-----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, Nt7jB6R08ZV5MBufxu1tgSfMi3bWG7rBd10i/mhlo0MPEoEpgMkDRnrT8NXbT4L3 s+n6r39uCmImYH9ob48c3w== 0000869004-97-000008.txt : 19971230 0000869004-97-000008.hdr.sgml : 19971230 ACCESSION NUMBER: 0000869004-97-000008 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971229 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PEOPLES BANCORP CENTRAL INDEX KEY: 0000869004 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 351811284 STATE OF INCORPORATION: IN FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-18991 FILM NUMBER: 97745701 BUSINESS ADDRESS: STREET 1: 212 WEST 7TH ST CITY: AUBURN STATE: IN ZIP: 46706 BUSINESS PHONE: 2199252500 MAIL ADDRESS: STREET 1: 212 WEST SEVENTH ST CITY: AUBURN STATE: IN ZIP: 46706 10-K 1 FORM 10-K FOR THE YEAR ENDED SEPT 30, 1997 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K For Annual and Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 [X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended September 30, 1997 [ ] 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 0-18991 PEOPLES BANCORP (Exact name of registrant as specified in its charter) INDIANA 35-1811284 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification Number) 212 West 7th Street, Auburn, Indiana 46706 - ------------------------------------ ----- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (219) 925-2500 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act Common Stock, par value $1.00 per share (Title of Class) 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. Yes X No . Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy information statements incorporated by reference in Part III of this Form 10-K or any amendment to this form 10-K. [ ] Aggregate market value of voting stock held by non-affiliates of the registrant, as of December 26, 1997: $72,968,495. Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of December 26, 1997: 3,390,953 shares of Common Stock, par value $1.00 per share Documents Incorporated by Reference: Portions of the definitive Proxy Statement for the 1998 Annual Meeting of Stockholders (Part III) and the Annual Report to Stockholders for the year ended September 30, 1997 (Parts II and IV). PART I Item 1. Business General Peoples Bancorp (the "Company") is an Indiana corporation organized in October, 1990 to become the thrift holding company for Peoples Federal Savings Bank (the "Bank" or "Peoples Federal"). The Company is the sole shareholder of Peoples Federal. The Bank conducts business from its main office in Auburn and in its five full-service offices located in Avilla, Columbia City, Garrett, Kendallville, and LaGrange, Indiana. Peoples Federal offers a full range of retail deposit services and lending services to northeastern Indiana. The Company has no other business activity other than being the holding company for Peoples Federal. The Bank was founded in 1925 and chartered by the Federal Home Loan Bank Board ("FHLBB"), now the Office of Thrift Supervision ("OTS"), in 1937. Since that time, the Bank has been a member of the Federal Home Loan Bank System ("FHLB System") and the Federal Home Loan Bank of Indianapolis ("FHLB of Indianapolis"), and its savings accounts are insured up to applicable limits by the Savings Association Insurance Fund ("SAIF"), as administered by the Federal Deposit Insurance Corporation (the "FDIC"). The Company is a unitary savings and loan holding company subject to regulation by the OTS. The Company's securities are registered with the Securities and Exchange Commission ("SEC") pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"). As such, the Company is subject to the information, proxy solicitation, insider trading, and other restrictions and requirements of the Exchange Act. In May, 1997, the Board authorized a stock repurchase program. Purchases of up to 240,000 shares may be made in open market or in privately negotiated transactions. As of September 30, 1997, the Company had repurchased 25,656 shares. On a yearly basis, Peoples Federal updates its long-term strategic plan. This plan includes, among other things, Peoples Federal's commitment to maintaining a strong capital base and continuing to improve the organization's return on assets through asset growth and controlling operating expenses. Continued careful monitoring of Peoples Federal's interest rate risk is also cited as an important goal. As a result, continued origination of short-term consumer and installment loans, prime plus equity loans, adjustable rate mortgage loans, and fixed-rate real estate loans with original terms of 15 years or less will be emphasized. The Bank offers a wide range of consumer and commercial financial services. These services include: consumer demand deposit accounts; NOW accounts; regular and term savings accounts and savings certificates; residential and commercial real estate loans; and secured and unsecured consumer loans. The Bank provides these services through a branch network comprised of six full-service banking offices. It also provides credit card services, as well as enhancements to its loan and deposit products designed to provide customers with added conveniences. The Bank has historically concentrated its business activities in northeastern Indiana. The Bank's current strategy is to maintain its branch office network as well as remain alert to new opportunities. Over the years, the Bank has broadened its product line and enhanced its operations in order to accommodate its growth and to meet the vigorous competition from various financial institutions and other companies or firms that engage in similar activities. The Thrift Industry Thrift institutions are financial intermediaries which historically have accepted savings deposits from the general public and, to a lesser extent, borrowed funds from outside sources and invested those deposits and funds primarily in loans secured by first mortgage liens on residential and other types of real estate. Such institutions may also invest their funds in various types of short- and long-term securities. The deposits of thrift institutions are insured by the SAIF as administered by the FDIC, and these institutions are subject to extensive regulations. These regulations govern, among other things, the lending and other investment powers of thrift institutions, including the terms of mortgage instruments these institutions are permitted to utilize, the types of deposits they are permitted to accept, and reserve requirements. The operations of thrift institutions, including those of the Bank, are significantly affected by general economic conditions and by related monetary and fiscal policies of the federal government and regulations and policies of financial institution regulatory authorities, including the Board of Governors of the Federal Reserve System and the OTS. Lending activities are influenced by a number of factors including the demand for housing, conditions in the construction industry, and availability of funds. Sources of funds for lending activities include savings deposits, loan principal payments, proceeds from sales of loans, and borrowings from the Federal Home Loan Banks and other sources. Savings flows at thrift institutions are influenced by a number of factors including interest rates on competing investments and levels of personal income. Earnings The Bank's earnings depend primarily on the spread between income from lending activities and, to a lesser extent, investment activities, and the cost of money, that is the difference between income from interest-earning assets such as loans and investments, and interest paid on interest-bearing liabilities such as deposits and borrowings. The Bank typically engages in long-term mortgage lending at fixed rates of interest, generally for periods of up to 30 years, while accepting deposits for considerably shorter periods. Generally, rapidly rising interest rates cause the cost of interest-bearing liabilities to increase more rapidly than yields on interest-earning assets, thereby adversely affecting the earnings of many thrift institutions. While the industry has received expanded lending and borrowing powers in recent years permitting different types of investments and mortgage loans, including those with floating or adjustable rates and those with shorter terms, earnings and operations are still highly influenced by levels of interest rates and financial market conditions and by substantial investments in long-term mortgage loans. Competition The Bank experiences strong competition both in making real estate loans and in attracting savings deposits. In the past, thrift institutions generally competed for real estate loans with commercial banks, mortgage banking companies, insurance companies, and other institutional lenders. Recent legislative and regulatory actions have increased competition between thrift institutions and other financial institutions, such as commercial banks, by expanding the range of services that may be offered such as demand deposits, trust services, and consumer and commercial lending. The most direct competition for savings has historically come from other thrift institutions, mutual savings banks, commercial banks and credit unions. During periods of generally high interest rates, additional significant competition for savings accounts comes from corporate and government securities and, more recently, money market mutual funds. The principal methods generally used by thrift institutions to attract deposit accounts include: competitive interest rates, advertising, providing a variety of financial services, convenient office locations, flexible hours for the public, and promotions for opening or adding to deposit accounts. Net Interest Income Net interest income increases during periods when the spread is widened between the Bank's weighted average rate at which new loans are originated and the weighted average cost of interest-bearing liabilities. The Bank's ability to originate loans is affected by market factors such as interest rates, competition, consumer preferences, the supply of and demand for housing, and the availability of funds. The Bank has supplemented its interest income through purchases of investments when appropriate. This activity generates positive interest rate spreads on large principal balances with minimal administrative expense. Interest Rate and Volume of Interest-Related Assets and Liabilities Both changes in rate and changes in the composition of the Bank's interest- earning assets and interest-bearing liabilities can have a significant effect on net interest income. For information regarding the total dollar amount of interest income from interest-earning assets, the average yields, the amount of interest expense from interest-bearing liabilities and the average rate, net interest income, interest rate spread, and the net yield on interest-earning assets, refer to page 8 of Management's Discussion and Analysis of Financial Condition and Results of Operations in the Company's 1997 Annual Report, incorporated herein by reference. For information regarding the combined weighted average effective interest rate earned by the Bank on its loan portfolio and investments, the combined weighted average effective cost of the Bank's deposits and borrowings, the interest rate spread of the Bank, and the net yield on combined monthly weighted average interest-earning assets of the Bank on its loan portfolio and investments for the fiscal years ending September 30, 1997, 1996, and 1995 refer to page 6 of Management's Discussion and Analysis of Financial Condition and Results of Operations in the Company's 1997 Annual Report incorporated herein by reference. For information concerning the extent to which changes in interest rates and changes in volume of interest-related assets and liabilities have affected the Bank's interest income and expense during the fiscal years ending September 30, 1997, 1996, and 1995 refer to page 9 of Management's Discussion and Analysis of Financial Condition and Results of Operations in the Company's 1997 Annual Report incorporated herein by reference. Market Area The Bank's market area in northeastern Indiana spans the counties of DeKalb, Whitley, Noble, and LaGrange. This market area has a population of approximately 130,000 and consists of a diversified industrial economic base with an emphasis on the production sector that includes major manufacturers of international scope. Moreover, the distribution sector, primarily in the wholesale and retail trades, constitutes a substantial portion of the area's economy, both in terms of product mix, sales receipts, and employment. The most rapid growth has occurred in the manufacturing sector, especially in the production of automotive and electronics products, and in the service sector with respect to packaging, warehousing, and distribution services. Lending Activities General The Bank has attempted to emphasize investments in adjustable-rate residential mortgages and consumer loans in its market area. In order to lessen its risk from interest rate fluctuations, the Bank emphasizes the origination of interest rate sensitive loan products, such as one year adjustable-rate mortgage loans, and prime plus equity loans. Residential Mortgage Loans A substantial portion of the Bank's lending activity involves the origination of loans secured by residential real estate, consisting of single-family dwelling units. The Bank also lends on the security of mid-size multifamily dwelling units. The residential mortgage loans included in the Bank's portfolio are primarily conventional fixed-rate loans with a maturity of up to 30 years. The Bank also offers adjustable-rate mortgage loans. Currently, these loans generally have interest rates which adjust (up or down) every year. Currently in effect is a maximum adjustment of 6% over the life of these loans with a maximum adjustment of 2% during any given year. Adjustments are based upon an index established at the time the commitment is issued by the Bank. The index used for most loans is tied to the applicable United States Treasury security index. While the addition of adjustable-rate mortgage loans will better enable the Bank to maintain a positive spread during periods of high interest rates, it is not expected that adjustments in interest rates on adjustable-rate mortgages will match precisely changes in the Bank's cost of funds. The majority of the adjustable rate mortgages originated by the Bank have limitations on the amount (generally 6%) and frequency of interest rate changes. During the fiscal year ended September 30, 1997, the Bank originated $62,904,000 of residential loans of which $60,126,065 were five- to 30-year fixed-rate mortgages and $2,777,935 were adjustable-rate loans. The rates offered on the Bank's adjustable-rate residential mortgage loans are generally competitive with the rates offered by other thrift institutions in the Bank's market area and are based upon the Bank's cost of funds and the rate of return the Bank can receive on comparable investments. Fixed-rate loans are originated only under terms and conditions and using documentation which would permit their sale in the secondary market and at rates which are generally competitive with rates offered by other financial institutions in the Bank's market area. Set forth below are the amounts and percentages of fixed-rate and adjustable-rate loans (which include consumer loans) in the Bank's portfolio at September 30, 1997, 1996, and 1995 (in thousands). September 30, - -------------------------------------------------------------------------------- 1997 1996 1995 - ----------------------- --------------------- ---------------------------------- Fixed Adjustable Fixed Adjustable Fixed Adjustable - --------- ------------ --------- ------------ ----------- ---------------- $180,631 $59,025 $154,416 $73,159 $133,508 $89,221 75.4% 24.6% 67.9% 32.1% 59.9% 40.1% The terms of the residential loans originated by the Bank range from one to 30 years. Experience during recent years reveals that as a result of prepayments in connection with refinancings and sales of the underlying properties, residential loans generally remain outstanding for periods substantially shorter than maturity of the loan contracts. At September 30, 1997, the average contractual maturity of the Bank's portfolio of fixed-rate loans was 11 years and 4 months, and 19 years and 4 months with respect to its portfolio of adjustable-rate loans. Substantially all of the Bank's residential mortgages include so-called "due on sale" clauses, which are provisions giving the Bank the right to declare a loan immediately due and payable in the event that, among other things, the borrower sells or otherwise disposes of the real property subject to the mortgage, and the loan is not repaid. Generally, the Bank will not lend more than 80% of the appraised value of a residential property which is owner occupied unless the borrower obtains private mortgage insurance reducing the uninsured portion of the loan to 72% of the appraised value. If private mortgage insurance is obtained, the Bank's policy is to lend up to 90% of the appraised value of the property securing the loan. The Bank applies the same standards to residential loans purchased in the secondary market. Commercial Real Estate Loans Federal laws and regulations permit a federally-chartered savings institution to make commercial real estate loans. From September 30, 1996, to September 30, 1997, commercial real estate loans increased from $7,476,884 to $7,850,076, with the percentage of commercial real estate loans to total loans remaining at 3.30%. These loans consisted of construction and permanent loans secured by mortgages on mid-size commercial real estate. The terms of commercial real estate loans vary from loan to loan but are usually five-year adjustable-rate loans with terms of 20 to 25 years. The loan-to-value ratio of commercial real estate loans is generally 75% or less. Generally, commercial real estate loans involve greater risk to the Bank than do residential loans but usually provide for a higher rate of interest and increased fee income than do residential loans. Commercial real estate loans typically involve large loan balances to single borrowers or groups of related borrowers. In addition, the payment experience on loans secured by income producing properties is typically dependent on the successful operation of the related project and thus may be subject to a great extent to adverse conditions in the real estate market or in the economy generally. Construction Loans The Bank offers residential construction loans both to owner-occupants and to persons building residential property. Construction loans are usually offered with fixed rates of interest during construction. Generally, construction loans have terms ranging from six to 12 months at fixed rates over the construction period. Practically all residential construction loans are written so as to become permanent loans at the end of the construction period. Construction loans involve greater underwriting and default risks to the Bank than do loans secured by mortgages on existing properties. Loan funds are advanced upon the security of the project under construction, which is more difficult to value prior to the completion of construction. Moreover, because of the uncertainties inherent in estimating construction costs, it is relatively difficult to evaluate accurately the total loan funds required to complete a project and the related loan-to-value ratios. Should a default occur which results in foreclosure, the Bank could be negatively impacted in that it would have to take control of the project and attempt either to arrange for completion of construction or dispose of the unfinished project. The Bank's underwriting criteria are designed to evaluate and minimize the risks of each construction loan. The Bank carefully considers a wide variety of factors before originating a construction loan, including the availability of permanent financing or a takeout commitment to the borrower (which may be provided by the Bank at market rates); the reputation of the borrower and the contractor; independent valuations and reviews of cost estimates; pre-construction sale information; and cash flow projections of the borrower. Inspections of construction sites are made by the Bank on a timely basis to verify progress made to date as a further reinforcement of its conservative lending policy. To reduce the risks inherent in construction lending, the Bank limits the number of properties which can be constructed on a "speculative" or unsold basis by a developer at any one time and generally requires the borrower or its principals to guarantee personally repayment of the loan. Consumer and Other Loans Federal laws and regulations permit a federally-chartered savings institution to make secured and unsecured consumer loans including home equity loans (loans secured by the equity in the borrower's residence, but not necessarily for the purpose of improvement), home improvement loans (loans secured by a residential second mortgage), loans secured by deposit accounts, educational loans (insured by the State Student Loan Commission of Indiana), and credit card loans (unsecured). The Bank offers all of these types of loans and is currently emphasizing home equity loans to take advantage of the recent changes in the tax laws. These loans are often at adjustable interest rates that generally are higher than the rates offered on mortgage loans. Loan Portfolio Cash Flows The following table sets forth the estimated maturity of the Bank's loan portfolio by type of loan at September 30, 1997. The estimated maturity reflects contractual terms at September 30, 1997. Contractual principal repayments of loans do not necessarily reflect the actual term of the Bank's loan portfolio. The average life of mortgage loans is substantially less than their contractual terms because of loan prepayments and because of enforcement of "due on sale" clauses. The average life of mortgage loans tends to increase, however, when current mortgage loan rates substantially exceed rates on existing mortgage loans. Years Ended September 30 ----------------------------------------- 1999- 2003 and 1998 2002 thereafter Total ------- -------- ------------ --------- (In thousands) Type of Loan: Construction loans -- residential real estate $ 5,197 $ - $ - $ 5,197 Real estate loans: Mortgage-residential 57,995 45,860 110,786 214,641 Commercial 3,325 3,375 382 7,082 Installment loans -- consumer 8,701 2,776 1,259 12,736 -------- -------- ----------- --------- Total $75,218 $52,011 $112,427 $239,656 ======== ======== =========== ========= The following table sets forth the estimated maturity of the Bank's loan portfolio on and after one year from September 30, 1997, in the categories of fixed rate and adjustable rate. Cash Flows of Loans October 1, 1998 and thereafter - --------------------------------- Fixed Adjustable Total at September 30, 1997 - ---------------- --------------- -------------------------------- $112,840 $51,598 $164,438 Loan Portfolio Composition The following table sets forth the composition of the Bank's loan portfolio by type of security at the dates indicated. The table includes a reconciliation of total net loans receivable, after consideration of undisbursed portion of loans, deferred loan fees and discounts, and allowance for losses on loans. 1997 1996 1995 1994 1993 ------------------- ------------------ ------------------ ----------------- ---------------- TYPE OF SECURITY AMOUNT % AMOUNT % AMOUNT % AMOUNT % AMOUNT % ----------- ------- --------- -------- --------- -------- -------- -------- -------- ------- (Dollars in thousands) Residential: Single family units $217,528 90.8% $207,028 91.0% $203,211 91.2% $195,525 91.7% $188,135 91.9% 2-4 family units 1,541 0.6% 1,234 0.5% 1,008 0.4% 1,006 0.5% 654 0.3% Over 4 family units 2,813 1.2% 2,769 1.2% 1,738 0.8% 1,835 0.8% 1,751 0.9% Commercial real estate 4,269 1.8% 4,006 1.8% 3,696 1.7% 2,729 1.3% 2,344 1.1% Land acquisition and development 769 0.3% 702 0.3% 838 0.4% 438 0.2% 560 0.3% Consumer and other loans 11,915 5.0% 10,959 4.8% 11,337 5.1% 10,931 5.1% 10,441 5.1% Loans on deposits 821 0.3% 877 0.4% 901 0.4% 860 0.4% 888 0.4% ----------- ------- --------- ------- --------- ------ --------- ------ --------- ------ 239,656 100.0% 227,575 100.0% 222,729 100.0% 213,324 100.0% 204,773 100.0% ----------- ------- --------- ------- --------- ------ --------- ------ --------- ------ Less: Undisbursed portion of loans 2,444 2,717 2,237 1,971 1,762 Deferred loan fees and discounts 1,070 959 916 988 893 ----------- --------- --------- ---------- --------- 3,514 3,676 3,153 2,959 2,655 ----------- --------- --------- ---------- --------- Total loans receivable 236,142 223,899 219,576 210,365 202,118 Allowance for losses on loans 887 888 912 1,035 1,025 ----------- ---------- --------- ---------- --------- Net loans $235,255 $223,011 $218,664 $209,330 $201,093 =========== ========== ========= ========== =========
