-----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, O/Ph3J8OSfuEqS+EF3hwnSaXHy9IytAF5QDAZHtfCjboS/YVScIuJy7R4Sluuhwg tsVhsykiJ1snwyWydmrXHQ== 0000914317-98-000720.txt : 19981118 0000914317-98-000720.hdr.sgml : 19981118 ACCESSION NUMBER: 0000914317-98-000720 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981116 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: 98752399 BUSINESS ADDRESS: STREET 1: 101 SOUTHEAST THIRD ST CITY: EVANSVILLE STATE: IN ZIP: 47708 BUSINESS PHONE: 8124286800 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, 1998 [ ] 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 November 9, 1998, there were 3,859,098 shares of the Registrant's Common Stock outstanding. PERMANENT BANCORP, INC. 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 Item 3. Quantitative & Qualitative Disclosures of Market Risk PART II. OTHER INFORMATION Signatures
PERMANENT BANCORP, INC. CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED) September 30, March 31, 1998 1998 ------------ ------------ ASSETS: Cash .................................................................... $ 6,686,087 $ 4,274,700 Interest-bearing deposits ............................................... 11,868,825 1,808,159 ------------ ------------ Total cash and cash equivalents ......................................... 18,554,912 6,082,859 Securities available for sale - at fair value (amortized cost $95,118,385 and $105,529,613) ..................................................... 95,462,255 105,618,621 Mortgage-backed securities available for sale at fair value (amortized cost $46,897,643 and $62,368,921) ....................................... 47,661,574 62,652,286 Mortgage-backed securities held to maturity (fair value $16,324,314 and $19,119,093) ...................................................... 16,113,992 18,861,416 Other investments ....................................................... 1,171,347 1,100,826 Loans (net of allowance for loan losses of $2,045,942 and $1,973,410) ... 285,270,126 225,349,258 Interest receivable, net ................................................ 3,155,700 3,270,173 Office properties and equipment, net .................................... 8,739,924 7,533,251 Real estate owned ....................................................... 10,413 93,182 Federal Home Loan Bank stock ............................................ 5,466,000 5,466,000 Cash surrender value of life insurance .................................. 2,248,917 1,625,253 Goodwill (net of accumulated amortization of $2,130,606 and $1,909,003) . 9,801,420 452,912 Other ................................................................... 9,172,479 1,008,463 ------------ ------------ TOTAL ASSETS ............................................................... $502,829,059 $439,114,500 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY: LIABILITIES: Deposits ................................................................ $351,254,152 $282,942,123 Federal Home Loan Bank advances ......................................... 96,013,124 99,352,678 Other Long-Term Debt .................................................... 4,153,875 Advance payments by borrowers for taxes and insurance ................... 905,032 979,859 Interest payable ........................................................ 2,162,129 2,193,548 Other ................................................................... 8,253,370 10,963,033 ------------ ------------ TOTAL LIABILITIES .......................................................... 462,741,682 396,431,241 ------------ ------------
PERMANENT BANCORP, INC. CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED) (continued) September 30, March 31, 1998 1998 ------------ ------------ STOCKHOLDERS' EQUITY: Serial Preferred Stock ($.01 par value) Authorized and unissued- 1,000,000 shares Common Stock ($.01 par value) Authorized - 9,000,000 shares; issued - 4,927,000 shares; Outstanding - 3,858,898 and 4,102,094 shares ........ 49,212 49,241 Additional paid-in capital .............................................. 24,777,513 24,525,662 Treasury Stock - 947,244 and 682,674 shares ............................. (10,080,753) (6,255,083) Retained Earnings - substantially restricted ............................ 25,561,453 25,127,127 Unrealized gain on securities available for sale, net of deferred tax of $437,720 and $147,127 ................................................. 670,081 225,247 ESOP Borrowing .......................................................... (595,125) (714,150) Unearned compensation - restricted stock awards ......................... (295,004) (274,785) ------------ ------------ TOTAL STOCKHOLDERS' EQUITY ................................................. 40,087,377 42,683,259 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ................................ $502,829,059 $439,114,500 ============ ============
See notes to consolidated financial statements
