-----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, LVaMVnGwm5/fISX96yxcMxKVctcXqpUBpOomxgb4wdd84kr6r2gtw03hkBvf6l5u y7qMlZ6aeSgcPC6CYWZX1Q== 0000914317-98-000108.txt : 19980217 0000914317-98-000108.hdr.sgml : 19980217 ACCESSION NUMBER: 0000914317-98-000108 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980212 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: SEC FILE NUMBER: 000-23370 FILM NUMBER: 98535213 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 December 31, 1997 [ ] 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 January 31, 1998, there were 2,107,627 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) DECEMBER 31,1997 MARCH 31, 1997 -------------- -------------- ASSETS: Cash .................................................................... $ 5,507,401 $ 3,211,091 Interest-bearing deposits ............................................... 826,877 3,153,385 ------------- ------------- Total cash and cash equivalents ......................................... 6,334,278 6,364,476 Securities available for sale - at fair value (amortized cost $88,209,175 and $87,020,254) ..................................................... 88,407,603 85,180,313 Mortgage-backed securities available for sale at fair value (amortized cost $65,254,222 and $74,846,178) .................................... 65,589,390 74,052,253 Securities held to maturity (fair value $0 and $25,000) ................. -- 25,000 Mortgage-backed securities held to maturity (fair value $23,711,577 and $27,197,070) ..................................................... 23,711,572 27,180,891 Other Investments ....................................................... 1,469,092 1,056,036 Loans (net of allowance for loan losses of $2,098,470 and $2,126,225) ... 214,941,709 210,189,422 Interest receivable, net ................................................ 3,031,585 3,539,085 Office properties and equipment, net .................................... 7,637,083 6,968,587 Real estate owned, net .................................................. 87,943 40,653 Deferred income tax ..................................................... 101,424 1,374,109 Federal Home Loan Bank stock ............................................ 5,466,000 5,192,600 Cash surrender value of life insurance .................................. 1,608,044 1,552,875 Goodwill (net of accumulated amortization of $1,868,945 and $1,741,967) . 492,971 326,198 Other ................................................................... 940,717 655,833 ------------- ------------- TOTAL ASSETS ................................................................ $ 419,819,411 $ 423,698,331 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY: LIABILITIES: Deposits ................................................................ $ 273,183,064 $ 280,753,353 Federal Home Loan Bank advances ......................................... 99,551,955 98,483,986 Advance payments by borrowers for taxes and insurance ................... 496,485 1,014,598 Other borrowed funds .................................................... -- 1,793,967 Interest payable ........................................................ 2,231,789 2,049,727 Other ................................................................... 2,386,462 508,073 ------------- ------------- TOTAL LIABILITIES ........................................................... $ 377,849,755 $ 384,603,704 ------------- -------------
PERMANENT BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED) DECEMBER 31,1997 MARCH 31, 1997 -------------- -------------- 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 - 2,458,982 shares; Outstanding - 2,030,546 and 2,052,075 shares ..................................................... $ 24,590 $ 24,590 Additional paid-in capital .............................................. 24,303,989 24,045,413 Treasury Stock - 355,877 and 317,893 shares ............................. (6,422,247) (5,547,823) Retained Earnings - substantially restricted ............................ 24,759,682 23,393,701 Unrealized gain (loss) on securities available for sale, net of deferred tax of $193,088 and $(1,043,275) ............................................ 340,508 (1,590,591) ESOP Borrowing .......................................................... (773,663) (952,200) Unearned compensation - restricted stock awards ......................... (263,203) (278,463) ------------- ------------- TOTAL STOCKHOLDERS' EQUITY .................................................. $ 41,969,656 $ 39,094,627 ------------- ------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .................................. $ 419,819,411 $ 423,698,331 ============= =============
See notes to consolidated financial statements