Origination, Purchase and Sale of Loans and Loan Concentrations The Bank originates residential loans in conformity with standard underwriting criteria to assure maximum eligibility for possible resale in the secondary market. Although the Bank has authority to lend anywhere in the United States, it has confined its loan origination activities primarily in the Bank's service area. Loan originations are developed from a number of sources, primarily from referrals from real estate brokers, builders, and existing and walk-in customers. The Bank also utilizes the services of a loan broker located in Fort Wayne, Indiana, who is paid on a commission basis (generally 1% of the loan amount) to originate loans for the Bank. The Bank's mortgage loan approval process is intended to assess the borrower's ability to repay the loan, the viability of the loan, and the adequacy of the value of the property that will secure the loan. Residential and commercial loans ranging up to $200,000 can be approved by the loan committee of the Bank. Loans exceeding $200,000 must be approved by the Bank's Board of Directors. The Bank utilizes independent qualified appraisers approved by the Board of Directors to appraise the properties securing its loans and requires title insurance or title opinions so as to insure that the Bank has a valid lien on the mortgaged real estate. The Bank requires borrowers to maintain fire and casualty insurance on its secured properties. The procedure for approval of construction loans is the same as for residential mortgage loans, except that the appraiser evaluates the building plans, construction specifications, and estimates of construction costs. The Bank also evaluates the feasibility of the proposed construction project and the experience and track record of the developer. In addition, all construction loans generally require a commitment from a third-party lender or from the Bank for a permanent long-term loan to replace the construction loan upon completion of construction. Consumer loans are underwritten on the basis of the borrower's credit history and an analysis of the borrower's income and expenses, ability to repay the loan, and the value of the collateral, if any. Consumer loans must be approved by a consumer loan officer. Consumer loan originations currently are being generated primarily through advertising. Currently, it is the Bank's policy to originate both fixed-rate and adjustable-rate loans, providing all such loans are eligible for sale in the secondary market. It is the Bank's intention to hold all originated and purchased loans in its portfolio and not for sale. Generally, the Bank is not active in the secondary market. The following table shows mortgage and other loan origination, purchase, and repayment activity for the Bank during the periods indicated: Years Ended September 30 -------------------------------------- 1997 1996 1995 ---------- ---------- ----------- (Dollars in thousands) Mortgage loans originated for the purpose of: Construction-commercial $ - $ 995 $ - Construction-residential 9,120 6,582 7,069 Purchase/refinance-commercial 618 1,905 1,910 Purchase/refinance-residential 53,374 51,926 41,376 Consumer and other loans originated 9,462 6,837 9,160 ---------- ---------- ----------- Total loans originated 72,574 68,245 59,515 ---------- ---------- ----------- Loans purchased - - - ---------- ---------- ----------- 72,574 68,245 59,515 ---------- ---------- ----------- Principal repayments 60,368 64,146 50,316 ---------- ---------- ----------- Other: Provision for losses on loans 50 9 50 Amortization of loan fees (271) (368) (412) Loan foreclosures, net 183 111 228 ---------- ---------- ----------- (38) (248) (134) ---------- ---------- ----------- Total credits, net 60,330 63,898 50,182 ---------- ---------- ----------- Net increases in mortgage and other loans receivable, net $12,244 $ 4,347 $ 9,333 ========== ========== ============ Interest Rates, Points and Fees The Bank realizes interest, point, and fee income from its lending activities. The Bank also realizes income from commitment fees for making commitments to originate loans, from prepayment and late charges, loan fees, application fees, and fees for other miscellaneous services. The Bank accounts for loan origination fees in accordance with the Statement of Financial Accounting Standards on Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans ("SFAS No. 91") issued by the Financial Accounting Standards Board (the "FASB"). SFAS No. 91 prohibits the immediate recognition of loan origination fees as revenues and requires that such income (net of certain direct loan origination costs) for each loan be amortized, generally by the interest method, over the estimated life of the loan as an adjustment of yield. Nonperforming Assets Loans are reviewed on a regular basis and are generally placed on nonaccrual status when the loans become past due 90 days or more, or when, in the judgment of management, the probability of collection is deemed to be insufficient to warrant further accrual. When a loan is placed on a nonaccrual status, previously accrued but unpaid interest is deducted from interest income. When the Bank is unable to resolve a delinquency satisfactorily within 45 days after the loan is past due, it will undertake foreclosure or other proceedings, as necessary, to minimize any potential loss. Real estate acquired by the Bank as a result of foreclosure or by deed in lieu of foreclosure is classified as "real estate owned" until it is sold. When property is so acquired, it is recorded at the lower of loan balance or fair market value at the date of acquisition. Periodically, real estate owned is reviewed to ensure that net realizable value is not less than carrying value, and any allowance resulting therefrom is charged to operations as a provision for loss on real estate owned. All costs incurred in maintaining the property from the date of acquisition are expensed. The following table reflects the amount of loans in delinquent status as of the dates indicated: Loans Delinquent For ---------------------------------------------------------------------------- 30-59 Days 60-89 Days 90 Days and Over --------------------------- ----------------------- ------------------------ Percent Percent Percent of Loan of Loan of Loan Number Amount Category Number Amount Category Number Amount Category ------- -------- ---------- ------ ------ --------- ------ ------ --------- (Dollars in thousands) Real estate: One to four 31 $1,187 0.54% 8 $298 0.14% 30 $671 0.31% family Consumer 18 192 1.51% 9 74 0.58% 14 94 0.74% ==== ========== ==== ======= ==== ======== Total 49 $1,379 0.58% 17 $372 0.16% 44 $765 0.32% ==== ========== ==== ======= ==== ========
The following table sets forth the Bank's nonperforming assets at the dates indicated: At September 30, ------------------------------------------ 1997 1996 1995 1994 1993 ------ ------- ------- -------- --------- (Dollars in thousands) Nonaccrual loans $658 $814 $765 $1,020 $866 Loans past due 90 days and still accruing 64 88 99 49 87 ------ ------- ------- -------- ---------- 722 902 864 1,069 953 Real estate owned, net of allowance - 110 47 25 106 ------ ------- ------- -------- ---------- Total nonperforming assets $722 $1,012 $911 $1,094 $1,059 ====== ======= ======= ======== ========== Consumer loans are placed on nonaccrual generally when the loan exceeds 90 days delinquent, or if in the opinion of management, the possibility of collecting the loan becomes questionable. Mortgage loans are placed on nonaccrual generally when the loan exceeds 90 days delinquent; however, if the loan is below a 25% loan-to-value, management may at their option decide to accrue interest on the loan since collection of the loan appears highly likely. Interest income that would have been recognized for the year ended September 1997, if nonaccrual loans had been current in accordance with their original terms, approximated $38,000. Interest income recognized on such loans for the year ended September 30, 1997, approximated $25,000. The federal regulations require savings associations to review their assets on a regular basis and to classify them as: special mention; substandard; doubtful and loss. Loans classified as special mention are loans which currently do not expose the Bank to an unusual risk of loss but based on information available require the attention of management. This classification usually includes loans secured by unusual collateral, loans with documentary items which are being addressed by counsel, and relatively large loans where the borrower has had a history of delinquent payments and the collateral has a cashflow shortfall, however, the borrower has continued to service the debt. Loans classified as substandard or doubtful generally represent balances where the borrower has made several late payments and is unable to bring the loan current. Substandard loans generally represent situations where the borrower is attempting to resolve the delinquency in the normal course of business (i.e., sale of the property or infusion of additional capital). Loans classified as doubtful represent situations where the borrower has been unsuccessful in attempts to resolve the delinquency in the normal course of business. Doubtful loans involve a greater degree of uncertainty regarding estimate of loss. Loans classified as loss represent situations where the loan is severely delinquent. These loans typically involve extensive bankruptcy proceedings or other unusual circumstances where the debtor contests foreclosure. Loans classified as special mention, substandard or doubtful do not necessarily require specific reserves. Individual loan balances may be classified in one or more categories based on management's analysis and estimate of the risk underlying each individual situation. In accordance with the federal regulations, Management continually reviews the mix and delinquency status of its loan portfolio and classifies those loans which it deems appropriate. As of September 30, 1997, loan balances were classified by the Bank as follows: Loss $ 11,567 Doubtful -0- Substandard 808,459 Special Mention 605,383 Allowance for Losses on Loans and Real Estate Owned The allowances for loan and real estate owned losses represent amounts available to absorb inherent losses in the loan portfolio. Such allowances are based on management's continuing review of the portfolios, historical charge-offs, current economic conditions, and such other factors, which in management's judgment deserve recognition in estimating possible losses. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the allowance for loan losses. Such agencies may require additions to the allowances based on their judgment about the information available to them at the time of their examination. Provisions for losses are charged to earnings to bring the allowances to levels considered necessary by management. Losses are charged to the allowances when considered probable. As of September 30, 1997, the allowances for losses on loans and real estate owned were $886,567 and $-0- respectively. Management believes that the allowances are adequate to absorb known and inherent losses in the portfolio. No assurance can be given, however, that economic conditions which may adversely affect the Bank's markets or other circumstances will not result in additions to the allowance for loan losses. The following table presents an allocation of the Bank's allowance for loan losses at the dates indicated and the percentage of loans in each category to total loans. September 30, ---------------------------------------------------------------------------- 1997 1996 1995 1994 1993 ---------------------------------------------------------------------------- Amount % Amount % Amount % Amount % Amount % ---------------------------------------------------------------------------- (Dollars in thousands) ---------------------------------------------------------------------------- Balance at end of period applicable to: Residential Mortgage Loans $ 9 91.7% $ 19 91.8% $ 42 92.2% $ 20 92.6% $ 177 92.4% Commercial Real Estate Loans - 3.0% - 3.0% - 2.0% 140 1.3% 140 1.1% Consumer Loans 2 5.3% - 5.2% 30 5.8% 42 6.1% 15 6.5% Unallocated 875 868 840 832 693 ----------------------------------------------------------------------------- Total $ 886 100.0% $887 100.0% $912 100.0% $1,034 100.0% $1,025 100.0% -----------------------------------------------------------------------------
The following table is a summary of activity in the Bank's allowance for loan losses for the periods indicated. Summary of Loan Loss Experience Years ended September 30, ------------------------------------------ (Dollars in Thousands) 1997 1996 1995 1994 1993 ------ ------ -------- -------- ---------- Balance of loan loss allowance at beginning of year $887 $912 $1,034 $1,025 $895 Charge-offs Residential - - 153 5 1 Commercial real estate - - - - - Commercial - - - - - Consumer 84 55 47 30 45 ------ ------ -------- -------- ---------- Total Charge-offs 84 55 200 35 46 ------- ------ -------- -------- ---------- Recoveries Residential - - - - - Consumer 33 21 28 21 22 ------ ------ -------- -------- ---------- Total Recoveries 33 21 28 21 22 ------ ------ -------- -------- ---------- Net Charge-offs (Recoveries) 51 34 172 14 24 Provision for loan losses 50 9 50 23 154 ------ ------ -------- -------- ---------- Balance of loan loss allowance at end of year $886 $887 $ 912 $1,034 $1,025 ====== ====== ======== ======== ========== Ratio of net charge-offs to average loans outstanding 0.02% 0.02% 0.08% 0.01% 0.02% Investment Activities Federal thrift institutions have authority to invest in various types of liquid assets, including United States Treasury obligations and securities of various federal agencies, certificates of deposit at insured banks, bankers' acceptances and federal funds. As a member of the FHLB System, the Bank must maintain minimum levels of liquid assets specified by the OTS which vary from time to time. Subject to various regulatory restrictions, federal thrift institutions may also invest a portion of their assets in certain commercial paper, corporate debt securities and mutual funds whose assets conform to the investments that a federal thrift institution is authorized to make directly. At September 30, 1997, the Bank's ratio of liquid assets to total assets was 13.0%, which exceeds the regulatory requirement. At September 30, ------------------------------------------- 1997 1996 1995 ------------- ------------- -------------- Interest-bearing deposits and certificates of deposit (1) $ 8,714,990 $ 7,823,900 $ 8,190,942 U.S. government and federal agency securities Held to maturity 8,000,000 13,175,118 26,987,247 Available for sale 19,822,410 20,590,450 6,966,562 Mortgage backed securities Held to Maturity 498,823 630,503 794,328 Stock in FHLB of Indianapolis 2,062,200 2,004,400 1,941,100 Other Held to maturity 757,855 455,414 1,158,980 Available for sale 8,645,390 5,295,565 4,103,300 ------------- ------------- ------------- Total investments $48,501,668 $49,975,350 $50,142,459 ============= ============= ============= - ---------------------------------- (1)In FHLB of Indianapolis ($7,738,990) and insured certficates of deposit ($976,000) at September 30, 1997; in FHLB of Indianapolis at September 30, 1996; in FHLB of Indianapolis ($7,800,686) and insured certificates of deposit ($390,256) at September 30, 1995. The following table sets forth information regarding the maturity distribution of investment securities at September 30, 1997, and the weighted average yield on those securities. At September 30, 1997 ---------------------------------------------------------------------- Available for Sale Held to Maturity ---------------------------------- ----------------------------------- Weighted Approximate Weighted Approximate Amortized Average Fair Amortized Average Fair Maturity Distribution at September 30: Cost Yield Value Cost Yield Value ------------ ------ ------------- ------------- -------- ------------- Due in one year or less $ 3,321,375 5.60% $ 3,326,153 $2,075,000 5.37% $2,065,967 Due after one through five years 14,787,543 5.79% 14,823,974 6,290,000 5.36% 6,266,561 Due after five through ten years 5,658,899 7.08% 5,681,031 367,855 5.93% 382,524 Due after ten years 2,015,504 7.70% 2,072,688 25,000 6.50% 25,000 ------------- ------------- ------------- ------------- 25,783,321 25,903,846 8,757,855 8,740,052 Mortgage-backed securities - - - 498,823 9.58% 523,035 Marketable equity securities 2,563,954 2,563,954 - - ------------- -------------- ------------- ------------- $28,347,275 $28,467,800 $9,256,678 $9,263,087 ============= ============== ============= =============