PERMANENT BANCORP, INC. AND SUBSIDIARY PERMANENT BANCORP, INC. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) THREE MONTHS ENDED SIX MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, --------------------------- --------------------------- 1998 1997 1998 1997 ----------- ----------- ----------- ----------- INTEREST INCOME: Loans ........................................ $ 5,699,498 $ 4,372,781 $10,146,753 $ 8,660,601 Mortgage-backed securities ................... 1,152,247 1,818,734 2,369,188 3,478,685 Investment securities ........................ 1,586,876 1,465,321 3,170,038 3,052,009 Deposits ..................................... 50,464 14,372 142,203 31,845 Dividends on Federal Home Loan Bank stock .... 110,634 112,875 219,655 214,780 ----------- ----------- ----------- ----------- 8,599,719 7,784,083 16,047,837 15,437,920 ----------- ----------- ----------- ----------- INTEREST EXPENSE: Deposits ..................................... 3,998,808 3,419,637 7,420,132 6,823,656 Federal Home Loan Bank advances .............. 1,201,856 1,564,765 2,481,278 2,982,693 Long-term borrowings ......................... 29,374 29,374 Short-term borrowings ........................ 16,876 45,827 ----------- ----------- ----------- ----------- 5,230,038 5,001,278 9,930,784 9,852,176 ----------- ----------- ----------- ----------- NET INTEREST INCOME ............................. 3,369,681 2,782,805 6,117,053 5,585,744 PROVISION FOR LOAN LOSSES ....................... 75,000 75,164 150,000 152,550 ----------- ----------- ----------- ----------- NET INTEREST INCOME AFTER LOAN LOSS PROVISION .................................... 3,294,681 2,707,641 5,967,053 5,433,194 ----------- ----------- ----------- ----------- OTHER INCOME: Service charges .............................. 483,172 233,675 865,086 460,486 Gain on sale of loans ........................ 34,222 29,258 60,427 48,629 Gain on sale of real estate owned ............ 13,656 27,436 46,109 40,677 Commissions .................................. 140,298 171,837 303,692 299,523 Gain on sale of investment and mortgage-backed securities ................................. 88,146 4,016 152,961 10,285 Other ........................................ 113,507 63,762 226,535 167,419 ----------- ----------- ----------- ----------- 873,001 529,984 1,654,810 1,027,019 ----------- ----------- ----------- -----------
PERMANENT BANCORP, INC. AND SUBSIDIARY PERMANENT BANCORP, INC. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (continued) THREE MONTHS ENDED SIX MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, --------------------------- --------------------------- 1998 1997 1998 1997 ----------- ----------- ----------- ----------- OTHER EXPENSE: Salaries and employee benefits ............... 1,524,548 1,132,894 2,767,201 2,255,661 Deposit insurance assessments ................ 70,618 69,223 138,179 138,179 Occupancy .................................... 194,048 204,590 405,174 403,167 Equipment .................................... 187,110 158,837 347,200 322,309 Computer service ............................. 225,445 138,460 380,205 263,543 Advertising .................................. 136,747 84,038 250,446 172,952 Postage and office supplies .................. 187,265 66,474 279,346 144,721 Other ........................................ 540,503 286,239 877,185 563,661 ----------- ----------- ----------- ----------- 3,066,284 2,140,755 5,444,936 4,264,193 ----------- ----------- ----------- ----------- INCOME BEFORE INCOME TAXES ...................... 1,101,398 1,096,870 2,176,927 2,196,020 INCOME TAX PROVISION ............................ 415,539 451,966 863,720 913,194 ----------- ----------- ----------- ----------- NET INCOME ...................................... $ 685,859 $ 644,904 $ 1,313,207 $ 1,282,826 =========== =========== =========== =========== EARNINGS PER SHARE OF COMMON STOCK Basic ........................................ $ 0.17 $ 0.16 $ 0.32 $ 0.32 Diluted ...................................... $ 0.16 $ 0.15 $ 0.30 $ 0.30 WEIGHTED AVERAGE SHARES OUTSTANDING Basic ........................................ 4,014,550 4,036,192 4,061,701 4,029,802 Diluted ...................................... 4,249,693 4,278,000 4,315,675 4,270,520
See notes to consolidated financial statements
