-----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, B/a5kMNKxnWLSDLL51Kkg302b+OfPQV0wbmEFICk726kiammJpq0WhqwT0LWStQU Iw5lfiNYPYMAuhNZYjqHZQ== 0000914317-96-000401.txt : 19961115 0000914317-96-000401.hdr.sgml : 19961115 ACCESSION NUMBER: 0000914317-96-000401 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961113 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PERMANENT BANCORP INC CENTRAL INDEX KEY: 0000916604 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 351908797 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-23370 FILM NUMBER: 96661136 BUSINESS ADDRESS: STREET 1: 101 SOUTHEAST THIRD ST CITY: EVANSVILLE STATE: IN ZIP: 47708 BUSINESS PHONE: 8124286825 MAIL ADDRESS: STREET 1: 101 SOUTHEAST THIRD STREET CITY: EVANSVILLE STATE: IN ZIP: 47708 10-Q 1 PERMANENT BANCORP, INC. -- 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended September 30, 1996 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number: 0-23370 PERMANENT BANCORP, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 35-1908797 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer Incorporation or Origination) Identification No.) 101 Southeast Third Street, Evansville Indiana 47708 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number including area code: (812) 428-6800 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 [ ] As of October 8, 1996, there were 2,239,234 shares of the Registrant's Common Stock outstanding. PERMANENT BANCORP, INC. AND SUBSIDIARY FORM 10-Q INDEX PART I. FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) Consolidated Statements of Financial Condition Consolidated Statements of Income Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Supplemental Data Regulatory Developments PART II. OTHER INFORMATION Signatures
PERMANENT BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED) SEPTEMBER 30, MARCH 31, 1996 1996 ------------- -------------- ASSETS: Cash ................................................................................... $ 2,896,504 $ 4,900,671 Interest-bearing deposits .............................................................. 857,123 15,750 ------------- ------------- Total cash and cash equivalents ........................................................ 3,753,627 4,916,421 Securities available for sale - at fair value (amortized cost $100,966,750 and $73,408,686) .................................................................... 99,097,444 73,170,635 Mortgage-backed securities available for sale at fair value (amortized cost $60,084,202 and $61,888,585) ................................................... 59,436,170 61,953,242 Securities held to maturity (fair value $25,000 and $25,000) ........................... 25,000 25,000 Mortgage-backed securities held to maturity (fair value $29,184,747 and $32,319,409) .................................................................... 29,318,873 32,153,595 Other Investments ...................................................................... 633,302 633,302 Loans (net of allowance for loan losses of $2,274,585 and $2,237,804) .................. 209,615,032 206,909,621 Interest receivable, net ............................................................... 3,558,410 2,874,362 Office properties and equipment, net ................................................... 7,227,375 7,256,587 Real estate owned, net ................................................................. 13,442 21,881 Deferred income tax .................................................................... 1,653,736 281,495 Federal Home Loan Bank stock ........................................................... 5,192,600 3,503,600 Cash surrender value of life insurance ................................................. 974,685 953,199 Goodwill (net of accumulated amortization of $1,621,598 and $1,523,364) ................ 446,567 544,801 Other .................................................................................. 711,374 705,051 ------------- ------------- TOTAL ASSETS ............................................................................... $ 421,657,637 $ 395,902,792 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY: LIABILITIES: Deposits ............................................................................... $ 271,731,184 $ 280,008,062 Federal Home Loan Bank advances ........................................................ 100,141,308 68,303,217 Advance payments by borrowers for taxes and insurance .................................. 1,150,902 1,022,263 Other borrowed funds ................................................................... 4,654,624 2,681,753 Interest payable ....................................................................... 1,979,473 1,922,635 Other .................................................................................. 2,093,619 471,231 ------------- ------------- TOTAL LIABILITIES .......................................................................... $ 381,751,110 $ 354,409,161 ------------- ------------- PERMANENT BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED) (continued) SEPTEMBER 30, MARCH 31, 1996 1996 ------------- -------------- STOCKHOLDERS' EQUITY Serial Preferred Stock ($.01 par value) Authorized and unissued - 1,000,000 shares Common Stock ($.01 par value) Authorized - 9,000,000 shares; Issued - 2,459,839 and 2,460,196 shares; Outstanding - 2,130,356 and 2,134,515 shares ........ $ 24,598 24,602 Additional paid-in capital ............................................................. 23,923,244 23,849,500 Treasury Stock - 215,605 and 211,803 shares ............................................ (3,426,029) (3,361,279) Retained Earnings - substantially restricted ........................................... 22,383,953 22,727,602 Unrealized loss on securities available for sale, net of deferred tax of $(997,117) and $(64,521) ............................................................ (1,520,221) (98,371) ESOP Borrowing ......................................................................... (1,071,225) (1,190,250) Unearned compensation - restricted stock awards ........................................ (407,793) (458,173) ------------- ------------- TOTAL STOCKHOLDERS' EQUITY ................................................................. $ 39,906,527 $ 41,493,631 ------------- ------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ................................................. $ 421,657,637 $ 395,902,792 ============= ============= See notes to consolidated financial statements
PERMANENT BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) THREE MONTHS ENDED SIX MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ---------------------------- ---------------------------- 1996 1995 1996 1995 ------------ ------------ ------------ ------------ INTEREST INCOME: Loans ............................................... $ 4,196,681 $ 4,029,951 $ 8,314,320 $ 7,969,031 Mortgage-backed securities .......................... 1,435,494 1,372,633 2,961,832 2,627,224 Investment securities ............................... 1,671,767 798,126 3,151,122 1,499,793 Deposits ............................................ 34,583 63,915 54,384 101,389 Dividends on Federal Home Loan Bank stock ........... 97,715 51,849 180,699 101,531 ------------ ------------ ------------ ------------ 7,436,240 6,316,474 14,662,357 12,298,968 ------------ ------------ ------------ ------------ INTEREST EXPENSE: Deposits ............................................ 3,358,373 3,411,488 6,696,363 6,607,551 Federal Home Loan Bank advances ..................... 1,311,562 657,431 2,539,802 1,146,709 Short-term borrowings ............................... 41,260 12,390 46,412 32,580 ------------ ------------ ------------ ------------ 4,711,195 4,081,309 9,282,577 7,786,840 ------------ ------------ ------------ ------------ NET INTEREST INCOME ...................................... 2,725,045 2,235,165 5,379,780 4,512,128 PROVISION FOR LOAN LOSSES ................................ 88,486 76,070 148,486 102,424 ------------ ------------ ------------ ------------ NET INTEREST INCOME AFTER LOAN LOSS PROVISION ........................................... 2,636,559 2,159,095 5,231,294 4,409,704 ------------ ------------ ------------ ------------ OTHER INCOME: Service charges ..................................... 214,404 150,170 419,171 290,840 Gain on sale of loans ............................... 1,865 3,220 4,862 6,946 Commissions ......................................... 162,588 100,873 257,901 242,910 Gain (loss) on sale of investment and mortgage-backed securities ......................................... 8,201 (4,549) 2,366 (7,145) Other ............................................... 55,339 72,995 112,080 149,517 ------------ ------------ ------------ ------------ 442,397 322,709 796,380 683,068 ------------ ------------ ------------ ------------
PERMANENT BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (continued) THREE MONTHS ENDED SIX MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ---------------------------- ---------------------------- 1996 1995 1996 1995 ------------ ------------ ------------ ------------ OTHER EXPENSE: Salaries and employee benefits ...................... 1,086,977 1,062,150 2,112,540 2,142,871 Deposit insurance assessments ........................ 1,952,115 175,610 2,134,106 355,822 Occupancy ........................................... 208,651 424,809 223,152 416,399 Equipment ........................................... 149,056 294,613 137,942 297,453 Net (gain) loss on real estate owned ................ (11,755) 636 (5,020) (2,191) Computer service .................................... 112,673 233,016 118,912 249,023 Advertising ......................................... 80,291 146,951 67,947 153,147 Postage and office supplies ......................... 83,901 151,400 74,988 127,865 Other ............................................... 250,073 519,243 258,259 464,445 ------------ ------------ ------------ ------------ 3,915,272 2,110,650 5,952,787 4,269,361 ----------- ------------ ------------ ------------ INCOME (LOSS) BEFORE INCOME TAXES ........................ (836,316) 371,154 74,887 823,411 INCOME TAX PROVISION (BENEFIT) ........................... (275,822) 56,907 130,978 204,740 ------------ ------------ ------------ ------------ NET INCOME (LOSS) ........................................ $ (560,494) $ 314,247 $ (56,091) $ 618,671 ============ ============ ============ ============ EARNINGS (LOSS) PER SHARE OF COMMON STOCK Primary ............................................. $ (0.26) $ 0.14 $ (0.03) $ 0.28 Fully Diluted ....................................... $ (0.26) $ 0.14 $ (0.03) $ 0.27 WEIGHTED AVERAGE SHARES OUTSTANDING Primary ............................................. 2,140,841 2,209,717 2,137,613 2,336,053 Fully diluted ....................................... 2,220,996 2,296,364 2,217,738 2,322,700 See notes to consolidated financial statements