Sources of Funds General Deposits have traditionally been the primary source of funds of the Bank for use in lending and investment activities. In addition to deposits, the Bank derives funds from loan prepayments and income on earning assets. While income on earning assets is a relatively stable source of funds, deposit inflows and outflows can vary widely and are influenced by prevailing interest rates, money market conditions, and levels of competition. Deposits Deposits are attracted principally from within the Bank's primary market area through the offering of a variety of deposit instruments, including passbook and statement accounts and certificates of deposit ranging in terms from three months to five years. Deposit account terms vary, principally on the basis of the minimum balance required, the time periods the funds must remain on deposit and the interest rate. The Bank also offers individual retirement accounts ("IRA's"). The Bank's policies are designed primarily to attract deposits from local residents rather than to solicit deposits from areas outside its primary market. The Bank does not accept deposits from brokers due to the volatility and rate sensitivity of such deposits. Interest rates paid, maturity terms, service fees and withdrawal penalties are established by the Bank on a periodic basis. Determination of rates and terms are predicated upon funds acquisition and liquidity requirements, rates paid by competitors, growth goals and federal regulations. A major determinant of the Bank's average cost of funds is the distribution of the Bank's accounts by interest rate paid. An important indicator of the Bank's stability of lendable funds is the distribution of the Bank's accounts by maturity. For information on the various interest rate categories, the amounts of certificate accounts at September 30, 1997, maturing during the next five years and thereafter see the Notes to Consolidated Financial Statements in the Company's 1997 Annual Report. The following table lists maturities of certificates of deposits where the balance of the certificate exceeds $100,000 for the periods indicated. None of these certificates were brokered deposits. At September 30, 1997 ---------------------- 3 months or less $ 5,598,526 3-6 months 2,815,865 6-12 months 5,704,785 over 12 months 3,247,415 -------------- Total $17,366,591 ============== Borrowings As a member of the FHLB System and the FHLB of Indianapolis, the Bank is eligible to arrange borrowings or advances for various purposes and on various terms. The Bank had no advances at September 30, 1997. As of September 30, 1996, and 1995 the Bank had outstanding advances to the FHLB of Indianapolis of -0- and $1,000,000 respectively. Reverse repurchase agreements, another source of borrowing for the Bank, are retail obligations of the Bank with a maturity of 90 days or less, and are generally secured with specific investment securities owned by the Bank. The following tables set forth certain information as to the Bank's short-term borrowings consisting of FHLB of Indianapolis advances and reverse repurchase agreements for the periods and at the dates indicated. Average balances and average interest rates are based on month-end balances. Years Ended September 30 -------------------------------- 1997 1996 1995 ---------- --------- ---------- Average balance of total borrowings..............$2,412,000 $ 723,000 $ 279,000 Highest month-end balance of total borrowings... 3,292,639 1,000,000 1,000,000 Weighted average interest rate of total borrowings 4.85% 5.83% 5.83% At September 30 ------------------------------ 1997 1996 1995 ---------- ------- ----------- Advances from FHLB of Indianapolis............... $ - $ - $1,000,000 Reverse Repurchase agreements..................... 3,162,400 - - ----------- ------ ----------- Total borrowings..................................$3,162,400. $ - $1,000,000 =========== ====== =========== Weighted average interest rate................. 5.31% - 5.83% Trust Department and Discount Brokerage Services In October 1984, the FHLB of Indianapolis granted full trust powers to the Bank, one of the first savings institutions in Indiana to be granted such powers. As of September 30, 1997, the Bank's trust department assets totaled approximately $43,699,000 including self-directed IRA accounts, and it was offering a variety of trust services including estate planning. As of that date, the trust department was administering approximately 765 trust accounts, including estates, guardianships, revocable and irrevocable trusts, testamentary trusts, and self-directed IRA accounts. The trust department also offers and administers self-directed Individual Retirement Accounts ("IRA's") and Simplified Employee Pension IRA's for small businesses. Non-Bank Subsidiary Peoples Financial Services, Inc. ("PFSI") was organized in 1977 under the laws of the State of Indiana. It is wholly owned by the Bank and conducts a general insurance business within the State of Indiana under the name of Peoples Insurance Agency. During fiscal years ended September 30, 1997 and 1996, PFSI recorded total income of $41,094 and $36,851, respectively, with net income for such periods amounting to $15,538 and $13,411, respectively. Since 1985, the Bank also has offered discount brokerage services to its customers. In 1996, this service was moved to the service corporation and was offered through U.S. Clearing Corp. Prior to 1996, another vendor was used. This service also reduces the expenses of securities transactions for the various trust accounts administered by the trust department and provides customers with a convenient and inexpensive means of conducting brokerage transactions. Employees As of September 30, 1997, the Bank employed 78 persons on a full-time basis and 8 persons on a part-time basis. A comprehensive employee benefits program is maintained which provides hospitalization and major medical insurance, retirement income, life insurance and disability insurance which is provided under the Bank's pension program. The Bank also maintains an Employee Stock Ownership Plan for the benefit of its employees which provides for distributions of an employee's vested portions upon retirement, disability, death or termination of employment. The Bank's employees are not represented by any collective bargaining group, and management considers its relations with its employees to be excellent. REGULATION General The Company, as a savings and loan holding company, and the Bank, as a federally chartered savings association, are subject to extensive regulation by the OTS. The lending activities and other investments of the Bank must comply with various federal regulatory requirements, and the OTS periodically examines the Bank for compliance with various regulatory requirements and for safe and sound operations. The FDIC also has the authority to conduct examinations. The Bank must file reports with the OTS describing its activities and financial condition and is also subject to certain reserve requirements promulgated by the Federal Reserve Board. This supervision and regulation is intended primarily for the protection of depositors and the deposit insurance funds and not for the protection of stockholders of the Company. Certain of these regulatory requirements are referred to below or appear elsewhere herein. In recent years, significant legislative proposals and reforms affecting the financial services industry have been discussed and evaluated by Congress. Such proposals include legislation to revise the Glass-Steagall Act, the Bank Holding Company Act of 1956, as amended, and the Home Owners' Loan Act, as amended, to expand permissible activities for banks, principally to facilitate the convergence of commercial and investment banking. Certain proposals also sought to expand insurance activities of banks and to eliminate the thrift charter. In addition, certain proposals seek to limit the powers of unitary savings and loan holding companies. It is unclear whether any of these proposals, or any form of them, will be introduced in the current Congress and become law. Consequently, it is not possible to determine what effect, if any, they may have on the Company and the Bank. Regulation of the Company General. The Company is a unitary savings and loan holding company as defined by the HOLA. As such, the Company is registered with the OTS and is subject to OTS regulation, examination, supervision and reporting requirements. As a subsidiary of a savings and loan holding company, the Bank is subject to certain restrictions in its dealings with the Company and affiliates thereof. The Company also is required to file certain reports with, and otherwise comply with, the rules and regulations of the SEC under the federal securities laws. Activities Restrictions. There are generally no restrictions on the activities of a unitary savings and loan holding company. The broad latitude to engage in activities under current law can be restricted if the OTS determines that there is reasonable cause to believe that the continuation by a savings and loan holding company of an activity constitutes a serious risk to the financial safety, soundness or stability of its subsidiary savings institution, the OTS may impose such restrictions as deemed necessary to address such risk including limiting: (i) payment of dividends by the savings institution; (ii) transactions between the savings institution and its affiliates; and (iii) any activities of the savings institution that might create a serious risk that the liabilities of the holding company and its affiliates may be imposed on the savings institution. Notwithstanding the above rules as to permissible business activities of unitary savings and loan holding companies, if the savings institution subsidiary of such a holding company fails to meet the QTL test, then such unitary holding company shall also become subject to the activities restrictions applicable to multiple holding companies and, unless the savings institution requalifies as a QTL within one year thereafter, register as, and become subject to, the restrictions applicable to a bank holding company. See "Regulation of the Bank--Qualified Thrift Lender." Restrictions on Acquisitions. Savings and loan holding companies are prohibited from acquiring, without prior approval of the OTS, (i) control of any other savings institution or savings and loan holding company or substantially all the assets thereof or (ii) more than 5% of the voting shares of a savings institution or holding company thereof which is not a subsidiary. Under certain circumstances, a registered savings and loan holding company is permitted to acquire, with the approval of the OTS, up to 15% of the voting shares of an undercapitalized savings institution pursuant to a "qualified stock issuance" without that savings institution being deemed controlled by the holding company. In order for the shares acquired to constitute a "qualified stock issuance," the shares must consist of previously unissued stock or treasury shares, the shares must be acquired for cash, the saving and loan holding company's other subsidiaries must have tangible capital of at least 6-1/2% of total assets, there must not be more than one common director or officer between the savings and loan holding company and the issuing savings institution, and transactions between the savings institution and the savings and loan holding company and any of its affiliates must conform to Sections 23A and 23B of the Federal Reserve Act. Except with the prior approval of the OTS, no director or officer of a savings and loan holding company or person owning by proxy or otherwise more than 25% of such company's stock, may also acquire control of any savings institution, other than a subsidiary savings institution, or of any other savings and loan holding company. Regulation of the Bank Federal Home Loan Bank System. The Bank is a member of the FHLB System, which consists of 12 district Federal Home Loan Banks subject to supervision and regulation by the Federal Housing Finance Board ("FHFB"). The Federal Home Loan Banks provide a central credit facility primarily for member institutions. As a member of the FHLB of Indianapolis, the Bank is required to acquire and hold shares of capital stock in the FHLB of Indianapolis in an amount at least equal to 1% of the aggregate unpaid principal of its home mortgage loans, home purchase contracts, and similar obligations at the beginning of each year, or 1/20 of its advances (i.e., borrowings) from the FHLB of Indianapolis, whichever is greater. The Bank was in compliance with this requirement with an investment in FHLB of Indianapolis stock at September 30, 1997, of $2,062,200. The FHLB of Indianapolis serves as a reserve or central bank for its member institutions within its assigned district. It is funded primarily from proceeds derived from the sale of consolidated obligations of the FHLB System. It makes advances to members secured by certain prescribed collateral in accordance with policies and procedures established by the FHFB and the Board of Directors of the FHLB of Indianapolis. Long-term advances may only be made for the purpose of providing funds for residential housing finance. Members must meet standards of community investment or service established by the FHLB of Indianapolis in order to maintain continued access to long-term advances. As of September 30, 1997, the Bank had no advances outstanding. See "Business of the Company--Deposit Activity and Other Sources of Funds" and "--Borrowings." Liquidity Requirements. The Bank is required to maintain average daily balances of liquid assets (cash, certain time deposits, bankers' acceptances, highly rated corporate debt and commercial paper, securities of certain mutual funds, and specified United States government, state or federal agency obligations) equal to the monthly average of not less than 4% of its net withdrawable savings deposits plus short-term borrowings. Monetary penalties may be imposed for failure to meet liquidity requirements. Qualified Thrift Lender Test. Savings institutions must meet a qualified thrift lender ("QTL") test, which test may be met either by maintaining a specified level of assets in qualified thrift investments as specified in HOLA or by meeting the definition of a "domestic building and loan association" in section 7701 of the Internal Revenue Code of 1986, as amended (the "Code"). If the Bank maintains an appropriate level of certain specified investments (primarily residential mortgages and related investments, including certain mortgage-related securities) and otherwise qualifies as a QTL or a domestic building and loan association, it will continue to enjoy full borrowing privileges from the FHLB. The required percentage of investments under HOLA is 65% of assets while the Code requires investments of 60% of assets. An association must be in compliance with the QTL test or definition of domestic building and loan association on a monthly basis in nine out of every 12 months. Associations that fail to meet the QTL test will generally be prohibited from engaging in any activity not permitted for both a national bank and a savings association. As of September 30, 1997, the Bank was in compliance with its QTL requirement and met the definition of a domestic building and loan association. Uniform Lending Standards. Under OTS regulations, savings institutions must adopt and maintain written policies that establish appropriate limits and standards for extensions of credit that are secured by liens or interests in real estate or are made for the purpose of financing permanent improvements to real estate. These policies must establish loan portfolio diversification standards, prudent underwriting standards, including loan-to-value limits, that are clear and measurable, loan administration procedures and documentation and approval and reporting requirements. The real estate lending policies must reflect consideration of the Interagency Guidelines for Real Estate Lending Policies (the "Interagency Guidelines") that have been adopted by the federal bank regulators. The Interagency Guidelines, among other things, call upon depository institutions to establish internal loan-to-value limits for real estate loans that are not in excess of the following supervisory limits: (i) for loans secured by raw land, the supervisory loan-to-value limit is 65% of the value of the collateral; (ii) for land development loans (i.e., loans for the purpose of improving unimproved property prior to the erection of structures), the supervisory limit is 75%, (iii) for loans for the construction of commercial, multifamily or other nonresidential property, the supervisory limit is 80%; (iv) for loans for the construction of one to four-family properties, the supervisory limit is 85%; and (v) for loans secured by other improved property (e.g., farmland, completed commercial property and other income-producing property including nonowner-occupied, one to four-family property), the limit is 85%. Although no supervisory loan-to-value limit has been established for owner occupied, one to four-family and home equity loans, the Interagency Guidelines state that for any such loan with a loan-to-value ratio that equals or exceeds 90% at origination, an institution should require appropriate credit enhancement in the form of either mortgage insurance or readily marketable collateral. The Interagency Guidelines state that it may be appropriate in individual cases to originate or purchase loans with loan-to-value ratios in excess of the supervisory loan-to-value limits, based on the support provided by other credit factors. The aggregate amount of loans in excess of the supervisory loan-to-value limits, however, should not exceed 100% of total capital and the total of such loans secured by commercial, agricultural, multifamily and other non-one to four-family residential properties should not exceed 30% of total capital. The supervisory loan-to-value limits do not apply to certain categories of loans including loans insured or guaranteed by the U.S. government and its agencies or by financially capable state, local or municipal governments or agencies, loans backed by the full faith and credit of a state government, loans that are to be sold promptly after origination without recourse to a financially responsible party, loans that are renewed, refinanced or restructured without the advancement of new funds, loans that are renewed, refinanced or restructured in connection with a workout, loans to facilitate sales of real estate acquired by the institution in the ordinary course of collecting a debt previously contracted and loans where the real estate is not the primary collateral Management believes that the Bank's current lending policies conform to the Interagency Guidelines and that the Interagency Guidelines will have no material effect on its lending activities. Regulatory Capital Requirements. Under OTS capital regulations, savings institutions must maintain "tangible" capital equal to 1.5% of adjusted total assets, "core" capital equal to 3% of adjusted total assets and "total" capital (a combination of core and "supplementary" capital) equal to 8% of risk-weighted assets. In addition, OTS regulations which impose certain restrictions on savings associations that have a total risk-based capital ratio that is less than 8.0%, a ratio of Tier 1 capital to risk-weighted assets of less than 4.0% or a ratio of Tier 1 capital to adjusted total assets of less than 4.0% (or 3.0% if the institution is rated Composite 1 under the OTS examination rating system). The OTS has adopted an amendment to its risk-based capital requirements that requires savings institutions with more than a "normal" level of interest rate risk to maintain additional total capital (the OTS is delaying implementation of this requirement). A savings institution's interest rate risk will be measured in terms of the sensitivity of its "net portfolio value" to changes in interest rates. Net portfolio value is defined, generally, as the present value of expected cash inflows from existing assets and off-balance sheet contracts less the present value of expected cash outflows from existing liabilities. A savings institution will be considered to have a "normal" level of interest rate risk exposure if the decline in its net portfolio value after an immediate 200 basis point increase or decrease in market interest rates (whichever results in the greater decline) is less than 2% of the current estimated economic value of its assets. A savings institution with a greater than normal interest rate risk will be required to deduct from total capital, for purposes of calculating its risk-based capital requirement, an amount (the "interest rate risk component") equal to one-half the difference between the institution's measured interest rate risk and the normal level of interest rate risk, multiplied by the economic value of its total assets. The OTS will calculate the sensitivity of a savings institution's net portfolio value based on data submitted by the institution in a schedule to its quarterly Thrift Financial Report and using the interest rate risk measurement model adopted by the OTS. The amount of the interest rate risk component, if any, to be deducted from a savings institution's total capital will be based on the institution's Thrift Financial Report filed two quarters earlier. In general, savings institutions with less than $300 million in assets and a risk-based capital ratio above 12% are exempt from this interest rate risk component unless the OTS terminates such exemption. Although the Bank qualifies for the exemption, management believes that based on current financial data, the Bank would not be deemed to have more than a normal level of interest rate risk. In addition to generally applicable capital standards for savings institutions, the Director of the OTS is authorized to establish the minimum level of capital for a savings institution at such amount or at such ratio of capital-to-assets as the Director determines to be necessary or appropriate for such institution in light of the particular circumstances of the institution. The Director of the OTS may treat the failure of any savings institution to maintain capital at or above such level as an unsafe or unsound practice and may issue a directive requiring any savings institution which fails to maintain capital at or above the minimum level required by the Director to submit and adhere to a plan for increasing capital. Such a directive may be enforced in the same manner as an order issued by the OTS. At September 30, 1997, the Bank exceeded all regulatory minimum capital requirements as indicated in the table below. Dollars in Thousands Actual Required Excess Amount % Amount % Amount % Tangible capital $34,080 12.00% $4,261 1.5% $29,819 10.50% Core capital 34,080 12.00 8,523 3.0 25,557 9.00 Risk-based capital 34,955 24.67 11,334 8.0 23,621 16.67 Insurance of Deposit Accounts. The Bank's deposit accounts are insured by the SAIF to the maximum amount permitted by law. Insurance of deposits may be terminated by the FDIC upon a finding that the institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order, or condition imposed by the FDIC or the institution's primary regulator. The FDIC charges an annual assessment for the insurance of deposits based on the risk a particular institution poses to its deposit insurance fund. Under this system as of December 31, 1995, SAIF members paid within a range of 23 cents to 31 cents per $100 of domestic deposits, depending upon the institution's risk classification. This risk classification is based on an institution's capital group and supervisory subgroup assignment. Pursuant to the Economic Growth and Paperwork Reduction Act of 1996 (the "Act"), the FDIC imposed a special assessment on SAIF members to capitalize the SAIF at the designated reserve level of 1.25% as of October 1, 1996. Based on the Bank's deposits as of March 31, 1995, the date for measuring the amount of the special assessment pursuant to the Act, at September 30, 1997, the Bank