PERMANENT BANCORP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) SIX MONTHS ENDED SEPTEMBER 30, ------------------------------ 1998 1997 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income .......................................... $ 1,313,207 $ 1,282,826 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation ................................... 258,127 267,273 Amortization and accretion ..................... 552,024 163,855 Vesting of restricted stock awards ............. 4,760 Provisions for loan and real estate owned losses 72,532 57,658 (Gain) on sale of securities ................... (152,961) (10,285) (Gain) on sale of loans ........................ (60,427) (48,629) Loss on sale of bank premises .................. 119 (Gain) on sale of real estate owned ............ (46,109) (40,677) ESOP shares earned ............................. 231,623 165,597 Changes in assets and liabilities: Proceeds from the sales of loans .................. 4,392,468 1,921,689 Origination of loans for resale ................... (4,332,000) (1,873,060) Other investments ................................. (51,998) (126,203) Interest receivable ............................... 114,473 (2,701) Other assets ...................................... (2,052,202) 1,472 Interest payable .................................. 31,419 22,470 Other liabilities ................................. (2,709,704) 742,004 ------------ ------------ Net cash provided by (used in )operating activities . (2,439,528) 2,528,168 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Cash acquired through branch acquisitions ........... 26,872,394 4,578,736 Loans originated .................................... (56,251,768) (33,644,339) Loan principal repayments ........................... 44,588,930 31,708,431 Proceeds from: Maturities of: Securities available for sale ................ 66,935,465 7,000,000 Securities held to maturity .................. 25,000 Sales of: Securities available for sale ................ 30,607,069 12,295,958 Real estate owned ............................ 115,060 68,900 Purchases of: Securities available for sale ................ (79,417,891) (17,825,781) Mortgage-backed securities available for sale (14,652,047) (13,576,118) Equity Investments ........................... (250,000) Loans ........................................ (5,099,080) (3,731,733) FHLB Stock ................................... (273,400) Office properties, equipment and land ........ (556,808) (265,998) Payments on mortgage-backed securities .............. 16,243,701 8,886,296 Increase in cash surrender value of life insurance .. (623,664) (36,780) Other ............................................... (10,513) ------------ ------------ Net cash provided by (used in) investing activities . 28,761,361 (5,051,341) ------------ ------------
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SIX MONTHS ENDED SEPTEMBER 30, ------------------------------ 1998 1997 ----------- -------------- CASH FLOWS FROM FINANCING ACTIVITIES: Dividends paid ...................................... (480,263) ($ 367,165) Net change in deposits .............................. (10,436,728) (7,563,383) Receipts from FHLB advances ......................... 88,000,000 131,800,000 Payments on FHLB advances ........................... (91,339,554) (123,222,726) Principal repayment of ESOP borrowing ............... 119,026 119,026 Advance payments by borrowers for taxes and insurance (74,827) (94,186) Net change in other borrowed funds .................. 544,235 Net change in long-term debt ........................ 4,153,875 Purchase of treasury stock .......................... (4,163,316) (993,628) Sale of common stock ................................ 90,390 77,160 ------------- ------------- Net cash provided by (used in) financing activities . (14,131,397) 299,333 ------------- ------------- NET (INCREASE) IN CASH AND CASH EQUIVALENTS ............ 12,190,436 (2,223,840) ------------- ------------- CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ....... 6,364,476 6,364,476 ------------- ------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD ............. 18,554,912 4,140,636 ============= ============= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest ....................................... $9,962,203 $ 6,821,479 Income taxes ................................... 850,000 703,000 Noncash transactions: Transfers from loans to real estate owned ...... 22,001
See notes to consolidated financial statements. PERMANENT BANCORP, INC. 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 financial statements at September 30, 1998 and for the three and six month periods ended September 30, 1998 and 1997 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. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is therefore suggested that these statements 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, 1998. 2. BRANCH ACQUISITION - On June 26, 1998 the Company acquired four branch banking offices from NBD, N.A. in a transaction accounted for as a purchase. The Company acquired approximately $79 million of deposit liabilities and $43 million of loans in the transaction. Included in the Consolidated Statements of Financial Condition at September 30, 1998 is approximately $9.4 million of goodwill related to the acquisition, net amortization of approximately $159,000. Generally accepted accounting principles provide for an allocation period, generally not to exceed one year, to identify and quantify the fair value of assets acquired and liabilities assumed. Therefore, the allocations reflected in the accompanying financial statements are subject to change as additional information concerning fair values becomes available. 