PERMANENT BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) THREE MONTHS ENDED NINE MONTHS ENDED DECEMBER 31, DECEMBER 31, ------------------------------- ----------------------------- 1997 1996 1997 1996 ------------ ------------ ------------ ------------ INTEREST INCOME: Loans ........................................... $ 4,421,004 $ 4,283,531 $ 13,081,605 $ 12,597,851 Mortgage-backed securities ...................... 1,555,066 1,509,932 5,033,751 4,471,764 Investment securities ........................... 1,467,632 1,616,162 4,519,641 4,767,284 Deposits ........................................ 33,785 20,298 65,630 74,682 Dividends on Federal Home Loan Bank stock ....... 110,220 102,467 325,000 283,166 ------------ ------------ ------------ ------------ 7,587,707 7,532,390 23,025,627 22,194,747 ------------ ------------ ------------ ------------ INTEREST EXPENSE: Deposits ........................................ 3,337,450 3,329,365 10,161,106 10,025,728 Federal Home Loan Bank advances ................. 1,479,848 1,403,942 4,462,541 3,943,744 Short-term borrowings ........................... 19,022 45,827 65,434 ------------ ------------ ------------ ------------ 4,817,298 4,752,329 14,669,474 14,034,906 ------------ ------------ ------------ ------------ NET INTEREST INCOME ................................. 2,770,409 2,780,061 8,356,153 8,159,841 PROVISION FOR LOAN LOSSES ........................... (500) (132,040) 152,050 16,446 ------------ ------------ ------------ ------------ NET INTEREST INCOME AFTER LOAN LOSS PROVISION ....................................... 2,770,909 2,912,101 8,204,103 8,143,395 ------------ ------------ ------------ ------------ OTHER INCOME: Service charges ................................. 256,035 215,979 716,521 635,150 Gain on sale of loans ........................... 9,270 6,149 57,899 11,011 Net gain on real estate owned ................... 3,862 2,566 44,539 4,757 Commissions ..................................... 194,592 164,499 494,115 422,400 Gain on sale of investment and mortgage-backed securities ..................................... 30,407 27,176 40,692 29,542 Other ........................................... 97,508 97,424 264,927 209,504 ------------ ------------ ------------ ------------ 591,674 513,793 1,618,693 1,312,364 ------------ ------------ ------------ ------------
PERMANENT BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (continued) THREE MONTHS ENDED NINE MONTHS ENDED DECEMBER 31, DECEMBER 31, ------------------------------- ----------------------------- 1997 1996 1997 1996 ------------ ------------ ------------ ------------ OTHER EXPENSE: Salaries and employee benefits .................. 1,155,679 1,088,592 3,411,340 3,201,132 Deposit insurance assessments ................... 69,790 147,481 207,969 2,281,587 Occupancy ....................................... 221,940 191,856 625,107 608,255 Equipment ....................................... 151,349 133,037 473,658 430,490 Computer service ................................ 124,920 113,636 388,463 362,659 Advertising ..................................... 90,171 81,332 263,123 234,479 Postage and office supplies ..................... 67,754 70,297 212,475 198,162 Other ........................................... 314,569 309,489 878,230 773,934 ------------ ------------ ------------ ------------ 2,196,172 2,135,720 6,460,365 8,090,698 ------------ ------------ ------------ ------------ INCOME BEFORE INCOME TAXES .......................... 1,166,411 1,290,174 3,362,431 1,365,061 INCOME TAX PROVISION ................................ 461,303 573,492 1,374,497 704,470 ------------ ------------ ------------ ------------ NET INCOME .......................................... $ 705,108 $ 716,682 $ 1,987,934 $ 660,591 ============ ============ ============ ============ EARNINGS PER SHARE OF COMMON STOCK Basic ........................................... $ 0.35 $ 0.34 $ 0.99 $ 0.31 Diluted ......................................... $ 0.33 $ 0.32 $ 0.93 $ 0.30
See notes to consolidated financial statements
PERMANENT BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) NINE MONTHS ENDED DECEMBER 31, --------------------------------- 1997 1996 -------------- -------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income .............................................. $ 1,987,934 $ 660,591 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation .................................... 382,879 368,960 Deposit premium purchased ....................... (293,751) Amortization and accretion ..................... 208,647 76,171 Vesting of restricted stock awards .............. 4,760 63,813 Provisions for loan and real estate owned losses (27,755) (165,421) (Gain) on sale of securities .................... (18,368) (44,495) (Gain) on sale of mortgage-backed securities .... (22,325) (95) (Gain) on sale of loans ......................... (57,899) (11,012) (Gain) loss on sale of bank premises ............ (13,883) 59,068 (Gain) on sale of real estate owned ............. (57,728) ESOP shares earned .............................. 261,146 131,620 Changes in assets and liabilities: Proceeds from the sales of loans .................... 2,274,959 829,997 Origination of loans for resale ..................... (2,217,060) (818,985) Other investments ................................... (121,886) Interest receivable ................................. 507,500 (53,983) Deferred income tax ................................. 337 (46,012) Other assets ........................................ (284,884) 41,548 Interest payable .................................... 182,062 80,892 Other liabilities ................................... 1,878,390 299,354 ------------- ------------- Net cash provided by operating activities ............... 4,573,075 1,472,011 ------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES: Loans originated ........................................ (51,312,339) (47,786,343) Loan principal repayments ............................... 54,588,301 58,640,041 Proceeds from: Maturities of: Securities available for sale ................... 28,994,050 16,974,688 Securities held to maturity ..................... 25,000 Sales of: Securities available for sale ................... 12,992,977 19,379,854 Mortgage-backed securities available for sale ... 12,221,521 11,158,884 Bank premises ................................... 167,742 42,239 Real estate owned ............................... 123,884 Purchases of: Securities available for sale ................... (43,198,041) (49,920,625) Mortgage-backed securities available for sale ... (13,576,118) (22,389,606) Equity Investments .............................. (250,000) Loans ........................................... (8,190,692) (13,773,496) FHLB Stock ...................................... (273,400) (1,689,000) Office properties, equipment and land ........... (1,205,234) (260,511)
PERMANENT BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (continued) NINE MONTHS ENDED DECEMBER 31, --------------------------------- 1997 1996 -------------- -------------- Payments on mortgage-backed securities .................. 14,471,457 12,094,301 Increase in cash surrender value of life insurance ...... (55,169) (63,229) Payments on real estate owned ........................... (3,202) 7,946 ------------- ------------- Net cash provided by (used in) investing activities ..... 5,520,737 (17,584,857) ------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Dividends paid .......................................... $ (574,879) $ (448,482) Net change in deposits .................................. (7,570,289) (8,708,828) Receipts from FHLB advances ............................. 180,000,000 116,450,000 Payments on FHLB advances ............................... (178,932,031) (87,820,246) Principal repayment of ESOP borrowing ................... 178,538 178,538 Advance payments by borrowers for taxes and insurance ... (518,114) (491,285) Net change in other borrowed funds ...................... (1,793,967) (1,316,556) Purchase of treasury stock .............................. (993,628) (1,389,091) Sale of common stock ................................... 80,360 14,590 ------------- ------------- Net cash provided by (used in) financing activities ..... (10,124,010) 16,468,640 ------------- ------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ........ (30,198) 355,794 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ............ 6,364,476 4,916,421 ------------- ------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD .................. 6,334,278 5,272,215 ============= ============= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest ............................................ $ 10,009,683 $ 10,015,622 Income taxes ........................................ 1,123,000 730,000 Noncash transactions: Transfers from loans to real estate owned ........... 110,415 --
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 December 31, 1997 and for the three and nine month periods ended December 31, 1997, and 1996, 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, 1997. 2. CHANGES IN PRESENTATION - Certain amounts and items appearing in the financial statements for the quarter and nine months ended December 31, 1996 have been reclassified to conform with the presentation presented for the period ended December 31, 1997. 3. FINANCIAL ACCOUNTING STANDARDS NO. 128 (FAS 128) "EARNINGS PER SHARE" - FAS 128 applies to financial statements for public companies for periods ending after December 15, 1997. Accordingly, the Company adopted FAS 128 in the third quarter of fiscal 1998. This statement establishes new accounting standards for the calculation of basic earnings per share as well as diluted earnings per share. The following is a reconciliation of the weighted average common shares for the basic and diluted earnings per shaer computations:
Three Months Ended Nine Months ended December 31, December 31, --------------------- --------------------- 1997 1996 1997 1996 --------- --------- --------- --------- Basic earnings per share: Weighted average common shares 2,024,643 2,127,977 2,018,160 2,134,006 Diluted earnings per share: Weighted average common shares 2,024,643 2,127,977 2,018,160 2,134,006 Dilutive effect of stock options 124,846 94,338 119,696 81,157 --------- --------- --------- --------- Weighted average common and incremental shares 2,149,489 2,222,315 2,137,856 2,215,163 ========= ========= ========= =========
The difference between basic and diluted earnings per share represents the dilutive impact of the Company's outstanding stock options. 4. FINANCIAL ACCOUNTING STANDARDS NO. 130 (FAS 130) "ACCOUNTING FOR COMPREHENSIVE INCOME" - FAS 130 requires that changes in the amounts of certain items, including foreign currency translation adjustments and gains and losses on certain securities be shown in the financial statements. FAS 130 does not require a specific format for the financial statement in which comprehensive income is reported, but does require that an amount representing total comprehensive income be reported in that statement. FAS 130 is effective for fiscal years beginning after December 15, 1997. FAS 130 will receive reclassification of earlier financial statements for comparative purposes. Management has not yet determined the effect, if any, of FAS 130 on the consolidated financial statements. 5. FINANCIAL ACCOUNTING STANDARDS NO. 131 (FAS 131) "DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION" - FAS 131 changes the way public companies report information about segments of their business in their annual financial statements and requires them to report selected segment information in their quarterly reports issued to shareholders. It also requires entity-wide disclosures about the products and services an entity provides, the material countries in which it holds assets and reports revenues, and its major customers. FAS 131 is effective for fiscal years beginning after December 15, 1997. Management has not yet determined the effect, if any, of FAS 131 on the consolidated financial statements. 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 DECEMBER 31, 1997 COMPARED TO DECEMBER 31,1996 NET INTEREST INCOME - Net interest income before provision for loan losses decreased by $10,000 or 0.3% for the quarter ended December 31, 1997 compared to the quarter ended December 31, 1996. This decrease was primarily attributable to a decline in the interest rate spread (the difference between the rate earned on interest earning assets and the rate paid on interest bearing liabilities) which more than offset the increase in interest earning assets. Net interest income after loan loss provisions decreased by $142,000, or 4.9% for the quarter ended December 31, 1997 compared to the quarter ended December 31, 1996. The loan loss provision was a benefit of $500 during the quarter ended December 31, 1997, compared to a benefit of $132,000 during the quarter ended December 31, 1996. During the quarter ended December 31, 1997, the Bank reduced loan loss provisions by $75,500 relating to the reversal of specific reserves of $75,000 on an impaired loan which was paid off through a negotiated settlement, and by $500 on another previously impaired loan. This reversal was offset by provision increases of $75,000 reflecting actual and anticipated loan growth. During the quarter ended December 31, 1996, the Bank reduced the loan loss provision by $232,000 relating to the reversal of specific reserves on a previously impaired loan. This reversal was partially offset by provision increases of $100,000 reflecting actual and anticipated loan growth. INTEREST INCOME - Total interest income for the three months ended December 31, 1997 increased $55,000, or 0.7%, from the three month period ended December 31, 1996. This increase was attributable to an increase of $6.7 million in average balances of interest earning assets for the comparable periods which was nearly offset by a decrease of one basis point in the average rate earned on total interest earning assets and a decrease in interest received on non-accrual loans (not considered interest earning assets by definition) which have been settled since the quarter ended December 31, 1996. INTEREST EXPENSE - Total interest expense increased by $65,000, or 1.4%, during the three months ended December 31, 1997 compared to the three months ended December 31, 1996. Average interest bearing liabilities increased by $7.6 million and the average cost of such liabilities increased by 1 basis point compared to the quarter ended December 31, 1996. OTHER INCOME - Total other income increased by $78,000 during the quarter ended December 31, 1997 compared to the quarter ended December 31, 1996. Service charges