recorded a pretax expense of $1,500,871 and paid such special assessment on November 27, 1996 to recapitalize the SAIF. Pursuant to the Act, the Bank pays, in addition to its normal deposit insurance premium as a member of the SAIF ranging from 0 to 27 basis points as of October 1, 1996, an amount equal to approximately 6.4 basis points toward the retirement of the Financing Corporation bonds ("Fico Bonds") issued in the 1980s to assist in the recovery of the savings and loan industry. Members of the Bank Insurance Fund ("BIF"), by contrast, pay, in addition to their normal deposit insurance premium, approximately 1.3 basis points. Under the Act, the FDIC also is not permitted to establish SAIF assessment rates that are lower than comparable BIF assessment rates. Beginning no later than January 1, 2000, the rate paid to retire the Fico Bonds will be equal for members of the BIF and the SAIF. The Act also provides for the merging of the BIF and the SAIF by January 1, 1999, provided there are no financial institutions still chartered as savings associations at that time. Should the insurance funds be merged before January 1, 2000, the rate paid by all members of this new fund to retire the Fico Bonds would be equal. Federal Reserve System. Pursuant to regulations of the Federal Reserve Board, a savings institution must maintain average daily reserves equal to 3% on the first $54.0 million of transaction accounts, plus 10% on the remainder. This percentage is subject to adjustment by the Federal Reserve Board. Because required reserves must be maintained in the form of vault cash or in a non-interest bearing account at a Federal Reserve Bank, the effect of the reserve requirement is to reduce the amount of the institution's interest-earning assets. As of September 30, 1997, the Bank met its reserve requirements. Dividend Restrictions. Under OTS regulations, the Bank is not permitted to pay dividends on its capital stock if its regulatory capital would thereby be reduced below the remaining balance of the liquidation account established for the benefit of certain depositors in connection with the conversion of the Bank from the mutual to stock form of organization. In addition, the Bank is required by OTS regulations to give the OTS 30 days' prior notice of any proposed declaration of dividends to the Company. OTS regulations impose additional limitations on the payment of dividends and other capital distributions (including stock repurchases and cash mergers) by the Bank. Under these regulations, a savings institution that, immediately prior to, and on a pro forma basis after giving effect to, a proposed capital distribution, has total capital (as defined by OTS regulation) that is equal to or greater than the amount of its fully phased-in capital requirements (a "Tier 1 Association") is generally permitted, after notice, to make capital distributions during a calendar year in the amount equal to the greater of: (a) 75% of its net income for the previous four quarters; or (b) up to 100% of its net income to date during the calendar year plus an amount that would reduce by 50% its surplus capital ratio at the beginning of the calendar year. A savings institution with total capital in excess of current minimum capital ratio requirements but not in excess of the fully phased-in requirements (a "Tier 2 Association") is permitted, after notice, to make capital distributions without OTS approval of up to 75% of its net income for the previous four quarters, less dividends already paid for such period. A savings institution that fails to meet current minimum capital requirements (a "Tier 3 Association") is prohibited from making any capital distributions without the prior approval of the OTS. A Tier 1 Association that has been notified by the OTS that it is in need of more than normal supervision will be treated as either a Tier 2 or Tier 3 Association. Except under limited circumstances and with OTS approval, no capital distributions would be permitted if they would cause the institution to become undercapitalized. As of September 30, 1997, the Bank was considered a Tier 1 Association under OTS regulations. Despite the above authority, the OTS may prohibit any savings institution from making a capital distribution that would otherwise be permitted by the regulation, if the OTS were to determine that the distribution constituted an unsafe or unsound practice. Furthermore, under the OTS prompt corrective action regulations, the Bank would be prohibited from making any capital distributions if, after making the distribution, it would have: (i) a total risk-based capital ratio of less than 8.0%; (ii) a Tier 1 risk-based capital ratio of less than 4.0%; or (iii) a leverage ratio of less than 4.0%. See "--Prompt Corrective Regulatory Action." Affiliate Restrictions. Transactions between a savings association and its "affiliates" are subject to quantitative and qualitative restrictions under Sections 23A and 23B of the Federal Reserve Act. Affiliates of a savings association include, among other entities, the savings association's holding company and companies that are under common control with the savings association. In general, Sections 23A and 23B and OTS regulations issued in connection therewith limit the extent to which a savings association or its subsidiaries may engage in certain "covered transactions" with affiliates to an amount equal to 10% of the association's capital and surplus, in the case of covered transactions with any one affiliate, and to an amount equal to 20% of such capital and surplus, in the case of covered transactions with all affiliates. In addition, a savings association and its subsidiaries may engage in covered transactions and certain other transactions only on terms and under circumstances that are substantially the same, or at least as favorable to the savings association or its subsidiary, as those prevailing at the time for comparable transactions with nonaffiliated companies. A "covered transaction" is defined to include a loan or extension of credit to an affiliate; a purchase of investment securities issued by an affiliate; a purchase of assets from an affiliate, with certain exceptions; the acceptance of securities issued by an affiliate as collateral for a loan or extension of credit to any party; or the issuance of a guarantee, acceptance, or letter of credit on behalf of an affiliate. In addition, under the OTS regulations, a savings association may not make a loan or extension of credit to an affiliate unless the affiliate is engaged only in activities permissible for bank holding companies; a savings association may not purchase or invest in securities of an affiliate other than shares of a subsidiary; a savings association and its subsidiaries may not purchase a low-quality asset from an affiliate; and covered transactions and certain other transactions between a savings association or its subsidiaries and an affiliate must be on terms and conditions that are consistent with safe and sound banking practices. With certain exceptions, each loan or extension of credit by a savings association to an affiliate must be secured by collateral with a market value ranging from 100% to 130% (depending on the type of collateral) of the amount of the loan or extension of credit. The OTS regulation generally excludes all non-bank and non-savings association subsidiaries of savings associations from treatment as affiliates, except to the extent that the OTS or the Board of Governors of the Federal Reserve System (the "Federal Reserve Board") decides to treat such subsidiaries as affiliates. The regulation also requires savings associations to make and retain records that reflect affiliate transactions in reasonable detail, and provides that certain classes of savings associations may be required to give the OTS prior notice of affiliate transactions. Prompt Corrective Action. The prompt corrective action regulation of the OTS requires certain mandatory actions and authorizes certain other discretionary actions to be taken by the OTS against a savings bank that falls within certain undercapitalized capital categories specified in the regulation. The regulation establishes five categories of capital classification: "well capitalized," "adequately capitalized," "undercapitalized," "significantly undercapitalized," and "critically undercapitalized." Under the regulation, the risk-based capital, leverage capital, and tangible capital ratios are used to determine an institution's capital classification. At September 30, 1997, the Bank met the capital requirements of a "well capitalized" institution under applicable OTS regulations. In general, the prompt corrective action regulation prohibits an insured depository institution from declaring any dividends, making any other capital distribution, or paying a management fee to a controlling person if, following the distribution or payment, the institution would be within any of the three undercapitalized categories. In addition, adequately capitalized institutions may accept Brokered Deposits only with a waiver from the FDIC and are subject to restrictions on the interest rates that can be paid on such deposits. Undercapitalized institutions may not accept, renew, or roll-over Brokered Deposits. If the OTS determines that an institution is in an unsafe or unsound condition, or if the institution is deemed to be engaging in an unsafe and unsound practice, the OTS may, if the institution is well capitalized, reclassify it as adequately capitalized; if the institution is adequately capitalized but not well capitalized, require it to comply with restrictions applicable to undercapitalized institutions; and, if the institution is undercapitalized, require it to comply with certain restrictions applicable to significantly undercapitalized institutions. Community Reinvestment Act and Fair Lending Developments. The Bank is subject to certain fair lending requirements and reporting obligations involving home mortgage lending operations and Community Reinvestment Act ("CRA") activities. The CRA generally requires the federal banking agencies to evaluate the record of a financial institution in meeting the credit needs of its local communities, including low- and moderate-income neighborhoods. A savings association may be subject to substantial penalties and corrective measures for a violation of certain fair lending laws. The federal banking agencies may take compliance with such laws and CRA obligations into account when regulating and supervising other activities. A savings association's compliance with its CRA obligations is based on a performance-based evaluation system which bases CRA ratings on an institution's lending service and investment performance. When a holding company applies for approval to acquire another financial institution or financial institution holding company, the OTS will review the assessment of each subsidiary savings association of the applicant; and such records may be the basis for denying the application. In February, 1997, the OTS rated the Bank "satisfactory" in complying with its CRA obligations. Year 2000 Compliance. In May 1997, the Federal Financial Institutions Examination Council issued an interagency statement to the chief executive officers of all federally supervised financial institutions regarding Year 2000 project management awareness. It is expected that unless financial institutions address the technology issues relating to the coming of the year 2000, there will be major disruptions in the operations of financial institutions. The statement provides guidance to financial institutions, providers of data services, and all examining personnel of the federal banking agencies regarding the year 2000 problem. The federal banking agencies intend to conduct year 2000 compliance examinations, and the failure to implement a year 2000 program may be seen by the federal banking agencies as an unsafe and unsound banking practice. In addition, federal banking agencies will be taking into account year 2000 compliance programs when analyzing applications and may deny an application based on year 2000 related issues. Item 2. Properties The Bank owns six full-service banking offices located in Avilla, Auburn, Columbia City, Garrett, Kendallville and LaGrange, Indiana. The following table provides certain information with respect to the Bank's full-service offices at September 30, 1997. Full Service Net Book Offices Date Opened Value(1) ---------- ----------- -------- Main Office, Auburn 1973 $177,520 Avilla 1980 131,852 Garrett 1972 59,178 Columbia City 1971 139,929 Kendallville 1941 495,246 LaGrange 1972 180,881 (1) Of real estate at September 30, 1997. The Bank owns data processing equipment including computers, terminals and communications equipment for record keeping purposes. The estimated costs to make this equipment year 2000 compliant, are not expected to be material. The total net book value of the Bank's premises and equipment at September 30, 1997, was $1,712,774. Item 3. Legal Proceedings There are no material pending legal proceedings to which the Company, the Bank or any subsidiary is a party or to which any of their property is subject. Item 4. Submission of Matters to a Vote of Security Holders Not Applicable. PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters Reference is made to page 2 of the Company's Annual Report to Stockholders, for the year ended September 30, 1997, for the information required by this Item, which is hereby incorporated by reference. Item 6. Selected Financial Data Reference is made to page 12 of the Company's Annual Report to Stockholders for the year ended September 30, 1997, for the information required by this Item which is hereby incorporated by reference. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Reference is made to pages 6 to 11 of the Company's Annual Report to Stockholders for the year ended September 30, 1997, for the information required by this Item which is hereby incorporated by reference. Item 8. Financial Statements and Supplementary Data Reference is made to pages 13 to 26 of the Company's Annual Report to Stockholders for the year ended September 30, 1997, for the information required by this Item which is hereby incorporated by reference. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures None. PART III Item 10. Directors and Executive Officers of the Registrant Reference is made to pages 2 - 4 of the Company's definitive Proxy Statement for the 1998 Annual Meeting of Stockholders for the information required by this Item which is hereby incorporated by reference. Item 11. Executive Compensation Reference is made to pages 6 - 10 of the Company's definitive Proxy Statement for the 1998 Annual Meeting of Stockholders for the information required by this Item which is hereby incorporated by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management Reference is made to pages 2 and 5 of the Company's definitive Proxy Statement for the 1998 Annual Meeting of Stockholders for the information required by this Item which is hereby incorporated by reference. Item 13. Certain Relationships and Related Transactions Reference is made to pages 5 and 6 of the Company's definitive Proxy Statement for the 1998 Annual Meeting of Stockholders for the information required by this Item which is hereby incorporated by reference. PART IV Item 14. Exhibits, Financial Statements, Schedules, and Reports on Form 8-K (a) The following consolidated financial statements of Peoples Bancorp and Its Wholly-owned Subsidiary, included in the Annual Report to Stockholders of the registrant for the year ended September 30, 1997, are filed as part of this report: 1. Financial Statements o REPORT OF GEO. S. OLIVE & CO. LLC, INDEPENDENT AUDITORS. o CONSOLIDATED STATEMENT OF FINANCIAL CONDITION - AS OF SEPTEMBER 30, 1997, AND 1996. o CONSOLIDATED STATEMENT OF INCOME FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996, AND 1995. o CONSOLIDATED STATEMENT OF CHANGE IN STOCKHOLDERS' EQUITY FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996, AND 1995. o CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996, AND 1995. o NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 2. Financial Statement Schedules All schedules are omitted because they are not applicable, or the required information is shown in the consolidated financial statements and notes. 3. Exhibits Exhibit No. Description of Exhibit 3.1 Articles of Incorporation of Peoples Bancorp (1) 3.2 Bylaws of Peoples Bancorp (1) 10.2 Employment Agreement of Roger J. Wertenberger (1) 10.2(a) Amendment No. 1 to Employment Agreement of Roger J. Wertenberger(1) 10.4 Amended and Restated Stock Option and Stock Grant Plan (2) 10.5 Employee Stock Ownership Plan (1) 10.5(a) First Amendment to Employee Stock Ownership Plan (3) 10.5(b) Second Amendment to Employee Stock Ownership Plan (3) 10.5(c) Third Amendment to Employee Stock Ownership Plan (3) Exhibit No. Description of Exhibit 10.6 Expense and Tax Sharing Agreement between Peoples Bancorp, Peoples Federal Savings Bank of DeKalb County and Peoples Financial Services, Inc., dated May 28, 1992 (3) 13 Annual Report to Stockholders 22 Subsidiaries of the Registrant 23 Consent of Auditors 27 Financial Data Schedule (4) (1) Incorporated by reference to Exhibit bearing the same number in the Company's Registration Statement of Form S-4 (33-37343) filed with the Securities and Exchange Commission on October 17, 1990. (2) Incorporated by reference to Exhibit bearing the same number in the Company's Annual Report on form 10-K for the year ended September 30, 1991. (3) Incorporated by reference to Exhibit bearing the same number in the Company's Annual Report on form 10-K for the year ended September 30, 1992. (4) For electronic filing purposes only. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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 BANCORP December 29, 1997 Roger J. Wertenberger Chairman of the Board, Principal Executive Officer, and Director Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. December 29, 1997 Roger J. Wertenberger, Chairman of the Board, Principal Executive Officer, and Director December 29, 1997 Maurice F. Winkler III, President, and Director December 29, 1997 Robert D. Ball, Director December 29, 1997 Jack L. Buttermore, Director December 29, 1997 John C. Harvey, Director December 29, 1997 Douglas D. Marsh, Director December 29, 1997 Lawrence R. Bowmar, Director December 29, 1997 John C. Thrapp, Director EXHIBIT 22 SUBSIDIARIES OF THE REGISTRANT Name of Subsidiary State of Incorporation - -------------------------------- ------------------------- Peoples Federal Savings Bank of DeKalb County United States of America and its subsidiary Peoples Financial Services Inc. Indiana EX-19 2 ANNUAL REPORT TO STOCKHOLDERS-YEAR ENDED 9/30/97 CONTENTS Letter to Stockholders . . . . . . . . 1 Highlights and Stock Information . . .2 Planning Today For a Better Tomorrow .3 Board of Directors and Executive Officers . . . . . . . . . .4 Branch Managers and Associates . . . .5 Management's Discussion and Analysis . . . . . . . . . . . . . 6 Selected Consolidated Financial Data 12 Consolidated Financial Statements . .13 Independent Auditor's Report . . . . .27 Statement of Management's Responsibility . . . . . . . . . . . 