3. STOCK DIVIDEND - In April, 1998 the Company announced a two-for-one stock split effected in the form of a 100% stock dividend paid on April 14, 1998. The consolidated financial statements, notes and other references to share and per share data have been retroactively restated for this stock dividend. 4. STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 130, "COMPREHENSIVE INCOME" - This statement requires that changes in the amounts of certain items, including foreign currency translation adjustments and unrealized gains and losses on certain securities be shown in the annual financial statements. FAS 130 does not require a specific format for the annual financial statement in which comprehensive income is reported, but does require that an amount representing total comprehensive income be reported in that statement. This statement was adopted by the Company effective April 1, 1998 and all prior year financial statements will be reclassified for comparative purposes. The following is a summary of the Company's total comprehensive income for the interim three month and six month periods ended September 30, 1998 and 1997 under FAS 130:
Three Months Ended Six Months Ended September 30, September 30, 1998 1997 1998 1997 ---------- ---------- ---------- ---------- Net income .................................. $ 685,859 $ 644,904 $1,313,207 $1,282,826 Other comprehensive income, net of tax: Unrealized gains (losses) on securities: Unrealized holding gains arising during period ............. 145,961 717,651 537,207 932,098 Reclassifications adjustment for (gains) losses included in net income ..... (53,231) (2,422) (92,373) (6,211) ---------- ---------- ---------- ---------- Other comprehensive income .................. 92,730 715,229 444,834 925,887 COMPREHENSIVE INCOME ........................ $ 778,589 $1,360,133 $1,758,041 $2,208,713 ========== ========== ========== ==========
5. STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 131, "DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION". The statement is not required to be applied to interim reporting and will be applied in the Company's fiscal 1999 annual financial statements. The statement requires financial disclosure and descriptive information about reportable operating segments. Upon its adoption, this statement may result in additional financial statement disclosures. 6. STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 133, "ACCOUNTING FOR DERIVATIVE INSTRUMENTS" - This statement was issued on June 16, 1998 and is effective for all quarters of fiscal years beginning after June 15, 1999. This statement establishes accounting and reporting standards for derivative instruments, including derivative instruments embedded in financial contracts and for hedging. The Company adopted this statement as of October 1, 1998. Except as noted below, adoption of this statement is not expected to have a significant impact on the financial condition, results of operations or cash flows of the Company. As permitted by the statement, the Company, as of October 1, 1998, transferred debt securities previously classified as held-to-maturity into the available-for-sale category. As of September 30, 1998 these securities had a book value of $16,113,992 and a fair value of $16,324,314. 7. STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 134, "ACCOUNTING FOR MORTGAGE-BACKED SECURITIES RETAINED AFTER THE SECURITIZATION OF MORTGAGE LOANS HELD FOR SALE BY A MORTGAGE BANKING ENTERPRISE." This statement was issued on October 9, 1998 and is effective for fiscal quarters beginning after December 15, 1998. This statement conforms the accounting for securities retained after securitization of mortgage loans by a mortgage banking enterprise with the accounting for securities retained after the securitization of other types of assets by a non-mortgage banking enterprise. The Company is currently evaluating the statement to determine the impact, if any, that it will have on its results of operations or financial condition. 8. COMPANY BORROWING - On August 25, 1998, the Company borrowed $4,153,875 from an unaffiliated financial institution to purchase 302,100 shares of its common stock. The debt is secured by the Bank stock owned by the Company. Interest only on the debt is payable quarterly and is, at the option of the Company, based upon the prime rate or the ninety day LIBOR rate plus 1.80%. Annual principal repayments in the amount of $500,000 commence on February 29, 2000 and continue until August 15, 2003 at which time any principal which remains outstanding is due and payable. The Company may repay principal at anytime without penalty. The loan agreement requires that the Company maintain minimum levels of capital (as regulatorily defined), attain a defined minimum annual return on assets and maintain a defined level of loan loss reserve to non-performing loans. In addition, the loan agreement specifies that non-performing loans shall not exceed 25% of equity. The Company is in compliance with the loan requirements as of September 30, 1998. 