PERMANENT BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) SIX MONTHS ENDED SEPTEMBER 30, ------------------------------------- 1996 1995 ------------ ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) .............................................................. $ (56,091) 618,671 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation ........................................................... 251,699 240,617 Amortization and accretion ............................................ 76,247 85,801 Vesting of restricted stock awards ..................................... 46,810 Provisions for loan and real estate owned losses ....................... 36,781 62,825 Gain on sale of office properties and equipment ........................ (200) Gain on sale of real estate owned ...................................... (22,028) (Gain) loss on sale of securities ...................................... (19,813) 9,031 (Gain) on sale of mortgage-backed securities ........................... (761) (1,886) (Gain) on sale of loans ................................................ (4,862) (6,946) ESOP shares earned ..................................................... 77,310 Changes in assets and liabilities: Proceeds from the sales of loans ........................................... 514,847 1,560,046 Origination of loans for resale ............................................ (509,985) (1,287,118) Interest receivable ........................................................ (684,048) (521,259) Deferred income tax ........................................................ (439,645) (184,122) Other assets ............................................................... (6,323) 249,742 Interest payable ........................................................... 56,838 234,905 Other liabilities .......................................................... 1,622,388 277,383 ------------ ------------ Net cash provided by operating activities ...................................... 961,392 1,315,462 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Loans originated ............................................................... (32,924,343) (29,535,575) Loan principal repayments ...................................................... 37,803,024 24,149,849 Proceeds from: Maturities of: Securities held to maturity ............................................ 7,338,705 Securities available for sale .......................................... 6,974,688 Sales of: Securities held to maturity ............................................ 4,967,856 Securities available for sale .......................................... 13,365,641 Mortgage-backed securities held to maturity ............................ 741,183 Mortgage-backed securities available for sale .......................... 7,694,935 Land ................................................................... 7,450 Real estate owned ...................................................... 70,254 Purchases of: Securities available for sale .......................................... (47,920,625) (4,983,125) Securities held to maturity ............................................ (12,397,536) Mortgage-backed securities held to maturity ............................ (14,729,959) Mortgage-backed securities available for sale .......................... (11,757,132) (7,661,940) Loans .................................................................. (7,665,460) (1,975,400) FHLB Stock ............................................................. (1,689,000) Office properties and equipment ........................................ (222,487) (236,566) PERMANENT BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (continued) SIX MONTHS ENDED SEPTEMBER 30, ------------------------------------- 1996 1995 ------------ ----------- Payments on mortgage-backed securities ......................................... 8,800,181 4,689,297 Increase in cash surrender value of life insurance ............................. (21,486) (18,906) Payments on real estate owned .................................................. 8,439 9,894 ------------ ------------ Net cash used in investing activities .......................................... (27,553,625) (29,564,519) CASH FLOWS FROM FINANCING ACTIVITIES: Dividends paid $ (280,538) (117,145) Net change in deposits (8,276,878) 5,341,790 Receipts from FHLB advances 80,350,000 29,611,698 Payments on FHLB advances (48,511,910) (4,763,186) Principal repayment of ESOP borrowing 119,025 119,025 Advance payments by borrowers for taxes and insurance 128,639 (101,925) Net change in other borrowed funds 1,972,871 (193,908) Purchase of treasury stock (83,750) (1,953,242) Sale of common stock 11,980 35,690 ------------- ----------- Net cash provided by financing activities 25,429,439 27,978,797 ------------- ----------- NET DECREASE IN CASH AND CASH EQUIVALENTS (1,162,794) (270,260) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 4,916,421 5,573,343 ------------- ----------- CASH AND CASH EQUIVALENTS AT END OF PERIOD 3,753,627 5,303,083 ============= =========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest $6,730,061 $6,446,468 Income taxes 505,000 218,300 Noncash transactions: Transfers from loans to real estate owned - 70,772 See notes to consolidated financial statements.