28 Corporate Profile . . . . . Inside Cover Executive Officers of Bancorp Roger J. Wertenberger Chairman of the Board and Chief Executive Officer Maurice F. Winkler, III President and Chief Operating Officer Carole J. Leins Corporate Secretary Independent Auditors Geo. S. Olive & Co. LLC 201 North Illinois Street Indianapolis, IN 46204 Legal Counsel Manatt, Phelps & Phillips 1200 New Hampshire Avenue N.W. Suite 200 Washington, D.C. 20036 Transfer Agent Fifth Third Bank Corporate Trust Administration 38 Fountain Square Plaza Cincinnati, OH 45263 TEL: 513-579-6016 800-336-6782 FAX: 513-744-6785 CORPORATE PROFILE Peoples Bancorp (the Company) is a holding company formed in 1990. It's stock is traded on NASDAQ National Market System under the symbol PFDC. The Company's primary asset is Peoples Federal Savings Bank of Dekalb ounty(the Bank). The Bank was formed in 1925 and has grown to assets of more than $290 million. The Bank's Main office is located in Auburn, Indiana with full service offices in Avilla, Columbia City, Garrett, Kendallville and LaGrange. The Bank's financial services include mortgages, trusts, consumer banking, and individual retirement accounts. The Bank is a member of the Federal Home Loan Bank System, and its deposits are insured by the Federal Deposit Insurance Corp. CORPORATE INFORMATION Form 10-K Report A copy of the Company's 10-K, including financial statements as filed with the Securities and Exchange Commission, will be furnished without charge to stockholders of the Company upon written request to the Secretary, Peoples Bancorp, 212 West 7th Street, P.O. Box 231, Auburn, Indiana 46706. As of the close of business on September 30, 1997, the Company had approximately 1,500 stockholders. ANNUAL MEETING The annual meeting of stockholders of Peoples Bancorp will be held Wednesday, January 14, 1998 at 2:00 p.m. at Greenhurst Country Club, 1740 North Main Street, Auburn, Indiana 46706. ABOUT THE COVER Investing in our customers and the communities we serve" is this year's 1997 Annual Report theme. On the cover: (top left) Richard Lewton, Branch Manager, delivers mortgage papers to a customer; (top right) Branch Manager, Kay Smith, working with Hertha Moran, Garrett Librarian, a recipient of donation support; (lower left) Clark Ream, Branch Manager and long term park board member, visiting with Kendallville Mayor, Larry McGahen, at the newly landscaped park garden; (lower right) Branch Manager, Andy Anderson, delivering mortgage papers with the Scott Gates family in Columbia City. TO OUR STOCKHOLDERS: We are pleased to report net income for the fiscal year of $4,202,192, an increase of 30% over the $3,212,458 earned during the same period one year ago. However, we must remember the F.D.I.C. assessment in fiscal 1996 reduced our after-tax income by approximately $893,000. Capital now stands at $44.3 million, which gives the Bancorp a net worth to asset ratio of 15.24%. The return on average assets (ROA) was 1.47%, and the return on equity (ROE) was 9.69%. Your Board of Directors has taken steps to improve the ROE, such as renewing the Stock Repurchase Plan. During the past fiscal year, we repurchased 64,170 shares of common stock at a cost of $1,360,208. Cash dividends of $0.41 per share ($1,391,751) were paid during the year. This was the tenth consecutive year that the cash dividends have been increased. An investment in Peoples Bancorp continues to be rewarding to shareholders. A stock split in the form of a stock dividend was declared in October, 1997. One additional share of common stock was issued for each two outstanding shares to stockholders of record on November 7, 1997. Assessing the needs of our market area has led us to several expansion projects. We expect to have a new ATM and debit card service for our customers by early 1998, and we are in the process of securing a second banking location in the Columbia City area. This new location will provide additional convenience for our customers in that area. During the past year, Max E. Robart retired as Executive Vice President. Mr. Robart had been with Peoples since 1984, and his banking career spanned 41 years. We thank him for his years of service, as his influence upon the Bank will be long felt. Jay Grate was promoted to Vice President of Lending Operations upon Mr. Robart's retirement. Mr. Grate has worked in the Bank for the past ten years in several lending areas. Donald E. Budd was hired in 1997 as Vice President and Trust Officer. He will service the trust needs of our client base, as well as develop new trust business for the Bank. Budd has 21 years of experience in the banking industry, the past six years specializing in trust, estate planning, and investment services. Mr. Budd was formerly vice president and trust officer of Citizens Bank of Kentucky. Effective January 1998,Jack L. Buttermore, a valued and trusted advisor, will retire from the Board of Directors after 17 years of service. Mr. Buttermore was first elected to the Board of Peoples Federal Savings Bank in 1980. His wise and valuable contributions have helped guide the Bank to the position of strength and stability it holds today. Mr. Buttermore will continue to serve the Bank as a Director Emeritus. On behalf of the Board of Directors, we would like to thank you--our stockholders, customers, and fellow employees for your continued confidence and support. Information listed below has been adjusted for stock split Market Price Dividends -------------------------- Low High Per Share ------------ ----------- ---------- Fiscal 1996 1st QTR $ 12.83 $ 13.67 $0.10 2nd QTR 13.00 15.33 0.10 3rd QTR 14.50 15.33 0.10 4th QTR 14.67 21.17 0.11 Fiscal 1996 1st QTR $ 13.50 $ 14.83 $0.09 2nd QTR 12.50 13.92 0.09 3rd QTR 12.50 14.00 0.09 4th QTR 12.83 13.50 0.10 The price of PFDC stock traded on NASDAQ on November 25, 1997 was $23.00 This page also included graphs depicting comparisons of total assets, net loans, stockholder's equity, and dividends per share for the years 1992 through 1997. Planing Today for a Better Tomorrow Peoples Federal produced excellent results in 1997 as this annual report shows, continuing on its course of achieving customer satisfaction through a sound offering of products and services. Peoples launched new products to improve existing services and made plans for changes ahead in 1998, all with an eye toward improving customer service. Our promise is to invest in the technology and people necessary to prepare for the future while maintaining a strong financial picture for the present. The bank will continue to grow steadily for the long run while producing results for our stockholders, customers, and the communities we serve that surpass the competition. With constant new technology to improve the service we can provide to our customers, it is truly an exciting time in the banking industry. For 1998, we plan to continue to build on our strength of local decision making through the branch network while seeking efficiencies corporate-wide Initiatives already in progress include: Introducing Automated Teller (ATM) and Debit Cards; Establishing a wide-area computer network to electronically link our branches; and Implementing a new mortgage processing system. Peoples Federal is preparing to launch an ATM and debit card service by early 1998. Customers will be able to tap into the existing network at about 7,000 ATM machines worldwide. Debit cards will give Peoples Federal customers a convenient way to pay for purchases directly from their checking accounts without the hassle of writing a check. As an added safety precaution, customers will be able to add their picture on the card to prevent an unauthorized person from using the card. Peoples also plans to install a wide-area network to enable our offices to work together better by sharing information electronically. The network, to be completed in `98, will improve communications among the branches, reduce long distance telephone costs, and most importantly, enhance our customer service. All of this technology would be wasted if our staff was not ready to make the most of it. That's why Peoples is also investing in our greatest asset, our employees, through computer training and product knowledge, so they are ready to make a smooth transition to the new systems and promote the products. Peoples continues to gain mortgage customers in each of the areas we serve sparked by a strong local economy. Whether it is the new Noble Hawk subdivision in Kendallville, Eagle Glen and Sugar Creek Estates in Columbia City, Maple Knoll, Maple Glen, and Baltimore Place in Garrett, Hunter's Glen or the soon-to-be-constructed Bridgewater development in Auburn, all of the areas Peoples serves are experiencing a new housing surge, which gives us the opportunity to provide a higher volume of mortgage services. This established pattern of building is expected to continue for 1998, and Peoples has the products to serve that market. While 1998 promises to be a year of exciting improvements, 1997 was also a year of accomplishments. A new and dynamic way of presenting checking statements, check imaging, was fully implemented. The new method of sending our customers images of their canceled checks along with their statements has been well received. With this new technology, customers have copies of checks when they need them. All of the same information as a traditional statement is provided more efficiently with the added advantage of reducing postage costs. Peoples celebrated the remodeling of the LaGrange office with an open house in September. The refurbishing contributes to an efficient, contemporary facility. We want our customers to enjoy coming to our branches because of the pleasant atmosphere and friendly service. Sign improvements were recently made in Avilla, Garrett, and Columbia City enabling us to promote our new products and special rates. This is essential to these markets because some customers may not have a daily newspaper but often drive by the bank. Expanded and improved training on club checking products, such as Rx Prescription Advantage and Children's Safety ID Network were added to the club accounts. The Rx Prescription Advantage provides benefits to checking club members with discounts at local drugstores by belonging to the plus checking club. The Safety ID Network enables customers to enter the pictures of children in a nationwide protection network with a digitized photo and description of a child by calling a toll-free number. A child's description can be sent anywhere in the country should the need ever arise. We're excited about our accomplishments and look forward to the year ahead, but we'll continue to remember the keystone that has contributed to our success for more than 70 years: Our commitment is to our customers and the community. This page displayed photographs of the members of the board Roger J. Wertenberger of directors, and the Chairman of the Board and Chief Executive executive officers of the Officer of the Bank, Auburn, Indiana. bank. Director since 1954. Robert D. Ball Former principal owner of Ball Brass and Aluminum Foundry, Inc. Auburn, Indiana Director since 1982. Lawrence R. Bowmar Retired Vice President-Consumer Loans of the Bank, Auburn, Indiana Director from 1974-1992 and 1993-present. Jack L. Buttermore Owner of Buttermore Farms, Auburn, Indiana Director since 1980. John C. Harvey Physician, Auburn, Indiana Director since 1979. Douglas D. Marsh Chairman of the Board, Applied Innovations, Inc. Chicago, Illinois President, Bridgewater Golf Co. Auburn, Indiana Associate, Auburn Realty, Auburn, Indiana Director since 1982. John C. Thrapp Attorney, Thrapp & Thrapp Kendallville, Indiana Director since 1990. Maurice F. Winkler, III President and Chief Operating Officer of the Bank, Auburn, Indiana Director since 1993. Lloyd M. Cline Director Emeritus Jesse A. (Jack) Sanders Director Emeritus Russell A. Spice Director Emeritus EXECUTIVE OFFICERS OF THE BANK Roger J. Wertenberger Donald E. Budd Chief Executive Officer Vice President-Trust Officer Maurice F. Winkler, III Carole J. Leins President and Chief Operating Officer Corporate Secretary Jeffery L Grate Deborah K. Stanger Vice President-Lending Operations Vice President-Chief Financial Officer Herma F. Fields Vice President-Savings This page includes a photograph of the Bank's branch managers ASSOCIATES Molly Allen o Karyn Alwine o Trisha Arnold o Dewayne Anderson o Trisha Arnold o Cathy Banet o Vicki Beasley o Cheryl Bherns o Debby Blevins o Lisa Boardman o Elaine Bolinger o Shane Bowen o Kay Brandon o Susan Branscum o Mona Brown o Don Budd o Jean Bush o Retha Butler o Michele Carnahan o Chris Coleman o Larry Cooney o Linda Cummins o Sharleen DeJohn o Herma Fields o Delores Forbes o Teresa Fox o Mandy Fugate o Scott Gates o Jay Grate o Sheryl Hanes o Bonnie Harlan o Marilee Harris o Stefanie Harris o CJ Herendeen o Paula Hertsel o Jennifer Hochstetler o Adina Houser o Courtney Jacobs o Sherry Johnson o Cindy Jollief o Dixie Jones o Heather Jones o Paula Jones o Heather Kaiser o Mary Ann Ketzenberger o Rebecca Klingenberger o Lisa LaVergne o Carole Leins o Ann Leis o Richard Lewton o Helen Lindley o Jodi Manier o Eleanor Manns o Sandra McAfee o Delara Miller o Gayle Morris o Nadia Mundroff o Donna O'Dell oTrisha Patton o Linda Plattner oJane Pepple o Kristie Prater o Jenny Pressler o Clark Ream o Lora Refner o Standing First Row: DeWayne Anderson Karen Reust o Rita Richardson o Dawn Rieke o Linda Columbia City, Kristie Prater, Avilla, Second Rodebaugh o Joatta Sayles o Richard Shankle o Monica Row: R. Clark Ream, Kendallville, Kay Smith Sheets o Kay Shepherd o Diane Slone o Kay Smith o Garrett, Third Row: Richard Lewton, LaGrange Deborah Stanger o, Brenda Strohm o Cheri Taylor o John Thrapp o Shalisa Troyer o Patricia Trumbull o Kathy VanAllen o Linda Walker o Tracy Walker o John Weigel o Mary Welch o Roger Wertenberger o Maury Winkler o Becky Workman o Monique Zawadzke Office Locations Auburn Office--212 West 7th St., Auburn, IN 46706 Avilla Office--105 North Main St., Avilla, IN 46710 Columbia City Office--123-129 S. Main St., Columbia City, IN 46725 Garrett Office--1212 S. Randolph St, Garrett, IN 46738 Kendallville Office--116 W Mitchell St., Kendallville, IN 46755 LaGrange Office--414-418 S Detroit St., LaGrange, IN 46761 General Peoples Bancorp (the "Company") is an Indiana corporation organized in October, 1990 to become the thrift holding company for Peoples Federal Savings Bank (the "Bank"). The Company is the sole stockholder of Peoples Federal. The Bank conducts business from its main office in Auburn and in its six full-service offices located in Avilla, Columbia City, Garrett, Kendallville, and LaGrange, Indiana. Peoples Federal offers a full range of retail deposit services and lending services to northeastern Indiana. The Company's primary business activity is being the holding company for Peoples Federal. Historically, the principal business of savings banks, including Peoples Federal, has consisted of attracting deposits from the general public and making loans secured by residential real estate. Peoples Federal's net earnings are contingent on the difference or spread between the interest earned on its loans and investments and the interest paid on its consumer deposits and borrowings. The Bank is also significantly affected by prevailing economic conditions, government policies, regulations, interest rates, and local competition. The Company's earnings are primarily dependent upon the earnings of the Bank. Interest income is a function of the balance of loans and investments outstanding during a given period and the yield earned on such loans and investments. Interest expense is a function of the amounts of deposits and borrowings outstanding during the same period and the rates paid on such deposits and borrowings. Peoples Federal's earnings are also affected by gains and losses on sales of loans and investments, provisions for loan losses, service charges, income from subsidiary activities, operating expenses and income taxes. On a yearly basis, Peoples Federal updates its long-term strategic plan. This plan includes, among other things, Peoples Federal's commitment to maintaining a strong capital base and continuing to improve the organization's return on assets through asset growth and controlling operating expenses. Continued careful monitoring of Peoples Federal's interest rate risk is also cited as an important goal. As a result, continued origination of short-term consumer and installment loans, prime plus equity loans, adjustable rate mortgage loans, and fixed-rate real estate loans with original terms of 15 years or less will be emphasized. The following table sets forth the weighted average yield on interest-earning assets and the weighted average rate on interest- bearing liabilities for the years ending September 30, 1997, 1996, and 1995. September 30 ----------------------------- 1997 1996 1995 --------- --------- --------- Weighted average interest rate on: Loans 8.15% 8.33% 8.17% Securities 5.89 5.64 5.20 Other interest-earning assets 6.42 6.19 7.19 Combined 7.76 7.85 7.68 Weighted average cost of: NOW and savings deposits 2.78 2.64 2.61 Certificates of deposit 5.64 5.70 5.59 Borrowings 4.85 5.94 5.73 Combined 4.80 4.79 4.65 Interest rate spread 2.96 3.06 3.03 Net yield on weighted average interest-earning assets 3.70 3.75 3.70 The following table sets forth the weighted average yield on interest-earning assets and the weighted average rate of interest- bearing liabilities at September 30, 1997, 1996 and 1995. At September 30 ------------------------------- 1997 1996 1995 ---------- --------- -------- Weighted average interest rate on: Loans 8.34% 8.02% 8.31% Securities 5.41 5.18 5.19 Other interest-earning assets 6.20 6.81 6.41 Combined 7.89 7.57 7.79 Weighted average cost of: NOW and savings deposits 2.98 2.80 2.70 Certificates of deposit 5.78 5.72 5.92 Borrowings 5.31 --- 5.83 Combined 4.97 4.89 4.94 Interest rate spread 2.92 2.68 2.85 Asset and Liability Management Peoples Federal, like other savings banks, is subject to interest rate risk to the degree that its interest-bearing liabilities, primarily deposits with short and medium-term maturities, mature or reprice more rapidly than its interest-earning assets. Although having liabilities that mature or reprice more frequently on average than assets will be beneficial in times of declining interest rates, such an asset/liability structure will result in lower net income during periods of rising interest rates, unless offset by other factors such as noninterest income. Historically, all of Peoples Federal's real estate loans were made at fixed rates. More recently, the Bank has adopted an asset and liability management plan that calls for the origination of residential mortgage loans and other loans with adjustable interest rates, the origination of 15-year or less residential mortgage loans with fixed rates, and the maintenance of investments with short to medium terms. The following table illustrates the projected maturities and the repricing mechanisms of the major asset and liability categories of Peoples Federal as of September 30, 1997. Maturity and repricing dates have been stated to reflect the contractual maturity and repricing dates. The information presented in the following table is derived from information that is provided to the OTS in "Schedule CMR: Maturity and Rate" filed as part of Peoples Federal's September 30, 1997, quarterly report. The data contained in the following report is the contractual repricing information and does not contain any assumptions regarding repricing. At September 30, 1997 (Dollars in Thousands) --------------------------------------------------------------------- 3 Months More than 3 Months Over Period to maturity or repricing or Less Thru 1 Year 1-3 Years 3-5 Years 5 Years Total --------- ------------ ----------- ----------- --------- --------- Interest earning assets: Adjustable rate loans $ 15,052 $ 29,351 $ 3,512 $ 6,446 $ - $ 54,361 Fixed rate loans 1,632 2,084 935 3,902 164,006 172,559 Investment securities 11,799 4,881 12,057 9,555 8,147 46,439 Consumer and other loans 1,216 2,571 2,843 3,439 2,667 12,736 --------- ------------ --------- ----------- --------- --------- Total Assets Subject to Repricing 29,699 38,887 19,347 23,342 174,820 286,095 --------- ------------ --------- ----------- --------- --------- Liabilities Subject to Repricing: Certificates of deposit 52,665 52,008 59,385 6,977 - 171,035 N.O.W. and other transaction accounts 25,670 - - - - 25,670 Passbook accounts 34,564 - - - - 34,564 Money market accounts 10,271 - - - - 10,271 Borrowings 3,162 - 3,162 --------- ------------ ---------- ---------- --------- ---------- Total Liabilities Subject to to repricing 126,332 52,008 59,385 6,977 - 244,702 -------- ------------ ---------- ---------- --------- ---------- Excess (deficiency) of rate sensitive assets over rate sensitive liabilities $(96,633) $ (13,121) $ (40,038) $16,365 $174,820 $41,393 ========= ============ =========== =========== ========== ========== Cumulative excess (deficiency) of rate sensitive assets over rate sensitive liabilities $(96,633) $(109,754) $(149,792) $(133,427) $41,393 $41,393 ========= ============ =========== =========== ========== ========== As a % of Total Assets Subject to Repricing (33.78)% (38.36)% (52.36)% (46.64)% 14.47% 14.47%
A negative interest rate gap leaves Peoples Federal's earnings vulnerable to periods of rising interest rates because during such periods, the interest expense paid on liabilities will generally increase more rapidly than the interest income earned on assets. Conversely, in a falling interest rate environment, the total expense paid on liabilities will generally decrease more rapidly than the interest income earned on assets. A positive interest rate gap will have the opposite effect. The Company's management believes that the Bank's interest rate gap in recent periods has generally been maintained within an acceptable range in view of the prevailing interest rate environment. Interest Income Net interest income decreases during periods when the spread is narrowed between the Bank's weighted average rate at which new loans are originated and its weighted average cost of liabilities. In addition, the Bank's ability to originate and sell mortgage loans is affected by market factors such as interest rates, competition, consumer preferences, the supply of and demand for housing, and the availability of funds. The following table sets forth the weighted average yields earned on the Bank's assets and the weighted average interest rates paid on the Bank's liabilities. Years ended September 30 (Dollars in Thousands) -------------------------------------------------------------------------------------------------- 1997 1996 1995 -------------------------------- -------------------------------- ------------------------------- Average Interest Average Interest Average Interest Outstanding Earned/ Yield/ Outstanding Earned/ Yield/ Outstanding Earned/ Yield/ Balance Paid Rate Balance Paid Rate Balance Paid Rate ----------- ---------- --------- ------------- --------- -------- ------------ --------- -------- Interest-earning assets: Loans(1) $230,278 $ 18,758 8.15% $223,861 $ 18,646 8.33% $218,789 $ 17,877 8.17% Investment securities 34,992 2,060 5.89 36,655 2,068 5.64 43,261 2,284 5.20 Other interest-earning assets 16,822 1,080 6.42 16,513 1,022 6.19 7,290 524 7.19 ----------- ---------- ------------- --------- ---------- --------- Total interest-earning assets 282,092 21,898 7.76 277,029 21,736 7.85 269,340 20,685 7.68 ---------- --------- --------- Allowance for loan losses (883) (932) (977) Other assets 3,484 3,796 3,571 ----------- ------------- ----------- Total Assets $284,693 $279,893 $271,934 =========== ============= =========== Interest-bearing liabilities: NOW and savings deposits $ 70,004 $ 1,949 2.78 $ 70,043 $ 1,846 2.64 $ 72,382 $ 1,892 2.61 Certificates of deposit 166,557 9,402 5.64 163,758 9,341 5.70 157,902 8,819 5.59 Borrowings 2,412 117 4.85 724 43 5.94 279 16 5.73 ----------- ---------- ------------- --------- ---------- --------- Total interest-bearing liabilities 238,973 11,468 4.80 234,525 11,230 4.79 230,563 10,727 4.65 ---------- --------- --------- Other liabilities 2,358 2,513 1,006 Stockholders' equity 43,362 42,855 40,365 ----------- ------------- ----------- Total Liabilities and Stockholders' equity $284,693 $279,893 $271,934 =========== ============= =========== Net interest income/spread $ 10,430 2.96 $ 10,506 3.06 $ 9,958 3.03 ========== ========= ========= Net yield on interest earning assets 3.70 3.75 3.70 (1) Average balances include nonaccrual balances.