9. CHANGES IN PRESENTATION - Certain amounts and items appearing in the financial statements for the quarter ended September 30, 1997 have been reclassified to conform with September 30, 1998 presentation. PERMANENT BANCORP, INC. 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 Consolidated Statements of Income, except where noted are attributable primarily to the operations of the Bank. INFORMATION SYSTEMS AND THE YEAR 2000 As is the case with most other companies using computers in its operations, the Company is currently engaged in a comprehensive project to ascertain that the computer programs it utilizes, both internally generated and those provided by outside sources, will consistently and properly recognize the year 2000. Many of the Company's significant systems used to generate both internal reports and external documents (such as account statements and year-end tax reports) are generated by an outside provider of data processing services which has represented these systems will be Year 2000 compliant. The Company has initiated contingency processing plans should this supplier not become Year 2000 compliant in a timely manner. The Company is in the process of obtaining assurances from vendors that timely updates will be made available to make all remaining purchased software Year 2000 compliant. The Company has utilized and will continue to utilize both internal and external resources to reprogram or replace and test all of its software for Year 2000 compliance and the Company expects to complete the project in early calendar year 1999. The estimated cost for this project is being funded through operating cash flows. While the Company believes it is taking reasonable steps to assure Year 2000 compliance, and to date is satisfied with the results of its evaluation and testing procedures, no assurance can be given by the Company that either it or its vendors will be Year 2000 compliant and failure by the Company and/or significant vendors to complete Year 2000 compliance work in a timely manner could have a material adverse effect on certain of the Company's operations. FORWARD LOOKING STATEMENTS When used in this Form 10-Q and in future filings with the SEC, in the Company's press releases or other public or shareholder communications, as well as in oral statements made by the executive officers of the Company or its primary subsidiary, the words or phrases "will likely result," "are expected to," "will continue," "is anticipated," "estimated," "project," or similar expresssions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties, including, among other things, changes in economic conditions in the Company's market area, changes in policies by regulatoroy agencies, fluctuations in interest rates, demand for loans in the Company's market area and competition, that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The Company wishes to advise readers that the factors listed above could affect its financial performances and could cause its actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements. The Company does not undertake -- and specifically declines any obligation -- to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. QUARTER ENDED SEPTEMBER 30, 1998 COMPARED TO SEPTEMBER 30, 1997 NET INTEREST INCOME - Net interest income before provision for loan losses increased by $586,876 or approximately 21.1% for the quarter ended September 30, 1998 compared to the quarter ended September 30, 1997. This increase is primarily the result of the acquisition of assets and liabilities of branch locations from NBD Bank, N.A.. Net interest income after provision for loan losses increased by $587,040, or approximately 21.7% for the quarter ended September 30, 1998 compared to the quarter ended September 30, 1997. The increase was larger than the increase in net interest income before provision for loan losses because of a slight decrease in the loss provision reflecting a decrease in the level of non-performing loans. INTEREST INCOME - Total interest income for the three months ended September 30, 1998 increased $815,636, or approximately 10.5% from the three month period ended September 30, 1997. This increase occurred despite a decrease of 10 basis points (.10%) on the interest rate earned on earning assets from the comparable quarter of 1997, since average interest earning assets at the Bank increased by approximately $56 million from the quarter ended September 30, 1997 to the quarter ended September 30, 1998. INTEREST EXPENSE - Total interest expense increased by $228,760 or approximately 4.6% during the three months ended September 30, 1998 compared to the three months ended September 30, 1997, despite a decrease in the cost of interest-bearing liabilities of 49 basis points (.49%) which was offset by an increase in average interest-bearing liabilities at the