were $40,000 more and commissions were $30,000 more during the quarter ended December 31, 1997 than during the comparable quarter in 1996. During the quarter ended December 31, 1997 the Company recognized gains on sales of loans of $9,000 compared to $6,000 during the quarter ended December 31, 1996, recognized gains of $4,000 on sales of real estate owned compared to $3,000 during the quarter ended December 31, 1996 and recognized gains on sales of investment and mortgage-backed securities of $30,000 during the quarter ended December 31, 1997, compared to $27,000 during the quarter ended December 31, 1996. The remaining other income accounts were nearly identical during the comparable quarters. OTHER EXPENSE - Other expense increased a total of $60,000 during the quarter ended December 31, 1997 compared to the quarter ended December 31, 1996. Deposit insurance assessments decreased by $78,000 during the quarter ended December 31, 1997 compared to the quarter ended December 31, 1996 due to lower rates. Salaries and employee benefits increased by $67,000 or 6.2% during the quarter ended December 31, 1997 compared to the same period in 1996, with $41,000 of the increase due to an increase in Employee Stock Ownership Plan expenses attributable to increases in the market value of the Company's stock. Occupancy expenses increased by $30,000 and equipment and computer expenses also increased by $30,000 during the comparable periods. Advertising expenditures were $9,000 higher during the quarter ended December 31, 1997 than during the quarter ended December 31, 1996. Postage and office supplies were $3,000 lower during the quarter ended December 31, 1997. The remaining other expense categories were $5,000 higher during the current year quarter. INCOME TAXES - Provisions for income taxes amounted to $461,000, or 39.5% of income before taxes during the quarter ended December 31, 1997, compared to $573,000, or 44.5% of income before taxes during the quarter ended December 31, 1996. NINE MONTHS ENDED DECEMBER 31, 1997 COMPARED TO NINE MONTHS ENDED DECEMBER 31, 1996 NET INTEREST INCOME - Net interest income before provision for loan losses increased by $196,000 or 2.4% for the nine months ended December 31, 1997 compared to the nine months ended December 31, 1996. This increase was primarily attributable to an increase in interest earning assets. Net interest income after loan loss provisions increased by $61,000 for the nine months ended December 31, 1997 compared to the nine months ended December 31, 1996. The loan loss provision was $152,000 during the nine months ended December 31, 1997, compared to $16,000 during the nine months ended December 31, 1996. During the period ended December 31, 1997, the Bank reduced loan loss provisions by $75,500 relating to the reversal of specific reserves of $75,000 on an impaired loan which was paid off through a negotiated settlement, and by $500 on another previously impaired loan. During the period ended December 31, 1996, the bank reduced the loan loss provision by $232,000 relating to the reversal of specific reserves on a previously impaired loan. This reversal was offset by provision increases of $248,000 reflecting actual and anticipated loan growth. INTEREST INCOME - Total interest income for the nine months ended December 31, 1997 increased $831,000, or 3.7%, from the nine month period ended December 31, 1996. This increase was attributable to an increase of $11.3 million in average balances of interest earning assets and an increase of 22 basis points in the average rate earned on total interest earning assets for the comparable periods. INTEREST EXPENSE - Total interest expense increased by $635,000, or 4.5%, during the nine months ended December 31, 1997 compared to the nine months ended December 31, 1996. Average interest bearing liabilities increased by $14.2 million and the average rate on such liabilities increased by 17 basis points, compared to the nine months ended December 31, 1996. OTHER INCOME - Total other income increased by $306,000 during the nine months ended December 31, 1997 compared to the nine months ended December 31, 1996. Service charges were $81,000 more and commissions were $72,000 more during the nine months ended December 31, 1997 than during the comparable quarter in 1996. During the nine months ended December 31, 1997 the Company recognized gains on sales of loans of $58,000 compared to $11,000 during the nine months ended December 31, 1996 and recognized gains of $41,000 on sales of investment and mortgage-backed securities compared to gains of $30,000 during the nine months ended December 31, 1996. The Company recognized gains of $45,000 on the sale of real estate owned during the current year period compared to $5,000 during the prior year period. The remaining other income accounts were up by $55,000 during the current year period. OTHER