The Company has supplemented its interest income through purchases of investment securities when appropriate. Such investments include US Government securities, including those issued and guaranteed by the Federal Home Loan Mortgage Corporation ("FHLMC"), the Federal National Mortgage Association ("FNMA"), and the Government National Mortgage Association ("GNMA"), and state and local obligations. This activity (a) generates positive interest rate spreads on large principal balances with minimal administrative expense; (b) lowers the credit risk of the Bank's loan portfolio as a result of the guarantees of full payment of principal and interest by FHLMC, FNMA, and GNMA; (c) enables the Bank to use securities as collateral for financings in the capital markets; and (d) increases the liquidity of the Bank. In addition to changes in interest rates, changes in volume can have a significant effect on net interest income. The following table describes the extent to which changes in interest rates and changes in volume of interest related assets and liabilities have affected Peoples Federal's interest income and expense for the periods indicated. For the purposes of this table, changes attributable to both rate and volume which cannot be separated have been allocated proportionately to the change due to volume and the change due to rate. Years ended September 30, --------------------------------------------------------------------------------- 1997 vs 1996 1996 vs 1995 1995 vs 1994 ---------------------------- -------------------------- -------------------------- Increase Increase Increase (Decrease) Total (Decrease) Total (Decrease) Total Due to Increase Due to Increase Due to Increase ----------------- --------------- -------------- Volume Rate (Decrease) Volume Rate (Decrease) Volume Rate (Decrease) --------- ------- ---------- -------- ------ ---------- -------- ----- ---------- Interest income from: Loans $457 $(345) $112 $417 $352 $ 769 $1,144 $ 696 $1,840 Mortgage-backed securities (4) - (4) (14) (8) (22) (26) - (26) Investment securities (86) 82 (4) (371) 177 (194) 274 (84) 190 Other interest-earning assets 20 38 58 581 (83) 498 (267) 258 (9) -------- ------- ---------- -------- ------- -------- -------- ------- --------- Total interest income 387 (225) 162 613 438 1,051 1,125 870 1,995 -------- ------- ---------- -------- ------- -------- -------- ------- --------- Interest expense from: NOW and savings deposits (1) 104 103 (70) 24 (46) (66) 8 (58) Certificates of deposit 159 (98) 61 341 181 522 651 1,296 1,947 Borrowings 80 (6) 74 26 1 27 9 - 9 ------- ------- ---------- -------- ------- --------- ------- ------- --------- Total interest expense 238 - 238 297 206 503 594 1,304 1,898 ------- ------- ---------- -------- ------- --------- ------- ------- --------- Net interest income (expense) $149 $(225) $ (76) $316 $232 $ 548 $ 531 $(434) $ 97 ======= ======= =========== ======== ======= ========= ======= ======= =========
Operating Expense While operating expenses have increased, the increases have been due in large part to the expansion of the Bank's operations. The increases, with the exception of increased FDIC premiums, are service related and consist of the following: appraisal and legal fees in connection with loan originations, data processing due to automating manual systems; and start up costs for new services. Operating expenses as a percentage of the Bank's total assets were 1.46%, 2.12%, and 1.50% for fiscal years ended September 30, 1997, 1996, and 1995, respectively. However, the ratio for 1996 includes the special assessment by the FDIC to recapitalize the SAIF. Without this assessment, the ratio for 1996 would have been 1.58%. The Bank continuously seeks to reduce operating expenses. In this regard, the budget committee of the Board of Directors monitors the Bank's current operating budget on at least a quarterly basis to ascertain that expense levels remain within projected ranges and to establish competitive, as opposed to aggressive, rates for the Bank's various deposit accounts. The Bank's efforts to contain operating expense also include underwriting policies that attempt to reduce potential losses and conservative expansion of personnel. Liquidity and Capital Resources The standard measure of liquidity for savings banks is the ratio of cash and eligible investments to a certain percentage of net withdrawable savings and borrowings due within one year. The minimum required ratio is currently set by OTS regulation at 5%, of which 1% must be comprised of short-term investments (i.e., generally with a term of less than one year). Liquid assets consist of cash and eligible investments, which include certain United States Treasury obligations, securities of various federal agencies, certificates of deposit at insured banks, federal funds, and bankers' acceptances. At September 30, 1997, the Bank had liquid assets of $43,773,723. This represents a ratio of liquid assets to total assets of 15.1%. The primary internal sources of funds for operations are principal and interest payments on loans and new deposits. In addition, if greater liquidity is required, the Bank can borrow from the FHLB. In the opinion of management, the Bank's liquid assets are adequate to meet mortgage commitments ($7,523,329 at September 30, 1997, all for residential mortgage loans), consumer loan commitments ($8,808,071 at September 30, 1997, primarily for home equity lines) and other obligations and expenditures. During the year ended September 30, 1997, there was a net decrease of $0.3 million in cash and cash equivalents. This decrease was primarily due to lower levels of cash on hand this year versus last. The loan portfolio increased approximately $12 million. The major sources of cash during the year were the increase in deposits of $6.7 million, the increase in borrowed funds of $3.2 million, securities maturities of $2.7 million which were not reinvested, and operating activities which provided $3.2 million. During the year ended September 30, 1996, there was a net decrease of $0.9 million in cash and cash equivalents. This decrease was primarily due to lower levels of cash on hand this year versus last. The loan portfolio increased approximately $4 million. The major sources of cash during the year were the increase in deposits of $2.3 million and operating activities which provided $3.8 million. Results of Operations, Fiscal Year Ended September 30, 1997 Compared to Fiscal Year Ended September 30, 1996 The company's net interest income decreased $117,346 to $10,380,240. This decrease was a combination of higher interest income and higher interest expense. Interest on loans increased $112,653 due to higher volumes partially offset by lower rates charged on the loans. Interest on securities remained stable at $2,052,480. While security volumes decreased during the year, the decrease was offset by higher rates earned on these investments. Other interest income increased slightly due to a combination of higher rates and higher volumes. Interest expense increased $237,969 due to a combination of higher rates paid on DDA and savings products, and higher volumes on certificate of deposit accounts and short term borrowings. Provision for loan losses increased $41,176 from $8,824 to $50,000 reflecting adjustments due to management's continuing review of its earning asset portfolio. Management's review of its loan portfolio is based on historical information, review of specific loans, and general economic conditions. Other income remained steady at $644,164 as compared to $640,928 last year. Total non-interest expense was $4,228,452, a decrease of $1,701,597. The biggest component of the decrease was deposit insurance expense. Last year the company was assessed a special charge of $1,500,870 to cover the SAIF fund recapitalization. After the special assessment, deposit insurance premiums decreased from 23 basis points to 6.3 basis points per $100 of insured deposits effective January 1, 1997. This accounted for an additional savings of $315,332 over the previous year. This savings was partially offset by increased occupancy and equipment expense of $111,736 due to the installation of the check imaging system and other capital improvements made during the year. The effective tax rates for the Company for the years ended 1997 and 1996 were 38.2% and 38.3% respectively. Results of Operations, Fiscal Year Ended September 30, 1996 Compared to Fiscal Year Ended September 30, 1995 The Company's net interest income increased to $10,497,586 for the fiscal year ended September 30, 1996, an increase of $589,987 from 1995. This increase was a combination of higher interest income partially offset by higher interest expense. Interest on loans increased $768,543 due to a combination of higher loan volume and higher rates being charged on loans. Interest income on securities and other interest earning assets showed an increase of $282,346. These increases were partially offset by an increase in interest expense of $502,136 from 1995. This increase was also due to a combination of higher volumes of deposits and higher rates paid by the Bank on these deposits. Provision for loan losses decreased $41,234 from $50,058 to $8,824 reflecting an adjustment due to management's continuing review of its earning asset portfolio. Management's review of its loan portfolio is based on historical information, review of specific loans, and general economic conditions. Other income increased $10,864 to $640,928 from $630,064 due to increased service charges on NOW accounts. Total non-interest expense was $5,930,049, an increase of $1,783,858. The special assessment from the FDIC accounted for $1,500,870 of this increase. The balance of the increase was composed of several small increases. Deposit insurance, excluding the special assessment, increased $13,964 to $531,316 due to higher volumes of insured deposits. The effective tax rates for the Company for the years ended 1996 and 1995 were 38.3% and 39.0% respectively Impact of Inflation and Changing Prices The consolidated financial statements and related data presented herein have been prepared in accordance with generally accepted accounting principles which require the measurement of financial condition and operating results in terms of historical dollars or fair value without considering changes in the relative purchasing power of money over time due to inflation. Virtually all of the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates have a more significant impact on a financial institution's performance than the effects of general levels of inflation. Interest rates do not necessarily move in the same direction or with the same magnitude as the prices of goods and services, since such prices are affected by inflation. In a volatile interest rate environment, liquidity and the maturity structure of the Bank's assets and liabilities are critical to the maintenance of acceptable performance levels. Year 2000 The Company has an ongoing program to ensure that its operational and financial systems will not be adversely affected by year 2000 software failures. While the Company believes it is taking all appropriate steps to assure year 2000 compliance, it is dependent on vendor compliance to some extent. The Company is requiring its systems and software vendors to represent that the services and products provided are, or will be, year 2000 compliant, and has planned a program of testing compliance. The Company estimates that the cost to redevelop, replace or repair its technology will not be material. Future Accounting Issues The FASB issued SFAS No. 123 Accounting for Stock- Based Compensation. This Statement establishes a fair value based method of accounting for stock-based compensation plans. The Statement permits a company to continue the accounting for stock-based compensation prescribed in Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees. If a company elects that option, proforma disclosures of net income (and EPS, if presented) are required in the footnotes as if the provisions of this Statement had been used to measure stock-based compensation. The disclosure requirements of Opinion No. 25 have been superseded by the disclosure requirements of this Statement. This Statement is not expected to have a material impact on the financial statements of the Company. FASB No. 125, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, deals with resolving long-standing questions about whether transactions should be accounted for as secured borrowings or as sales. The Statement provides consistent standards for distinguishing transfers of financial assets that are sales from transfers that are considered secured borrowings. A transfer of financial assets in which the transferor surrenders control over those assets is accounted for as a sale to the extent that consideration other than beneficial interests in the transferred assets is received in exchange. This Statement provides detailed measurement standards for assets and liabilities included in these transactions. It also includes implementation guidance for assessing isolation of transferred assets and for accounting for transfers of partial interest, servicing of financial assets, securitization, transfers or sales type and direct financing lease receivables, securities lending transactions, repurchase agreements, "wash sales," loan syndications and participation, risk participation in banker's acceptances, factoring arrangements, transfers of receivables with recourse and extinguishment of liabilities. This Statement is effective for transfers and servicing of financial assets and extinguishment of liabilities occurring after December 31, 1996 and is to be applied prospectively. Earlier or retroactive application is not permitted. This Statement is not expected to have a material impact on the financial statements of the Company. Disclosures about Segments of an Enterprise. In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, establishing standards for the way public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports issued to shareholders. It also establishesstandards for related disclosures about products and services, geographic areas, and major customers. SFAS No. 131 requires that a public business enterprise report financial and descriptive information about its reportable operating segments. Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Generally, financial information is required to be reported on the basis that is used internally for evaluating segment performance and deciding how to allocate resources to segments. SFAS No. 131 is effective for financial statements for periods beginning after December 15, 1997. In the initial year of application, comparative information for earlier years is to be restated. This Statement need not be applied to interim financial statements in the initial year of its application, but comparative information for interim periods in the initial year of application is to be reported in financial statements for interim periods in the second year of application. SELECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY September 30 --------------------------------------------------------------------- 1997 1996 1995 1994 1993 ------------- ------------- ------------- ------------- ------------- Financial Condition Data: Total assets $290,601,595 $280,011,850 $276,607,771 $266,455,068 $251,116,307 Loans receivable, net 235,255,669 223,011,251 218,663,928 209,330,499 201,092,662 Investments and other interest-earning assets 46,439,468 47,970,950 47,811,103 44,711,326 43,514,676 Deposits 241,790,139 235,081,440 232,747,018 226,851,009 213,590,085 Borrowed funds 3,162,400 - 1,000,000 - 542,659 Stockholders' equity 44,298,170 42,676,765 41,624,026 38,720,750 36,077,655 For Years ended September 30 --------------------------------------------------------------------- 1997 1996 1995 1994 1993 ------------- ------------- ------------- ------------- ------------- Operating Data: Interest income $ 21,897,799 $ 21,736,000 $ 20,685,111 $ 18,689,877 $ 19,298,823 Interest expense 11,467,559 11,229,590 10,727,454 8,829,951 9,146,451 ------------- ------------- ------------- ------------- ------------- Net interest income 10,430,240 10,506,410 9,957,657 9,859,926 10,152,372 Provision for losses on loans 50,000 8,824 50,058 23,746 154,343 ------------- ------------- ------------- ------------- ------------- Net interest income after provision for losses on loans 10,380,240 10,497,586 9,907,599 9,836,180 9,998,029 Other income 644,164 640,928 630,064 606,722 508,021 Other expenses 4,228,452 5,930,049 4,146,191 4,259,836 4,087,292 ------------- ------------- ------------- ------------- ------------- Income before income taxes 6,795,952 5,208,465 6,391,472 6,183,066 6,418,758 Income tax expense 2,593,760 1,996,007 2,492,042 2,424,950 2,571,899 ------------- ------------- ------------- ------------- ------------- Net income $ 4,202,192 $ 3,212,458 $ 3,899,430 $ 3,758,116 $ 3,846,859 ============= ============= ============= ============= ============= Net income per common share $1.22 $0.91 $1.10 $1.06 $1.09 ============= ============= ============= ============= ============= Dividends per common share $0.41 $0.37 $0.31 $0.27 $0.25 ============= ============= ============= ============= ============= Other Data: Average yield on all interest-earning assets 7.76% 7.85% 7.68% 7.26% 7.96% Average cost of all interest- bearing liabilities 4.80 4.79 4.65 4.01 4.40 -------------- ----------- ----------- ------------ ------------- Interest rate spread 2.96% 3.06% 3.03% 3.25% 3.56% ============== =========== =========== ============ ============= Number of full service banking offices 7 6 6 6 6 Return on assets (net income divided by average total assets) 1.47 1.15 1.43 1.45 1.58 Return on equity (net income divided by average total equity) 9.69 7.50 9.66 10.06 11.10 Dividend payout ratio(dividends per common share divided by net income per common share) 33.61 40.66 41.82 25.79 22.70 Equity to assets ratio (average total equity divided by average total assets) 15.22 15.37 14.84 14.43 14.21
PEOPLES BANCORP AND SUBSIDIARY Consolidated Balance Sheet September 30 1997 1996 --------------- ---------------- Assets Cash and due from banks $ 2,993,154 $ 3,207,845 Interest-bearing deposits 7,738,990 7,823,900 --------------- ---------------- Total cash and cash equivalents 10,732,144 11,031,745 Interest-bearing time deposits 976,000 -- Investment securities Available for sale 28,467,800 25,886,015 Held to maturity 9,256,678 14,261,035 --------------- ----------------- Total investment securities 37,724,478 40,147,050 Loans 236,142,236 223,898,729 Less: Allowance for loan losses 886,567 887,478 --------------- ----------------- Net loans 235,255,669 223,011,251 Premises and equipment 1,712,774 1,467,764 Federal Home Loan Bank of Indianapolis stock at cost 2,062,200 2,004,400 Other assets 2,138,330 2,349,640 --------------- ---------------- Total assets $290,601,595 $280,011,850 ================ ================ Lbilities NOW and savings deposits $ 70,539,511 $ 68,344,163 Certificates of deposit 171,250,628 166,737,277 Short-term borrowings 3,162,400 -- Advances by borrowers for taxes and insurance 1,591 3,450 Other liabilities 1,349,295 2,250,195 --------------- ---------------- Total liabilities 246,303,425 237,335,085 --------------- ---------------- Cmitments and Contingencies Sckholders' Equity Preferred stock, $1 par value Authorized and unissued--5,000,000 shares Common stock, $1 par value Authorized--7,000,000 shares Issued and outstanding--3,391,986 and 3,488,241 3,391,986 3,488,241 Additional paid-in capital 5,263,589 6,527,542 Retained earnings--substantially restricteded 35,573,293 32,762,852 Net unrealized gain (loss) on secur available for sale 69,302 (101,870) --------------- ----------------- Total stockholders' equity 44,298,170 42,676,765 --------------- ----------------- Total liabilities and stockholders equity $290,601,595 $280,011,850 =============== ================= See notes to consolidated financial statements. PEOPLES BANCORP AND SUBSIDIARY Consolidated Statement of Income Year Ended September 30 1997 1996 1995 ------------- ------------- ------------ Interest Income Loans $18,758,262 $18,645,609 $17,877,066 Investment securities 2,052,480 2,068,753 2,284,206 Other interest and dividend income 1,087,057 1,021,638 523,839 ------------- ------------- ------------ 21,897,799 21,736,000 20,685,111 ------------- ------------- ------------ Interest Expense Deposits NOW and savings deposits 1,948,834 1,845,731 1,892,010 Certificates of deposit 9,401,639 9,340,756 8,819,245 Short-term borrowings 117,086 43,103 16,199 ------------- ------------- ------------ 11,467,559 11,229,590 10,727,454 ------------- ------------- ------------ Net Interest Income 10,430,240 10,506,410 9,957,657 Provision for loan losses 50,000 8,824 50,058 ------------- ------------- ------------ Net Interest Income After Provision for Loan Losses 10,380,240 10,497,586 9,907,599 ------------- ------------- ------------ Other Income Fiduciary activities 54,689 63,089 64,146 Fees and service charges 448,124 445,691 410,179 Other income 141,351 132,148 155,739 ------------- ------------- ------------ Total other income 644,164 640,928 630,064 ------------- ------------- ------------ Other Expenses Salaries and employee benefits 2,238,731 2,253,254 2,097,596 Net occupancy expenses 294,372 255,784 254,707 Equipment expenses 229,011 155,863 160,585 Data processing expense 284,328 303,577 294,283 Deposit insurance expense 215,984 2,032,186 517,351 Other expenses 966,026 929,385 821,669 ------------- ------------- ------------ Total other expenses 4,228,452 5,930,049 4,146,191 ------------- ------------- ------------ Income Before Income Tax 6,795,952 5,208,465 6,391,472 Income tax expense 2,593,760 1,996,007 2,492,042 ------------- ------------- ------------ Net Income $ 4,202,192 $ 3,212,458 $ 3,899,430 ============= ============= ============ Net Income Per Common Share $1.22 $.91 $1.10 Average Common Shares Outstanding 3,432,177 3,528,675 3,544,157 See notes to consolidated financial statements. PEOPLES BANCORP AND SUBSIDIARY Consolidated Statement of Changes in Stockholders' Equity Net Unrealized Common Stock Additional Gain (Loss) on Total ---------------------------- Number Paid-in Retained Securities Stockholders' of Shares Amount Capital Earnings Available for Sale Equity - -------------------------------------------------- ------------- ------------- ------------ ---------------- ---------------- Balances October 1, 1994 2,363,252 $2,363,252 $8,484,958 $28,052,537 $(179,997) $38,720,750 Exercise of stock options 4,000 4,000 16,000 -- -- 20,000 Repurchase of stock (4,354) (4,354) (77,573) -- (81,927) Net income for 1995 -- -- -- 3,899,430 -- 3,899,430 Net change in unrealized gain (loss) on securities available -- -- -- -- 152,480 152,480 for sale Cash dividends ($0.31 per share) -- -- -- (1,086,707) -- (1,086,707) -------------- -------------- ------------ ------------- -------------- ----------------- Balances September 30, 1995 2,362,898 2,362,898 8,423,385 30,865,260 (27,517) 41,624,026 Exercise of stock options 3,400 3,400 13,600 -- -- 17,000 Repurchase of stock (40,804) (40,804) (746,696) -- -- (787,500) Net income for 1996 -- -- -- 3,212,458 -- 3,212,458 Net change in unrealized gain (loss) on securities -- -- -- -- (74,353) (74,353) available for sale, Cash dividends ($0.37 per share) -- -- -- (1,314,866) -- (1,314,866) -------------- ------------- ------------- ------------- ------------- ------------------ Balances September 30, 1996 2,325,494 2,325,494 7,690,289 32,762,852 (101,870) 42,676,765 Repurchase of stock (64,170) (64,170) (1,296,038) (1,360,208) Net income for 1997 4,202,192 4,202,192 Stock split 1,130,662 1,130,662 (1,130,662) Net change in unrealized gain (loss) on securities available 171,172 171,172 for sale Cash dividends ($0.41 per share) (1,391,751) (1,391,751) -------------- ------------- ------------- ------------- ------------- ------------------ Balances September 30, 1997 3,391,986 $3,391,986 $5,263,589 $35,573,293 $ 69,302 $44,298,170 ============== ============= ============= ============= ============= ================== See notes to consolidated financial statements.