PERMANENT BANCORP, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements 1. BASIS OF PRESENTATION - The consolidated financial statements include the accounts of Permanent Bancorp, Inc. (the "Company"), its wholly owned subsidiary, Permanent Federal Savings Bank, its wholly owned subsidiary, Perma-Service Corp, and its wholly owned subsidiary, Permanent Insurance Agency, Inc. (collectively the "Bank"). All significant intercompany accounts and transactions have been eliminated. These consolidated interim financial statements at September 30, 1996 and for the three and six month periods ended September 30, 1996, and 1995, have not been examined by independent auditors, but reflect, in the opinion of the Company's management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position and results of operations for such periods. The preparation of financial statements in conformity with generally accepted accounting principals requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures 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. Estimates most susceptible to change in the near term include the allowance for loan losses and the fair value of securities. These statements should be read in conjunction with the consolidated financial statements and related notes which are incorporated by reference in the Company's Annual Report on Form 10-K for the year ended March 31, 1996. 2. CHANGES IN PRESENTATION - Certain amounts and items appearing in the financial statements for the quarter and six months ended September 30,1995 have been reclassified to conform with the presentation presented for the period ended September 30, 1996. 3. SAVINGS ASSOCIATION INSURANCE FUND (SAIF) SPECIAL ASSESSMENT - The deposits of savings associations, such as Permanent Federal, are presently insured by the SAIF, which together with the Bank Insurance Fund (BIF), are the two insurance funds administered by the Federal Deposit Insurance Corporation (FDIC). Financial institutions which are members of the BIF have been experiencing substantially lower deposit insurance premiums because the BIF has achieved its required level of reserves while the SAIF has not yet achieved its required reserves. In order to help eliminate this disparity and any competitive disadvantage due to disparate deposit insurance premium schedules, legislation to recapitalize the SAIF was enacted in September 1996. The legislation requires a special one-time assessment of approximately 65.7 cents per $100 of SAIF insured deposits held by the bank at March 31, 1995. The one-time special assessment resulted in a tax affected charge to earnings of approximately $1,067,000 during the quarter ended September 30, 1996. The legislation is intended to fully recapitalize the SAIF fund so that commercial bank and thrift deposits will be charged the same FDIC premiums beginning October 1, 1996. As of such date deposit insurance premiums for highly rated institutions, such as the Bank, have been eliminated. The Bank, however, will continue to be subject to an assessment to fund repayment of the Financing Corporation (FICO) obligations. It is anticipated that the FICO assessment for SAIF insured institutions will be 18 cents per annum per $100 of deposits for the quarter ended December 31, 1996. Beginning January 1, 1997 financial institutions insured by BIF will begin sharing in the FICO obligation and it is expected SAIF insured institutions will pay an assessment of 6.4 cents per $100 of deposits while BIF insured Institutions will pay 1.3 cents per $100 of deposits until the year 2000 when the assessment will be imposed at the same rate on all FDIC insured institutions. Accordingly, as a result of the reduction of the SAIF assessment and the resulting FICO assessment, the annual after tax decrease in assessment costs is expected to be approximately $272,000 based upon the September 30, 1996 assessment base. 4.NEW ACCOUNTING PRONOUNCEMENTS FINANCIAL ACCOUNTING STANDARDS NO. 122 (FAS 122) " ACCOUNTING FOR MORTGAGE SERVICING RIGHTS" - FAS 122 was adopted by the Company effective April 1, 1996. This statement specifies conditions under which mortgage servicing rights should be accounted for separately from the underlying mortgage loans. Generally the statement applies to mortgages sold with servicing rights retained. An allocation of the loan's book value is made to the servicing rights retained. The value of the servicing rights are capitalized and written off as servicing income is received. The effect is to increase profits recognized when loans are sold, but to reduce net income recognized on servicing, as loans are repaid. The application of FAS 122 had a nominal effect on the Company's financial statements for the three and six months ended September 30, 1996, but could have a more material impact if loan sales are increased. FINANCIAL ACCOUNTING STANDARDS NO. 123 (FAS 123) "ACCOUNTING FOR STOCK BASED COMPENSATION" - Effective April 1, 1996, the Company adopted FAS 123 by continuing to account for stock compensation in accordance with Accounting Principals Board Opinion No. 25 "Accounting for Stock Issued to Employees." However, the fair value disclosures are not included as the fair values are not deemed to have a significant impact on the financial position or results of operations of the Company. FINANCIAL ACCOUNTING STANDARDS NO. 125 (FAS 125) "ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENTS OF LIABILITIES" - FAS 125 was issued in June 1996 and provides accounting and reporting standards for transfers and servicing of financial assets and extinquishments of liabilities. FAS 125 applies to transactions occuring after December 31, 1996. Management has not yet quantified the effect of this new standard on the Consolidated Financial Statements. 