PRIVACY-ENHANCED MESSAGE-----