PEOPLES BANCORP AND SUBSIDIARY Consolidated Statement of Cash Flows Year Ended September 30 1997 1996 1995 ------------ ------------ ------------ Operating Activities Net income $ 4,202,192 $ 3,212,458 $ 3,899,430 Adjustments to reconcile net income to net cash provided by operating activities Provision for loan losses 50,000 8,824 50,058 Depreciation and amortization 255,095 204,083 223,897 Investment securities amortization, net (36,876) (23,481) 35,052 Amortization of deferred loan fees (271,410) (368,361) (412,144) Deferred income tax 617,401 (385,000) 207,773 Change in Interest receivable 116,711 (170,033) (216,202) Interest payable (26,034) (4,603) 111,051 Other adjustments (1,660,388) 1,412,211 21,547 ------------ ------------ ------------ Net cash provided by operating activities 3,246,711 3,886,098 3,920,462 ------------ ------------ ------------ Investing Activities Net change in interest-bearing deposits (976,000) 390,256 (373,826) Purchases of securities available for sale (14,636,858) (22,544,576) (117,678) Purchases of securities held to maturity (320,000) -- (245,000) Proceeds from maturities and paydowns of securities held to maturity 5,342,664 14,688,070 1,262,258 Proceeds from maturities of securities available for sale 14,929,330 7,620,000 4,000,000 Net change in mutual funds (2,563,954) Net change in loans (12,205,762) (4,098,609) (9,238,270) Purchases of premises and equipment (492,605) (65,338) (101,415) Proceeds from sales of real estate owned 277,254 42,499 235,314 Purchases of Federal Home Loan Bank of Indianapolis stock (57,800) (63,300) (69,900) ------------ ------------ ------------ Net cash used by investing activities (10,703,731) (4,030,998) (4,648,517) ------------ ------------ ------------ Financing Activities Net change in NOW and savings deposits 2,192,329 (2,943,040) (4,773,195) Certificates of deposit 4,542,405 5,279,885 10,560,392 Short-term borrowings 3,162,400 (1,000,000) 1,000,000 Net change in advances by borrowers for taxes and insurance (1,859) (76,603) 11,898 Cash dividends (1,377,648) (1,274,539) (1,039,489) Exercise of stock options -- 17,000 20,000 Repurchase of common stock (1,360,208) (787,500) (81,927) ------------ ------------ ------------ Net cash provided (used) by financing activities 7,157,419 (784,797) 5,697,679 ------------ ------------ ------------ Net Change in Cash and Cash Equivalents (299,601) (929,697) 4,969,624 Cash and Cash Equivalents, Beginning of Year 11,031,745 11,961,442 6,991,818 ------------ ------------ ------------ Cash and Cash Equivalents, End of Year $10,732,144 $11,031,745 $11,961,442 ============ ============ ============ Additional Cash Flows and Supplementary Information: Interest paid $11,493,593 $11,231,922 $10,649,528 Income tax paid 1,511,993 2,315,550 2,117,721
See notes to consolidated financial statements. PEOPLES BANCORP AND SUBSIDIARY Notes to Consolidated Financial Statements Note 1--Nature of Operations and Summary of Significant Accounting Policies The accounting and reporting policies of Peoples Bancorp ("Company"), its wholly owned subsidiary, Peoples Federal Savings Bank of DeKalb County ("Bank"), and the Bank's wholly owned subsidiary, Peoples Financial Services, Inc. ("Peoples Financial") conform to generally accepted accounting principles and reporting practices followed by the thrift industry. The more significant of the policies are described below. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company is a thrift holding company whose principal activity is the ownership and management of the Bank. The Bank operates under a federal thrift charter and provides full banking services, including trust services. As a federally-chartered thrift, the Bank is subject to the regulation of the Office of Thrift Supervision ("OTS") and the Federal Deposit Insurance Corporation. The Bank generates mortgage and consumer loans and receives deposits from customers located primarily in DeKalb County, Indiana and surrounding counties. The Bank's loans are generally secured by specific items of collateral including real property and consumer assets. Consolidation--The consolidated financial statements include the accounts of the Company, the Bank and Peoples Financial after elimination of all material intercompany transactions and accounts. Investment Securities--Debt securities are classified as held to maturity when the Company has the positive intent and ability to hold the securities to maturity. Securities held to maturity are carried at amortized cost. Debt securities not classified as held to maturity and marketable equity securities are classified as available for sale. Securities available for sale are carried at fair value with unrealized gains and losses reported separately, net of tax, in stockholders' equity. The Company holds no securities for trading. Amortization of premiums and accretion of discounts are recorded as interest income from securities. Realized gains and losses are recorded as net security gains (losses). Gains and losses on sales of securities are determined on the specific-identification method. PEOPLES BANCORP AND SUBSIDIARY Notes to Consolidated Financial Statements Loans are carried at the principal amount outstanding. Interest income is accrued on the principal balances of loans. The accrual of interest on impaired loans is discontinued when, in management's opinion, the borrower may be unable to meet payments as they become due. When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income is subsequently recognized only to the extent cash payments are received. Certain loan fees and direct costs are being deferred and amortized as an adjustment of yield on the loans. Allowance for loan and real estate losses are maintained to absorb loan and real estate losses based on management's continuing review and evaluation of the loan and real estate portfolios and its judgment as to the impact of economic conditions on the portfolios. The evaluation by management includes consideration of past loss experience, changes in the composition of the portfolios, the current condition and amount of loans and foreclosed real estate outstanding, and the probability of collecting all amounts due. Impaired loans are measured by the present value of expected future cash flows, or the fair value of the collateral of the loan, if collateral dependent. The determination of the adequacy of the allowance for loan losses and the valuation of real estate is based on estimates that are particularly susceptible to significant changes in the economic environment and market conditions. Management believes that, as of September 30, 1996 the allowance for loan losses and carrying value of foreclosed real estate are adequate based on information currently available. A worsening or protracted economic decline in the area within which the Bank operates would increase the likelihood of additional losses due to credit and market risks and could create the need for additional loss reserves. Premises and equipment are carried at cost net of accumulated depreciation. Depreciation is computed using accelerated and straight-line methods based principally on the estimated useful lives of the assets. Maintenance and repairs are expensed as incurred while major additions and improvements are capitalized. Gains and losses on dispositions are included in current operations. Federal Home Loan Bank stock is a required investment for institutions that are members of the Federal Home Loan Bank system. The required investment in the common stock is based on a predetermined formula. Foreclosed real estate is carried at the lower of cost or fair value less estimated selling costs. When foreclosed real estate is acquired, any required adjustment is charged to the allowance for loan losses. All subsequent activity is included in current operations. Pension plan costs are based on actuarial computations and charged to current operations. The funding policy is to pay at least the minimum amounts required by ERISA. Income tax in the consolidated statement of income includes deferred income tax provisions or benefits for all significant temporary differences in recognizing income and expenses for financial reporting and income tax purposes. The Company files consolidated income tax returns with its subsidiaries. Earnings per share have been computed based upon the weighted average common shares outstanding during each year. The dilutive effect on earnings per share from unissued stock option shares is not material. Reclassifications of certain amounts in the 1996 consolidated financial statements have been made to conform to the 1997 presentation. PEOPLES BANCORP AND SUBSIDIARY Notes to Consolidated Financial Statements Note 2--Restriction On Cash The Bank is required to maintain reserve funds in cash and/or on deposit with the Federal Reserve Bank. The reserve required at September 30, 1997, was $788,000. Note 3--Investment Securities September 30, 1997 --------------------------------------------------- Gross Gross Unrealized Unrealized Fair Amortized Cost Gains Losses Value -------------- ---------- ----------- ------------- Available for sale Federal agencies $19,699,605 $164,200 $ 41,395 $19,822,410 State and municipal obligations 6,083,716 28,999 31,279 6,081,436 Marketable equity securities 2,563,954 2,563,954 -------------- ---------- ----------- ------------- Total available for sale 28,347,275 193,199 72,674 28,467,800 -------------- ---------- ----------- ------------- Held to maturity Federal agencies 8,000,000 312 32,814 7,967,498 State and municipal obligation 757,855 14,699 772,554 Mortgage-backed securities 498,823 24,212 523,035 -------------- ---------- ----------- ------------- Total held to maturity 9,256,678 39,223 32,814 9,263,087 -------------- ---------- ----------- ------------- Total investment securities $37,603,953 $232,422 $105,488 $37,730,887 ============== ========== =========== =============
September 30, 1996 ------------------------------------------------------------------- Gross Gross Unrealized Unrealized Fair Amortized Cost Gains Losses Value -------------- ---------- ----------- ------------- Available for sale Federal agencies $20,710,594 $36,838 $156,982 $20,590,450 State and municipal obligations 5,346,630 6,981 58,046 5,295,565 -------------- ---------- ----------- ------------- Total available for sale 26,057,224 43,819 215,028 25,886,015 -------------- ---------- ----------- ------------- Held to maturity Federal agencies 13,175,118 424 156,862 13,018,680 State and municipal obligation 455,414 12,210 -- 467,624 Mortgage-backed securities 630,503 32,809 479 662,833 -------------- ---------- ----------- ------------- Total held to maturity 14,261,035 45,443 157,341 14,149,137 -------------- ---------- ----------- ------------- Total investment securities $40,318,259 $89,262 $372,369 $40,035,152 ============== ========== =========== =============
PEOPLES BANCORP AND SUBSIDIARY Notes to Consolidated Financial Statements The amortized cost and fair value of securities held to maturity and available for sale at September 30, 1997, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. 1997 -------------------------------------------------- Held to Maturity Available for Sale ------------------------ ------------------------- Maturity Distributions Amortized Fair Amortized Fair at September 30 Cost Value Cost Value ----------- ------------ ------------ ------------ Within one year $2,075,000 $2,065,967 $ 3,321,375 $ 3,326,153 One to five years 6,290,000 6,266,561 14,787,543 14,823,974 Five to ten years 367,855 382,524 5,658,899 5,681,031 After ten years 25,000 25,000 2,015,504 2,072,688 ----------- ------------ ------------ ------------ 8,757,855 8,740,052 25,783,321 25,903,846 Mortgage-backed securities 498,823 523,035 -- -- Marketable equity securities -- 2,563,954 2,563,954 ----------- ------------ ------------ ------------ $9,256,678 $9,263,087 $28,347,275 $28,467,800 =========== ============ ============ ============ Securities with a carrying value of $4,037,500 were pledged at September 30, 1997 to secure repurchase agreements. There were no securities pledged at September 30, 1996. There were no sales of securities during the year ended September 30, 1997, 1996, or 1995. Note 4--Loans and Allowance September 30 1997 1996 -------------- -------------- Real estate loans $221,723,573 $210,541,364 Construction loans 5,196,837 5,197,237 Individuals' loans for household and other personal expenditures 12,735,795 11,836,185 -------------- -------------- Less: 239,656,205 227,574,786 -------------- -------------- Undisbursed portion of loans 2,443,791 2,717,235 Deferred loan fees and discounts 1,070,178 958,822 -------------- -------------- 3,513,969 3,676,057 -------------- -------------- Total loans $236,142,236 $223,898,729 ============== ============== Year Ended September 30 1997 1996 1995 - ------------------------------------------ -------------- ---------------- Allowance for loan losses Balances, October 1 $887,478 $912,268 $1,034,439 Provision for losses 50,000 8,824 50,058 Recoveries on loans 33,188 21,715 27,851 Loans charged off (84,099) (55,329) (200,080) -------------- --------------- ---------------- Balances, September 30 $886,567 $887,478 $ 912,268 ============== =============== ================ PEOPLES BANCORP AND SUBSIDIARY Notes to Consolidated Financial Statements The Company adopted Statement of Financial Accounting Standards (SFAS) No. 114 and No. 118 Accounting by Creditors for Impairment of a Loan and Accounting by Creditors for Impairment of a Loan--Income Recognition and Disclosures on October 1, 1995. The adoption of SFAS Nos. 114 and 118 did not have a material impact on the Company's financial position or results of operations. Note 5--Premises and Equipment September 30 1997 1996 -------------------- ----------------- Land $ 356,238 $ 356,238 Buildings 2,565,259 2,561,159 Equipment 1,620,626 1,204,628 -------------------- ----------------- Total cost 4,542,123 4,122,025 Accumulated depreciation (2,829,349) (2,654,261) -------------------- ----------------- Net $1,712,774 $1,467,764 ==================== ================= Note 6--Other Assets and Other Liabilities September 30 1997 1996 ---------------- ------------------ Other assets Interest receivable Loans $1,226,393 $1,234,223 Investment securities 566,722 675,603 Foreclosed real estate -- 110,297 Deferred income tax asset -- 100,545 Prepaid expenses and other 345,215 228,972 ----------------- -------------------- Total other assets $2,138,330 $2,349,640 ================= ==================== Other liabilities Dividends payable on common stock $ 361,812 $ 347,709 Deferred income tax liability 639,357 -- Accrued deposit insurance premium -- 1,500,872 Accrued expenses and other 348,126 401,614 ---------------- --------------------- Total other liabilities $1,349,295 $2,250,195 ================ ===================== PEOPLES BANCORP AND SUBSIDIARY Notes to Consolidated Financial Statements Note 7--Deposits September 30 1997 1996 ----------------- ---------------------- Demand deposits $ 35,940,976 $ 28,728,351 Savings deposits 34,563,685 39,583,982 Certificates and other time deposits of $100,000 or more 17,366,591 16,664,414 Other certificates and time deposits 153,668,708 149,828,480 Interest payable 250,179 276,213 ----------------- ---------------------- Total deposits $241,790,139 $235,081,440 ================= ====================== Certificates and other time deposits maturing in years ending September 30: 1998 $104,673,414 1999 51,082,282 2000 8,302,959 2001 4,127,985 2002 2,848,659 ---------------- $171,035,299 ================ Note 8--Short-term Borrowings Securities sold under agreement to repurchase totaling $3,162,400 at September 30, 1997, consist of obligations of the Company to other parties. The obligations are secured by investment securities and such collateral is held by a safekeeping agent. The maximum amount of outstanding agreements at any month-end during 1997 totaled $3,292,639 and the average of such agreements totaled $2,412,000. The agreements at September 30, 1997 matured on October 1, 1997. There were no outstanding agreements during 1996. PEOPLES BANCORP AND SUBSIDIARY Notes to Consolidated Financial Statements Note 9--Income Tax Year Ended September 30 1997 1996 1995 ------------- ---------------- --------------- Income tax expense: Currently payable: Federal $1,518,553 $1,809,917 $1,731,032 State 457,806 571,090 553,237 Deferred: Federal 489,827 (270,000) 186,114 State 127,574 (115,000) 21,659 ------------- ---------------- --------------- Total income tax expense $2,593,760 $1,996,007 $2,492,042 ============= ================ =============== Reconciliation of federal statutory to actual tax expense: Federal statutory income tax at 34% $2,310,624 $1,770,878 $2,173,100 Effect of state income taxes 386,351 301,019 379,431 Other, net (103,215) (75,890) (60,489) ------------- ---------------- --------------- Actual tax expense $2,593,760 $1,996,007 $2,492,042 ============= ================ =============== A cumulative deferred tax liability and asset of $639,357 and $100,545 is included in other liabilities and other assets at September 30, 1997 and 1996, respectively. The components of the asset and liability are as follows: September 30 1997 1996 -------------- ------------- Differences in accounting for accrued expenses -- $594,000 Differences in accounting for loan fees $300,842 231,457 Differences in depreciation methods (44,639) (24,389) Differences in accounting for loan and real estate losses 351,081 351,441 Tax bad debt reserves in excess of base year (964,077) (975,221) FHLB of Indianapolis stock dividend (78,527) (78,527) Differences in accounting for pensions and other employee benefits 13,469 Net unrealized (gains) losses on securities available for sale (53,161) 69,340 Other (150,876) (81,025) -------------- -------------- $(639,357) $100,545 ============== ============== Assets $651,923 $1,259,707 Liabilities 1,291,280) (1,159,162) -------------- -------------- $(639,357) $ 100,545 ============== ==============