5. SUBSEQUENT EVENTS - During October 1996 the Bank recognized profit on the sale of a parcel of real estate owned in the amount of $232,000. The actual sales transaction occured during the fiscal year ended March 31, 1995, however no profit could be recognized at the time because the purchaser (a limited partnership) did not have a significant equity interest in the property. The property has since been rehabilitated as a low income housing project with the limited partners making substantial equity contributions during October 1996. The gain on the sale of real estate owned was partially offset by a loss of $59,000 on the sale of Bank premises and equipment. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Permanent Bancorp, Inc. (the "Company") is a bank holding company which owns 100% of the capital stock of Permanent Federal Savings Bank (the "Bank") and has no other subsidiaries. Material changes in the consolidated statements of Financial Condition and Results of Operations of the Company, except where noted, are attributed to the operations of the Bank; therefore the following analysis is centered on the activities of the Bank. QUARTER ENDED SEPTEMBER 30, 1996 COMPARED TO SEPTEMBER 30, 1995 NET INTEREST INCOME - Net interest income before provision for loan losses increased by $490,000 or 21.9% for the quarter ended September 30, 1996 compared to the quarter ended September 30, 1995. This increase was primarily attributable to an increase in interest earning assets and an improvement in the interest rate spread (the difference between the rate earned on interest earning assets and the rate paid on interest bearing liabilities). Net interest income after provision for loan losses increased by $477,000, or 22.1% for the quarter ended September 30, 1996 compared to the quarter ended September 30, 1995. The increase was smaller than the increase in net interest income before provision for loan losses because of an increase in the loss provision reflecting actual and anticipated loan growth. INTEREST INCOME - Total interest income for the three months ended September 30, 1996 increased $1,120,000, or 17.7%, from the three month period ended September 30, 1995. This increase was attributable to an increase of 18 basis points in the average rate earned on total interest earning assets and an increase of $51.9 million in average balances for the comparable periods. INTEREST EXPENSE - Total interest expense increased by $630,000, or 15.4%, during the three months ended September 30, 1996 compared to the three months ended September 30, 1995. Average interest bearing liabilities increased by $54.1 million, but the cost of such liabilities decreased by 7 basis points, compared to the quarter ended September 30, 1995. OTHER INCOME - Total other income increased by $120,000 during the quarter ended September 30, 1996 compared to the quarter ended September 30, 1995. Service charges were $64,000 more and commissions were $62,000 more during the quarter ended September 30, 1996 than during the comparable quarter in 1995. During the quarter ended September 30, 1996 the Company earned gains on sales of loans of $2,000 compared to $3,000 during the quarter ended September 30, 1995 and recognized gains of $8,000 on sales of investment and mortgage-backed securities compared to losses of $5,000 during the quarter ended September 30, 1995. The remaining other income accounts were down by $18,000 during the current year quarter, primarily because the prior year quarter included an adjustment for the conversion from regulatory accounting principals to generally acceptable accounting principals for the recognition of loan fees in the amount of $69,000. The conversion which had been phased in over a period of years was completed during January, 1996. The loss of the conversion fee recognition was partially offset by increases in other fees. OTHER EXPENSE - Other expense increased a total of $1,805,000 during the quarter ended September 30, 1996 compared to the quarter ended September 30, 1995, primarily because of the one time FDIC assessment in the amount of $1,766,000 (see Note 3 of "Notes to Consolidated Financial Statements"). Salaries and employee benefits increased by $25,000 or 2.3% during the quarter ended September 30, 1996 compared to the same period in 1995. Occupancy expenses increased by $15,000 while equipment and computer expenses decreased by $5,000 during the comparable periods. Deposit insurance assessments, exclusive of the one time assessment, were $10,000 higher during the quarter ended September 30, 1996, while advertising expenditures were $12,000 lower than during the quarter ended September 30, 1995. Postage and office supplies were $9,000 lower during the quarter ended September 30, 1996. Net gains on reas estate owned were $7,000 lower during the quarter ended September 30, 1996 than during the comparable period in 1995. INCOME TAXES - Provisions for income taxes resulted in a credit of $276,000, or 33.0% of losses before taxes during the quarter ended September 30, 1996, compared to $57,000, or 15.3% of income before taxes during the quarter ended September 30, 1995. The low rate of income taxes during the quarter ended September 30, 1995 was primarily the