EXPENSE - Other expense decreased a total of $1,630,000 during the nine months ended December 31, 1997 compared to the nine months ended December 31, 1996, largely because of the one time FDIC assessment in the amount of $1,766,000 paid during the 1996 period. Salaries and employee benefits increased by $210,000 during the nine months ended December 31, 1997 compared to the same period in 1996, with $130,000 of the increase due to an increase in Employee Stock Ownership Plan expenses attributable to increases in the market value of the Company's stock. Occupancy expenses increased by $17,000 and equipment and computer expenses increased by $69,000 during the comparable periods. Deposit insurance assessments, exclusive of the one time assessment, were $308,000 lower during the nine months ended December 31, 1997 due to a decrease in deposit insurance rates paid. Advertising expenditures were $29,000 higher and postage and office supplies were $14,000 higher than during the nine months ended December 31, 1996. The remaining other expense categories were up by $104,000 during the nine months ended December 31, 1997 compared to the comparable period in 1996. INCOME TAXES - Provisions for income taxes were $1,374,000, or 40.9% of income before taxes during the nine months ended December 31, 1997 compared to $704,000, or 51.6% during the nine month period ended December 31, 1996. FINANCIAL CONDITION DECEMBER 31, 1997 COMPARED TO MARCH 31, 1997 The Company's total assets at December 31, 1997 were $419.8 million representing a decrease of $3.9 million, or 0.9%, from March 31, 1997. Investment and mortgage-backed securities, including those classified as available for sale, decreased by $8.7 million to $177.7 million at December 31, 1997 from $186.4 million at March 31, 1997. Net loans increased by $4.7 million to $214.9 million at December 31, 1997 compared to $210.2 million at March 31, 1997. During May, 1997 the Bank assumed the $5.7 million deposit liabilities and purchased the building and certain other assets of a branch of First Chicago/NBD Corp. located in Bell Oaks Shopping Center in Newburgh, Indiana. This branch is located in what is widely considered the prime banking and commercial area of Newburgh, an upscale and rapidly growing community immediately east of Evansville. On September 19, 1997, the Bank's existing Newburgh Branch at Stonegate Square was closed and the accounts transferred to the new location. The Stonegate Square building and land was subsequently sold at a profit of $14,000. The sale was financed by the Bank at market rates and terms. The loan growth occurred in single family mortgage loans, commercial loans and through the purchase of commercial paper. Consumer loans decreased by $3.1 million during the period. 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 with terms exceeding 20 years. During December 1998, the Bank received negotiated settlements on two impaired loans. The settlements slightly exceeded the loans carrying value of $1.1 million. As a result, non-performing assets were reduced to $3.0 million, or 0.7% of total assets at December 31, 1997, compared to $4.7 million, or 1.1% of total assets at March 31, 1997. As of December 31, 1997, the Bank's loan loss allowance was $2.1 million. 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 December 31, 1997.
1997 1996 ---------- ---------- Balance, April 1 $2,126,225 $2,237,804 Provision for loan losses 152,050 16,446 Net charge offs (179,805) (181,867) ---------- ---------- Balance, December 31 $2,098,470 $2,072,383
Federal Home Loan Bank advances increased by $1.1 million to $99.6 million at December 31, 1997 compared to $98.5 million at March 31, 1997. Deposits decreased by $7.6 million to $273.2 million at December 31, 1997 compared to $280.8 million at March 31, 1997. Total stockholders' equity increased by $2.9 million to $42.0 million at December 31, 1997 from $39.1 million at March 31, 1997. The increase was attributable to an increase of $1.9 million in unrealized gains on securities available for sale, retention of earnings, reduction of Employee Stock Ownership Plan liability, vesting of restricted stock awards and through the exercise of stock options. Decreases in stockholders' equity resulted from the repurchase of stock and the payment of dividends. 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 4%. At December 31, 1997, the Bank's liquidity ratio was 60.88%. 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 December 31, 1997, the Bank had $99,552,000 in such borrowings. As of that date, the Bank had commitments to fund loan originations and construction loans of approximately $11.9 million and commitments to sell loans in the amount of $185,000. The Company had commitments to purchase $2.0 million in securities and no commitments to 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 December 31, 1997.