Bank of approximately $77.3 million from the comparable quarter of 1997. OTHER INCOME - Total other income increased by $343,017 during the quarter ended September 30, 1998 compared to the quarter ended September 30, 1997. Service charges increased $249,497 during the quarter ended September 30, 1998 compared to the same quarter of 1997. During the quarter ended September 30, 1998 the Company had gains on sales of loans of $34,222 compared to $29,258 during the quarter ended September 30, 1997 and recognized gains of $88,146 on sales of investment and mortgage-backed securities compared to gains of $4,016 during the quarter ended September 30, 1997. The Company recognized gains on the sale of real estate owned of $13,656 during the current year quarter compared to gains of $27,436 during the previous year's quarter. Commissions were $140,298 for the quarter ended September 30, 1998 compared to $171,837 for the quarter ended September 30, 1997. OTHER EXPENSE - Other expense increased a total of $925,529 during the quarter ended September 30, 1998 compared to the quarter ended September 30, 1997. Salaries and employee benefits increased by $391,654 during the quarter ended September 30, 1998 compared to the same period in 1997, primarily as a result of additional personnel acquired in the branch acquisitions. Occupancy expenses decreased by $10,542 and equipment and computer expenses increased by $28,723 and $86,985, respectively, from the comparable period in the prior year. Advertising expenses were $52,709 higher than during the quarter ended September 30, 1997 due principally to costs incurred in conjunction with branch acquisitions. For this same reason postage and office supplies were $120,791 higher during the quarter ended September 30, 1998 compared to the three months ended September 30, 1997. The remaining other expense categories were $255,209 higher during the quarter ended September 30, 1998 than during the quarter ended September 30, 1997, with the most significant change being an increase of $158,668 in amortization of goodwill. INCOME TAXES - Provisions for income taxes amounted to $415,539, or 37.7% of income before taxes during the quarter ended September 30, 1998 compared to $451,966, or 41.2% of income before taxes during the quarter ended September 30, 1997. SIX MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO SIX MONTHS ENDED SEPTEMBER 30, 1997. NET INTEREST INCOME - Net interest income before provision for loan losses increased by $531,309 or 9.5% for the six months ended September 30, 1998 compared to the six months ended September 30, 1997. Net interest income after loan loss provisions increased by $533,859, or 9.8% for the six months ended September 30, 1998 compared to the six months ended September 30, 1997. The increase was larger than the increase in net interest income before provision for loan losses because of a decrease of $2,550 in the provision for loan losses during the first six months of fiscal 1999 compared to the prior year. INTEREST INCOME - Total interest income for the six months ended September 30, 1998 increased $609,917, or 4.0% , from the six month period ended September 30, 1997. This increase was attributable to an increase of $18.6 million in average interest-earning balances which more than offset a decrease of 9 basis points in the average rate earned on total interest earning assets for the comparable periods. INTEREST EXPENSE - Total interest expense increased by $78,608, or .8% during the six months ended September 30, 1998 compared to the six months ended September 30, 1997. Average interest bearing liabilities increased by $29.2 million, which more than offset the 29 basis point decrease in the average rate on such liabilities, compared to the six months ended September 30, 1997. OTHER INCOME - Total other income increased by $627,791 during the six months ended September 30, 1998 compared to the six months ended September 30, 1997. Service charges were $404,600 more and commissions were $4,169 more during the six months ended September 30, 1998 than during the comparable quarter in 1997. During the six months ended September 30, 1998 the Company earned gains on sales of loans of $60,427 compared to $48,629 during the six months ended September 30, 1997 and recognized gains of $152,961 on sales of investment and mortgage-backed securities compared to gains of $10,285 during the six months ended September 30, 1997. The Company recognized gains of $46,109 on the sale of real estate owned during the current year period compared to $40,677 during the prior year period. The remaining other income accounts were up by $59,116 during the current year period. OTHER EXPENSE - Other expense increased a total of $1,180,743 during the six months ended September 30, 1998 compared to the six months ended September 30, 1997. Salaries and employee benefits increased by $511,540 or 22.7% during the six months ended September 30, 1998 compared to the same period in 