result of loan growth enabling the Bank to claim greater loan loss provisions for tax purposes than for book purposes. SIX MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO SIX MONTHS ENDED SEPTEMBER 30, 1995 NET INTEREST INCOME - Net interest income before provision for loan losses increased by $868,000 or 19.2% for the six months ended September 30, 1996 compared to the six months ended September 30, 1995. This increase was primarily attributable to an increase in interest earning assets and an improvement in the interest rate spread (the difference between the rate earned on interest earning assets and the rate paid on interest bearing liabilities). Net interest income after provision for loan losses increased by $822,000, or 18.6% for the six months ended September 30, 1996 compared to the six months ended September 30, 1995. The increase was smaller than the increase in net interest income before provision for loan losses because of an increase in the loss provision reflecting actual and anticipated loan growth. INTEREST INCOME - Total interest income for the six months ended September 30, 1996 increased $2,363,000, or 19.2%, from the six month period ended September 30, 1995. This increase was attributable to an increase of 25 basis points in the average rate earned on total interest earning assets and an increase of $51.9 million in average balances for the comparable periods. INTEREST EXPENSE - Total interest expense increased by $1,496,000, or 19.2%, during the six months ended September 30, 1996 compared to the six months ended September 30, 1995. Average interest bearing liabilities increased by $53.2 million, but the cost of such liabilities decreased by 8 basis points, compared to the six months ended September 30, 1995. OTHER INCOME - Total other income increased by $113,000 during the six months ended September 30, 1996 compared to the six months ended September 30, 1995. Service charges were $128,000 more and commissions were $15,000 more during the six months ended September 30, 1996 than during the comparable period in 1995. During the six months ended September 30, 1996 the Company earned gains on sales of loans of $5,000 compared to $7,000 during the period ended September 30, 1995 and recognized gains of $2,000 on sales of investment and mortgage-backed securities compared to losses of $7,000 during the six months ended September 30, 1995. The remaining other income accounts were down by $37,000 during the current year period, primarily because the prior year period included an adjustment for the conversion from regulatory accounting principals to generally acceptable accounting principals for the recognition of loan fees in the amount of $138,000. The conversion which had been phased in over a period of years was completed during January, 1996. The loss of the conversion fee recognition was partially offset by increases in other fees. OTHER EXPENSE - Other expense increased a total of $1,684,000 during the six months ended September 30, 1996 compared to the six months ended September 30, 1995, primarily because of the one time FDIC assessment in the amount of $1,766,000 (see Note 3 of "Notes to Consolidated Financial Statements"). Salaries and employee benefits decreased by $30,000 or 1.4% during the six months ended September 30, 1996 compared to the same period in 1995. Occupancy expenses decreased by $8,000 and equipment and computer expenses increased by $19,000 during the comparable periods. Deposit insurance assessments, exclusive of the one time assessment, were $12,000 higher during the six months ended September 30, 1996, and advertising expenditures were $6,000 higher than during the six months ended September 30, 1995. Postage and office supplies were $24,000 lower during the six months ended September 30, 1996. The remaining other expense categories were reduced by $55,000 during the six months ended September 30, 1996 compared to the comparable period in 1995. INCOME TAXES - Provisions for income taxes amounted to $131,000, even though income before taxes amounted to only $75,000 during the six months ended September 30, 1996, compared to $205,000, or 24.8% of income before taxes during the six months ended September 30, 1995. The 1996 taxes in excess of income before taxes was the result of the Bank's inability to claim loan loss provisions for tax purposes as high as the expense recognized for book purposes during the six months ended September 30, 1996 and because of other differences in income per books and taxable income. The low rate of income taxes during the six months ended September 30, 1995 was primarily the result of loan growth enabling the Bank to claim greater loan loss provisions for tax purposes than for book purposes. FINANCIAL CONDITION SEPTEMBER 30, 1996 COMPARED TO MARCH 31, 1996 The Company's total assets at September 30, 1996 were $421.7 million representing an increase of $25.8 million, or 6.5%, from March 31, 1996. Investment and mortgage-backed securities, including those classified as available for sale, increased by $20.6 million to $187.9 million at September 30, 1996 from $167.3 million at March 31, 1996. Net loans increased by $2.7 million to $209.6 million at September 30, 1996 compared to $206.9 million at March 31, 1996. The loan growth, primarily in single family mortgage loans and in automobile loans, is indicative of the strength of the local economy. By policy, the Bank retains all adjustable rate loans and all fixed rate loans with terms of 20 years or less in