Retained earnings at September 30, 1997, include approximately $6,778,000 for which no deferred income tax liability has been recognized. This amount represents an allocation of income to bad debt deductions as of June 30, 1988 for tax purposes only. Reduction of amounts so allocated for purposes other than tax bad debt losses or adjustments arising from carryback of net operating losses would create income for tax purposes only, which income would be subject to the then current corporate income tax rate. The unrecorded deferred income tax liability on the above amount was approximately $2,300,000 at September 30, 1997. Note 10--Commitments and Contingent Liabilities In the normal course of business there are outstanding commitments and contingent liabilities, such as commitments to extend credit, which are not included in the accompanying consolidated financial statements. The Banks' exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit is represented by the contractual or notional amount of those instruments. The Bank uses the same credit policies in making such commitments as it does for instruments that are included in the consolidated balance sheet. Financial instruments whose contract amount represents credit risk at September 30 were as follows: 1997 1996 --------------------------------------- Commitments to extend credit $16,331,400 $11,926,600 Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer's credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management's credit evaluation. Collateral held varies, but may include residential real estate, income-producing commercial properties, or other assets of the borrower. The Bank has employment agreements with two officers which include provisions for payment to them of three years' salary in the event of their termination in connection with any change in ownership or control of the Company, other than by agreement. The agreements have terms of three years which may be extended annually for successive periods of one year. The Company and subsidiary are also subject to possible claims and lawsuits which arise primarily in the ordinary course of business. It is the opinion of management that the disposition or ultimate determination of such possible claims or lawsuits will not have a material adverse effect on the consolidated financial position of the Company. PEOPLES BANCORP AND SUBSIDIARY Notes to Consolidated Financial Statements Note 11--Restriction on Dividends The Company is not subject to any regulatory restrictions on the payment of dividends to its stockholders. The OTS regulations provide that a savings association which meets fully phased-in capital requirements and is subject only to "normal supervision" may pay out, as a dividend, 100 percent of net income to date over the calendar year and 50 percent of surplus capital existing at the beginning of the calendar year without supervisory approval but with 30 days prior notice to the OTS. Any additional amount of capital distributions would require prior regulatory approval. At September 30, 1997, total stockholders' equity of the Bank was $34,184,090 of which approximately $14,510,000 was available for the payment of dividends to the Company. In 1997, the Company's board of directors approved the repurchase of up to 240,000 of the Company's outstanding shares of common stock ("1997 Plan"). Such purchases will be made subject to market conditions in the open market or block transactions. At September 30, 1997, the Company has repurchased 25,656 shares of its outstanding stock under the 1997 Plan. On October 4, 1997, the Company authorized a three-for-two stock split in the form of a stock dividend to shareholders of record on November 7, 1997, and will issue an additional 1,130,662 shares of the Company's common stock. All references in the accompanying consolidated financial statements to per share amounts have been restated to reflect the stock split. Note 12--Regulatory Capital The Company and Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate actions by the regulatory agencies that, if undertaken, could have a material effect on the Company's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and Bank must meet specific capital guidelines that involve quantitative measures of the Company's and Bank's assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Company's and Bank's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. At September 30, 1997, the management of the Bank believes that it meets all capital adequacy requirements to which it is subject. The most recent notification from the regulatory agency categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There have been no conditions or events since that notification that management believes have changed this categorization. PEOPLES BANCORP AND SUBSIDIARY Notes to Consolidated Financial Statements The Bank's actual and required capital amounts and ratios are as follows: September 30, 1997 ------------------------------------------------------ Required for Adequate To Be Well Actual Capital (1) Capitalized(1) ------------------------------------------------------ Amount Ratio Amount Ratio Amount Ratio - ----------------------------------------------------------------------------------------------------- Total risk-based capital (1) (to risk-weighted assets) $34,955 24.67% $11,334 8.0% $14,167 10.0% Core capital 1 (to adjusted tangible assets) 34,080 12.00% 8,523 3.0% 17,046 6.0% Core capital 1 (to adjusted total assets) 34,080 12.00% 8,523 3.0% 14,205 5.0% (1) As defined by regulatory agencies
The Bank's tangible capital at September 30, 1997 was $34,080,000, which amount was 12.00 percent of tangible assets and exceeded the required ratio of 1.5 percent. Note 13--Employee Benefit Plans The Bank is a participant in a pension fund known as the Financial Institutions Retirement Fund ("FIRF"). This plan is a multi-employer plan; separate actuarial valuations are not made with respect to each participating employer. According to FIRF administrators, the market value of the fund's assets exceeded the value of vested benefits in the aggregate as of June 30, 1997, the date of the latest actuarial valuation. Pension expense was $10,698, $153,848 and $114,070 for 1997, 1996 and 1995. This plan provides pension benefits for substantially all of the Bank's employees. The Company has a stock option plan in which 162,000 common shares were reserved at September 30, 1997, for issuance under the plan. The option exercise price will not be less than the fair market value of the common stock on the date of the grant of the option. The date on which the options are first exercisable is determined by the Board of Directors, and the terms of the stock options will not exceed ten years from the date of grant. The weighted option price at September 30, 1996 and for those options exercised in 1996 and 1995, was $3.33 per share. September 30 1997 1996 1995 --------------------------------- Shares under option after restatement for stock split: Outstanding at beginning of year -- 5,100 11,100 Exercised during the year -- 5,100 6,000 Outstanding and exercisable at end of year -- -- 5,100 ================================= PEOPLES BANCORP AND SUBSIDIARY Notes to Consolidated Financial Statements The Company has established an employee stock ownership plan ("ESOP") covering substantially all employees of the Company. The ESOP is designed to enable eligible employees to acquire Company common stock. The cost of the ESOP is borne by the Company through annual contributions to an employee stock ownership trust ("Trust") in amounts determined annually by the Board of Directors. Shares of common stock acquired by the ESOP are to be allocated to each participating employee and held until the employee's termination, retirement or death. At September 30, 1997 and 1996, the Trust owned 50,703 and 49,562 shares of the Company's common stock, all of which shares have been allocated to employee accounts. Employees may vote allocated shares, and the trustees may vote unallocated shares. Plan contributions charged to expense totaled $77,932, $73,940 and $72,824 for 1997, 1996 and 1995, respectively. Note 15--Fair Values of Financial Instruments The following methods and assumptions were used to estimate the fair value of each class of financial instrument: Cash and Cash Equivalents--The fair value of cash and cash equivalents approximates carrying value. Interest-bearing Deposits--The fair value of interest-bearing time deposits approximates carrying value. Securities and Mortgage-backed Securities--Fair values are based on quoted market prices. Loans--For both short-term loans and variable-rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. The fair value for other loans is estimated using discounted cash flow analyses using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Interest Receivable/Payable--The fair values of interest receivable/payable approximate carrying values. FHLB Stock--Fair value of FHLB stock is based on the price at which it may be resold to the FHLB. Deposits--The fair values of noninterest-bearing, interest-bearing demand and savings accounts are equal to the amount payable on demand at the balance sheet date. The carrying amounts for variable rate, fixed-term certificates of deposit approximate their fair values at the balance sheet date. Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on such time deposits. Short-term borrowings--The fair value of short-term borrowings approximates market value. PEOPLES BANCORP AND SUBSIDIARY Notes to Consolidated Financial Statements Advances by Borrowers for Taxes and Insurance--The fair value of advances by borrowers for taxes and insurance approximates carrying value. The estimated fair values of the Company's financial instruments are as follows: September 30 1997 1996 --------------------------------------------------- Carrying Fair Carrying Fair Amount Value Amount Value ----------- ------------- ------------ ------------ Assets Cash and cash equivalents $ 10,732,144 $ 10,732,144 $ 11,031,745 $ 11,031,745 Interest-bearing deposits 976,000 976,000 -- -- Investment securities available for sale 28,467,800 28,467,800 25,886,015 25,886,015 Investment securities held to maturity 9,256,678 9,263,087 14,261,035 14,149,137 Loans 236,142,236 237,213,206 223,898,729 224,376,294 Interest receivable 1,793,115 1,793,115 1,909,826 1,909,826 Stock in FHLB 2,062,200 2,062,200 2,004,400 2,004,400 Liabilities Deposits 241,539,960 241,467,192 234,805,227 234,919,630 Short-term borrowings 3,162,400 3,162,400 -- -- Interest payable 251,421 251,421 276,304 276,304 Advances by borrowers for taxes and insurance 1,591 1,591 3,450 3,450
PEOPLES BANCORP AND SUBSIDIARY Notes to Consolidated Financial Statements Note 16--Quarterly Results of Operations (Unaudited) Average Provision Common Earnings Quarter Interest Interest Net Interest For Loan Net Shares Per Ending Income Expense Income Losses Income Outstanding Share - ------- ----------- ----------- ------------- ----------- ----------- ----------- --------- Dec 96 $ 5,385,443 $ 2,811,494 $ 2,573,949 $ 11,315 $ 943,729 3,468,419 $0.27 Mar 97 5,329,118 2,803,134 2,525,984 (485) 1,034,761 3,444,413 0.30 Jun 97 5,562,104 2,874,152 2,687,952 22,700 1,093,103 3,414,836 0.32 Sep 97 5,621,134 2,978,779 2,642,355 16,470 1,130,599 3,398,987 0.33 ----------- ----------- ------------ ------------ ----------- $21,897,799 $11,467,559 $10,430,240 $ 50,000 $4,202,192 =========== =========== ============= =========== =========== Dec 95 $ 5,426,782 $ 2,855,748 $ 2,571,034 $(36,502) $1,031,209 3,544,347 $0.29 Mar 96 5,511,194 2,800,922 2,710,272 34,739 1,071,819 3,548,097 0.30 Jun 96 5,428,628 2,768,770 2,659,858 17,925 1,027,157 3,522,107 0.29 Sep 96 5,369,396 2,804,150 2,565,246 (7,338) 82,273 3,500,228 0.03 ----------- ----------- ------------- ----------- ------------ $21,736,000 $11,229,590 $10,506,410 $ 8,824 $3,212,458 =========== =========== ============= =========== ============
Note 17--Condensed Financial Information (Parent Company Only) Presented below is condensed financial information as to financial position, results of operations and cash flows of the Company. Condensed Balance Sheet September 30 1997 1996 --------------- ---------------- Assets Cash $ 29,525 $ -- Securities purchased from subsidiary under agreement to resell 4,064,079 4,278,290 Investment in subsidiary 34,184,104 33,123,537 Securities available for sale 6,081,437 5,295,565 Securities held to maturity 215,000 245,000 Interest receivable 87,261 75,925 Other assets 969 6,157 --------------- ----------------- Total assets $44,662,375 $43,024,474 =============== ================= Liabilities Dividends payable on common stock $ 361,812 $ 347,709 Other 2,393 -- ---------------------------------- Total liabilities 364,205 347,709 ---------------------------------- Stockholders' equity Common stock 3,391,986 3,488,241 Additional paid-in capital 5,263,589 6,527,542 Retained earnings 35,573,293 32,762,852 Net unrealized gain (loss) on securities available for sale 69,302 (101,870) ---------------------------------- 44,298,170 42,676,765 ---------------------------------- Total liabilities and stockholders' equity $44,662,375 $43,024,474 ================================== PEOPLES BANCORP AND SUBSIDIARY Notes to Consolidated Financial Statements Condensed Statement of Income September 30 1997 1996 ---------------------------------- Income Dividends from subsidiary $3,000,000 $3,500,000 Interest on investments 365,654 296,353 Expenses (57,937) (69,211) -------------- ----------------- Income before equity in undistributed income of subsidiary and income tax expense 3,307,717 3,727,142 Equity in undistributed incom of subsidiary 927,455 (489,734) -------------- ----------------- Income before income tax 4,235,172 3,237,408 Income tax expense 32,980 24,950 -------------- ----------------- Net income $4,202,192 $3,212,458 ============== ================= Condensed Statement of Cash Flows September 30 1997 1996 ------------- -------------- Net cash provided by operating activities $3,294,089 $3,738,114 -------------- --------------- Cash flows from investing activities: Purchases of securities available for sale (1,700,919) (2,876,180) Proceeds from maturities of securities held to maturity 30,000 - Proceeds from maturities of securities available for sale 930,000 1,620,000 Net change in securities purchased under agreement to resell 214,211 (517,067) -------------- --------------- Net cash used by investing activities (526,708) (1,773,247) -------------- --------------- Cash flows from financing activities: Stock options exercised -- 17,000 Stock repurchased (1,360,208) (787,500) Cash dividends (1,377,648) (1,274,539) -------------- --------------- Net cash used by financing activities (2,737,856) (2,045,039) -------------- --------------- Net change in cash 29,525 (80,172) Cash at beginning of year -- 80,172 -------------- --------------- Cash at end of year $ 29,525 $ -- ============== ===============
Independent Auditor's Report To the Stockholders and Board of Directors Peoples Bancorp Auburn, Indiana We have audited the consolidated balance sheet of Peoples Bancorp and subsidiary as of September 30, 1997 and 1996, and the related consolidated statements of income, changes in stockholders' equity and cash flows for each of the three years in the period ended September 30, 1997. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements described above present fairly, in all material respects, the consolidated financial position of Peoples Bancorp and subsidiary as of September 30, 1997 and 1996, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 1997, in conformity with generally accepted accounting principles. Indianapolis, Indiana October 21, 1997 STATEMENT OF MANAGEMENT'S RESPONSIBILITY The management of Peoples Bancorp is responsible for the preparation and integrity of the consolidated financial statements and all other information presented in this annual report. The consolidated financial statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis and therefore, include estimates based on management's' judgment and estimates. Management maintains a system of internal controls to meet its responsibility for reliable financial information and the protection of assets. This system includes proper segregation of duties, the establishment of appropriate policies and procedures, and careful selection, training and supervision of qualified personnel. In addition, both independent auditors and management periodically review the system of internal controls and report their findings to the Audit Committee of the Board of Directors. The Committee is composed of non-management directors and meets periodically with the independent auditors and management to review their respective activities and responsibilities. Each has free and separate access to the Committee to discuss accounting, financial reporting, internal control and audit matters. Management recognized that the cost of a system of internal controls should not exceed the benefits derived and that there are inherent limitations to be considered in the potential effectiveness of any system. However, management believes that the Company's system of internal controls provides reasonable assurance that financial information is reliable and that assets and customer deposits are protected. Roger J. Wertenberger Chief Executive Officer Maurice F. Winkler III President Deborah K. Stanger Chief Financial Officer Peoples Federal Philosophy of Community Banking Peoples Federal Savings Bank believes in community banking. Peoples serves individuals and small to medium-sized businesses in its market areas. We believe that community banking is the most consistently profitable type of banking. Peoples believes that community banking operates best with empowerment of local management you know and trust. Peoples emphasizes funding of its assets with retail core deposits generated in its branches and main office. Peoples does not use brokered deposits and believes borrowings should be kept to a minimum. Peoples is a secured local lender and always emphasizes credit quality over asset growth. The costs of poor credit far outweigh the benefits of unwise asset growth. Peoples believes it is essential to be well-capitalized with a strong balance sheet. Capital is the cushion against poor economic times and errors in credit judgment. Peoples is very expense control oriented. A profitable community bank must be a low-cost provider of services. Peoples is very sales oriented and believes in sharing profits with the community and with all employees. Peoples places a high priority on the development of technology to enhance productivity, customer service and new products. Properly applied technology reduces costs and enhances services. Peoples is committed to providing extra services through convenient access, innovative products and good customer relations. Many of our customers bank with us because we are convenient. Peoples encourages open employee communications. Peoples promotes from within whenever possible and places the highest priority on honesty, integrity and ethical behavior. Peoples believes in community participation, both financially and through volunteerism. Peoples practices affirmative action and does not discriminate against anyone in employment or the extension of credit. Peoples Federal is committed to providing affordable housing for low income people. Several programs are in place with the Federal Home Loan Bank of Indianapolis ("FHLB") to assist our low income customers with their housing needs. EX-27 3 FINANCIAL DATA SCHEDULE FOR THE YEAR ENDED 9/30/97
9 YEAR SEP-30-1997 SEP-30-1997 2993154 7738990 0 0 28467800 9256678 9263087 236142236 886567 290601595 241790139 3162400 1350886 0 0 0 44298170 0 290601595 18758262 2052480 1087057 21897799 11350473 11467559 10430240 50000 0 4228452 6795952 6795952 0 0 4202192 1.22 1.22 3.70 658 64 109136 605383 887478 84000 33000 886567 886567 0 875000
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