1997. Equipment and computer expenses increased by $24,891 and $116,662, respectively, from the comparable period last year. Advertising expenditures and postage and office supplies were $77,494 and $134,625 higher, respectively, than during the six months ended September 30, 1997. The remaining other expense categories were up by $315,531 during the six months ended September 30, 1998 compared to the comparable period in 1997 primarily due to an increase in the amortization of goodwill expense. INCOME TAXES - Provisions for income taxes were $863,720, or 39.7% of income before taxes during the six months ended September 30, 1998. During the six month period ended September 30, 1997 the Company recorded a provision for income taxes of $913,194 or 41.6% of income before taxes. FINANCIAL CONDITION SEPTEMBER 30, 1998 COMPARED TO MARCH 31, 1998 The Company's total assets at September 30, 1998 were $502.8 million representing an increase of $63.7 million, or 14.5%, from March 31, 1998. Investment and mortgage-backed securities, including those classified as available for sale, decreased by $27.9 million to $159.2 million at September 30, 1998 from $187.1 million at March 31, 1998. Net loans increased by $60.0 million to $285.3 million at September 30, 1998 compared to $225.3 million at March 31, 1998, primarily as a result of the Company's acquisition of loans associated with its acquisition of additional branches. During June, 1998 the Bank purchased deposits amounting to approximately $78.7 million, loans amounting to approximately $43.4 million, and certain other assets of four branch offices of NBD, N.A. located in Evansville, Indiana. As part of the transaction the Bank purchased two of the branch banking facilities, including land, and assumed the lease liabilities for the other two branch facilities. Loans acquired in the branch acquisition included consumer line of credit loans of approximately $7.8 million, other consumer loans of approximately $11.4 million, commercial real estate loans of approximately $800,000 and commercial loans of approximately $23.4 million. Approximately 72% of the Company's loan growth from March 31, 1998 to September 30, 1998 was the result of this transaction. Non-performing assets were approximately $1.1 million at both September 30, 1998 and at March 31, 1998, compared to $4.7 million at September 30, 1997. As of September 30, 1998, the Bank's loan loss allowance was $2,045,942. 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 and non-performing 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, 1998. The Bank conducts an on-going review of its loan portfolio for potential problems and is currently focusing its analysis on the loans acquired as part of the branch acquisition described above. 1998 1997 ---------- ---------- Balance, April 1 $1,973,410 $2,126,225 Provision for loan losses 150,000 152,550 Net charge offs (77,468) (94,893) ---------- ---------- Balance, June 30 $2,045,942 $2,183,882 ========== ========== Federal Home Loan Bank advances decreased by $3.4 million to $96.0 million at September 30, 1998 compared to $99.4 million at March 31, 1998 and, as a result of the acquisition described above, deposits increased by $68.3 million to $351.2 million at September 30, 1998 compared to $282.9 million at March 31, 1998. Substantially all of the Company's deposit growth from March 31, 1998 to September 30, 1998 is attributable to the branch acquisitions. Total stockholders' equity decreased by $2.6 million to $40.1 million at September 30, 1998 from $42.7 million at March 31, 1998. This decrease was primarily the result of the purchase of 302,100 treasury shares at a cost of $4,163,316 and dividends of $480,263. Offsetting these decreases were net income of $1,313,207, an increase of $444,834 (net of taxes) in the fair value of available-for-sale securities, a reduction of the Employee Stock Ownership Plan liability of $119,025 and the sale of $90,390 of common stock. 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 September 30, 1998, the Bank's liquidity ratio was 47.75%. 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, 1998, the Bank had $96.0 million in such borrowings. As of that date, the Bank had commitments to fund loans of approximately $16.3 million (which includes unfunded lines and letters of credit of approximately $12.4 million) and purchase investment securities of approximately $10.6 million. 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, 1998. Amount Percent (*) ----------- ----- Core Capital: Capital level $30,293,617 6.18% Requirement 19,597,865 4.00% ----------- ----- Excess $10,695,752 2.18% =========== ===== Risk-Based Capital: Capital level $32,157,040 12.39% Requirement 20,774,702 8.00% ----------- ----- Excess $11,382,338 4.39% =========== ===== (*) Core capital is computed as a percentage of adjusted total assets of $489,946,635. Risk-based capital is computed as a percentage of risk-weighted assets of $259,683,770.