its portfolio, and sells all fixed rate loans of terms exceeding 20 years. During the six months ended September 30, 1996, customers showed a marked preference for the Bank's mortgage loan program offering loans at an interest rate which is fixed for ten years, then adjustable annually. In July, 1996 the bank received a payoff on a (Cardinal Industries) multi-family housing loan. The loan, with a principal balance of $1,439,858 was carried as a criticized asset in the "other assets especially mentioned" category. The Bank received its full principal balance on the loan. As previously disclosed, the Bank holds an additional five Cardinal Industries' loans with aggregate principal balances of nearly $6.8 million; three of the five remaining loans with principal balances of approximately $4.3 million are carried as impaired loans and one with a principal balance of nearly $2.0 million is a troubled debt restructuring. The remaining loan is a 50% participation and has always performed according to the note terms. Management of the Bank and of Cardinal Industries have reached a contingent agreement, deemed acceptable by the Bank's board of directors, on two of the impaired loans with total principal balances of approximately $3.0 million. The contingencies are satisfactory appraisals, and Cardinal's ability to obtain other financing. If the proposed settlement is reached, it will have little or no effect on the Bank's earnings, however nonperforming assets will decline significantly. Bank management cannot now predict if the contingencies will be satisfied. Non-performing assets were at $7.2 million at September 30, 1996, compared to $6.9 million at March 31, 1996 and $8.3 million at September 30, 1995. As of September 30, 1996, the Bank's loan loss allowance was $2,274,585. Although no assurance can be provided, management believes this amount to be sufficient based upon historical averages and current trends. Based on management's analysis of classified assets, loss histories and future projections, the allowance for loan losses (presented below in tabular form) was deemed by management to be adequate at September 30, 1996. Figures presented for April 1, 1995 have been restated to reflect the reclassification of impaired loans from in-substance foreclosure back to loan categories pursuant to the provisions of Statement of Financial Accounting Standards No. 114 (FAS 114), which was adopted during the quarter ended June 30, 1995.
1996 1995 ---- ---- Balance, April 1 $2,237,804 $2,093,491 Provision for loan losses 148,486 102,424 Net charge offs (111,705) (24,344) ---------- ---------- Balance, September 30 $2,274,585 $2,171,571
The loan growth and the increase in investment and mortgage-backed securities was funded through Federal Home Loan Bank advances which increased by $31.8 million to $100.1 million at September 30, 1996 compared to $68.3 million at March 31, 1996. Deposits decreased by $8.3 million to $271.7 million at September 30, 1996 compared to $280.0 million at March 31, 1996. Total stockholders' equity decreased by $1.6 million to $39.9 million at September 30, 1996 from $41.5 million at March 31, 1996. The decrease was primarily attributable to an increase of $1.4 million in unrealized losses on securities available for sale. Additionally, the Company paid dividends of $280,538 and purchased treasury stock at a cost of $83,750 during the six months ended September 30, 1996. Increases resulted from the retention of earnings, reduction of employee stock ownership liability, vesting of restricted stock awards, and through the exercise of stock options resulting in the sale of 1,198 shares of treasury stock at $10 per share. LIQUIDITY AND CAPITAL RESOURCES - The standard measure of liquidity for the thrift industry is the ratio of cash and eligible investments to a certain percentage of borrowings due within one year and net withdrawable deposit accounts. The minimum required level is currently set by OTS regulation at 5%. At September 30, 1996, the Bank's liquidity ratio was 10.02%. Historically, the Bank has maintained its liquid assets which qualify for purposes of the OTS liquidity regulations above the minimum requirements imposed by such regulations and at a level believed adequate to meet requirements of normal daily activities, repayment of maturing debt, and potential deposit outflows. Cash flow projections are regularly reviewed and updated to assure that adequate liquidity is maintained. Cash for these purposes is generated through the maturity of investment securities and loan sales and repayments, and may be generated through increases in deposits. Loan payments are a relatively stable source of funds while deposit flows are influenced significantly by the level of interest rates and general money market conditions. Borrowings may be used to compensate for reductions in other sources of funds such as deposits. As a member of the FHLB system, the Bank may borrow from the FHLB of Indianapolis. At September 30, 1996, the Bank had $100,141,000 in such borrowings. As of that date, the Bank had commitments to fund loan origination's of approximately $2.3 million and commitments to sell loans in the amount of $89,000. The Company had no commitments to either purchase or sell securities. In the opinion of management, the Bank has sufficient cash flow and borrowing capacity to meet current and anticipated funding commitments. The following table sets forth the Bank's compliance with its capital requirements at September 30, 1996.