Amount Percent (*) ----------- ----- Tangible Capital: Capital level .................... $37,023,068 8.89% Requirement ...................... 6,248,034 1.50% ----------- ----- Excess ........................... $30,775,034 7.39% ----------- ----- Core Capital: Capital level .................... $37,304,579 8.95% Requirement ...................... 12,504,512 3.00% ----------- ----- Excess ........................... $24,800,067 5.95% ----------- ----- Risk-Based Capital: Capital level .................... $39,137,774 22.05% Requirement ...................... 14,198,160 8.00% ----------- ----- Excess ........................... $24,939,614 14.05% ----------- -----
(*) Tangible capital is computed as a percentage of adjusted total assets of $416,535,571. Core capital is computed as a percentage of adjusted total assets of $416,817,082. Risk-based capital is computed as a percentage of risk-weighted assets of $177,477,001.
SUPPLEMENTAL DATA Three Months Ended Six Months Ended December 31, 1997 December 31, 1997 ------------------ ------------------ 1997 1996 1997 1996 ---- ---- ---- ---- Weighted average interest rate earned on total interest-earning assets ........................ 7.61% 7.62% 7.70% 7.48% Weighted average cost of total interest-bearing liabilities ......................... 5.17% 5.16% 5.25% 5.08% Interest rate spread during period ..................... 2.44% 2.46% 2.45% 2.40% Net yield on interest-earning assets (net interest income divided by average interest-earning assets on annualized basis) ......... 2.73% 2.78% 2.77% 2.79% Total interest income divided by average total assets (on annualized basis) ................... 7.11% 7.22% 7.28% 7.32% Total interest expense divided by average total assets (on annualized basis) ........... 4.52% 4.56% 4.64% 4.63% Net interest income divided by average total assets (on annualized basis) ................... 2.59% 2.66% 2.64% 2.69% Return on assets (net income divided by average total assets on annualized basis) ............ 0.66% 0.69% 0.63% 0.22% Return on equity (net income divided by average total equity on annualized basis) ............ 6.80% 7.17% 6.54% 2.16% Interest rate spread at end of period .................. 2.44% 2.36% 2.44% 2.36% Data as of Dec. 31, March 31, 1997 1997 ------ ------ (IN THOUSANDS) NONPERFORMING ASSETS: Loans: Non-accrual .............................. $ 782 $2,463 Restructured ............................ 1,941 2,128 ------ ------ Total nonperforming loans ........................ $2,723 $4,591 Real estate owned, net ........................... 88 41 Other repossessed assets, net .................... 146 58 ------ ------ Total Nonperforming Assets ......................... $2,957 $4,690 Nonperforming assets divided by total assets ....... 0.70% 1.11% Nonperforming loans divided by total loans ......... 1.37% 2.18% Balance in Allowance for Loan Losses ............... $2,098 $2,126
REGULATORY DEVELOPMENTS 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, were permitted to establish a tax reserve for bad debts and to make annual additions thereto, which additions could, 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, could previously 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 recently 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 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 the current or 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 None 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 February 12, 1998 By /s/ Donald P. Weinzapfel ------------------------ Donald P. Weinzapfel, Chairman of the Board President and Chief Executive Officer (Principal Executive Officer) DATE February 12, 1998 By /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 ON FORM 10-Q FOR THE FISCAL QUARTER ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS MAR-31-1998 DEC-31-1997 5,507,401 826,877 0 0 153,996,993 23,711,572 23,711,577 217,040,179 2,098,470 419,819,411 273,183,064 69,950,000 5,114,736 29,608,345 24,590 0 0 41,945,066 419,819,411 13,081,605 9,553,392 390,630 23,025,627 10,161,106 14,669,474 8,204,103 152,050 40,692 6,460,365 3,362,431 1,987,934 0 0 1,987,934 0.99 0.93 7.70 782,000 0 1,941,000 337,329 2,126,225 304,821 125,016 2,098,470 260,275 0 1,838,195
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