SUPPLEMENTAL DATA Three Months Ended Six Months Ended September 30, September 30, --------------------- --------------------- 1998 1997 1998 1997 Weighted average interest rate earned on total interest-earning assets 7.43% 7.53% 7.38% 7.47% Weighted average cost of total interest-bearing liabilities 4.69 5.18 4.81 5.10 Interest rate spread during period 2.79 2.35 2.57 2.37 Net yield on interest-earning assets (net interest income divided by average interest-earning assets on annualized basis) 2.88 2.68 2.83 2.73 Total interest income divided by average total assets (on annualized basis) 6.79 7.18 7.00 7.20 Total interest expense divided by average total assets (on annualized basis) 4.13 4.62 4.31 4.60 Net interest income divided by average total assets (on annualized basis) 2.66 2.56 2.69 2.60 Return on assets (net income divided by average total assets on annualized basis) 0.54 0.60 0.57 0.60 Return on equity (net income divided by average total equity on annualized basis) 6.52 6.39 6.24 6.40 Interest rate spread at end of period 2.78 2.37 2.78 2.37 Data as of ---------------------------- September 30, March 31, 1998 1998 ------ ------ (IN THOUSANDS) NONPERFORMING ASSETS: Loans: Non-accrual ...................................... $1,025 $ 911 Restructured ..................................... 0 0 ------ ------ Total nonperforming loans ................................ 1,025 911 Real estate owned, net ...................... 10 93 Other repossessed assets, net ............... 77 81 ------ ------ Total Nonperforming Assets ............................... $1,112 $1,085 ====== ====== Nonperforming assets divided by total assets ............. .22% .25% Nonperforming loans divided by total loans ............... .36% .40% Balance in Allowance for Loan Losses ..................... $2,046 $1,973
Item 3. Quantitative and Qualitative Disclosures About Market Risk The Office of Thrift Supervision (OTS) requires each thrift institution to calculate the estimated change in the institution's market value of portfolio equity (MVPE) assuming an instantaneous, parallel shift in the Treasury yield curve of 100 to 400 basis points either up or down in 100 basis point increments. MVPE is defined as the net present value of an institution's existing assets, liabilities and off-balance sheet instruments. The OTS permits institutions to perform this MVPE analysis using their own internal model based upon reasonable assumptions. The Company has determined that, as of September 30, 1998, there has been no material change in prepayment assumptions or the estimated sensitivity of the Company's MVPE to parallel yield curve shifts in comparison to the disclosures set forth in the Company's 1998 annual report to shareholders. PART II. OTHER INFORMATION ITEM 1. Legal Proceedings Other than ordinary routine litigation incidental to the business, there are no material pending legal proceedings to which the Company or the Bank are a party. 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 meting of stockholder was held in Evansville, Indiana on July 28, 1998. A total of 3,666,149 shares of Common Stock, 86.3% 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 2001. FOR VOTES WITHHELD --- -------------- Jack H. Kinkel 3,602,310 63,839 James A. McCarty, Jr. 3,597,321 68,828 Murray J. Brown 3,582,945 83,204 Accordingly, the individuals named above were declared to be duly elected directors of the Company. Messieurs. Weinzapfel, Stone, Butterfield, Vogel, Schenk, Korb, and Northener 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, 1999. PERCENTAGE OF VOTES IN NUMBER ATTENDANCE OF VOTES AT THE MEETING FOR 3,613,948 98.6% AGAINST 47,981 1.3% ABSTAIN 4,220 .1% Accordingly, the proposal described above was declared to be duly adopted by the stockholders of the company. ITEM 5. Other Information If a stockholder proposal is not received by the Company by February 26, 1999, but otherwise meets the Company's eligibility requirements to be presented at the next Annual Meeting of Stockholders, the persons named in the Company's form of proxy and acting thereon will have the discretion to vote on any such proposal in accordance with their best judgment if the proposal is received at the Company's main office later than April 21, 1999. ITEM 6. Exhibits and Reports on Form 8- (a) Exhibits None. (b) Reports on Form 8-K A Form 8-K was filed on August 25, 1998, with the Securities and Exchange Commission, regarding the purchase of 302,100 shares of the Company's common stock held by LaSalle Financial Partners, L.P. The purchase was made pursuant to an agreement dated August 25, 1998 between the Company, LaSalle and certain persons and entities affiliated with LaSalle. The purchase of the stock was funded by a loan from an unaffiliated financial institution. 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: November 13, 1998 By /s/ Donald P. Weinzapfel ----------------- ------------------------- Donald P. Weinzapfel, Chairman of the Board Chief Executive Officer (Principal Executive Officer) Date: November 13, 1998 By /s/ Robert A. Cern ----------------- ------------------- Robert A. Cern Chief Financial Officer and Secretary (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 SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS MAR-31-1999 SEP-30-1998 6,686,087 11,868,825 0 0 143,123,829 16,113,992 16,324,314 287,316,068 2,045,942 502,829,059 351,254,152 14,645,536 10,415,499 81,367,588 0 0 49,212 40,758,165 502,829,059 10,146,753 5,539,226 361,858 16,047,837 7,402,132 9,930,784 6,117,053 150,000 152,961 5,444,936 2,176,927 1,313,207 0 0 1,313,207 .32 .30 7.38 1,025 0 0 3,840,000 1,973,410 63,858 49,796 2,045,942 177,000 0 1,868,942
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