Amount Percent (*) ------ ----------- Tangible Capital: Capital level ...................... $33,004,781 7.90% Requirement ........................ 6,266,623 1.50% ----------- ----- Excess ............................. $26,738,158 6.40% ----------- ----- Core Capital: Capital level ...................... $33,004,781 7.90% Requirement ........................ 12,533,246 3.00% ----------- ----- Excess ............................. $20,471,535 4.90% ----------- ----- Risk-Based Capital: Capital level ...................... $34,750,130 19.95% Requirement ........................ 13,936,729 8.00% ----------- ----- Excess ............................. $20,813,401 11.95% ----------- -----
(*) Tangible and core capital are computed as a percentage of adjusted total assets of $417,774,856. Risk-based capital is computed as a percentage of risk-weighted assets of $174,209,107. REGULATORY DEVELOPMENTS Pending Legislation Regarding Bad Debt Reserves - Under Section 593 of the Internal Revenue Code of 1986, as amended (the "Code"), thrift institutions such as the Bank, which meet certain definitional tests primarily relating to their assets and the nature of their business, are permitted to establish a tax reserve for bad debts and to make annual additions thereto, which additions may, within specified limitations, be deducted in arriving at their taxable income. The Company's deduction with respect to "qualifying loans", which are generally loans secured by certain interests in real property, may currently be computed using an amount based on the Company's loss experience (the "experience method"), or a percentage equal to 8.0% of the Company's taxable income (the "percentage of taxable income method"), computed without regard to this deduction and with additional modifications and reduced by the amount of any permitted addition to the non-qualifying reserve. Under recenty passed legislation, Section 593 of the Internal Revenue Code of 1986 has been repealed and the Bank will be permitted to use only the experience method of computing additions to its bad debt reserve. In addition, the Bank will be unable to make additions to its tax bad debt reserve, and will be permitted to deduct bad debts only as they occur. The legislation will not affect the Company's tax calculation during the current fiscal year. Management can not now predict the impact of the legislation on the results of operations in future fiscal years. PART II. OTHER INFORMATION ITEM 1. Legal Proceedings None. ITEM 2. Changes in Securities None. ITEM 3. Defaults Upon Senior Securities None. ITEM 4. Submission of Matters to a Vote of Security Holders The annual meeting of stockholder was held in Evansville, Indiana on July 23, 1996. A total of 1,698,949 shares of Common Stock, 75.6% of outstanding shares, were represented in person or by proxy. The following is a record of votes cast in the election of directors of the Company for 3-year terms expiring in 1999:
FOR VOTES WITHELD --- ------------- Donald P. Weinzapfel 1,652,300 46,649 John R. Stone 1,650,393 48,556 James D. Butterfield 1,651,465 47,484
Accordingly, the individuals named above were declared to be duly elected directors of the Company. Messrs. Korb, Northerner, Vogel, Forster, and Kinkel will continue as directors. The following is a record of the votes cast in respect of the proposal to ratify the appointment of Deloitte & Touche LLP as auditors of the Company for the fiscal year ending March 31, 1997.
PERCENTAGE OF VOTES IN NUMBER ATTENDANCE OF VOTES AT THE MEETING -------- -------------- FOR 1,695,924 98.82% AGAINST 1,700 .10 ABSTAIN 1,325 .08
Accordingly, the proposal described above was declared to be duly adopted by the stockholders of the company. ITEM 5. Other Information None ITEM 6. Exhibits and Reports on Form 8-K (a) Exhibits None. (b) Reports on Form 8-K None. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PERMANENT BANCORP, INC. DATE By: s/sDonald P. Weinzapfel ----------------------- Donald P. Weinzapfel Chairman of the Board President and Chief Executive Officer (Principal Executive Officer) DATE By: s/s Joseph M. Schnapf --------------------- Joseph M. Schnapf Chief Financial Officer (Principal Financial Accounting Officer) EX-27 2
9 The schedule contains summary financial information extracted from the quarterly report of Form 10-Q for the fiscal quarter ended September 30, 1996 and is qualified in its entirety by reference to such financial statements. 6-MOS MAR-31-1997 SEP-30-1996 2,896,504 857,123 0 0 158,533,614 29,343,873 29,209,747 211,889,617 2,274,585 421,657,637 271,731,184 61,954,624 5,223,994 42,841,308 24,598 0 0 39,881,929 421,657,637 8,314,320 6,112,954 235,083 14,662,357 6,696,363 9,282,577 5,379,780 148,486 2,366 5,952,787 74,887 (56,091) 0 0 (56,091) (0.03) (0.03) 7.51 4,916,000 0 2,147,000 267,650 2,251,907 77,608 19,832 2,274,585 529,236 0 1,745,349
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